DEF 14A 1 pnc2020proxystatement.htm DEF 14A Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.     )
 
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Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under §240.14a-12
THE PNC FINANCIAL SERVICES GROUP, INC.
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Letter from the Chairman and
Chief Executive Officer to
Our Shareholders
 
Dear Shareholder,
We invite you to attend the 2020 Annual Meeting of Shareholders of The PNC Financial Services Group, Inc. on Tuesday, April 28, 2020.
The meeting will be held in the James E. Rohr Auditorium in The Tower at PNC Plaza, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222, beginning at 11:00 a.m., Eastern Time.
We will consider the matters described in the proxy statement and also review significant developments since last year’s annual meeting of shareholders.
We are again making our proxy materials available to you electronically. We hope this continues to offer you convenience while allowing us to reduce the number of copies we print.
The proxy statement contains important information and you should read it carefully. Your vote is important and we strongly encourage you to vote your shares using one of the voting methods described in the proxy statement. Please see the notice that follows for more information.
If you are unable to attend the annual meeting in person, you will be able to listen to the meeting by webcast or conference call.
We look forward to your participation and thank you for your support of PNC.
March 17, 2020
Sincerely,
 
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William S. Demchak
 
Chairman, President and Chief Executive Officer




PARTICIPATE IN THE FUTURE OF PNC — PLEASE CAST YOUR VOTE
Your vote is important to us and we want your shares to be represented at the annual meeting. Please cast your vote on the proposals listed below.
Under New York Stock Exchange rules, if you hold your shares through a broker, bank or other nominee (referred to as holding your shares in “street name”) and you do not provide any voting instructions, your broker has discretionary authority to vote on your behalf only with respect to proposals that are considered “routine” items. The only routine item on this year’s ballot is the ratification of our auditor selection. If an item is non-routine and you do not provide voting instructions, no vote will be cast on your behalf with respect to that item.
Proposals requiring your vote
 
 
 
More
information
Board
recommendation
Routine
item?
Item 1
Election of 12 nominated directors
Page 12
FOR
each nominee
No
 
Item 2
 
Ratification of independent registered public accounting firm for 2020
Page 84
FOR
Yes
 
Item 3
 
Advisory approval of the compensation of PNC’s named executive officers (say-on-pay)
Page 87
FOR
No
 
Item 4
 
Approval of the PNC Employee Stock Purchase Plan, as amended and restated effective January 1, 2020
Page 88
FOR
No
With respect to each item, a majority of the votes cast will be required for approval. Abstentions will not be included in the total votes cast and will not affect the results.
Vote your shares
 
Please review the proxy statement closely and vote right away. We offer a number of ways for you to vote your shares. Voting instructions are included in the Notice of Internet Availability of Proxy Materials and the proxy card. If you hold shares in street name, you will receive information on how to give voting instructions to your broker, bank or other nominee. For registered holders, we offer the following methods to vote your shares and give us your proxy:
 
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www.envisionreports.com/PNC
Follow the instructions
on the proxy card.
Complete, sign and date the proxy card
and return it in the envelope provided.
Attend our 2020 Annual Meeting of Shareholders
 
Directions to attend the annual meeting
  
Tuesday, April 28, 2020 at 11:00 a.m.
are available at
  
The Tower at PNC Plaza — James E. Rohr Auditorium
www.pnc.com/annualmeeting
  
300 Fifth Avenue
 
  
Pittsburgh, Pennsylvania 15222*
*As a precautionary measure related to coronavirus or COVID-19, it is possible we may hold the annual meeting solely by means of remote communication. If we determine to do so, we will announce the decision in advance, and details on how to participate in the annual meeting will be available at www.pnc.com/annualmeeting. We recommend that you visit the website to confirm the status of the annual meeting before planning to attend in person.

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

PROXY STATMENT SUMMARY

Proxy Statement Summary
To assist you in reviewing the proposals to be acted upon at the annual meeting, we have included a summary of certain relevant information. This summary does not contain all of the information you should consider. You should review the entire proxy statement and the 2019 Annual Report before you vote.
You may read the proxy statement and the 2019 Annual Report at www.envisionreports.com/PNC.
Who can vote (page 94)
You are entitled to vote if you were a PNC shareholder on the record date of January 31, 2020.
Voting methods (page 94)
We offer our shareholders a number of ways to vote, including by Internet, telephone or mail. Shareholders may also vote in person at the annual meeting.
Attending the annual meeting (page 92)
To attend the annual meeting in person, you must be a PNC shareholder on the record date of January 31, 2020, or hold a valid legal proxy, and bring with you the required documentation as described in the proxy statement.
We encourage shareholders to pre-register in advance of the annual meeting. Registered holders should pre-register at www.envisionreports.com/PNC or by following the instructions on the proxy card. Street name holders should pre-register and print an admission ticket at www.proxyvote.com.
Items of business
Item 1:  Election of 12 nominated directors (page 12)
The proxy statement contains important information about the experience, qualifications, attributes and skills of the 12 nominees to our Board of Directors (the "Board"). The Board’s Nominating and Governance Committee performs an annual assessment to evaluate whether our directors have the skills and experience necessary to serve PNC, and that the Board and its committees are effective in carrying out their duties.
The Board recommends that you vote FOR all 12 director nominees.
Item 2:  Ratification of independent registered public accounting firm for 2020 (page 84)
Each year, the Board’s Audit Committee selects our independent registered public accounting firm. For 2020, the Audit Committee selected PricewaterhouseCoopers LLP ("PwC") to fulfill this role.
The Board recommends that you vote FOR the ratification of the Audit Committee’s selection of PwC as our independent registered public accounting firm for 2020.
Item 3:  “Say-on-pay” (page 87)
Each year, we ask our shareholders to cast a non-binding advisory vote on the compensation of our named executive officers — known generally as the “say-on-pay” vote. We have offered an annual say-on-pay vote since 2009. Last year, over 95% of the votes cast by our shareholders approved the compensation of our named executive officers, and we have averaged over 96% support in say-on-pay votes over the past five years.
We recommend that you read the Compensation Discussion and Analysis (beginning on page 41), which explains how and why the Board’s Personnel and Compensation Committee made its executive compensation decisions for 2019.
The Board recommends that you vote FOR the approval, on a non-binding advisory basis, of the compensation of our named executive officers.
Item 4:  Approval of the PNC Employee Stock Purchase Plan (page 88)
On January 30, 2020, the Board's Personnel and Compensation Committee adopted, subject to shareholder approval, the PNC Employee Stock Purchase Plan, as amended and restated January 1, 2020 (the "ESPP") to, among other things, increase the number of shares authorized for issuance under the ESPP by 2,000,000.
The Board recommends that you vote FOR the approval of the ESPP.

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
5

PROXY STATEMENT SUMMARY

2019 PNC performance (page 41)
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PNC delivered a successful year in 2019. Diluted earnings per common share were $11.39, a 6% increase over 2018, and we generated record revenue of $17.8 billion while achieving positive operating leverage.
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We increased our net income to $5.4 billion, a 1% increase compared to 2018, and grew loans and deposits. Our return on average assets was 1.35% and our return on average common equity was 11.50%. At December 31, 2019, our tangible book value was $83.30 per common share, an increase of 10% from year-end 2018.
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We achieved a total shareholder return of 40.9%, which was above the peer median for 2019. Our total shareholder return has been in the top quartile of peers over each of the three-year and five-year periods ending December 31, 2019.
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We continued to control expenses, improving our efficiency ratio to 59% and achieving our $300 million continuous improvement program savings goal for the year.
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We returned $5.4 billion of capital to our shareholders in 2019 through share repurchases of $3.5 billion and common stock dividends of $1.9 billion, including raising the quarterly common stock dividend from $0.95 to $1.15 per share.
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We successfully expanded our middle market corporate banking business into new markets (Boston and Phoenix).
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We continued our retail national expansion strategy in markets outside of our existing branch network.
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We continued to focus on the strategies of transforming the customer experience in our Retail Banking segment, enhancing product and service offerings within our Corporate & Institutional Banking segment, and launching new platforms and expanding capabilities within our Asset Management Group segment.
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We made additional significant progress in leveraging technology to innovate and enhance our products, services, security and processes.
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We continued to maintain a risk profile within our desired risk appetite.
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We successfully executed against our internal talent mobility strategy, developed a comprehensive accessibility strategy and met our organizational diversity objectives for the year.
2019 compensation decisions (page 49)
The table below shows, for each named executive officer, the incentive compensation target for 2019 and the actual annual cash incentive and long-term equity-based incentives awarded in 2020 for 2019 performance.
 
William S.
Demchak
 
Robert Q.
Reilly
 
Michael P.
Lyons
 
E William
Parsley, III
 
Karen L. Larrimer
Incentive compensation target
$
11,500,000

 
$
3,800,000

 
$
7,300,000

 
$
7,300,000

 
$
3,300,000

 
 
 
 
 
 
 
 
 
 
Incentive compensation awarded for 2019 performance
$
16,100,000

 
$
4,300,000

 
$
8,300,000

 
$
8,150,000

 
$
4,300,000

Annual cash incentive portion
$
5,780,000

 
$
1,800,000

 
$
2,900,000

 
$
2,840,000

 
$
1,800,000

Long-term incentive portion
$
10,320,000

 
$
2,500,000

 
$
5,400,000

 
$
5,310,000

 
$
2,500,000

 
 
 
 
 
 
 
 
 
 
Incentive compensation disclosed in the Summary compensation table(1)
$
14,030,000

 
$
4,150,000

 
$
8,150,000

 
$
8,090,000

 
$
3,850,000

Annual cash incentive portion (2019 performance)
$
5,780,000

 
$
1,800,000

 
$
2,900,000

 
$
2,840,000

 
$
1,800,000

Long-term incentive portion (2018 performance)
$
8,250,000

 
$
2,350,000

 
$
5,250,000

 
$
5,250,000

 
$
2,050,000

(1)
Under SEC regulations, the incentive compensation amounts disclosed in the Summary compensation table on page 62 include the cash incentive award paid in 2020 for 2019 performance (the "Non-Equity Incentive Plan Compensation" column) and the long-term incentive award granted in 2019 for 2018 performance (the "Stock Awards" column). The amounts shown in the "Stock Awards" column of the Summary compensation table differ slightly from the amounts shown in the table above due to the impact of fractional shares, which are not included in the "Stock Awards" column as they are paid out in cash.

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

PROXY STATMENT SUMMARY

PNC corporate governance (page 19)
The entire Board is elected each year; we have no staggered elections.
The election of directors is subject to a majority voting requirement; any director who does not receive a majority of the votes cast in an uncontested election must tender his or her resignation to the Board.
Our corporate governance guidelines require the Board to have a substantial majority (at least two-thirds) of independent directors. All but one of our current directors and all but one of the nominees to the Board are independent, with the only exception in each case being our CEO.
The Board has a Presiding Director, a lead independent director with specific duties.
The Presiding Director approves Board meeting agendas.
The Board meets regularly in executive session, with no members of management present.
We have four primary standing Board committees:
Audit Committee
Personnel and Compensation Committee
Nominating and Governance Committee
Risk Committee
The Risk Committee has formed two subcommittees:
Compliance Subcommittee
Technology Subcommittee
In 2019, the Board met ten times and each director attended at least 75% of the aggregate number of meetings of the Board and all committees of the Board on which he or she served. The average attendance of all directors at Board and applicable committee meetings was over 97%. All of our directors then serving attended our 2019 annual meeting of shareholders.
You can find additional information about our governance policies and principles at www.pnc.com/corporategovernance.
Board nominees (page 14)
Name
Age
Director since
Independent
Primary Standing Board Committee & Subcommittee Memberships
Joseph Alvarado
67
2019
þ
Audit; Compliance
Charles E. Bunch
70
2007
þ
Compensation (Chair); Governance
Debra A. Cafaro
62
2017
þ
Audit; Compensation
Marjorie Rodgers Cheshire
51
2014
þ
Governance; Risk; Compliance (Chair)
William S. Demchak
57
2013
Risk
Andrew T. Feldstein
55
2013
þ
Compensation; Governance (Chair); Risk
Richard J. Harshman
63
2019
þ
Audit; Compensation
Daniel R. Hesse
66
2016
þ
Risk; Technology (Chair)
Linda R. Medler
63
2018
þ
Risk; Compliance; Technology
Martin Pfinsgraff
65
2018
þ
Audit; Risk (Chair); Compliance
Toni Townes-Whitley
56
2019
þ
Technology
Michael J. Ward
69
2016
þ
Compensation; Governance


THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
7


Table of Contents
11

 
 
12

 
 
19

 
 
19

19

20

21

21

21

22

31

 
 
32

 
 
32

34

35

35

36

36

 
 
37

 
 
37

37

 
 
39

 
 
40

 
 
41

 
 
41

41

42

44

44

49

55

 
 
59

 
 
60

 
 
60

61

 



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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement


62

 
 
62

64

65

70

71

73

 
 
76

 
 
76

76

77

78

79

 
 
81

 
 
82

 
 
82

83

 
 
84

 
 
84

85

 
 
86

 
 
87

 
 
87

87

87

87

 
 
88

 
 
91

 
 
92

 
 
92

93

94

95

 
 
97

 
 
98

 
 
A-1

 
 

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement


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Notice of Annual Meeting
of Shareholders
Tuesday, April 28, 2020
11:00 a.m. (Eastern Time)
The Tower at PNC Plaza — James E. Rohr Auditorium, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222*
WEBCAST
A listen-only webcast of the annual meeting will be available at www.pnc.com/annualmeeting. An archive of the webcast will be available on our website for 30 days.
CONFERENCE CALL
You may access the listen-only conference call of the annual meeting by calling 800-708-4508 or 303-223-4382 (international). A telephone replay will be available for one week by calling 800-633-8284 or 402-977-9140 (international), conference ID 21951608.
ITEMS OF BUSINESS
1.
Election of the 12 director nominees named in the proxy statement to serve until the next annual meeting and until their successors are elected and qualified;
2.
Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020;
3.
An advisory vote to approve the compensation of our named executive officers;
4.
Approval of the PNC Employee Stock Purchase Plan, as amended and restated January 1, 2020; and
5.
Such other business as may properly come before the meeting.
RECORD DATE
The close of business on January 31, 2020 is the record date for determining shareholders entitled to receive notice of and to vote at the annual meeting and any adjournment.
MATERIALS TO REVIEW
We began providing access to the proxy statement and a form of proxy card on March 17, 2020. We have made our proxy materials available electronically. Certain shareholders will receive a Notice of Internet Availability of Proxy Materials explaining how to access our proxy materials and vote. Other shareholders will receive a paper copy of the proxy statement and a proxy card.
PROXY VOTING
Even if you plan to attend the annual meeting in person, we encourage you to cast your vote over the Internet or, if you have a proxy card, by mailing the completed proxy card or by telephone as instructed on your proxy card. This Notice of Annual Meeting and Proxy Statement and our 2019 Annual Report are available at www.envisionreports.com/PNC.
ATTENDING THE ANNUAL MEETING
To be admitted to the annual meeting, you must present proof of your stock ownership as of the record date and valid photo identification. We encourage shareholders to pre-register in advance of the annual meeting. Please follow the procedures for attending the annual meeting described beginning on page 92 of the proxy statement.
March 17, 2020
By Order of the Board of Directors,           
 
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Alicia G. Powell
Corporate Secretary
*As a precautionary measure related to coronavirus or COVID-19, it is possible we may hold the annual meeting solely by means of remote communication. If we determine to do so, we will announce the decision in advance, and details on how to participate in the annual meeting will be available at www.pnc.com/annualmeeting. We recommend that you monitor this website for updated information, including to confirm the status of the annual meeting before planning to attend in person.

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
11


ELECTION OF DIRECTORS (ITEM 1)
Our Board of Directors (the "Board") determines the number of directors to nominate for election to the Board. Our By-laws contemplate a range in the size of the Board from five to 36 directors. For the annual meeting, the Board fixed the number of directors to be elected at 12.
Each of the 12 nominees currently serves on the Board. In this section, we include the following information regarding the nominees:
 
Their names and ages
The years they first became directors of PNC
Their principal occupations and public company directorships over the past five years
A brief discussion of the specific experience, qualifications, attributes or skills that led to the Board’s conclusion that the individual should serve as a director
We recognize the value of a Board that is diverse in perspective and experience. We understand that diverse boards lead to better decisions and outcomes for our employees, customers and communities.
In developing the slate of director nominees, the Board's Nominating and Governance Committee evaluates potential directors for demographic, cognitive, gender and ethnic diversity, as well as breadth of background, skills and experience. The Committee considers the company's strategy and industry trends when anticipating the skills the Board will need in the future.
As the financial services industry has evolved, so has the Board. Our slate of director nominees includes senior leaders with substantial expertise in technology, cybersecurity, financial services, regulatory affairs, risk management, operations and strategic planning, finance and accounting, marketing and branding, talent management and succession planning. Of our 12 director nominees, all 12 have valuable senior leadership experience, 11 are independent, four are women and three are people of color. Further, the average tenure is just over four years. The Board's commitment to refreshment is evidenced by the addition of nine new directors and nine director retirements since our 2015 annual meeting of shareholders.
The following graphic highlights the composition, skills and experience of the Board as comprised of the 12 director nominees.
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Each director elected at the annual meeting will serve for one year, until the next annual meeting of our shareholders and the election and qualification of his or her successor, or until his or her earlier resignation or removal from the Board. We do not stagger our elections — the entire Board will be considered for election at the annual meeting.
Each nominee consents to being named in this proxy statement and to serve if elected. The Board has no reason to believe that any nominee will be unavailable or unable to serve as a director.

