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Proxy statement table of contentsReference guideCompensation discussion and analysis
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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ý | Definitive Proxy Statement | |
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o | Soliciting Material under §240.14a-12 |
U.S. Bancorp | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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A message from our Fellow shareholders:
persevered. I am proud
That success is due to our
We expect to see signs of recovery throughout 2021, due in part to the possibility of additional economic stimulus efforts and greater availability of the COVID-19 vaccine. We are ready for a return to more of a normal state and expect to move quickly when that time comes. I am confident in our leadership, our strategy and our team to help us move forward and deliver results throughout the year. As always, we appreciate the trust you | ||
Sincerely, | ||
Chairman, President and Chief Executive Officer | ||
March 9, 2021 |
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A message from our Lead Director
Although our Board was able to meet in We have entered 2021 more confident than ever that U.S. Bancorp has the agility, stamina, talent and vision to provide leadership in turbulent times, to serve customers needs as new challenges and opportunities arise, and to take action on critical and strategic issues for
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Sincerely,
March 9, 2021 |
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Notice of Annual Meeting of Shareholders of U.S. Bancorp
Date and time: | Tuesday, April | |||
Place: | ||||
Items of business: | 1. | The election of the | ||
2. | The ratification of the selection of Ernst & Young LLP as our independent auditor for the | |||
3. | An advisory vote to approve the compensation of our executives disclosed in the proxy statement | |||
4. | Any other business that may properly be considered at the meeting or any adjournment of the meeting | |||
Record date: | You may vote at the meeting if you were a shareholder of record at the close of business on February | |||
Voting by proxy: | It is important that your shares be represented and voted at the meeting. You may vote your shares by Internet or telephone by no later than 11:59 p.m., Eastern time, on April | |||
Internet availability of proxy materials: | Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on April | |||
Sign up for electronic delivery: | If you received paper copies of the notice or proxy materials, we encourage you to sign up to receive all of your future proxy materials electronically, as described under "How can I receive my proxy materials by e-mail in the future?" on page 74. To express our appreciation, we will plant a tree in partnership with the Arbor Day Foundation on behalf of every retail shareholder account that registers for electronic delivery of our proxy materials. |
By order of the Board of Directors
Laura F. Bednarski
Corporate Secretary
March 6, 20189, 2021
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Proxy statement table of contents
Proxy statement highlights | ||||
Proposal 1 – Election of directors | ||||
▶ Director selection and nomination considerations | ||||
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Corporate governance | ||||
▶ Director independence | ||||
▶ Board meetings and committees | 19 | |||
▶ Board performance evaluations | 20 | |||
▶ Director education | 21 | |||
▶ Shareholder engagement | 21 | |||
▶ Conduct | 21 | |||
▶ Committee member qualifications | 21 | |||
▶ Committee responsibilities | 22 | |||
▶ Risk oversight by the Board of Directors | 24 | |||
▶ Board leadership structure | ||||
▶ Majority vote standard for election of directors | ||||
▶ Succession planning and management development | ||||
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Certain relationships and related transactions | 30 | |||
▶ Review of related person transactions | 30 | |||
▶ Related person transactions | 31 | |||
Compensation discussion and analysis | 32 | |||
Compensation committee report | ||||
Executive compensation | ||||
▶ Summary compensation table | ||||
▶ Grants of plan-based awards | ||||
▶ Outstanding equity awards | ||||
▶ Option exercises and stock vested | ||||
▶ Pension benefits | ||||
▶ Nonqualified deferred compensation | ||||
▶ Potential payments upon termination or change-in-control | ||||
▶ Pay ratio | ||||
Director compensation | ||||
Audit committee report and payment of fees to auditor | ||||
Proposal 2 – Ratification of selection of independent auditor | ||||
Proposal 3 – Advisory vote on executive compensation | ||||
Security ownership of certain beneficial owners and management | ||||
Questions and answers about the annual meeting and voting | ||||
Other matters | ||||
▶ Annual Report to Shareholders and Form 10-K | ||||
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▶ Communicating with U.S. Bancorp's Board of Directors | ||||
▶ Deadlines for nominating directors and submitting proposals | ||||
▶ Other matters for consideration | ||||
Non-GAAP financial measures |
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Proxy statement highlights |
This highlights section does not contain all of the information that you should consider before voting. Please read the entire proxy statement carefully.