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

ELECTION OF DIRECTORS (ITEM 1)

In addition to information regarding the background and qualifications of each nominee, this proxy statement contains other important information related to your evaluation of the nominees, including:
 
The Board’s leadership structure
How the Board operates
Relationships between PNC and our directors
How we evaluate director independence
How we pay our directors
Our director stock ownership requirement
See the following sections for additional details on these topics:
 
Corporate Governance (page 19)
Director and Executive Officer Relationships (page 32)
Related Person Transactions (page 37)
Director Compensation (page 39)
Security Ownership of Management and Certain Beneficial Owners (page 82)
If you sign, date and return your proxy card but do not give voting instructions, or if you do not provide voting instructions when voting over the Internet, we will vote your shares FOR all of the nominees listed on pages 14 to 18. See General Information—How a proposal gets approved beginning on page 95 for information regarding the vote required for election of the director nominees.
The Board of Directors recommends a vote FOR each of the nominees listed on pages 14 to 18.

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
13

ELECTION OF DIRECTORS (ITEM 1)

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Joseph Alvarado
Age 67
Director Since 2019
Experience, Qualifications, Attributes or Skills
Joseph Alvarado is the former Chairman, President and Chief Executive Officer of Commercial Metals Company, a Fortune 500 global metals company that under his leadership was active in recycling,
manufacturing, fabricating and trading. In this role, Mr. Alvarado
was responsible for the overall strategic leadership of CMC, with nearly 9,000 employees and operations in over 200 locations in more than 20 countries. Mr. Alvarado held the position of Executive Vice President and Chief Operating Officer of CMC from 2010 to 2011, during which time he had full profit and loss and operating responsibility for the company's diverse global businesses.
Prior to his career with CMC, Mr. Alvarado served as Operating Partner for Wingate Partners and The Edgewater Funds from 2009 to 2010, where he consulted on new deal evaluation and portfolio company management. Mr. Alvarado worked for a number of other businesses throughout his 42-year career within the steel, metal processing, energy and chemical industries. Mr. Alvarado held the position of President at United States Steel Tubular Products, Inc. from 2007 to 2009, President and Chief Operating Officer at Lone Star Technologies from 2004 to 2007, Vice President, Long Product Sales and Marketing, North America at ArcelorMittal from 1998 to 2004, and Executive Vice President, Commercial for Birmingham Steel from 1997 to 1998. Mr. Alvarado also held various positions at Inland Steel Company from 1976 to 1997, the latest of which was President, Inland Steel Bar Company (a division of Inland Steel Company) from 1995 to 1997.
Mr. Alvarado received a BA in Economics from the University of Notre Dame and an MBA from Cornell University's SC Johnson Graduate School of Management.
The Board values Mr. Alvarado's extensive business knowledge and experience in accounting, sales, manufacturing, planning and global operations.
PNC Board Committee Memberships
Audit Committee
Compliance Subcommittee
Public Company Directorships
Arcosa, Inc.
Commercial Metals Company (until January 2018) Kennametal, Inc.
Trinseo S.A.
Spectra Energy Corp (until February 2017)





















 
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Charles E. Bunch
Age 70
Director Since 2007
Experience, Qualifications, Attributes or Skills
Charles E. Bunch is the retired Executive Chairman and former Chief Executive Officer of PPG Industries, Inc., a Pittsburgh-based global supplier of paints, coatings, optical products, specialty materials, chemicals,
glass and fiberglass.
Mr. Bunch received an undergraduate degree from Georgetown University and an MBA from the Harvard Business School.
Mr. Bunch’s service as a public company CEO, his extensive management and finance experience, and his involvement in the Pittsburgh community add significant value to the Board. In addition, Mr. Bunch brings regulatory and banking industry experience to the Board as he formerly served as a Director and the Chairman of the Federal Reserve Bank of Cleveland, our principal banking regulator.
PNC Board Committee Memberships
Executive Committee
Nominating and Governance Committee
Personnel and Compensation Committee (Chair)
Public Company Directorships
ConocoPhillips
Marathon Petroleum Corporation
Mondelēz International, Inc.
PPG Industries, Inc. (until September 2016)

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Debra A. Cafaro
Age 62
Director Since 2017
Experience, Qualifications, Attributes or Skills
Debra A. Cafaro is Chairman of the Board and Chief Executive Officer of Ventas, Inc., an S&P 500 company that is a leading owner of seniors housing, healthcare and research properties.
Building on an early career in law and her 21-year tenure at Ventas, Ms. Cafaro is broadly engaged across business, public policy and non-profit sectors. She is Chair of the Real Estate Roundtable and the Economic Club of Chicago, and is a member of the Business Council. She serves on the boards of the University of Chicago, Chicago Symphony Orchestra and World Business Chicago, and on the management committee of the Pittsburgh Penguins. Ms. Cafaro has been recognized multiple times by Harvard Business Review as one of the top 100 global CEOs and by Modern Healthcare as one of the top 100 leaders in healthcare.
Ms. Cafaro received a JD cum laude in 1982 from the University of Chicago Law School and a BA magna cum laude from the University of Notre Dame in 1979.
The Board values Ms. Cafaro’s extensive corporate leadership, knowledge and experience. Her years of experience as a public company CEO in the financial sector provide insight into the oversight of financial and accounting matters. Her vision as a strategic thinker adds depth and strength to the Board in its oversight of PNC’s continued growth. The Board also values Ms. Cafaro’s active involvement in the Chicago and Pittsburgh communities.
PNC Board Committee Memberships
Audit Committee
Personnel and Compensation Committee
Public Company Directorships
Ventas, Inc.
Weyerhaeuser Company (until February 2016)

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

ELECTION OF DIRECTORS (ITEM 1)

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Marjorie Rodgers Cheshire
Age 51
Director Since 2014
Experience, Qualifications, Attributes or Skills
Marjorie Rodgers Cheshire is President and Chief Operating Officer of A&R Development Corp., a diversified real estate investment company which owns large-scale multifamily, commercial and mixed-use properties. Since
its founding, A&R has developed more than 50 projects with an aggregate construction value of more than $900 million.
Prior to joining A&R, Ms. Cheshire spent many years in the media and sports industries. Her most recent position was as Senior Director of Brand & Consumer Marketing for the National Football League. Prior to that, Ms. Cheshire held positions as Vice President of Business Development for Oxygen Media, Director and Special Assistant to the Chairman & CEO of ESPN, and Manager of Strategic Marketing for ABC Daytime. Ms. Cheshire also worked as a consultant with The Boston Consulting Group, a strategic consulting firm serving Fortune 500 companies.
Ms. Cheshire received a BS in Economics from the Wharton School of the University of Pennsylvania and an MBA from the Stanford University Graduate School of Business. She is Chairman of the Board of Baltimore Equitable Insurance, and is a Trustee of Baltimore School for the Arts, Johns Hopkins Medicine and The Johns Hopkins Hospital.
The Board values Ms. Cheshire’s executive management experience and her background in real estate, marketing and media, as well as her involvement in the Baltimore community and her familiarity with this important market for PNC.
PNC Board Committee Memberships
Nominating and Governance Committee
Risk Committee
Compliance Subcommittee (Chair)
Public Company Directorships
None
 
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William S. Demchak
Age 57
Director Since 2013
Experience, Qualifications, Attributes or Skills
William S. Demchak is Chairman, President and Chief Executive Officer of The PNC Financial Services Group, Inc., one of the largest diversified financial services companies in the United States.
Mr. Demchak joined PNC in 2002 as Chief Financial Officer. In July 2005, he was named Head of PNC’s Corporate & Institutional Banking segment responsible for PNC’s middle market and large corporate businesses, as well as capital markets, real estate finance, equity management and leasing. Mr. Demchak was promoted to Senior Vice Chairman in 2009 and named Head of PNC Businesses in August 2010. He was elected President in April 2012, Chief Executive Officer in April 2013 and Chairman in April 2014.
Before joining PNC in 2002, Mr. Demchak served as the Global Head of Structured Finance and Credit Portfolio for JPMorgan Chase. He also held key leadership roles at JPMorgan prior to its merger with the Chase Manhattan Corporation in 2000. He was actively involved in developing JPMorgan’s strategic agenda and was a member of the company’s capital and credit risk committees.
Mr. Demchak is a member and past Chairman of the board of directors of the Bank Policy Institute and is a member of The Business Council. In addition, he serves as Chairman of the Allegheny Conference on Community Development and is on the boards of directors of the Extra Mile Education Foundation and the Pittsburgh Cultural Trust.
Mr. Demchak received a BS from Allegheny College and an MBA with an emphasis in accounting from the University of Michigan.
The Board believes that the current CEO should also serve as a director. Under the leadership structure discussed elsewhere in this proxy statement, a CEO-director acts as a liaison between directors and management, and assists the Board in its oversight of the company. Mr. Demchak’s experiences and strong leadership provide the Board with insight into the business and strategic priorities of PNC.
PNC Board Committee Memberships
Executive Committee
Risk Committee
Public Company Directorships
BlackRock, Inc.

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
15

ELECTION OF DIRECTORS (ITEM 1)

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Andrew T. Feldstein
Age 55
Director Since 2013
Experience, Qualifications, Attributes or Skills
Andrew T. Feldstein is the Chief Executive Officer of BlueMountain Capital Management, a subsidiary of Assured Guaranty. Mr. Feldstein also serves as Chief Investment Officer for both Assured and
BlueMountain. BlueMountain is a leading alternative asset manager with $18 billion in assets under management. Assured is the leading provider of financial guaranty insurance.
Prior to co-founding BlueMountain in 2003, Mr. Feldstein spent over a decade at JPMorgan where he was a Managing Director and served as Head of Structured Credit, Head of High Yield Sales, Trading and Research, and Head of Global Credit Portfolio.
Mr. Feldstein is a Trustee of Third Way, a public policy think tank, and a member of the Harvard Law School Leadership Council.
Mr. Feldstein received a BA from Georgetown University and a JD from Harvard Law School.
The Board values Mr. Feldstein’s extensive financial and risk management expertise. As founder and CEO of BlueMountain Capital and through his senior management positions at JPMorgan, Mr. Feldstein has built a reputation for innovation and significant insight into risk management. The Board believes that these skills are particularly valuable to its effective oversight of risk management and will also be a valuable resource to PNC as it continues to grow its business and strengthen its balance sheet.
PNC Board Committee Memberships
Executive Committee (Chair)
Nominating and Governance Committee (Chair)
Personnel and Compensation Committee
Risk Committee
Public Company Directorships
None

 
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Richard J. Harshman
Age 63
Director Since 2019
Experience, Qualifications, Attributes or Skills
Richard J. Harshman is the retired Executive Chairman and former President and Chief Executive Officer of Allegheny Technologies Incorporated, a Pittsburgh-based global manufacturer of technically advanced
specialty materials and complex parts and components. Mr. Harshman previously served in other roles at ATI, including President and Chief Operating Officer from August 2010 to May 2011, Executive Vice President and Chief Financial Officer from December 2000 to August 2010, and other roles of increasing responsibility since August 1996. Mr. Harshman began his career as an Internal Auditor at Teledyne, Inc., an ATI predecessor company, in 1978.
Mr. Harshman is active within the Pittsburgh community, including through his service with several non-profit boards. Mr. Harshman is Chair of the board of trustees of Robert Morris University, Chair of the board of trustees of the Pittsburgh Cultural Trust and a current member and past chair of the board of directors of the Allegheny Conference on Community Development, in addition to his service with other Pittsburgh-based non-profit organizations.
Mr. Harshman received a BS in Accounting from Robert Morris University and was previously licensed as a Certified Public Accountant by the California Board of Accountancy.
The Board values Mr. Harshman's depth of experience with the operational and financial aspects of leading a public company, including as chief executive officer, chief financial officer and chief operating officer. The Board also values Mr. Harshman's active involvement in the Pittsburgh community.
PNC Board Committee Memberships
Audit Committee
Personnel and Compensation Committee
Public Company Directorships
Allegheny Technologies Incorporated (until May 2019)
Ameren Corporation (Lead Director)

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Daniel R. Hesse
Age 66
Director Since 2016
Experience, Qualifications, Attributes or Skills
Daniel R. Hesse is the former President and Chief Executive Officer of Sprint Corporation, one of the United States’ largest wireless carriers.
Mr. Hesse received a BA from the University of Notre Dame, an MBA from Cornell University and an MS from Massachusetts Institute of Technology where he was awarded the Brooks Thesis Prize.
Mr. Hesse brings extensive corporate leadership experience to the Board, having served in a variety of executive positions, including as CEO of Sprint Corporation. His years of experience in the wireless communications industry provide insight into the dynamic and strategic issues overseen by the Board. The broad spectrum of technological issues in this industry give him a strong understanding to assist the Board in its oversight of technological issues.
PNC Board Committee Memberships
Risk Committee
Technology Subcommittee (Chair)
Public Company Directorships
Akamai Technologies, Inc.

16
THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

ELECTION OF DIRECTORS (ITEM 1)

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Linda R. Medler
Age 63
Director Since 2018
Experience, Qualifications, Attributes or Skills
Linda R. Medler, Brigadier General, United States Air Force (Retired), is Founder, President and CEO of L A Medler & Associates, LLC, providing cyber strategy and operational consulting services to
commercial clients and numerous U.S. Department of Defense customers and academic institutions. Ms. Medler served until December 2017 as the Chief Information Security Officer and Director of IT Security for Raytheon Missile Systems, a major business unit of Raytheon Company, a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. She initially joined Raytheon Missile Systems in June 2015 as the Director of Cyber, where she was responsible for developing a roadmap to incorporate cyber resiliency into the company's products.
In 2014, Ms. Medler completed 30 years of total military service, including 27 years of service in the U.S. Air Force, retiring as a Brigadier General. She began her military service as an enlisted U.S. Marine. Her last position held was Director of Capability and Resource Integration for the United States Cyber Command. Her previous assignments included Director of Communications and Networks for the Joint Staff, Joint Chiefs of Staff Deputy CIO, Chief of Staff for Air Force Materiel Command, and Commander/Vice Commander for the 75th Air Base Wing.
Ms. Medler received a BBA in Management & Computer Information Systems from the University of Arkansas at Little Rock, an MS in National Security & Strategic Studies from the Naval War College, and an MBA in Management Information Systems Concentration from the University of Arizona.
The Board values Ms. Medler’s extensive leadership experience and her deep knowledge of cybersecurity and information technology. Her years of experience leading cybersecurity, information technology and multi-function organizations facing a broad range of technology and operational issues provide the Board with additional skills to facilitate oversight of the cybersecurity and technology issues facing PNC.
PNC Board Committee Memberships
Risk Committee
Compliance Subcommittee
Technology Subcommittee
Public Company Directorships
None
 
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Martin Pfinsgraff
Age 65
Director Since 2018
Experience, Qualifications, Attributes or Skills
Martin Pfinsgraff retired as Senior Deputy Comptroller Large Bank Supervision of the Office of the Comptroller of the Currency in February 2017. He held the position of Deputy Comptroller for Credit and Market
Risk from 2011 to 2013. Mr. Pfinsgraff served on the Executive Committee of the OCC and as a member of the Senior Supervisors Group, an international committee comprised of supervisors from 10 Organisation for Economic Co-operation and Development member countries and the European Central Bank.
Prior to his career with the OCC, Mr. Pfinsgraff held various positions from 2000 to 2009 at iJet International, a provider of operating risk management solutions, including Chief Operating Officer and Chief Financial Officer. Mr. Pfinsgraff held various positions with Prudential Securities from 1989 through 2000, the latest of which was President Capital Markets, Prudential Securities from 1997 to 2000.
Mr. Pfinsgraff received a BBA in Psychology from Allegheny College and an MBA from Harvard Business School.
The Board values Mr. Pfinsgraff’s leadership experience as well as his extensive knowledge of the financial services industry and the regulatory requirements applicable to the industry. His experience in banking regulation, risk management and finance, along with his years of executive leadership, provide the Board with additional skills to oversee complex regulatory, risk management and financial matters.
PNC Board Committee Memberships
Audit Committee
Executive Committee
Risk Committee (Chair)
Compliance Subcommittee
Public Company Directorships
None

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
17

ELECTION OF DIRECTORS (ITEM 1)

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Toni Townes-Whitley
Age 56
Director Since 2019
Experience, Qualifications, Attributes or Skills
Toni Townes-Whitley is President, U.S. Regulated Industries at Microsoft Corporation, a technology company that enables digital transformation for the era of an intelligent cloud and an intelligent edge. In
this role Ms. Townes-Whitley leads Microsoft's U.S. sales team and manages a P&L of approximately $11 billion across the public sector and regulated industries, including healthcare, financial services, education and government, driving digital transformation across customers and partners. Prior to taking on her current role in July 2018, Ms. Townes-Whitley was Corporate Vice President for Global Industry at Microsoft, a role she held since 2015.
Before starting with Microsoft, Ms. Townes-Whitley worked for CGI Corporation, an IT and business consulting services firm, from 2010 to 2015. During her tenure at CGI, Ms. Townes-Whitley held the positions of President and Chief Operating Officer from 2011 to 2015 and Senior Vice President, Civilian Agency Program from 2010 to 2011. From 2002 to 2010, Ms. Townes-Whitley held various positions at Unisys Corporation, a global information technology company that provides a portfolio of IT services, software and technology, including Vice President, Global Public Sector, Vice President, North America Consulting & Systems Integration, and Lead Partner, Federal Civilian Business Unit.
Ms. Townes-Whitely is an active participant in industry client and partner organizations, and a presenter on IT innovation and societal impact. Ms. Townes-Whitley sits on the executive committee of the World Business Council for Sustainable Development, is a board member on the Northern VA Tech Council and Thurgood Marshall Foundation, and serves as an advisor to the Women's Center of Northern Virginia.
Ms. Townes-Whitley received a BA in Economics from Princeton University's Woodrow Wilson School.
The Board values Ms. Townes-Whitley's significant experience and involvement in the information technology industry and the value she adds to the Board's oversight of technological issues facing PNC.
PNC Board Committee Memberships
Technology Subcommittee
Public Company Directorships
None


 
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Michael J. Ward
Age 69
Director Since 2016
Experience, Qualifications, Attributes or Skills
Michael J. Ward is the former Chairman and Chief Executive Officer of CSX Corporation, one of the world’s largest railroad companies.
Mr. Ward received a BS from the University
of Maryland and an MBA from the Harvard Business School.
Mr. Ward has extensive operations, sales, marketing and finance experience from his various management roles with CSX and its subsidiaries. As a public company CEO with years of corporate leadership experience in a regulated industry, he brings knowledge and insight to the Board in its oversight of complex issues. His management of an executive team and a large group of employees adds value to his oversight of compensation issues.
PNC Board Committee Memberships
Nominating and Governance Committee
Personnel and Compensation Committee
Public Company Directorships
Ashland Inc. (until September 2016)
Ashland Global Holdings, Inc. (until May 2019)
CSX Corporation (until March 2017)
Contura Energy, Inc. (until August 2019)


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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement


CORPORATE GOVERNANCE
The Board is committed to maintaining strong corporate governance practices. Through the Nominating and Governance Committee, the Board evaluates its corporate governance policies and practices against evolving best practices. This section highlights some of our corporate governance policies and practices. Visit www.pnc.com/corporategovernance for additional information about corporate governance at PNC, including our:
 
Corporate governance guidelines
By-laws
Code of Business Conduct and Ethics
Board committee charters
To receive free printed copies of any of these
documents, please send a request to:
Corporate Secretary
The PNC Financial Services Group, Inc.
300 Fifth Avenue
Pittsburgh, Pennsylvania 15222
or
corporate.secretary@pnc.com
This proxy statement is also available at
www.pnc.com/proxystatement
Recent corporate governance developments
One of our current directors, Richard B. Kelson, reached the Board-adopted mandatory retirement age of 72 in connection with the 2019 annual meeting of shareholders, but the Board approved a limited waiver of this mandatory retirement to enable him to be nominated for election as a director at the 2019 annual meeting of shareholders. As this waiver ends in connection with the annual meeting, Mr. Kelson is not included as a nominee for election as a director.
Corporate governance guidelines
The Board has approved corporate governance guidelines that address important principles adopted by the Board, including:
 
The qualifications a director should possess
The director nomination process
The Board's leadership structure
The responsibilities of our lead independent director (the "Presiding Director")
How the Board committees serve to support the Board’s duties
A description of ordinary course relationships that will not impair a director’s independence
The importance of the Board meeting in executive session without management present
The importance of the Board having access to management
The majority voting requirement for director elections
The mandatory director retirement age (72)
How the Board evaluates our CEO’s performance
How the Board considers management succession planning
Our views on directors holding board positions at other public companies
How the Board continually evaluates its own performance and composition
Our approach to director orientation and education
The Board’s role in strategic planning
The Board’s responsibility for oversight of our policies, programs and strategies regarding significant corporate social responsibility issues, including matters related to environmental, social and governance concerns
The Nominating and Governance Committee reviews the corporate governance guidelines at least annually. Any changes recommended by the Committee are reviewed and approved by the Board.

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Our Board leadership structure
Based on an assessment of its current needs and composition, as well as the skills and qualifications of the directors, the Board believes that the appropriate Board leadership structure should include the following attributes:
A substantial majority (at least two-thirds) of independent directors
A Presiding Director
Regular executive sessions of all independent directors without management present
The current leadership structure of the Board includes all three attributes. The Board has not adopted a policy with respect to separating the Chairman and CEO positions. The Board believes the leadership structure should be flexible enough to accommodate different approaches based on an evaluation of relevant facts and circumstances. The Board considers its structure and leadership each year, and the Personnel and Compensation Committee discusses whether to separate the positions of Chairman and CEO as part of its ongoing evaluation of management succession plans.
William S. Demchak, our current CEO, also serves as Chairman of the Board. Andrew T. Feldstein, the Chair of the Nominating and Governance Committee, currently serves as Presiding Director. We describe the responsibilities of the Presiding Director in more detail below.
Substantial majority of independent directors. We have long maintained a Board with a substantial majority of directors who are not PNC employees and who otherwise qualify as independent under the rules of the New York Stock Exchange (the "NYSE"). The NYSE requires at least a majority of our directors be independent from management.
Mr. Demchak is the only director who is not independent under the NYSE’s “bright-line” tests for independence because he is our CEO. The Board has affirmed the independence of each of the other 11 nominees for director. See Director and Executive Officer Relationships beginning on page 32 for a description of how we evaluate the independence of our directors, including information about the NYSE’s bright-line tests for independence.
Presiding Director responsibilities. The Presiding Director, the lead independent director for the Board, is selected by the Board’s independent and non-management directors. The Board approved the following responsibilities for the Presiding Director, which are included in our corporate governance guidelines:
 
Preside at meetings of the Board in the event of the Chairman’s unavailability
Preside at regularly scheduled executive sessions of the Board’s independent directors
When the Presiding Director considers it appropriate, convene and preside at meetings or executive sessions of the Board’s independent directors
If the Board includes non-management directors who are not independent, when the Presiding Director considers it appropriate to do so, convene and preside at meetings or executive sessions including such non-management directors
Confer with the Chairman or CEO immediately following the meetings or executive sessions of the Board’s independent or non-management directors to convey the substance of the discussions held during those sessions, subject to any limitations specified by the independent directors
Act as the principal liaison between the Chairman and the CEO and the Board’s independent and non-management directors
Be available for confidential discussions with any director who may have concerns that he or she believes have not been properly considered by the Board as a whole
Following consultation with the Chairman, CEO and other directors as appropriate, approve the Board’s meeting agendas, in order to promote the effectiveness of the Board’s operation and decision making and help ensure there is sufficient time for discussion of all agenda items
Be available for consultation and direct communication with major shareholders as appropriate
Discharge such other responsibilities as the Board’s independent directors may assign from time to time
During the course of the year, the Presiding Director may suggest, revise or otherwise discuss agenda items for Board meetings with the Chairman or CEO. In between meetings, each director is encouraged to raise any topics or issues with the Presiding Director that the director believes should be discussed in executive session.
As Chair of the Nominating and Governance Committee, the Presiding Director leads the Board and committee annual self-evaluation process and the evaluation of the independence of directors. The Nominating and Governance Committee also reviews, and the Presiding Director as Chair of the Committee oversees reports to the Board on, significant developments in corporate governance.
Regular executive sessions of independent directors. Our independent directors have met and will continue to meet in regularly scheduled executive sessions without management present. The NYSE requires our independent directors to meet in executive session at least once a year. Under the Board’s own policy, our independent directors meet in executive session at least quarterly. The Presiding Director leads these executive sessions.

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

CORPORATE GOVERNANCE

Communicating with the Board
Shareholders and other interested parties who wish to communicate with the Board, any director (including the Presiding Director), the non-management or independent directors as a group, or any Board committee may send an email to corporate.secretary@pnc.com or a letter to the following address:
Presiding Director
The PNC Financial Services Group, Inc.
Board of Directors
P.O. Box 2705
Pittsburgh, Pennsylvania 15230-2705

The Corporate Secretary will process such communications as set forth herein. The Corporate Secretary will forward email communications to the appropriate director(s) named. The Corporate Secretary will not open a written communication sent to the above P.O. Box if it is addressed to the Board, any director (including the Presiding Director) or group of directors, the non-management or independent directors as a group, or any Board committee. The Corporate Secretary will forward the communication to the named director or the Presiding Director who will determine how to respond. Depending on the content, the Presiding Director may forward the communication to a PNC employee, a third party, another director, a Board committee or the full Board.
The Corporate Secretary may elect not to forward email or written communications that she believes are: (i) a commercial, charitable or other solicitation; (ii) a complaint about PNC products or services that would be customarily handled in the ordinary course of business; (iii) abusive, improper or otherwise irrelevant to the Board’s duties and responsibilities; or (iv) subject to the policies or procedures that specify the proper handling of a communication that addresses such subject matter. 
Our Code of Business Conduct and Ethics
PNC has adopted, and the Audit Committee has approved, a Code of Business Conduct and Ethics that applies generally to all employees and directors.
The Code of Business Conduct and Ethics addresses these important topics, among others:
 
Our commitment to ethics and values
Fair dealing with customers, suppliers, competitors and employees
Conflicts and potential conflicts of interest, including self-dealing, insider trading and other trading restrictions, outside employment and transactions with PNC
Gifts and entertainment
Creating business records, document retention and protecting confidential information
Protection and proper use of our assets, including intellectual property and electronic media
Communicating with the public
Political involvement, including campaigning and political contributions and spending
Compliance with laws and regulations
Protection from retaliation
The Code of Business Conduct and Ethics is available on our website at www.pnc.com/corporategovernance. Any shareholder may also request a free printed copy by writing to our Corporate Secretary at the address provided on page 19.
Our adoption of the Code of Business Conduct and Ethics is intended to satisfy the Securities and Exchange Commission (the "SEC") requirement to adopt a code that applies to a company’s CEO and senior financial officers. The Audit Committee must approve any waivers of or exceptions to code provisions granted to our directors or executive officers. We will post on our website any future amendments to, or waivers from, a provision of the Code of Business Conduct and Ethics that applies to any of our directors or executive officers (including our Chairman and CEO, CFO and Controller).
PNC has also adopted, and the Audit Committee has approved, Ethics Guidelines for Directors to supplement the Code of Business Conduct and Ethics.
Orientation and education
All of our new directors undergo a director orientation and education program. In addition to written materials provided to new directors, in-person sessions are held with each new director. These in-person sessions generally include meetings with senior management to familiarize new directors with our strategic plans, significant financial, accounting and risk management issues, capital markets activities, compliance programs, the Code of Business Conduct and Ethics and related policies,

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CORPORATE GOVERNANCE

principal officers, and internal and independent auditors, as well as specified matters related to the Board committees or subcommittees to which the new director has been appointed.
We also provide a continuing education program for our directors that considers their knowledge and experience and our risk profile, and includes training on complex products and services, our lines of business, significant risks to the company, applicable laws, regulations and supervisory requirements, and other relevant topics identified by the Board and management. The continuing education program is provided through a combination of in-person sessions and coordination of attendance by directors at outside seminars, including those offered by regulators, relevant to the duties of a director. The in-person sessions may be held in connection with, or as part of, a meeting of the Board or a Board committee.
Board committees
The Board currently has five standing committees. The four primary standing committees — Audit, Nominating and Governance, Personnel and Compensation, and Risk — meet on a regular basis. The Executive Committee, which is composed of our CEO and the chairs of the four primary standing committees, meets as needed. The Executive Committee may act on behalf of the Board and would report to the full Board following any action taken. Our Presiding Director chairs the Executive Committee, which did not meet in 2019.
Our By-laws provide that, unless otherwise stated in its charter, each committee may form and delegate its authority to subcommittees of one or more committee members. The Risk Committee has formed a Technology Subcommittee to facilitate Board-level oversight of technology risk, cybersecurity, information security, physical security, business continuity and significant technology initiatives and programs, including those that can position the use of technology to drive strategic advantage. The Risk Committee has also formed a Compliance Subcommittee to facilitate Board-level oversight of compliance risk, significant compliance-related initiatives and programs, and the maintenance of a strong compliance risk management culture. Our By-laws also authorize the Board to establish other committees.
Each committee operates under a written charter approved by the Board, and each subcommittee operates under a written charter approved by the applicable committee. Each committee and subcommittee annually reviews and reassesses its charter. The Nominating and Governance Committee assesses the Executive Committee charter. Each committee and subcommittee, other than the Executive Committee, performs an annual self-evaluation to determine whether it is functioning effectively and fulfilling its charter duties.
We describe the main responsibilities of the Board’s four primary standing committees below. The descriptions of the committee functions in this proxy statement are qualified by reference to the applicable committee charter and our relevant By-law provisions. The charters for the four primary standing committees are available on our website at www.pnc.com/corporategovernance.

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

CORPORATE GOVERNANCE

Audit Committee
image27.jpg
Chair
 
Other members:
Richard B. Kelson
 
Joseph Alvarado
 
 
Debra A. Cafaro
 
 
Richard J. Harshman
 
 
Martin Pfinsgraff
 
 
 
 
 
 
The Audit Committee consists entirely of directors who are independent as defined in the NYSE’s corporate governance rules and in SEC regulations related to audit committee members. When the Board meets on April 28, 2020 to organize its committees, only independent directors will be appointed to the Committee.
As Mr. Kelson reached the Board-established mandatory retirement age, he will not stand for re-election to the Board at the annual meeting, and following the annual meeting will no longer be a member of the Audit Committee. The new Chair of the Committee, who will be independent as defined in the NYSE’s corporate governance rules, will be selected when the Board meets on April 28, 2020 to organize its committees.
The Board has determined that each Audit Committee member is financially literate and possesses accounting or related financial management expertise. The Board made these determinations in its business judgment, based on its interpretation of the NYSE’s requirements for audit committee members. Acting on the recommendation of the Nominating and Governance Committee, the Board determined that each of Mr. Alvarado, Ms. Cafaro, Mr. Harshman, Mr. Kelson and Mr. Pfinsgraff is an “audit committee financial expert,” as that term is defined by the SEC.
The Audit Committee satisfies the requirements of SEC Rule 10A-3, which addresses the following topics:
The independence of committee members
The responsibility for selecting and overseeing our independent auditors
The establishment of procedures for handling complaints regarding our accounting practices
The authority of the committee to engage advisors
The determination of appropriate funding for payment of the independent auditors and any outside advisors engaged by the committee and for the payment of the committee’s ordinary administrative expenses
The Board most recently approved the charter of the Audit Committee on November 14, 2019, and it is available on our website at www.pnc.com/corporategovernance.
The Audit Committee’s primary purposes are to assist the Board by:
Monitoring the integrity of our consolidated financial statements
Monitoring the effectiveness of our internal control over financial reporting
Monitoring compliance with our Code of Business Conduct and Ethics
Overseeing conduct risk management
Evaluating a periodic, independent assessment of the bank's overall risk governance and risk management practices
Monitoring compliance with certain legal and regulatory requirements
Evaluating and monitoring the qualifications and independence of our independent auditors
Evaluating and monitoring the performance of our internal audit function and our independent auditors
At each in-person meeting of the full Board, the Chair of the Audit Committee presents a report of the items discussed and actions approved at previous meetings of the Committee.
The Audit Committee’s responsibility is one of oversight. Management is responsible for preparing our consolidated financial statements, for maintaining internal controls and for our compliance with laws and regulations, and the independent auditors are responsible for auditing our consolidated financial statements. The Committee is responsible for holding management accountable for establishing and maintaining an adequate and effective internal control system and processes. The Committee typically approves the internal and external audit plans, and reviews and discusses audit reports and results with representatives of our internal audit function and our independent auditors.
The Audit Committee has the authority to retain independent legal, accounting, economic or other advisors. The Committee is directly responsible for the selection, appointment, compensation and oversight of our independent auditors (including the resolution of any disagreements that may arise between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditors report directly to

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CORPORATE GOVERNANCE

the Committee. We describe the role of the Committee as it relates to the independent auditors, including consideration of the rotation of the independent audit firm, in more detail on page 84.
With respect to work performed by the independent auditors, the Audit Committee must approve all audit engagement fees and terms, as well as all permitted non-audit engagements. The Committee (or its delegate) pre-approves all audit services, audit-related services and permitted non-audit services to be performed by the independent auditors. The Committee also considers whether the provision of any audit services, audit-related services or permitted non-audit services will impair the auditors’ independence. We describe the Committee’s procedures for the pre-approval of audit services, audit-related services and permitted non-audit services on page 85.
The Audit Committee receives periodic reports on finance, reserve adequacy, ethics, and internal and external audit.
The Audit Committee also appoints our General Auditor, who leads our internal audit function and is functionally accountable to the Committee. The Committee holds regular executive sessions with management, the General Auditor, the Chief Ethics Officer and the independent auditors. The Committee reviews the performance and approves the compensation of the General Auditor, and annually reviews the General Auditor succession plan with the CEO and the Board.
Under our corporate governance guidelines, Audit Committee members may serve on the audit committees of no more than three public companies at the same time, including PNC.
The Audit Committee has approved the report on page 86 as required under its charter and in accordance with SEC regulations.