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Voting matters and Board recommendations |
Proposal | Board recommendation | For more information | ||||
Proposal 1 – | The election of the | "FOR" all nominees | Page | |||
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Proposal 2 – | The ratification of the selection of Ernst & Young LLP as our independent auditor for the | "FOR" | Page | |||
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Proposal 3 – | An advisory vote to approve the compensation of our executives disclosed in the proxy statement | "FOR" | Page | |||
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The Board of Directors of U.S. Bancorp is soliciting proxies for use at the annual meeting of shareholders to be held on April 17, 2018,20, 2021, and at any adjournment or postponement of the meeting. The proxy materials were first made available to shareholders on or about March 6, 2018.9, 2021.
Your vote is important! Please cast your vote and play a part in the future of U.S. Bancorp.
Even if you plan to attend our annual meeting, in person, please cast your vote as soon as possible by:
Internet www.proxyvote.com | Telephone |
The voting deadline is 11:59 p.m., Eastern time, on April 16, 201819, 2021 (or April 12, 2018,15, 2021, for shares held in the U.S. Bank 401(k) Savings Plan).
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U.S. Bancorp (NYSE traded: USB) is the parent company of U.S. Bank National Association, the 5th largest commercial bank in the United States.
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You are invited to attend the annual meeting of shareholders, which is being held virtually. You will be able to attend the meeting, as well as vote and submit your questions during the meeting, by visiting www.virtualshareholdermeeting.com/USB2021 and logging in with the 16-digit control number found on your proxy card, voter instruction form, or notice, as applicable. We encourage all shareholders to vote and submit questions in advance of the meeting at www.proxyvote.com.
"World's Most Ethical Companies" and "Ethisphere" names and marks are registered trademarks of Ethisphere LLC.
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Proxy statement highlights |
U.S. Bancorp, with nearly 70,000 employees and $554 billion in assets as of December 31, 2020, is the parent company of U.S. Bank National Association, the fifth-largest commercial bank in the United States. The Minneapolis-based bank blends its relationship teams, branches and ATM network with digital tools that allow customers to bank when, where and how they prefer. U.S. Bank is committed to serving its millions of retail, business, wealth management, payment, commercial, corporate, and investment customers across the country and around the world as a trusted and responsible financial partner. This commitment continues to earn a spot on the Ethisphere Institute's World's Most Ethical Companies list and puts U.S. Bank in the top 5% of global companies assessed on the CDP A List for climate change action. Visit usbank.com for more.
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U.S. Bancorp 2021 Proxy Statement | | 2 |
Proxy statement highlights |
Underpinning our best-in-class financial results: |
A differentiated business mix | Through-the-cycle underwriting discipline | A strong and nimble culture |
What differentiates U.S. Bank? |
Access to our ESG Report and Community Impact Report is provided for informational purposes only and none of the ESG Report, the Community Impact Report, nor any other information included on our website is incorporated by reference or otherwise made a part of this proxy statement.
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3 | | U.S. Bancorp 2021 Proxy Statement |
Proxy statement highlights |
Director |
Name | | Age | | Director since | Primary occupation | Committee memberships | Independent | | Age | | Director Since | Primary Occupation | Committee Memberships | Independent | ||||||||||
Warner L. Baxter | 56 | 2015 | Chairman, President and Chief Executive Officer, Ameren Corporation | CP (Chair), A, E | 59 | 2015 | Chairman, President and CEO, Ameren Corporation | A, CHR | ||||||||||||||||
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Marc N. Casper | 49 | 2016 | President and Chief Executive Officer, Thermo Fisher Scientific Inc. | CP, PR | ||||||||||||||||||||
Dorothy J. Bridges | 65 | 2018 | Former Senior Vice President, Federal Reserve Bank of Minneapolis | PR, RM | ||||||||||||||||||||
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Elizabeth L. Buse | 60 | 2018 | Former CEO, Monitise plc | A, CP | ||||||||||||||||||||