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

CORPORATE GOVERNANCE

Nominating and Governance Committee
image30.jpg
Chair
 
Other members:
Andrew T. Feldstein
 
Charles E. Bunch
 
 
Marjorie Rodgers Cheshire
 
 
Michael J. Ward
 
 
 
 
 
 
 
 
 

The Nominating and Governance Committee consists entirely of independent directors. When the Board meets on April 28, 2020 to organize its committees, only independent directors will be appointed to the Nominating and Governance Committee.
The Board most recently approved the charter of the Nominating and Governance Committee on November 14, 2019, and it is available on our website at www.pnc.com/corporategovernance.
At each in-person meeting of the full Board, the Chair of the Nominating and Governance Committee presents a report of the items discussed and actions approved at previous meetings of the Committee. The primary purpose of the Nominating and Governance Committee is to assist the Board in promoting the best interests of PNC and its shareholders through the implementation of sound corporate governance principles and practices. The Committee also assists the Board by identifying individuals qualified to become Board members. The Committee recommends to the Board the director nominees for each annual meeting of shareholders, and may also recommend the appointment of qualified individuals as directors between annual meetings.
In addition to conducting its annual committee self-evaluation, the Nominating and Governance Committee oversees the annual evaluation of the performance of the Board and other Board committees and reports to the Board on the evaluation results as necessary or appropriate. The Committee also annually reviews and recommends any changes to the Executive Committee charter.
How we evaluate directors and director candidates. At least annually, the Nominating and Governance Committee assesses the skills, qualifications and experience of our directors and recommends a slate of director nominees to the Board. In evaluating existing directors and new director candidates, the Committee assesses the needs of the Board and the qualifications of the individual. From time to time, the Committee also considers whether to change the composition of the Board. See the discussion on pages 12 to 18 for additional information regarding each of our current director nominees.
The Board and its committees must satisfy SEC, NYSE and banking regulatory standards. At least a majority of our directors must be independent under NYSE standards. Our corporate governance guidelines impose a more rigorous standard and require that a substantial majority (at least two-thirds) of our directors be independent. We require a sufficient number of independent directors to satisfy the membership needs of Board committees that also require independence.
The Nominating and Governance Committee expects directors to gain a sound understanding of our strategic vision, our mix of businesses and our approach to regulatory relations and risk management. The Board must possess a mix of qualities and skills adequate to address the various risks facing PNC. For a discussion of the Board’s oversight of risk, see Corporate Governance—Board committees—Risk Committee on page 30.
When evaluating each director, as well as new director candidates for nomination, the Committee considers the following criteria set forth in our Corporate Governance Guidelines:
A sustained record of high achievement in financial services, business, industry, government, academia, the professions, or civic, charitable or non-profit organizations
Manifest competence and integrity
A strong commitment to the ethical and diligent pursuit of shareholders’ best interests
The strength of character necessary to challenge management’s recommendations and actions when appropriate and to confirm the adequacy and completeness of management’s responses to such challenges to his or her satisfaction
The Board’s strong desire to maintain its diversity in terms of race and gender
Personal qualities that will help to sustain an atmosphere of mutual respect and collegiality among the members of the Board
The Nominating and Governance Committee also considers the current needs of the Board and its committees, meeting attendance and participation, and the value of a director’s contribution to the effectiveness of the Board and its committees.
Although the Board has not adopted a formal policy on diversity, the Board recognizes the value of a diverse Board. Therefore, the Nominating and Governance Committee considers the diversity of directors in the context of the Board’s overall needs, including the diversity of perspective, experience, knowledge, education, age and skills of each director. The Committee

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evaluates diversity in a broad sense, recognizing the benefits of demographic and cognitive diversity, and the breadth of diverse backgrounds, skills and experiences the directors bring to the Board.
How we identify new directors. The Nominating and Governance Committee utilizes as a discussion tool a matrix of certain skills and experiences the Committee believes would be beneficial to have represented on the Board and its committees. The Committee considers PNC's strategy and industry trends in developing a view of those skills and characteristics that would benefit the Board. The Committee is also focused on what skills are required or beneficial for those serving in key Board positions such as committee chairs, and considers succession planning for those positions. The Committee leverages the matrix, and considers the Board-approved evaluation criteria and various regulatory requirements described above, when identifying potential director candidates, which it does in a number of ways. The Committee may consider recommendations made by our current or former directors or members of executive management. The Committee may also identify potential directors through contacts in the business, civic, academic, legal and non-profit communities. When appropriate, the Committee may retain a search firm to identify candidates. In 2018, the Committee retained a third party search firm to further develop the pool of director candidates, and emphasized to the search firm the importance of diversity in its consideration of director candidates.
In addition, the Nominating and Governance Committee will consider director candidates recommended by our shareholders for nomination at the next year’s annual meeting of shareholders. For the Committee to consider a director candidate recommended by a shareholder, the shareholder must submit the recommendation in writing to the Corporate Secretary at our principal executive offices. The submission must include the information described under “Director Nomination Process” in Section 3 of our corporate governance guidelines, which can be found at www.pnc.com/corporategovernance. To be considered for the 2021 annual meeting of shareholders, the submission must be received by November 17, 2020.
The Nominating and Governance Committee will evaluate director candidates recommended by a shareholder in the same manner as candidates identified by the Committee or recommended by others. The Committee will not consider any candidate with an obvious impediment to serving as one of our directors.
The Nominating and Governance Committee will meet to review and discuss relevant available information regarding a director candidate, considering the Board-approved evaluation criteria, the candidate's contribution to the diversity of the Board and PNC's evolving strategic needs. If the Committee decides not to recommend a candidate for nomination or appointment, or for additional evaluation, no further action is taken. The Chair of the Committee will later report that decision to the full Board, and in the case of a shareholder-recommended candidate, the Corporate Secretary will communicate the decision to the shareholder.
If the Nominating and Governance Committee decides to recommend a director candidate to the Board as a nominee for election at an annual meeting of shareholders or for appointment by the Board, the Chair of the Committee will report that decision to the full Board. Following a discussion regarding the recommendation, the full Board will vote on whether to nominate the candidate for election or appoint the candidate to the Board, as applicable. Invitations to join the Board are extended by the Chairman of the Board and the Presiding Director, jointly acting on behalf of the Board.
Shareholders who wish to nominate a director candidate directly at an annual meeting of shareholders or nominate and include a director candidate in our annual meeting proxy materials must do so in accordance with the procedures contained in our By-laws, as described in Shareholder Proposals for the 2021 Annual Meeting on page 97 under the headings Advance notice procedures and Proxy access procedures, respectively.
 

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Personnel and Compensation Committee
image15.jpg
Chair
 
Other members:
Charles E. Bunch
 
Debra A. Cafaro
 
 
Andrew T. Feldstein
 
 
Richard J. Harshman
 
 
Richard B. Kelson
 
 
Michael J. Ward
 
 
 
The Personnel and Compensation Committee consists entirely of independent directors. The Committee membership is intended to satisfy the independence standards established by applicable federal income tax and securities laws, as well as NYSE standards. When the Board meets on April 28, 2020 to organize its committees, only independent directors will be appointed to the Committee.
As Mr. Kelson reached the Board-established mandatory retirement age, he will not stand for re-election to the Board at the annual meeting, and following the annual meeting will no longer be a member of the Personnel and Compensation Committee.
The Board most recently approved the charter of the Personnel and Compensation Committee on November 14, 2019, and it is available on our website at www.pnc.com/corporategovernance.
The Personnel and Compensation Committee’s principal purpose is to discharge the Board’s oversight responsibilities relating to the compensation of our executive officers and other specified responsibilities related to personnel and compensation matters affecting PNC. The Committee may also evaluate and approve, or recommend for approval, benefit, incentive compensation, severance, equity-based or other compensation plans, policies and programs.
The Personnel and Compensation Committee has the authority to retain independent legal, compensation, accounting or other advisors. The charter provides the Committee with the sole authority to retain and terminate an independent compensation consultant acting on the Committee’s behalf, and to approve the consultant’s fees and other retention terms. The Committee retained an independent compensation consultant in 2019 and prior years. See Role of compensation consultants below.
The Personnel and Compensation Committee reviews with management the Compensation Discussion and Analysis section of the proxy statement, which begins on page 41. The Compensation Committee Report is included on page 59. The Committee also evaluates the relationship between risk management and our incentive compensation programs and plans. See Compensation and Risk beginning on page 60.
The Personnel and Compensation Committee has responsibility for periodically reviewing our talent and human capital strategy, including our commitment to diversity and inclusion, and for reviewing and evaluating our executive management succession plan (except for the review and evaluation of the General Auditor and Chief Risk Officer succession plans, which are performed by the Audit Committee and the Risk Committee, respectively). The executive management succession plan, including for the CEO, is reviewed with the full Board from time to time. The Committee reviews a detailed succession planning report at least annually. The materials in the report typically include a discussion of the individual performance of each executive officer, as well as succession plans and development initiatives for other emerging talent. These materials provide necessary background and context to the Committee, and give each Committee member a familiarity with the employee’s position, duties, responsibilities and performance.
How we make decisions. The Personnel and Compensation Committee meets at least four times a year. Before each meeting, the Chair of the Committee reviews the agenda, materials and issues with members of management and the Committee’s independent compensation consultant, as appropriate. The Committee may invite legal counsel or other external consultants to advise the Committee during meetings and preparatory sessions.
The Personnel and Compensation Committee regularly meets in executive sessions without management present. At each in-person meeting of the full Board, during an executive session of the Board, the Chair of the Committee presents a report of the items discussed and actions approved at previous meetings of the Committee.
The Personnel and Compensation Committee has adopted guidelines for information that will be presented to the Committee. The guidelines contemplate, among other things, that any material change to a compensation program, plan or arrangement will be considered over the course of at least two separate meetings of the Committee, with any vote occurring no earlier than the second meeting.
The Personnel and Compensation Committee reviews all of the elements of our compensation programs periodically and adjusts those programs as appropriate. Each year, the Committee makes decisions regarding the amount of annual compensation and equity-based or other longer-term compensation for our executive officers and other designated senior employees. For the most part, these decisions are made in the first quarter of each year, following an evaluation of the prior year’s performance.

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Delegations of authority. The Personnel and Compensation Committee has delegated authority to management to make certain decisions or take certain actions with respect to compensation or benefit plans or arrangements, other than those that are solely or predominantly for the benefit of executive officers. For employee benefit, bonus, incentive compensation, severance, equity-based and other compensation or incentive plans and arrangements, the Committee has delegated to the Chief Human Resources Officer (or her designee) the ability to adopt a new plan or arrangement or amend an existing one if:
the adoption or amendment is not expected to result in a significant increase in incremental expense to PNC (defined as an incremental annual expense that exceeds $50 million for that plan category), the plan is broadly available to employees and the new plan or amendment would not confer a disproportionate benefit upon executives; or
the new plan or amendment is of a technical or administrative nature, is required by a change in applicable law, is not otherwise material or, with respect to employee benefit plans, will not result in a significant impact on PNC's overall employee benefits program.
This delegation also includes the authority to take certain actions to implement, administer, interpret or construe, or make eligibility determinations under, the plans and arrangements, including the ability to appoint a plan manager, administrator or committee and to adopt policies and procedures with respect to the plan, except with respect to plans that are overseen by the PNC administrative committee under its charter.
For grants of equity or equity-based awards, the Personnel and Compensation Committee has delegated to the CEO and the Chief Human Resources Officer (or the designee of either) the responsibility to make decisions with respect to equity grants for individuals who are not designated by the Committee as executives, including the determination of participants and grant sizes, allocation of the pool from which grants will be made, establishment and documentation of the terms and conditions of such grants, approval of amendments to outstanding grants (subject to any limitations set forth in the applicable plan or the Committee's delegation of authority) and exercise of any discretionary authority provided to PNC or the Committee pursuant to the terms of the grants and the applicable plan.
The Audit Committee and the Risk Committee (or in the case of equity-based grants, a qualified subcommittee of the Risk Committee) have the authority to award compensation under applicable plans to our General Auditor and our Chief Risk Officer, respectively.
Management’s role in compensation decisions. Our executive officers, including the CEO and the Chief Human Resources Officer, often review compensation information with the Personnel and Compensation Committee during Committee meetings and may present management’s views or recommendations. The Committee evaluates these recommendations, generally in consultation with an independent compensation consultant retained by the Committee who attends each meeting.
The Chair of the Personnel and Compensation Committee typically meets with management and an independent compensation consultant before each meeting of the Committee to discuss agenda topics, areas of focus or outstanding issues. The Chair of the Committee schedules other meetings with the Committee’s independent compensation consultant without management present as needed. Occasionally, management will schedule meetings with the Chair of the Committee or other Committee members to discuss substantive issues. For more complicated issues, these one-on-one meetings provide a dedicated forum for Committee members to ask questions outside of the meeting environment.
During Personnel and Compensation Committee meetings, the CEO often reviews corporate and individual performance as part of the compensation discussions, and other members of executive management may be invited to speak to the Committee about specific elements of performance or risk management. Our Chief Risk Officer regularly presents to the Committee regarding risk management, including its impact on the Committee’s discussions and decisions regarding executive compensation. The Committee reviews compensation decisions for the Chief Human Resources Officer and the CEO in executive session, without either officer present for the discussion of their compensation. Any decisions on CEO compensation are also discussed with the full Board, with no members of management present for the discussion.
Role of compensation consultants. The Personnel and Compensation Committee has the sole authority to retain and terminate any compensation consultant directly assisting it. The Committee also has the sole authority to approve fees and other engagement terms. The Committee receives comparative compensation data from management, from proxy statements and other public disclosures, and through surveys and reports prepared by compensation consultants.
The Personnel and Compensation Committee retained Meridian Compensation Partners, LLC ("Meridian") as its independent compensation consultant for 2019. In this capacity, Meridian reported directly to the Committee. In 2019, one or more representatives of Meridian attended all of the in-person and telephonic meetings of the Committee, and met regularly with the Committee without members of management present. Meridian also reviewed meeting agendas and materials prepared by management.
Meridian and members of management assisted the Personnel and Compensation Committee in its review of proposed compensation packages for our executive officers. For the 2019 performance year, Meridian prepared discussion materials for the compensation of the CEO, which were reviewed in executive session. Meridian also prepared other benchmarking

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

CORPORATE GOVERNANCE

reviews and pay for performance analyses for the Committee. PNC paid no fees to Meridian in 2019 other than fees paid in connection with work performed by Meridian for the Committee.
The Personnel and Compensation Committee evaluated whether the work of Meridian raised any conflicts of interest. The Committee considered various factors, including the six factors mandated by SEC rules, and determined that no conflict of interest was raised by the work performed by Meridian for the Committee.
Management retains other compensation consultants for its own use. In 2019, management retained McLagan to provide certain market data in the financial services industry. Management also engages Willis Towers Watson, a global professional services firm, to provide various actuarial and management consulting services from time to time, including:
Preparing specific actuarial calculations on values under our retirement plans
Preparing surveys of competitive pay practices
Analyzing our director compensation packages and providing related reports to management and the Nominating and Governance Committee
Providing insurance brokerage and consulting services to mitigate certain property and casualty risks
Providing guidance on certain aspects of total rewards, talent management and other human resources initiatives
Reports prepared by Willis Towers Watson and McLagan that relate to executive compensation may also be shared with the Personnel and Compensation Committee.
Compensation committee interlocks and insider participation. During 2019, the members of the Personnel and Compensation Committee included Charles E. Bunch, Debra A. Cafaro, Andrew T. Feldstein, Richard J. Harshman, Richard B. Kelson and Michael J. Ward. None of these directors were officers or employees of PNC during 2019, nor are they former officers of PNC or any of our subsidiaries. During 2019, no executive officer of PNC served on the board of directors or compensation committee (or other board committee performing equivalent functions) of an entity that had an executive officer who served on the Board or the Personnel and Compensation Committee.
Certain members of the Personnel and Compensation Committee, their immediate family members or entities with which they are affiliated were our customers or had transactions with us (or our subsidiaries) during 2019. Transactions that involved loans or commitments by subsidiary banks were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features, and otherwise complied with regulatory restrictions applicable to such transactions.
For additional information, see Director and Executive Officer Relationships—Regulation O policies and procedures beginning on page 35.

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CORPORATE GOVERNANCE

Risk Committee
image23.jpg
Chair
  
Other members:
  
 
Martin Pfinsgraff
  
Marjorie Rodgers Cheshire
  
 
 
  
William S. Demchak
  
 
 
  
Andrew T. Feldstein
  
 
 
  
Daniel R. Hesse
  
 
 
  
Linda R. Medler
  
 
 
  
 
  
 

The Board performs its risk oversight function primarily through the Risk Committee, which includes both independent and management directors.
The Board most recently approved the charter of the Risk Committee on November 14, 2019, and it is available on our website at www.pnc.com/corporategovernance.
The Risk Committee’s purpose is to require and oversee the establishment and implementation of our enterprise-wide risk governance framework, including related policies, procedures, activities and processes to identify, measure, monitor and manage direct and indirect risks at PNC, consisting primarily of credit, market, liquidity, compliance, operational, business, strategic, model, conduct and reputational risks. Accounting and financial reporting risk exposures and related reputational risks are the responsibility of the Audit Committee. The Risk Committee’s responsibility is one of oversight, and the Committee has no duty to assure compliance with laws and regulations.
The Risk Committee serves as the primary point of contact between the Board and the management-level committees dealing with risk management. The Committee receives regular reports on enterprise-wide risk management and capital and liquidity management, as well as credit, operational, line of business, model and reputational risks. At each in-person meeting of the full Board, the Chair of the Risk Committee presents a report of the items discussed and actions approved at previous meetings of the Committee.
The Risk Committee also appoints our Chief Risk Officer, who leads our risk management function. The Committee reviews the performance and approves the compensation of the Chief Risk Officer, except with respect to his equity-based grants, which are approved by a qualified subcommittee of the Risk Committee. The Committee reviews the Chief Risk Officer succession plan with the CEO annually and with the Board from time to time.
The Risk Committee, along with the Personnel and Compensation Committee, reviews the risk components of our incentive compensation plans. For a discussion of the relationship between compensation and risk, see Compensation and Risk beginning on page 60.
Subcommittees. The Risk Committee may form subcommittees as appropriate from time to time.
The Risk Committee has formed a Technology Subcommittee to assist in fulfilling the Committee’s oversight responsibilities with respect to technology risk, cybersecurity, information security, physical security, business continuity and significant technology initiatives and programs, including those that can position the use of technology to drive strategic advantage. The members of the Technology Subcommittee are:
 
 
Chair
 
Other members:
 
Daniel R. Hesse
 
Linda R. Medler
 
 
 
Toni Townes-Whitley
 
 
 
 
 
 
 
 
The Risk Committee has also formed a Compliance Subcommittee to assist in fulfilling the Committee’s oversight responsibilities with respect to compliance risk, significant compliance-related initiatives and programs, and the maintenance of a strong compliance risk management culture. The members of the Compliance Subcommittee are:
 
 
Chair
 
Other members:
 
Marjorie Rodgers Cheshire
 
Joseph Alvarado
 
 
 
Richard B. Kelson
 
 
 
Linda R. Medler
 
 
 
Martin Pfinsgraff



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Board meetings in 2019
 
The table below sets forth the membership of each of the Board's four primary standing committees and each subcommittee as of December 31, 2019 and indicates the number of meetings held by each committee and subcommittee during 2019. The table also identifies the Chair of each committee and subcommittee, the Presiding Director, any management directors and each director who has been designated by the Board as an “audit committee financial expert” as defined under SEC regulations.
The Board held ten meetings in 2019. Each director attended at least 75% of the aggregate number of meetings of the Board and all committees of the Board on which the director served. The average attendance of all directors at Board and applicable committee meetings was over 97%. The Board has adopted a policy that strongly encourages each director to attend the annual meeting of shareholders in person. We remind each director of this policy prior to the date of the annual meeting. All of our directors then serving attended our 2019 annual meeting of shareholders.
 
 
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Meetings
Held

 
 
(1)
 
 
 
(1)
 
 
 
(2)
 
(3)
 
(1)
 
 
 
(1)
 
 
 
(1)
 
 
 
 
 
 
Audit
 
l
 
 
 
l
 
 
 
 
 
 
 
l
 
 
 
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l
 
 
 
 
 
10

Nominating and Governance
 
 
 
l
 
 
 
l
 
 
 
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l
 
5

Personnel and Compensation
 
 
 
image46.jpg
 
l
 
 
 
 
 
l
 
l
 
 
 
l
 
 
 
 
 
 
 
l
 
6

Risk
 
 
 
 
 
 
 
l
 
l
 
l
 
 
 
l
 
 
 
l
 
image46.jpg
 
 
 
 
 
9

Compliance
 
l
 
 
 
 
 
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l
 
l
 
l
 
 
 
 
 
8

Technology
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
image48.jpg
 
 
 
l
 
 
 
l
 
 
 
5

 
image49.jpg
Chair
(1)
Designated as an “audit committee financial expert” under SEC regulations
(2)
Management director
(3)
Presiding Director (lead independent director)

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DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
This section discusses relationships between PNC (including its subsidiaries) and our directors, executive officers, their immediate family members, and certain of their affiliated entities. These relationships include transactions we considered in determining the independence of our directors.
In this section, we describe the NYSE independence standards for directors and our Board-adopted independence guidelines.
Director independence
The Board must affirmatively determine that a director has no “material relationship” with PNC for the director to qualify as independent under NYSE rules. A material relationship between a director and PNC can exist as a result of a relationship between PNC and an organization affiliated with the director.
Material relationships may include commercial, industrial, banking, consulting, legal, accounting, charitable and family relationships. The ownership of a significant amount of PNC stock, by itself, will not prevent a finding of independence under NYSE rules.
NYSE rules describe specific relationships that will always impair independence. The absence of one of the enumerated relationships under this “bright-line” test does not mean that a director is deemed independent. The Board must consider all relevant facts and circumstances in determining whether a material relationship exists.
The NYSE bright-line independence tests. Each of the following relationships will automatically impair a director’s independence under the NYSE bright-line tests:
 
A director was employed by PNC within the last three years
A director’s immediate family member was an executive officer of PNC within the last three years
A director or immediate family member received more than $120,000 in direct compensation from PNC, except for certain permitted payments (such as director fees), during any 12-month period within the last three years
Certain employment relationships between a director or an immediate family member and PNC’s internal or external auditors
A director or immediate family member has within the last three years been an executive officer of a company during the same time that a PNC executive officer served on that company’s compensation committee
A director is an employee or an immediate family member is an executive officer of a company that has made payments to, or received payments from, PNC in excess of certain amounts in any of the last three fiscal years
For purposes of these bright-line tests, references to PNC include certain of PNC’s subsidiaries.
Additional information about the NYSE bright-line director independence tests, including commentary regarding the application of the tests, can be found on the NYSE’s website at www.nyse.com.
Our Board guidelines on independence. To help assess director independence, the Board adopted guidelines that describe four categories of relationships that will not be deemed to be material. If a relationship involving a director meets the criteria outlined in the guidelines, the Board may affirm the director’s independence without further analysis of that relationship, provided that the director otherwise meets the relevant independence tests. These guidelines are included in our corporate governance guidelines, which can be found on our website at www.pnc.com/corporategovernance.
The four categories of relationships described in the director independence guidelines include:

Ordinary course business relationships, such as lending, deposit, banking or other financial service relationships, or other relationships involving the provision of products or services by or to PNC or its subsidiaries and involving a director, an immediate family member, or an affiliated entity of a director or immediate family member, where such relationships satisfy the criteria described in the guidelines
Contributions made by PNC, its subsidiaries or a PNC-sponsored foundation to a charitable organization of which a director or an immediate family member is an executive officer, director or trustee, subject to the conditions described in the guidelines
Relationships involving a director’s relative who is not an immediate family member
Relationships or transactions between PNC or its subsidiaries and a company or charitable organization where a director or an immediate family member serves solely as a non-management board member or trustee or where an immediate family member is employed in a non-officer position

 

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The director independence guidelines also allow investors to understand the considerations underlying the Board’s independence determinations.
In applying these guidelines, an “immediate family member” includes a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home.
If a director has a relationship that would not be considered material under our guidelines for independence but is one of the relationships described in the NYSE’s bright-line tests, the NYSE rules govern and the director will not qualify as independent.
The Board’s independence determinations. At a meeting held on February 13, 2020, the Board made an independence determination for each of our directors, including our director nominees. In making these determinations, the Board relied on the evaluation and recommendations made by the Nominating and Governance Committee. The Board considered relevant facts and circumstances, including an evaluation of the relationships described in this proxy statement.
In some cases, the relationships the Board evaluated included relationships a director has as a partner, member, shareholder, officer or employee of an organization that has a relationship with PNC. The relationships evaluated may have also included relationships where an immediate family member of a director is a partner, member, shareholder or officer of an organization that has a relationship with PNC.
The Board based its independence decisions on information known as of February 13, 2020. Each director has been asked to provide updates regarding any changes in circumstances that could impact the director’s status as an independent director. The Nominating and Governance Committee and the Board will consider information received throughout the year that may impact director independence.
Non-independent directors. The Board determined that Mr. Demchak is a non-independent director under the NYSE’s bright-line tests because he is an executive officer of PNC.
Independent directors. Based on its evaluation of the facts and circumstances of relevant relationships, the Board affirmatively determined that each director and director nominee other than Mr. Demchak qualifies as independent under NYSE rules.
 



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Transactions with directors
Customer relationships. We provide financial services to most of our directors. We also provide financial services to some of their immediate family members and affiliated entities. We offer these services in the ordinary course of our business and provide the services on substantially the same terms and conditions, including price, as we provide to other similarly situated customers. We also extend credit to some of our directors and their immediate family members and affiliated entities. Federal banking law ("Regulation O") governs these extensions of credit. We discuss the impact of Regulation O and our process for managing these extensions of credit under Director and Executive Officer Relationships—Regulation O policies and procedures beginning on page 35.
Business relationships. We enter into other business relationships with certain entities affiliated with our directors or their immediate family members. These relationships are entered into in the ordinary course of business.
Certain charitable contributions. We make contributions to charitable organizations where our directors or their immediate family members serve as directors, trustees or executive officers. We also have a matching gift program whereby we will match a non-employee director’s personal gifts to qualifying charities up to a limit of $5,000 per year.
The table below reflects banking relationships between PNC and a director, an immediate family member of a director or their affiliated entities. Affiliated entities include companies of which a director is, or was during 2019, a partner, executive officer or employee, companies of which an immediate family member of a director is, or was during 2019, a partner or executive officer, and companies in which a director or immediate family member holds a significant ownership or voting position. The table below also reflects relationships where PNC contributed to a charitable organization of which a director or an immediate family member of a director was a trustee, director or executive officer. All of these transactions satisfy the Board’s director independence guidelines as transactions that do not impair independence.
 
 
 
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Personal or Family Relationships
Deposit, Wealth Management and Similar Banking Products(1)
 
 
 
l
 
l
 
l
 
l
 
l
 
l
 
l
 
l
 
l
 
 
 
l
 
 
Credit Relationships(2)
 
 
 
l
 
l
 
l
 
l
 
l
 
l
 
l
 
l
 
 
 
 
 
l
 
l
Charitable Contributions(3)
 
 
 
 
 
l
 
l
 
l
 
l
 
l
 
l
 
l
 
l
 
l
 
 
 
l
Affiliated Entity Relationships
Deposit, Wealth Management and Similar Banking Products(1)
 
 
 
 
 
l
 
l
 
 
 
l
 
l
 
 
 
l
 
 
 
 
 
 
 
 
Credit Relationships or Commercial Banking Products(4)
 
 
 
 
 
l
 
l
 
 
 
l
 
 
 
 
 
l
 
 
 
 
 
l
 
 
(1)
Includes deposit accounts, trust accounts, certificates of deposit, safe deposit boxes, workplace banking and wealth management products.
(2)
Includes extensions of credit, including mortgages, commercial loans, home equity loans, credit cards and similar products, as well as credit and credit-related products.
(3)
Does not include matching gifts provided to charities personally supported by the director, because under the Board’s director independence guidelines, matching gifts are not a “material relationship” and are not included in considering the value of contributions against our guidelines. Matching gifts are capped at $5,000 for non-employee directors and are included in the "All Other Compensation" column in the Director compensation in 2019 table.
(4)
Includes extensions of credit, including commercial loans, credit cards and similar products, as well as credit-related products and other commercial banking products, including treasury management, purchasing card programs, foreign exchange and global trading services.



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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS


Code of Business Conduct and Ethics
Our Code of Business Conduct and Ethics contains several provisions that regulate related person transactions. The Code of Business Conduct and Ethics applies generally to all employees, including our executive officers, and directors.
Doing business with PNC. An employee or an immediate family member may want to engage in a business arrangement, such as the sale or lease of property or the provision of services, with PNC. For these transactions, we require prior approval from a supervisor and our Corporate Ethics Office. If a director desires to engage in a business arrangement with PNC, approval is required from our Corporate Ethics Office and the appropriate Board committee.
Financial services to employees. Our employees and their extended families are encouraged to use PNC for their personal financial services. These services must be provided on the same terms as are available to the general public, all employees in a market or business, or all similarly situated employees.
Transacting PNC business. We prohibit directors and employees from transacting business on behalf of PNC with a supplier or customer in which the director, employee or an extended family member has a significant personal or financial interest. We also prohibit directors and employees from transacting business on behalf of PNC with respect to their own accounts, extended family member accounts or accounts for anyone whose close relationship may reasonably be viewed as creating a conflict of interest. Our phrase “extended family member” is similar to the SEC’s definition of “immediate family member” in Item 404(a) of Regulation S-K. We have established procedures in certain of our businesses to permit employees to transact business with family members, subject to appropriate oversight and compliance with applicable laws and regulations, including Regulation O.
Employing relatives. We employ relatives of certain executive officers and directors, in some cases under circumstances that constitute related person transactions. For additional information, see Director and Executive Officer Relationships—Family relationships on page 36. We track the employment and compensation of relatives of our executive officers and directors, and we have policies that restrict special treatment in the hiring or compensation of a relative of an executive officer or director. Our employment of a director’s relative is also a factor in the determination of the director’s independence under NYSE rules and our own adopted guidelines regarding director independence. See Director and Executive Officer Relationships—Director independence beginning on page 32.
Waivers. Employees may generally request waivers or exceptions from certain provisions of the Code of Business Conduct and Ethics from our Corporate Ethics Office. In the case of directors and executive officers, any proposed waiver or exception must be approved by both our Corporate Ethics Office and the appropriate Board committee. In 2019, no directors or executive officers requested a waiver of any of the provisions described above.
Ethics Guidelines for Directors. The Audit Committee has adopted Ethics Guidelines for Directors that contain comprehensive guidance regarding the various PNC policies governing the conduct of our directors. The guidelines are designed to supplement and assist directors in understanding relevant policies, including our Code of Business Conduct and Ethics described above, our Regulation O policies and procedures and our Related Person Transactions Policy, each described in more detail below, our Director Pre-Clearance of Securities Policy and our Anti-Corruption Policy. The Ethics Guidelines for Directors were most recently approved on November 13, 2019.
Regulation O policies and procedures
We maintain additional policies and procedures to help ensure our compliance with Regulation O, which imposes various conditions on a bank’s extension of credit to directors and executive officers and related interests. Any extensions of credit we make must comply with our policies and procedures in accordance with Regulation O. Our Regulation O policies and procedures require:
Extensions of credit to covered individuals or entities be made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with those who are not covered. For credit extensions under a benefit or compensatory program widely available to all employees, we may not give preference to any covered individual
The covered extension of credit be made following credit underwriting procedures no less stringent than those prevailing at the time for comparable transactions with non-covered individuals or entities. The extension of credit may not involve more than the normal risk of repayment or present other unfavorable features
The amount of covered extensions of credit do not exceed individual and aggregate lending limits, depending on the identity of the borrower and the nature of the loan
Our subsidiary bank, PNC Bank, National Association, has a Regulation O Credit Officer who reviews extensions of credit to determine our compliance with these policies. If an extension of credit would result in an aggregate credit extension of more than $500,000, the bank’s Board of Directors must approve it. In addition, a director can only meet our guidelines for

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
35

DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS

independence with respect to extensions of credit if the credit complied with Regulation O at the time PNC extended it. The bank’s Board of Directors receives a report of all extensions of credit made to directors and executive officers and their related interests under Regulation O. All loans to directors and executive officers and their related interests outstanding during 2019 complied with our Regulation O policies and procedures.
Family relationships
No family relationships exist among any of our directors or executive officers. There are family relationships between certain of our directors and executive officers and some of the approximately 52,000 PNC employees. These employees, including those discussed below, participate in compensation and incentive plans or arrangements on the same basis as other similarly situated employees.
A brother-in-law of Gregory Jordan, one of our executive officers, is employed by PNC and had been for many years before Mr. Jordan joined PNC in 2013. He does not share a household with Mr. Jordan, is not an executive officer of PNC and does not report directly to an executive officer of PNC. His compensation paid in 2019 exceeded the $120,000 related person transaction threshold and as a result was reviewed by the Audit Committee.
A son of Michael Hannon, one of our executive officers, is employed by PNC. He does not share a household with Mr. Hannon, is not an executive officer of PNC and does not report directly to an executive officer of PNC. His compensation paid in 2019 exceeded the $120,000 related person transaction threshold and as a result was reviewed by the Audit Committee.
The daughter of Charles E. Bunch, one of our non-management directors, has been employed by PNC for several years. She does not share a household with Mr. Bunch, is not an executive officer of PNC and does not report directly to an executive officer of PNC. Her compensation paid in 2019 exceeded the $120,000 related person transaction threshold and as a result was reviewed by the Nominating and Governance Committee. As provided in the NYSE's commentary regarding application of its bright-line director independence tests, the compensation received by Mr. Bunch's daughter for her service as an employee of PNC need not be considered in determining his independence.
Indemnification and advancement of costs
We indemnify directors, executive officers and in some cases employees and agents against certain liabilities. The covered person may have incurred a liability as a result of service on our behalf or at our request. We may also advance the costs of certain claims or proceedings on behalf of a covered person. If we advance costs, the covered person agrees to repay us if it is determined that the person was not entitled to indemnification. The insurance policies we maintain for our directors and executive officers also provide coverage against certain liabilities.
The indemnification provisions, the advancement of costs and our insurance coverage may provide benefits to our directors and executive officers. During 2019, we did not advance legal costs to any director or executive officer.