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Andrew Cecere | 57 | 2017 | President and Chief Executive Officer, U.S. Bancorp | CP, RM | CEO | 60 | 2017 | Chairman, President and CEO, U.S. Bancorp | CP, RM, E | CEO | ||||||||||||||
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Arthur D. Collins, Jr. | 70 | 1996 | Retired Chairman and Chief Executive Officer, Medtronic, Inc. | C (Chair), G, E | ||||||||||||||||||||
Kimberly N. Ellison-Taylor | 50 | 2021 | Executive Director of Finance Thought Leadership, Oracle Corporation | A, PR | ||||||||||||||||||||
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Kimberly J. Harris | 53 | 2014 | President and Chief Executive Officer, Puget Energy, Inc. and Puget Sound Energy, Inc. | PR (Chair), G, E | 56 | 2014 | Retired President and CEO, Puget Energy, Inc. | G (Chair), CP, E | ||||||||||||||||
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Roland A. Hernandez | 60 | 2012 | Founding Principal and Chief Executive Officer, Hernandez Media Ventures | A (Chair), PR, E | 63 | 2012 | Founding Principal and CEO, Hernandez Media Ventures | CP (Chair), A, E | ||||||||||||||||
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Doreen Woo Ho | 70 | 2012 | Commissioner, San Francisco Port Commission | CP, RM | ||||||||||||||||||||
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Olivia F. Kirtley | 67 | 2006 | Business Consultant | RM (Chair), C, E | ||||||||||||||||||||
Olivia F. Kirtley Lead Director | 70 | 2006 | Business Consultant | CHR, G, E | ||||||||||||||||||||
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Karen S. Lynch | 55 | 2015 | President, Aetna Inc. | A, PR | 58 | 2015 | President and CEO, CVS Health Corporation | A (Chair), CHR, E | ||||||||||||||||
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Richard P. McKenney | 49 | 2017 | President and Chief Executive Officer, Unum Group | PR, RM | 52 | 2017 | President and CEO, Unum Group | RM (Chair), G, E | ||||||||||||||||
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David B. O'Maley Lead Director | 71 | 1995 | Retired Chairman, President and Chief Executive Officer, Ohio National Mutual Holdings, Inc. and Ohio National Financial Services, Inc. | C, G, E | ||||||||||||||||||||
Yusuf I. Mehdi | 54 | 2018 | Corporate Vice President, Microsoft Corporation | PR, RM | ||||||||||||||||||||
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O'dell M. Owens, M.D., M.P.H. | 70 | 1991 | President and Chief Executive Officer, Interact for Health | CP, C | ||||||||||||||||||||
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Craig D. Schnuck | 69 | 2002 | Former Chairman and Chief Executive Officer, Schnuck Markets, Inc. | G, RM | ||||||||||||||||||||
John P. Wiehoff | 59 | 2020 | Retired Chairman and CEO, C.H. Robinson Worldwide, Inc. | PR, RM | ||||||||||||||||||||
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Scott W. Wine | 50 | 2014 | Chairman and Chief Executive Officer, Polaris Industries Inc. | A, C | 53 | 2014 | CEO, CNH Industrial N.V. | CHR (Chair), A, E | ||||||||||||||||
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A | Audit Committee | PR | Public Responsibility Committee | |||
CP | Capital Planning Committee | RM | Risk Management Committee | |||
Compensation and Human Resources Committee | E | Executive Committee | ||||
G | Governance Committee | |||||
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U.S. Bancorp | | 4 |
Proxy statement highlights |
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5 | | U.S. Bancorp |
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The approval rate of our Say on Pay vote at the 2017 annual meeting was 74.7%, compared to 96.2% the prior year. Our Compensation and Human Resources Committee has been committed to understanding the shareholder concerns that drove the drop in approval rate and to making the executive compensation program more responsive to shareholder priorities.
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Proxy statement highlights |
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We have consistently outpaced our peers in return on tangible common equity (ROTCE)1
Why we use ROTCE as a key measure of corporate performance
ROTCE — which excludes goodwill and identified intangible assets — measures the performance of businesses consistently, whether they were acquired or developed internally. We believe that evaluating ROTCE over time, in conjunction with other return and profitability metrics, provides investors with a comprehensive view of how effectively a company is managing shareholders' capital.
Over each of the last 10 years, we have produced an ROTCE that has exceeded the median ROTCE for banks in our financial peer group, and in all but one of those 10 years, we produced the highest ROTCE of any peer bank.