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement


RELATED PERSON TRANSACTIONS
Related person transactions policy
A related person transaction is generally any transaction in which PNC or its subsidiaries is or will be a participant, the amount involved exceeds $120,000, and a director (or nominee), executive officer, family member or any beneficial owner of more than 5% of our common stock has or will have a direct or indirect material interest. Our policy for the review and approval of related person transactions was most recently approved on August 7, 2019.
This policy provides guidance on the framework for reviewing potential related person transactions and approving or ratifying related person transactions, and establishes our Presiding Director as the individual who decides how transactions should be evaluated.
In general, a potential related person transaction that involves a director would be reviewed by the Nominating and Governance Committee, as the transaction could also impact independence. A transaction that involves an executive officer or beneficial owner of more than 5% of our common stock would generally be reviewed by the Audit Committee. The full Board receives reports on approved, disapproved and ratified transactions. Under the policy, a permitted related person transaction must be considered to be in, or not inconsistent with, the best interests of PNC and its shareholders.
Certain related person transactions
We have a contract to purchase carpeting from Interface Americas, Inc. A sister-in-law of Gregory Jordan, one of our executive officers, is employed by Interface and serves as a sales representative on the PNC account. The relationship existed for many years before Mr. Jordan joined PNC in 2013. The contract was not negotiated with Mr. Jordan's sister-in-law; however, she does receive commissions on PNC's purchases of carpeting from Interface. We are not involved in the determination of the amount of her commission and understand that it is based on customary terms. In 2019, we purchased carpet in an aggregate amount of $3.6 million from Interface.
Based on information contained in a Schedule 13G filed with the SEC, BlackRock, Inc. ("BlackRock"), through certain of its subsidiaries, indicated that it beneficially owned more than 5% of our outstanding shares of common stock as of December 31, 2019 (see Security Ownership of Management and Certain Beneficial Owners—Security ownership of certain beneficial owners on page 83). BlackRock is the beneficial owner of our common stock as a result of being a parent company or control person of the subsidiaries disclosed in its Schedule 13G, each of which holds less than 5% of our outstanding shares of common stock.
During 2019, we paid BlackRock approximately $7 million for use of BlackRock’s enterprise investment system and related services, which include risk analytics, portfolio management, compliance and operational processing. We also paid BlackRock approximately $3 million for securities trading related services and approximately $1 million for investment advisory and administration services provided to certain of our subsidiaries and separate accounts assets for a fee based on assets under management. These transactions were entered into on an arm’s length basis and contain customary terms and conditions.
During 2019, we received approximately $7 million in fees from BlackRock for distribution and shareholder servicing activities. These transactions were entered into on an arm’s length basis and contain customary terms and conditions.
We may in the ordinary course of business engage in transactions with BlackRock mutual funds, including using the BlackRock funds as treasury management vehicles for our corporate clients, selling BlackRock investment products to our customers or placing our customer funds in BlackRock mutual funds, using BlackRock funds as an investment vehicle for the PNC 401(k) accounts, providing commercial loan servicing to BlackRock funds or providing shareholder services to our clients who are shareholders of BlackRock mutual funds.
We may also make loans to BlackRock or the BlackRock funds. These loans are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to PNC, and do not involve more than the normal risk of collectability.
We hold an equity investment of approximately 22% in BlackRock. In connection with this equity investment, we have entered into various agreements governing the terms of this relationship. We received cash dividends from BlackRock of approximately $459 million during 2019.
Based on information contained in separate Schedule 13G filings with the SEC, Wellington Management Group, LLP and certain subsidiaries ("Wellington") and The Vanguard Group, Inc. ("Vanguard") each indicated that it beneficially owned more than 5% of our outstanding shares of common stock as of December 31, 2019 (see Security Ownership of Management and Certain Beneficial Owners—Security ownership of certain beneficial owners on page 83). In the ordinary course of business during 2019, our Corporate & Institutional Banking business engaged in treasury management transactions with Vanguard

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
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RELATED PERSON TRANSACTIONS

and capital markets transactions with each of Vanguard and Wellington. These transactions were entered into on an arm's length basis and contain customary terms and conditions. This business is also a party to several credit facilities with Vanguard and counterparty clearing lines with each of Vanguard and Wellington. These credit transactions were on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable facilities with persons not related to PNC, and do not involve more than the normal risk of collectibility. In addition, our Asset Management Group includes Vanguard funds, including Vanguard exchange traded funds, in its investment platform, and has historically included Wellington funds in its investment platform and may do so again in the future. PNC Investments includes Vanguard funds in its investment platform. While PNC Investments does not currently include Wellington funds in its platform, it may do so in the ordinary course when evaluating the funds to be included.

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement


DIRECTOR COMPENSATION
The Nominating and Governance Committee of the Board reviews all elements of non-employee director compensation, which are described below, and makes an annual compensation recommendation to the Board. Mr. Demchak receives no additional compensation for serving as a PNC director. In addition to annual compensation, the Committee may approve special compensation to a director for extraordinary service. The primary objectives of the Committee’s annual review are to confirm continued alignment with business and shareholder interests, evaluate the competitiveness of our director compensation program relative to the peer group, and identify and respond to continued changes in director compensation in light of the competitive environment. The Committee conducted its annual compensation review for 2019 on April 23, 2019.
The following table describes the components of director compensation in 2019:
Annual Retainer
 
Each director
$
90,000

Additional retainer for Presiding Director
$
30,000

Additional retainer for Chairs of Audit, Nominating and Governance, Personnel and Compensation, and Risk Committees
$
25,000

Additional retainer for Chairs of Compliance Subcommittee and Technology Subcommittee
$
25,000

Meeting Fees (Committee/Subcommittee)
 
First six meetings
$
1,500

Each additional meeting
$
2,000

Equity-Based Grants
 
Value of 1,080 deferred stock units awarded as of April 23, 2019
$
144,936

 
Deferred compensation plans. Our non-management directors may choose to defer the compensation they receive for meeting fees and retainers under our Directors Deferred Compensation Plan. Under this plan, the directors may elect to defer compensation into an account that tracks the price of PNC common stock or an interest rate defined in the plan. The accounts that track the price of PNC common stock are credited with a number of units (including fractional shares) that could have been purchased with the equivalent of PNC common stock cash dividends. We do not pay above-market or preferential earnings on any director compensation that is deferred. The directors may choose the payout date and whether the payout, which is made in cash, will be in a lump sum or up to 10 annual installment payments.
Under the Outside Directors Deferred Stock Unit Program, a subprogram of the 2016 Incentive Award Plan, each non-employee director is eligible to receive an annual grant of deferred stock units that vest immediately upon grant and are paid out in shares of PNC common stock at retirement. The deferred stock units accrue dividends with reinvestment equal to the number of units that could have been purchased with the equivalent of PNC common stock cash dividends (rounded down to the nearest whole share).
Other director benefits. We generally limit the benefits we provide to our directors, but we regularly provide the following:
Charitable matching gifts. We will match a non-employee director’s personal gifts to qualifying charities up to a limit of $5,000 per year.
Insurance policies. We pay for various insurance policies that protect directors and their families from personal loss connected with Board service.
Expenses related to Board service. We pay for expenses connected with our directors’ Board service, including travel on corporate, private or commercial aircraft, lodging, meals and incidentals.
We may also provide other incidental benefits to our directors from time to time, including tickets to cultural, social, sporting or other events and small gifts for holidays, birthdays or special occasions. In limited circumstances, we may also provide travel for directors on corporate aircraft for personal purposes, such as when a family emergency arises or a seat is available on a previously scheduled flight. We determine the value of these benefits based on the incremental cost to PNC and we include the amount in the “All Other Compensation” column of the Director compensation in 2019 table below.
Director stock ownership requirement. The Board has adopted a common stock purchase guideline for our non-management directors. Under this guideline, each director must own shares of PNC common stock (including phantom stock units) with a value of at least five times the value of his or her annual base retainer. Until a director meets this ownership level, he or she must purchase or acquire common stock or stock units that equal at least 25% of the annual retainer for that year. A director may satisfy this requirement through open market purchases or by deferring compensation into stock units under the Directors Deferred Compensation Plan described above. As of December 31, 2019, the minimum ownership threshold for directors was valued at $450,000. All of our directors serving at that time other than Linda R. Medler, who was appointed in January 2018, and Joseph Alvarado, Richard J. Harshman and Toni-Townes Whitley, who were appointed in January 2019, satisfied the ownership guideline.

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
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DIRECTOR COMPENSATION

Director compensation in 2019
For fiscal year 2019, we provided the following compensation to our non-employee directors:
Director Name
 
Fees Earned(a)
 
Stock Awards(b)
 
All Other
Compensation(c)
 
Total
Joseph Alvarado
 
$
120,000

 
$
144,936

 
$

 
$
264,936

Charles E. Bunch
 
$
131,500

 
$
144,936

 
$
91,263

 
$
367,699

Debra A. Cafaro
 
$
114,500

 
$
144,936

 
$
7,085

 
$
266,521

Marjorie Rodgers Cheshire
 
$
150,500

 
$
144,936

 
$
23,920

 
$
319,356

Andrew T. Feldstein
 
$
156,500

 
$
144,936

 
$
60,125

 
$
361,561

Richard J. Harshman
 
$
116,000

 
$
144,936

 
$
472

 
$
261,408

Daniel R. Hesse
 
$
137,500

 
$
144,936

 
$
24,142

 
$
306,578

Richard B. Kelson
 
$
154,000

 
$
144,936

 
$
80,069

 
$
379,005

Linda R. Medler
 
$
118,500

 
$
144,936

 
$
6,504

 
$
269,940

Martin Pfinsgraff
 
$
161,500

 
$
144,936

 
$
5,000

 
$
311,436

Donald J. Shepard*
 
$
49,659

 
$

 
$
105,090

 
$
154,749

Toni Townes-Whitley
 
$
96,000

 
$
144,936

 
$

 
$
240,936

Michael J. Ward
 
$
106,500

 
$
144,936

 
$
20,819

 
$
272,255

*
Mr. Shepard served as a director through April 23, 2019.
(a)
This column includes the annual retainer, additional retainers for the Presiding Director and the chairs of standing committees and subcommittees, and meeting fees earned for 2019. The amounts in this column also include the fees voluntarily deferred by certain directors under our Directors Deferred Compensation Plan, a non-qualified defined contribution plan, as follows: Debra A. Cafaro ($114,500); Marjorie Rodgers Cheshire ($60,200); Andrew T. Feldstein ($156,500); Richard J. Harshman ($27,250); Daniel R. Hesse ($137,500); Linda R. Medler ($35,550); Donald J. Shepard ($49,659); and Michael J. Ward ($106,500).
(b)
The amounts in this column reflect the grant date fair value under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (FASB ASC Topic 718) of 1,080 deferred stock units awarded to each director under our Outside Directors Deferred Stock Unit Program as of April 23, 2019, the date of grant. The grant date fair value is calculated based on the NYSE closing price of our common stock on the date of grant of $134.20 per share.
As of December 31, 2019, the non-employee directors listed in the table below had outstanding stock units in the following amounts:
Director Name
 
Cash-Payable
Stock Units
 
Stock-Payable
Stock Units
Joseph Alvarado
 

 
1,096

Charles E. Bunch
 
20,923

 
3,408

Debra A. Cafaro
 
2,009

 
2,137

Marjorie Rodgers Cheshire
 
5,897

 
3,408

Andrew T. Feldstein
 
13,801

 
3,408

Richard J. Harshman
 
194

 
1,096

Daniel R. Hesse
 
2,987

 
3,408

Richard B. Kelson
 
15,831

 
3,408

Linda R. Medler
 
455

 
2,137

Martin Pfinsgraff
 

 
2,137

Toni Townes-Whitley
 

 
1,096

Michael J. Ward
 
5,325

 
3,408

    
None of our non-employee directors had any outstanding stock options or unvested stock awards as of December 31, 2019.
(c)
This column includes income under the Directors Deferred Compensation Plan and the Outside Directors Deferred Stock Unit Plan as follows: Charles E. Bunch ($86,263); Debra A. Cafaro ($7,085); Marjorie Rodgers Cheshire ($23,920); Andrew T. Feldstein ($55,125); Richard J. Harshman ($472); Daniel R. Hesse ($19,142); Richard B. Kelson ($75,069); Linda R. Medler ($1,504); Donald J. Shepard ($105,090); and Michael J. Ward ($20,819). This column also includes the dollar amount of matching gifts made by us in 2019 to charitable organizations. No non-employee director received any incidental benefits in 2019, and there were no incremental costs to PNC for personal use of our corporate aircraft by any non-employee director in 2019.



40
THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement


COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis ("CD&A") explains our executive compensation philosophy, describes our compensation programs and reviews our compensation decisions for the following named executive officers ("NEOs"):
Name of NEO
  
Title
William S. Demchak
  
Chairman, President and Chief Executive Officer
Robert Q. Reilly
  
Executive Vice President and Chief Financial Officer
Michael P. Lyons
  
Executive Vice President, Head of Corporate & Institutional Banking and Asset Management Group
E William Parsley, III
  
Executive Vice President and Chief Operating Officer
Karen L. Larrimer
  
Executive Vice President, Head of Retail Banking and Chief Customer Officer
Where to find information in the CD&A
Information
Description
Page
2019 PNC performance
A summary of PNC's performance in 2019
41
Compensation philosophy
An overview of PNC's four compensation principles, key features of our executive compensation program and an explanation of what we do (and don't do)
42
Stakeholder engagement and impact of 2019 say-on-pay vote
A summary of last year's say-on-pay vote (over 95% in favor) and our ongoing stakeholder engagement efforts
44
Compensation program summary
An explanation of how we set total compensation targets for each NEO, and how we evaluate and pay incentive compensation — both the annual cash incentives and the long-term equity-based incentives (PSUs and RSUs) — as well as a glossary of the key performance metrics the Committee reviews
44
2019 compensation decisions
A discussion of the 2019 incentive compensation targets set for each NEO, the actual incentive compensation paid and the rationale for those compensation decisions — including specific discussions on PNC performance and key achievements of each NEO
49
Compensation policies and practices
A description of other key compensation practices, including our peer group composition, stock ownership guidelines, clawback policy and limited perquisites
55
2019 PNC performance
image66.jpg
PNC delivered a successful year in 2019. Diluted earnings per common share were $11.39, a 6% increase over 2018, and we generated record revenue of $17.8 billion while achieving positive operating leverage.
image66.jpg
We increased our net income to $5.4 billion, a 1% increase compared to 2018, and grew loans and deposits. Our return on average assets was 1.35% and our return on average common equity was 11.50%. At December 31, 2019, our tangible book value was $83.30 per common share, an increase of 10% from year-end 2018.
image66.jpg
We achieved a total shareholder return of 40.9%, which was above the peer median for 2019. Our total shareholder return has been in the top quartile of peers over each of the three-year and five-year periods ending December 31, 2019.
image66.jpg
We continued to control expenses, improving our efficiency ratio to 59% and achieving our $300 million continuous improvement program savings goal for the year.
image66.jpg
We returned $5.4 billion of capital to our shareholders in 2019 through share repurchases of $3.5 billion and common stock dividends of $1.9 billion, including raising the quarterly common stock dividend from $0.95 to $1.15 per share.
image66.jpg
We successfully expanded our middle market corporate banking business into new markets (Boston and Phoenix).
image66.jpg
We continued our retail national expansion strategy in markets outside of our existing branch network.

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
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COMPENSATION DISCUSSION AND ANALYSIS


image66.jpg
We continued to focus on the strategies of transforming the customer experience in our Retail Banking segment, enhancing product and service offerings within our Corporate & Institutional Banking segment, and launching new platforms and expanding capabilities within our Asset Management Group segment.
image66.jpg
We made additional significant progress in leveraging technology to innovate and enhance our products, services, security and processes.
image66.jpg
We continued to maintain a risk profile within our desired risk appetite.
image66.jpg
We successfully executed against our internal talent mobility strategy, developed a comprehensive accessibility strategy and met our organizational diversity objectives for the year.
On pages 49 to 54, we discuss in more detail how our 2019 performance affected our compensation decisions.
Compensation philosophy
In this section, we discuss how we view executive compensation and why we make the decisions that we do. The Personnel and Compensation Committee (referred to in this CD&A as the "Committee") relies on defined principles to help guide its executive compensation decisions:
COMPENSATION PRINCIPLES
 
Pay for performance
Provide appropriate compensation for demonstrated performance
across the enterprise
 
Create value
Align executive compensation with long-term shareholder value creation
 
Manage talent
Provide competitive compensation opportunities to attract, retain and motivate high-quality executives
 
 
Discourage excessive
risk-taking
Encourage focus on the long-term success of PNC and discourage excessive risk-taking
 
The Committee believes that the successful application of these principles requires a thoughtful program design, which includes a balanced evaluation of performance. The Committee believes that discretion, flexibility and judgment are critical to its ability to award incentive compensation that reflects near-term performance results and progress toward longer-term strategic priorities that allow PNC to create value for our shareholders. See Evaluating performance to determine incentive compensation on page 45 for more information on how the Committee balances its evaluation of performance.
Key program features
The Committee reviews and approves the compensation to be paid to our NEOs. We seek clarity and transparency in our compensation structure, using features that we believe will help to create a balanced program. While we consider the expectations of various stakeholders, we want our compensation program to achieve multiple objectives, consistent with our compensation principles. The Committee also regularly reviews the operation of our compensation program to help ensure that our objectives continue to be met.
Taken as a whole, our executive compensation program includes several complementary features:
image88.jpg
We provide incentives for performance over different time horizons (short- and long-term).
image88.jpg
We embed performance goals into a significant portion of our long-term incentives, and include a risk-based performance review that could reduce or eliminate the awards.
image88.jpg
We reward achievement against both quantitative and qualitative goals, while allowing for discretion.
image88.jpg
We connect pay to company performance, relative to our internal objectives and controls, as well as relative to the performance of a carefully selected peer group.
image88.jpg
We consider market data and trends when making pay decisions.
image88.jpg
We place a substantial majority of compensation at risk.
image88.jpg
We pay some incentive compensation in cash today, while deferring a majority of incentives for several years through potential equity-based payouts.

42
THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS


The following table illustrates some important features of our executive compensation program:
WHAT WE DO
 
WHAT WE DON’T DO
image72.jpg   
  
We pay for performance. We link most of our executive pay to performance, including financial and operating performance measures, qualitative measures and risk-based metrics.
 
û
  
We do not allow tax gross-ups. We do not provide excise tax gross-ups in our current change of control agreements and we have eliminated these gross-ups from all existing change of control agreements. We do not offer tax gross-ups on the primary perquisites that we offer.
image72.jpg   
  
We discourage excessive risk-taking. Our program discourages executives from taking inappropriate, excessive risks in several ways — including by relying on multiple performance metrics, deferring payouts over a long period, establishing clawback and forfeiture provisions, and requiring meaningful stock ownership.
 
û
  
We will not enter into substantial severance arrangements without shareholder approval. If a severance arrangement would pay more than 2.99 times base and bonus (in the year of termination), it requires shareholder approval.
image72.jpg   
  
We require executives to hold PNC stock. Our executives must hold a substantial amount of PNC stock, and this amount continues to increase as their equity awards vest.
 
û
  
We do not grant equity that accelerates upon a change in control (no “single trigger”). We require a “double trigger” for equity to vest upon a change in control — not only must the change in control occur, but the executive must be terminated.
image72.jpg   
  
We have a clawback and forfeiture policy. Our policy requires us to claw back prior incentive compensation that we awarded based on materially inaccurate performance metrics. Our policy gives us broad discretion to cancel unvested equity awards due to risk-related issues or detrimental conduct.
 
û
  
We do not reprice stock options. Although we currently do not grant stock options, we cannot reprice stock options that are out-of-the-money unless our shareholders allow us.
image72.jpg   
  
We limit perquisites. We provide limited perquisites. Our NEOs receive financial planning and tax preparation services and limited personal use of the corporate aircraft. Two NEOs are eligible to receive executive physicals under a grandfathered program.
 
û
  
We do not enter into employment agreements. We do not enter into individual employment agreements with our executive officers — they serve at the will of the Board.
image72.jpg   
  
We retain an independent compensation consultant. The Committee retains an independent compensation consultant that provides no other services to PNC.
 
 
  
 
image72.jpg   
  
We prohibit hedging, pledging or short sales of PNC securities. We do not allow any director or employee to hedge or short-sell PNC securities. We do not allow any director or executive officer to pledge PNC securities.
 
 
  
 
Regulatory expectations
As a large diversified financial services company, we must also comply with various regulatory requirements. The Board of Governors of the Federal Reserve (the "Federal Reserve") regulates PNC as a bank holding company and has provided guidance and set expectations with respect to our current compensation program. The Office of the Comptroller of the Currency (the "OCC") regulates our primary banking subsidiary, and also sets expectations for our compensation program. The Federal Reserve, the OCC and other financial industry regulatory entities, including the SEC, may provide guidance periodically on compensation matters.

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
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COMPENSATION DISCUSSION AND ANALYSIS


Stakeholder engagement and impact of 2019 say-on-pay vote
image79.jpg
  
The annual advisory vote on executive compensation ("say-on-pay") that we provide to shareholders received another year of strong support in 2019, with over 95% of our shareholders voting in favor.
image79.jpg
  
For the past several years, we have engaged in outreach efforts with certain institutional investors based on investor interest. During 2019, we discussed our corporate governance approach and executive compensation program with several of our institutional investors. This helped them to better understand our philosophy and allowed us to answer questions and discuss our public disclosures with these investors.
image79.jpg
  
The Committee considered the results of the say-on-pay vote as one factor in its compensation decisions, as well as feedback received from our shareholder outreach efforts, among the other factors discussed in this CD&A. The Committee did not recommend any changes to the executive compensation program based on the say-on-pay vote or specific feedback from shareholders.
Compensation program summary
Total compensation targets
Each NEO receives a total compensation target for the year — consisting of a base salary and an incentive compensation target (cash and equity-based awards). We generally set these targets in the first quarter of the year, or when an executive joins PNC or assumes new responsibilities.
Total compensation targets include the following components:
compsummarychartpg44.jpg 
When constructing an appropriate total compensation target for an NEO, the Committee uses a framework that is consistent with our compensation principles:
image92.jpg
 
We set targets using several factors, including market data. The Committee reviews available market data, but does not use a formula to set an executive's target compensation. The Committee evaluates many factors, including the appropriateness of the job match and market data, the responsibilities of the position and the executive’s demonstrated performance, skills and experience.
image92.jpg
 
At least 50% of compensation is equity-based and not payable for several years. The Committee believes that a significant portion of compensation should be at risk, tied to PNC stock performance and not payable, if at all, for several years. Accordingly, at the beginning of the performance year, the Committee establishes a specific minimum percentage of each executive's total compensation that will be delivered through long-term equity-based awards: 60% for our CEO and two other NEOs; and 50% for the remaining NEOs. The remainder of the annual incentive payout is delivered as a cash incentive award. Beginning with the 2020 performance year, the Committee increased the percentage of our CEO's total compensation that will be delivered through long-term equity-based awards to 65%.
image92.jpg
 
The equity-based incentive is split between two forms of awards. Each NEO generally receives a long-term incentive award in two primary forms, a Performance Share Unit (60% of the award) and a Restricted Share Unit (40% of the award). Payouts under these awards are deferred over multiple years. For information on the terms of these awards, see pages 46 to 47.

44
THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS


Evaluating performance to determine incentive compensation
The Committee believes the total compensation targets collectively provide an appropriate balance between fixed and variable amounts, measuring short-term and long-term performance, immediate and deferred payouts, and cash and equity-based awards. For information on how the 2019 incentive compensation decisions by the Committee compared to the incentive compensation targets, see page 51.
The Committee believes that an effective executive compensation program requires a comprehensive evaluation of performance across multiple categories. This evaluation generally includes a review of financial performance, how we executed against our strategic objectives, and how we manage risk, customer experience and leadership.
The Committee has not adopted a formula-driven compensation program, believing that formulas may reward short-term results or incentivize behaviors that do not serve the long-term interests of our shareholders. Metrics that rely on formulas may also be inappropriately skewed by results outside of management's control. Finally, formulas may undervalue important strategic objectives that do not translate to easily or immediately quantifiable metrics.
To the extent possible, the performance metrics reviewed by the Committee align the objectives of our management, long-term shareholders and federal banking regulators. In some cases, these stakeholders have different objectives that cannot be easily reconciled — for example, long-term shareholders seeking higher returns may be willing to tolerate more risk than a federal banking regulator would accept. That is one reason we use multiple metrics, representing achievement against a range of goals, as well as significant adjustments for risk management. The Committee does not necessarily favor one metric over another. Instead, the Committee uses these metrics to gain a comprehensive understanding of our overall performance.
Following each quarter, the Committee reviews PNC's performance with the CEO. Following the end of the year, the CEO reviews the annual performance with the Committee. During these reviews, the Committee receives a report on the following metrics:
Core Financial Performance Metrics
Capital, Risk and Expense Management Metrics
 
 
Net interest income
Tangible book value
Noninterest income
CET1 ratio
EPS growth
Loans to deposits ratio
Return on assets
Net charge-offs to average loans
Return on equity
Allowance for loan and leases losses to total loans
Efficiency ratio
Noninterest expense
 
 
Core Business Growth Metrics
Total Shareholder Return
 
 
Average loan balances
1-year
Allowance for loan and lease losses
3-year
Average interest-bearing deposits
5-year
Average noninterest-bearing deposits
 
Assets under administration
 
Mortgage origination value
 
To provide context to the Committee, we compare PNC's core financial performance metrics to our results from the prior year, our budget for the current year and our most recent performance against peers. We also adjust these metrics for certain events as described in more detail beginning on page 49.
We compare our capital, risk and expense management metrics to our results from the prior year and, to the extent available, our most recent performance against peers. We compare our core business growth metrics to our results from the prior year, our budget for the current year and, to the extent available, our most recent performance against peers. We compare our total shareholder return over one-year, three-year and five-year periods to our peers and to the S&P banking index.
In addition to these metrics, the Committee also reviews our progress against strategic objectives and our risk management performance. In determining the amount of incentive performance awards against the incentive compensation targets, the Committee may consider any of these performance metrics without assigning a particular weight to specific metrics.
Incentive compensation program
The incentive compensation target includes two components — an annual incentive award payable in cash, and a long-term incentive award that is equity-based and granted in two different forms. After the performance year ends, the Committee evaluates PNC’s aggregate performance for the year, as well as the individual performance of each NEO, and determines

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
45

COMPENSATION DISCUSSION AND ANALYSIS


an incentive compensation amount to be awarded to each executive, expressed as a percentage of the incentive compensation target set at the beginning of the performance year.
Once the Committee determines the final incentive amount, it is divided between the annual cash incentive and the long-term equity-based incentive. The long-term incentive award makes up at least 50% of the value of the total compensation awarded to the NEO.
The Committee's evaluation of 2019 performance and the related compensation decisions made by the Committee for each NEO are described on pages 49 to 54.
Long-term incentive award (equity-based). The long-term incentive (“LTI”) is equity-based and granted through two separate awards — Performance Share Units (“PSUs”) and Restricted Share Units (“RSUs”). The Committee made these grants to NEOs in the first quarter of 2020 (for 2019 performance) and in the first quarter of 2019 (for 2018 performance). These awards, and all other equity-based awards, are made under PNC’s shareholder-approved 2016 Incentive Award Plan.
The table below summarizes the material terms and conditions of the awards granted in 2020 for 2019 performance (these terms and conditions do not differ from the terms and conditions of the awards granted in 2019 for 2018 performance):
Name of Award
% of LTI Value
Vesting Schedule
Metrics
Payout Range (% of target)
Stock or Cash Payout
PSU
60%
After 3-year performance period ends
PNC's return on equity (ROE) compared to performance targets
0–150%
Stock
EPS growth rank against our peer group
RSU
40%
Annual installments over 3 years
Time-based
0–100%
Stock
PSUs. With respect to 2019 performance, in the first quarter of 2020 the Committee granted to certain of our senior executives, including all of the NEOs, PSUs that represent an opportunity to receive shares of PNC common stock. The payout is based on how PNC performs against two corporate performance metrics over a three-year performance period. Performance on these two metrics generates a percentage (the corporate performance factor). The award may be decreased if PNC fails to satisfy a risk performance metric or based on a discretionary risk performance review conducted by the Committee. After applying any risk-related performance adjustment (and if PNC satisfies the risk performance metric), the resulting percentage is applied to the number of target PSUs to determine the final number of units available for settlement. The PSUs have a maximum payout opportunity of 150% of target. Payout of any award under the PSUs also requires the satisfaction of service requirements and other conditions of the award.
The Committee also retains limited discretion to reduce or increase the size of the final payout as it deems equitable to maintain the intended economics of the award in light of changed circumstances. These circumstances are limited to external events affecting PNC or members of its peer group or its financial statements that are outside of PNC's control and not reasonably anticipated.
The two corporate performance metrics include an absolute metric (an internal PNC measurement against a target) and a relative metric (PNC performance against peers). The absolute metric is PNC's three-year average return on equity ("ROE"), as adjusted, compared to three-year ROE performance targets established in advance by the Committee. The relative metric is PNC's three-year average earnings per share ("EPS") growth, as adjusted, compared to the three-year average EPS growth of PNC peers.
The ROE metric will be calculated annually for each year of the performance period. At the end of the three-year performance period, average ROE for the performance period will be determined as the average of PNC's annual ROE for each year. In establishing the ROE performance targets, the Committee considers multiple factors, including our historical performance, budget and future growth expectations, peer results, cost of capital and analyst expectations.
The EPS growth metric will be calculated for each year of the performance period. At the end of the three-year performance period, the annual EPS growth percentages will be averaged. PNC's three-year average EPS growth will be compared to the three-year average of each member of the peer group to determine our percentile rank.
Once PNC's percentile rank relating to average EPS growth and PNC's average ROE are determined for purposes of the grants, a corporate performance factor, ranging from 0% to 150%, will be calculated using the grid below and applying bilinear interpolation. The following chart shows the corporate performance metrics for the 2020 grants (the corporate performance metrics for the 2019 grants were included in our 2019 proxy statement).