Other measures of our strong performance in 2017
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U.S. Bancorp | | |
Proxy statement highlights |
Governance highlights |
Board independence | ||||
Strong Lead Director position: Our independent directors elect from among their ranks a Lead Director, who has broad authority and responsibility over Board governance and operation. |
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Key committees independent: Independent directors comprise 100% of each of the Audit, Compensation and Human Resources, and Governance Committees. |
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Regular executive sessions: The full Board and its standing committees each meet in executive session on a regular basis without members of management present. |
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Board accountability | ||||
Majority voting: Our directors are elected annually by a majority of votes cast in uncontested elections. |
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Board not classified: All of our directors are elected annually. |
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Shareholder rights and engagement | ||||
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Special meeting: Holders of at least 25% of our stock are able to call a special meeting of shareholders. |
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No poison pill: Our company does not maintain a shareholder rights plan. |
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Shareholder outreach: Each year we reach out to our top 50 shareholders to invite a conversation about corporate governance, executive compensation, disclosure and any other matter of interest to the shareholder. | ||||
Board effectiveness | ||||
Board, committee and individual evaluations: The Governance Committee annually conducts rigorous Board assessments, including evaluations of committees and individual directors. |
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Overboarding restrictions: |
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Retirement policy: Our Board does not have a rigid retirement policy but instead evaluates for appropriateness the | ||||
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Director/shareholder alignment | ||||
Stock ownership: Each non-employee director is |
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No hedging or pledging: Like our executive officers, our directors are prohibited from |
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Proposal 1 — Election of directors |
Proposal 1 — Election of directors
Our Board of Directors currently has 1614 members, and directors are elected annually to one-year terms. TwoThirteen of our current directors — Richard K. Davis, currently our Executive Chairman, and Douglas M. Baker, Jr. — are not standing for re-election at the 2018 annual meeting of shareholders. All of our other current directors have been nominated for election by the Board to hold office until the 20192022 annual meeting and the election of their successors. Marc N. Casper is currently serving as a director but will not stand for re-election at the 2021 annual meeting.
All of the nominees currently serve on our Board. Kimberly N. Ellison-Taylor was appointed a director by the Board and eachin January 2021. Each of themthe other nominees has previously been elected by the shareholders, except for Richard P. McKenney. Mr. McKenney was elected to the Board in October 2017.shareholders. The Board has determined that, except for Andrew Cecere, our Chairman, President and Chief Executive Officer, each nominee for election as a director at the annual meeting is independent from U.S. Bancorp as discussed later in this proxy statement under "Corporate Governance — Director Independence."
Director nominee selection process
The selection process for first-time director candidates includes the following steps:
Director candidates recommended by shareholders are given the same consideration as candidates suggested by a search firm, directors or executive officers. A shareholder seeking to recommend a prospective candidate for the Governance Committee's consideration should submit the candidate's name and sufficient written information about the candidate to permit a determination by the Governance Committee of whether the candidate meets the director selection criteria set forth in our Corporate Governance Guidelines. Recommendations should be sent to the Chair of the Governance Committee in care of the Corporate Secretary of U.S. Bancorp at the address listed on page 7975 of this proxy statement.
Our company is committed to diversity, equity and inclusion. Our Board is focused on diversity within its membership in order to benefit from a variety of perspectives, experiences and skill sets in exercising its oversight role. The Board's commitment to diversity is reflected in our Corporate Governance Guidelines, which require that any director search firm used to identify external candidates for a Board vacancy will be requested to present a diverse slate of candidates.
Director nomination considerations
Our Governance Committee continuously assesses the evolving opportunities and challenges facing our company in order to align the Board's composition with theour company's leadership needs and strategic direction. When nominating new and incumbent directors, our Governance Committee considers the following factors:
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U.S. Bancorp | | |
Proposal 1 — Election of directors |
The Governance Committee applies certain criteria to identify the skills, experiences and accounting:
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| Skill or qualification | | # | | Criteria | | Link to strategy | | |||||||||
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Financial reporting and accounting | 8 | Have specialized financial reporting qualifications, such as experience as a CPA or as the CFO of a large corporation | Are particularly well suited to overseeing the quality and integrity of our company's financial statements | ||||||||||||||
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Chief executive experience | 7 | Are current or former CEOs of publicly held or large private corporations | Have experience overseeing senior leadership, finance, marketing and execution of corporate strategy from both a management and a board perspective | ||||||||||||||
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Financial services industry expertise | 5 | Have executive-level experience in the financial services industry | Possess deep knowledge of the business challenges and opportunities facing our company | ||||||||||||||
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Risk management | 5 | Have specific risk-management expertise, gained through leadership at either a critical infrastructure company or a financial services institution | Are particularly adept at identifying and assessing the varied risks facing our company as a large financial institution | ||||||||||||||
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Corporate governance | 5 | Have significant experience serving on and leading the boards of other large corporations and/or professional experience in the corporate governance field | Help our Board fulfill its oversight function effectively | ||||||||||||||
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Technological transformation | 3 | Have executive-level experience in an industry driving technological change | Contribute expertise regarding product innovation and evolving customer expectations | ||||||||||||||
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Customer experience | 3 | Have executive-level experience in a consumer-focused industry other than financial services | Provide insight into how our company interacts with retail customers | ||||||||||||||
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Other regulated industry expertise | 2 | Have executive-level experience in a regulated industry other than financial services | Provide a valuable perspective on how an extensive regulatory framework intersects with strategic and operational planning | ||||||||||||||
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Community leadership | 1 | Has significant professional leadership experience in community service organizations and/or in public policy roles | Provides perspective on our company's connections to the communities it serves and responsible business practices | ||||||||||||||
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9 | | U.S. Bancorp 2021 Proxy Statement |
Proposal 1 — Election of directors |
The Governance Committee's decision to renominate an incumbent director is also informed by the director's past attendance, participation in the work of the Board and overall contribution to the Board, as assessed in the annual boardBoard evaluation process. The Board's commitment to refreshment can require candid conversations with individual directors when the Governance Committee has determined that a different board composition would increase the Board's effectiveness. As a result of the Board evaluation and skills-to-strategy alignment processes, directors may decide or be asked not to stand for re-election at the next annual meeting.