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS


 
 
 
 
Three-year average
EPS growth
(relative)
 
 
 
 
PNC percentile rank (25th percentile or below)
 
PNC percentile rank (50th percentile)
 
PNC percentile rank (75th percentile or above)
Three-year  average ROE  (absolute) 
 
13.00%
 
100.0%
 
125.0%
 
150.0%
 
12.25%
 
87.5%
 
112.5%
 
137.5%
 
11.25%
 
75.0%
 
100.0%
 
125.0%
 
10.25%
 
62.5%
 
87.5%
 
100.0%
 
8.50%
 
50.0%
 
75.0%
 
87.5%
 
Below
 
0.0%
 
25.0%
 
50.0%
When calculating our average ROE and EPS growth for this award, we will reverse the after-tax impact of our provision for credit losses — that is, we will add back the provision amount to our reported net income. We will then subtract total net charge-offs from the net income amount and adjust net income for the change in taxes. Net charge-offs represent the amount of a loan (or portion of a loan) that we remove from our balance sheet because we deem it to be uncollectible, less any recoveries. We expect this adjusted ROE and EPS growth to present a more accurate measurement of how efficiently we create profit, as it will replace a forecasted loss amount (provision) with the actual losses incurred (net charge-offs). Adjustments will also be made on an after-tax basis for the impact on PNC and the companies in our peer group, as appropriate, of items resulting from change in federal tax law, discontinued operations (as such term is used under GAAP), acquisition costs and merger integration costs, and the net impact to PNC of significant gains or losses related to certain BlackRock transactions.
RSUs. With respect to 2019 performance, in early 2020 the Committee also granted to certain of our senior executives, including all of the NEOs, RSUs that represent an opportunity to receive shares of PNC common stock. The RSUs have three-year pro rata vesting, and each of the three annual installments (tranches) will vest on the anniversary of the grant date, and require the satisfaction of service requirements and other award conditions.
Additional provisions for PSUs and RSUs. The provisions below apply to both the PSUs and the RSUs.
Risk-based performance reviews. Both the PSUs and the RSUs will be subject to risk-based performance reviews. The risk-based performance metric measures whether PNC has a Basel III common equity Tier 1 capital ratio of at least 7.0% based on current definitions and requirements ("CET1 Ratio"). The CET1 Ratio is measured as of the end of the performance year.
For PSUs, for each year during the three-year performance period that PNC fails to meet the CET1 Ratio, one-third of the target number of PSUs granted will be eligible for forfeiture. At the end of the performance period, the Committee will conduct its final performance review and reduce the number of target shares available for payout, if PNC failed to meet the CET1 Ratio for one or more years during the performance period.
With respect to the RSUs, each RSU tranche is subject to the same risk-related performance metric that will be applied to the PSUs, with all or a portion of that tranche being eligible for forfeiture. At the end of each year, the Committee will conduct a risk-based performance review and decrease the number of shares available for payout under the applicable tranche if PNC failed to meet the CET1 Ratio for the year end preceding the vesting date for that tranche.
In addition, and independent from the evaluation of the CET1 Ratio, the Committee may conduct another risk performance review for the PSUs and the RSUs. This discretionary review would generally occur in connection with a risk-related action of potentially material consequence to PNC. If the Committee exercises its discretion to conduct a risk performance review, the Committee will review and determine if a reduction to the corporate performance factor for risk performance is appropriate for the PSUs or if a reduction for risk performance is appropriate for the applicable RSU tranche.
Dividends. Both the PSUs and the RSUs will accrue cash dividend equivalents during their respective performance periods. For the PSUs, the accrued dividend equivalents will be adjusted by the same percentage as the target PSUs at the time of payout, and will then be paid out in cash. For the RSUs, the accrued dividend equivalents with respect to a tranche will pay out in cash at the same time, and will be adjusted by the same payout percentage, as the RSUs to which they relate.

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
47

COMPENSATION DISCUSSION AND ANALYSIS


Other compensation and benefits
In addition to the components included in the total compensation target outlined above, our executive compensation program also includes the following components:
Perquisites
 
 Maximize efficiency and focus on our business.
 Described in more detail beginning on page 57.
Change in Control Arrangements
 
 Provide for continuity of management in connection with a change in control.
 Described in more detail on page 76.
Health and Retirement Plans
 
 Promote health and wellness.
 Help employees achieve financial security after retirement.
Glossary of key performance metrics
The following chart defines some of the key performance metrics evaluated by the Committee, and provides a brief explanation of why we use each metric. We consider all of these metrics in our overall evaluation of executive compensation, and some of these metrics are also used to calculate payouts under the long-term incentive program, as described above.
Capital and risk metrics
  
  
Capital ratios
 
The federal banking regulators have adopted capital rules that establish risk-based and leverage capital ratios to evaluate the capital adequacy and financial strength of banking organizations. The regulatory capital rules establish certain minimum requirements for these ratios, as well as a capital conservation buffer requirement, in order to avoid limitations on capital distributions and certain discretionary incentive compensation payments. As of January 1, 2020, banking organizations (including PNC) were required to maintain a risk-based CET1 capital ratio of at least 7%, in addition to other capital ratios. PNC currently exceeds all required regulatory capital ratios.
 
 
Expense metrics
 
 
Efficiency ratio
 
The efficiency ratio helps us evaluate how efficiently we operate our business. The ratio divides our noninterest expense (such as compensation and benefits, occupancy costs, equipment, and marketing) by our revenue. In general, a smaller ratio is better. A bank’s efficiency ratio will be affected, however, by its particular mix of businesses. We calculate risk-adjusted efficiency ratio by adding our net charge-offs to our noninterest expense, which helps to show the quality of our overall credit decisions.
 
 
Profitability metrics
 
 
Earnings per share (EPS) and EPS growth
 
EPS is a common metric used by investors to evaluate the profitability of a company. It shows the earnings (net income) we make on each outstanding share of common stock. While EPS represents a specific dollar amount, EPS growth represents the percentage growth of EPS over the previous year. EPS growth helps us to compare our annual earnings strength to our peers.
Return on assets (ROA)
 
Investors often evaluate banks by their asset size, with loans and investment securities making up the largest components of assets. ROA is our annualized net income divided by our average assets and represents how efficiently we use assets to generate profit.
Return on equity (ROE)
 
Return on equity (including return on common equity) measures profitability by showing how much profit we generate (net income) with the money our shareholders have invested (equity). It shows how efficiently we deploy our investors’ funds. Return on equity measures total annual net income divided by average total shareholders’ equity. Return on common equity is our annual net income attributable to our common shareholders, divided by average common shareholders’ equity.
 
 
Revenue metrics
 
 
Net interest income
 
Net interest income measures the revenue generated from lending and other activities minus all interest expenses (such as interest paid on deposits and borrowings). It is a good indicator of performance for banks given the importance of interest-earning assets and interest-bearing sources of funds.
Noninterest income
 
Noninterest income measures the fees and other revenue we derive from our businesses (other than interest income). A healthy mix of net interest income and noninterest income provides diverse earnings streams and lessens a bank’s reliance on the interest rate environment.
 
 
Valuation metrics
 
 
Tangible book value per share
 
This financial measure takes our total tangible common shareholders’ equity (intangible assets, such as goodwill, are excluded) and divides that by the number of shares outstanding. This provides investors with an objective valuation method and allows them to compare relative values of similar companies.
Total shareholder return (TSR)
 
TSR is a common metric used to show the total returns to an investor in our common stock. Annual TSR takes into account the change in stock price from the beginning to the end of the year, as well as the reinvestment of any dividends paid throughout the year.


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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS


2019 compensation decisions
2019 total compensation targets
 
At the beginning of 2019, the Committee set the following total compensation targets for our NEOs:
 
 
William S.
Demchak
 
Robert Q.
Reilly
 
Michael P.
Lyons
 
E William
Parsley, III
 
Karen L.
Larrimer
Base salary (annualized)
 
$
1,100,000

 
$
700,000

 
$
700,000

 
$
700,000

 
$
700,000

Incentive compensation target
 
$
11,500,000

 
$
3,800,000

 
$
7,300,000

 
$
7,300,000

 
$
3,300,000

Annual cash incentive portion
 
$
3,940,000

 
$
1,550,000

 
$
2,500,000

 
$
2,500,000

 
$
1,300,000

Long-term incentive portion
 
$
7,560,000

 
$
2,250,000

 
$
4,800,000

 
$
4,800,000

 
$
2,000,000

Total compensation target
 
$
12,600,000

 
$
4,500,000

 
$
8,000,000

 
$
8,000,000

 
$
4,000,000

For the 2019 performance year, our CEO’s total compensation target fell within approximately 5% of the median total compensation target for our peer group, as adjusted for PNC’s total assets (and using actual total compensation if a peer had not disclosed targets). The total compensation targets for our other NEOs are generally aligned with the market, as adjusted for PNC's total assets. When establishing the total compensation targets for 2019, the Committee reviewed available market data with Meridian, its independent compensation consultant, and members of management.
For the 2020 performance year, the Committee increased Mr. Demchak’s total compensation target to $14,200,000. Following this increase, Mr. Demchak’s total compensation target remains within 20% of the peer group median total compensation target, as adjusted for PNC’s total assets. The Committee increased this target based on a number of factors, including Mr. Demchak’s tenure as CEO and PNC's successful long-term financial and strategic performance under his leadership. As part of this increase, the Committee also increased the percentage of pay delivered through equity, furthering the alignment of his compensation with the objectives of our long-term shareholders. Starting with the 2020 performance year, the long-term equity-based incentive component of Mr. Demchak’s compensation will be 65% (up from 60%) of his total compensation.
The Committee also increased the total compensation targets for each of Mr. Reilly and Ms. Larrimer to $4,800,000. The Committee approved these increases based on the scope of duties, performance, skills and experience of each executive, as well as changes in market information for similar executives at other financial institutions.
2019 performance
At meetings held during the first quarter of 2020, the Committee reviewed PNC's 2019 performance with the CEO, the Chief Risk Officer and other members of management. In evaluating our 2019 performance, the Committee reviewed our performance against the range of metrics described on page 48, including the selected performance metrics identified in the table below.
Selected performance metrics
 
2019 results(1)

 
2019 budget

 
2018 results(1)

 
2019 results vs. 2019 budget
 
2019 results v. 2018
results
Net interest income (in millions)
 
$9,965
 
$10,090
 
$9,721
 
-1.2%
 
+2.5%
Noninterest income (in millions)
 
$7,862
 
$7,475
 
$7,411
 
+5.2%
 
+6.1%
Diluted EPS*
 
$11.62
 
$11.51
 
$10.69
 
+1.0%
 
+8.7%
ROE*
 
11.35
%
 
11.44
%
 
11.40
 %
 
-0.8%
 
-0.4%
ROA*
 
1.38
%
 
1.41
%
 
1.41
 %
 
-2.1%
 
-2.1%
Risk-adjusted efficiency ratio*
 
62.92
%
 
62.34
%
 
62.55
 %
 
-0.9%(2)
 
-0.6%(2)
 
 
 
 
 
 
 
 
 
 
 
Net income (in millions)
 
$5,418
 
 
 
$5,346
 
 
 
 
Tangible book value per share*
 
$83.30
 
 
 
$75.42
 
 
 
 
Annual total shareholder return
 
40.9
%
 
 
 
(17.0
)%
 
 
 
 
CET1 Ratio
 
9.5
%
 
 
 
9.6
 %
 
 
 
 
*
Non-GAAP financial measure. See Annex A for a reconciliation of non-GAAP financial measures to GAAP, and for additional information about the adjustments to GAAP measures.
(1)
Some of the results include certain adjustments to PNC's performance. Based on these adjustments, the results in the table may differ from reported results under GAAP. PNC's 2019 and 2018 results included adjustments to reflect the addition of provision for credit losses and reduction of net charge-offs. When reviewing PNC's performance against peer performance, we adjust peer performance for the same types of items for which we could adjust PNC performance. We adjusted peer results for the impact of the Tax Cuts and Jobs Act (2018), various merger-related and restructuring charges (2019 and 2018), and income or loss from discontinued operations (2019 and 2018).

THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement
49

COMPENSATION DISCUSSION AND ANALYSIS


(2)
As a smaller efficiency ratio is better than a larger one, we have presented the increase in the risk-adjusted efficiency ratio as a negative change when compared to our budget and the prior year's results.
The Committee noted that PNC delivered a successful year across a range of performance criteria, including:
image88.jpg
An increase in adjusted diluted EPS (5th in the peer group), adjusted net interest income (4th in the peer group) and adjusted noninterest income (6th in the peer group) over 2018
image88.jpg
Growth in loans and deposits over the prior year
image88.jpg
Record total revenue for the second year in a row
image88.jpg
One-year TSR of 40.9% (5th in the peer group)
image88.jpg
Three-year TSR of 13.8% and five-year TSR of 14.6% (both 3rd in the peer group)
image88.jpg
Achieved the highest price to estimated 2020 earnings ratio in our peer group at year end 2019
image88.jpg
The return of $5.4 billion of capital to shareholders, including share repurchases of $3.5 billion and common stock dividends of $1.9 billion
image88.jpg
Increased the quarterly common stock dividend 21% from $0.95 to $1.15 per share
image88.jpg
Above-median performance in ROA, ROE and risk-adjusted efficiency ratio (5th in the peer group for each metric)
image88.jpg
A tangible book value per share of $83.30, representing a 10% increase over 2018
image88.jpg
Positive operating leverage (growing total revenue faster than expenses) for the year
image88.jpg
Exceeding our $300 million continuous improvement savings goal for the year
image88.jpg
Maintaining strong credit quality, with net charge-offs to average loans of 0.27% (top quartile of the peer group)
image88.jpg
Maintaining a strong capital position with a CET1 Ratio of 9.5% at year end
image88.jpg
Continuing to maintain a risk profile within PNC's desired risk appetite
image88.jpg
Meeting various human capital metrics, including the successful execution against a defined internal talent mobility strategy, developing a comprehensive accessibility strategy and meeting organizational diversity objectives
While PNC slightly underperformed its 2019 budget on net interest income, ROE, ROA and risk-adjusted efficiency ratio, the Committee noted that the budget (prepared in February 2019) assumed interest rate increases throughout the year, while the Federal Reserve instead reduced interest rates three times. Despite the challenging environment, PNC outperformed its 2019 budget on both diluted EPS and noninterest income.
The Committee reviewed these and other metrics and concluded that, in the aggregate, they reflected an excellent year in 2019, both on an absolute basis and relative to peers. At meetings held in early 2020, the Committee also reviewed PNC's performance against the strategic priorities listed below, which had previously been reviewed with the Board in 2019. The Committee concluded that management continued to drive growth across the franchise and make strategic investments to position PNC for long-term success, including the following achievements:
2019 strategic priorities
Expanding our leading banking franchise to new markets and digital platforms
image66.jpg
We successfully expanded our corporate banking business into two new markets (Boston and Phoenix).
image66.jpg
We continued the successful execution of our retail national expansion strategy with growth in deposits outside of our existing retail branch network.
image66.jpg
We increased the percentage of our deposit transactions made through ATM and mobile channels over the prior year.

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THE PNC FINANCIAL SERVICES GROUP, INC. - 2020 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS


Deepening customer relationships by delivering a superior banking experience and financial solutions
image66.jpg
We continued to focus on the strategy of transforming the customer experience in our Retail Banking segment, including simplifying products for our customers.
image66.jpg
We enhanced product and service offerings within our Corporate & Institutional Banking segment, including new payments solutions and an online paying agent platform.
Leveraging technology to innovate and enhance products, services, security and processes
image66.jpg
We continued to use intelligent automation to update our processes.
image66.jpg
We developed a new design thinking practice and training curriculum to employ a problem solving methodology to improve the customer experience.
In addition to evaluating our corporate performance based on these financial and strategic metrics, the Committee also reviewed the individual performance of each NEO. The CEO discussed the individual performance of the NEOs with the Committee and, where appropriate, discussed the performance of the lines of business or functions managed by the NEOs. The Committee approved compensation for each NEO based on an evaluation of corporate, business and individual performance. The Committee discussed compensation recommendations for the CEO with the Committee's independent compensation consultant and our Chief Human Resources Officer, but with no other members of management present. Following this discussion, the Committee approved the compensation for the CEO in an executive session.
The Committee also reviewed the CEO compensation decisions in an executive session of the independent members of the Board, with no members of management present. In that executive session, the Committee allowed time for the independent directors to provide comments or questions about the CEO's performance or compensation.
Based on a comprehensive evaluation of PNC's 2019 performance, the Committee determined that it was appropriate to award incentive compensation that was above target for each NEO and above the aggregate incentive compensation awarded to the NEOs last year. The key considerations for the Committee's compensation decisions included PNC's outstanding total shareholder return of 40.9%, excellent growth in 2019 both on an absolute basis and relative to peers (while remaining within the desired risk appetite), continued disciplined expense management, and demonstrable execution against strategic objectives.
2019 compensation decisions
The table below shows, for each NEO, the incentive compensation target for 2019 and the actual annual cash incentive and long-term incentives awarded for 2019 performance. The incentive compensation awarded for 2019 performance differs from what we disclose in the Summary compensation table on page 62. In compliance with SEC rules, the 2019 incentive compensation disclosed in the Summary compensation table includes incentive awards from two different performance years — the long-term equity-based incentives granted in 2019 (for 2018 performance) and the annual cash incentive paid in 2020 (for 2019 performance).
 
William S.
Demchak
 
Robert Q.
Reilly
 
Michael P.
Lyons
 
E William
Parsley, III
 
Karen L.
Larrimer
Incentive compensation target
$
11,500,000

 
$
3,800,000

 
$
7,300,000

 
$
7,300,000

 
$
3,300,000

 
 
 
 
 
 
 
 
 
 
Incentive compensation awarded for 2019 performance
$
16,100,000

 
$
4,300,000

 
$
8,300,000

 
$
8,150,000

 
$
4,300,000

Annual cash incentive portion
$
5,780,000

 
$
1,800,000

 
$
2,900,000

 
$
2,840,000

 
$
1,800,000

Long-term incentive portion
$
10,320,000

 
$
2,500,000

 
$
5,400,000

 
$
5,310,000

 
$
2,500,000