Each of the director nominees named below has agreed to serve as a director if elected. Proxies may not be voted for more than 1413 nominees. If, for any reason, any nominee becomes unable to serve before the election, the persons named as proxies will vote your shares for a substitute nominee selected by the Board of Directors. Alternatively, the
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Board of Directors at its option, may choose to reduce the number of directors that are nominated for election. In addition, as described below under "Corporate Governance — Majority Vote Standard for Election of Directors," each of the nominees has tendered his or her contingent resignation as a director in accordance with our Corporate Governance Guidelines, to be effective if he or she fails to receive a majority of the votes cast in an uncontested election and the Board accepts the tendered resignation.
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U.S. Bancorp 2021 Proxy Statement | | 10 |
Proposal 1 — Election of directors |
Included below is certain information that the director nominees have provided about themselves, as well as additional information that the Board considered in nominating them. Board service dates listed include service as directors of U.S. Bancorp's predecessor companies.
Committees ▶
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| Business experience: Mr. Baxter, Other public company directorships: ▶ Ameren Corporation since 2014 (Chairman)
Skills and qualifications: ▶ Chief executive experience: Mr. Baxter's experience as a current CEO of a Fortune 500 company provides valuable leadership insight to the Board. ▶ Corporate governance: Mr. Baxter has gained significant corporate governance expertise through his service as the Chairman of a large public company. ▶ Financial reporting and accounting: Through his past experience as the CFO and Controller of a large publicly traded company, Mr. Baxter brings extensive financial reporting and accounting expertise to our Board. ▶
▶ Risk management: As the current President and CEO of a company in a critical infrastructure industry, Mr. Baxter brings valuable risk management expertise to our Board of Directors. | |
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Committees
▶ Public Responsibility ▶ Risk Management | Business experience:
Skills and qualifications: ▶
▶
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Proposal 1 — Election of directors |
Committees ▶ Audit ▶ Capital Planning | Business experience: Ms. Buse, 60, is the former Chief Executive Officer of Monitise plc, a global mobile banking and payments company based in the United Kingdom. She served as Co-Chief Executive Officer and Chief Executive Officer of Monitise during 2014 and 2015, after retiring from Visa, Inc., the world's leading payment network, as Executive Vice President of Global Services, a position she held from 2013 to 2014. Ms. Buse held various senior leadership positions at Visa prior to that time, including Group President for Asia-Pacific, Central Europe, Middle East and Africa from 2010 to 2013. Other public company directorships: ▶ F5 Networks since 2020 ▶ Travelport Worldwide Ltd. from 2014 to 2019 Skills and qualifications: ▶ Financial services industry expertise: As the former CEO of Monitise and as a director for several public and private financial services technology companies, Ms. Buse gained broad financial industry expertise that is particularly relevant to our Board. | |
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Committees ▶ Capital Planning ▶ Risk Management ▶ Executive | Business experience: Mr. Cecere, Other public company directorships: ▶ Donaldson Company, Inc. since 2013 (Audit Committee) Skills and qualifications: ▶ Chief executive experience: As CEO of U.S. Bancorp, Mr. Cecere brings to all Board discussions and deliberations deep knowledge of ▶ Financial reporting and accounting: Through his service on the audit committee of a public company, as well as his past experience as CFO of U.S. Bancorp, Mr. Cecere brings valuable financial reporting and accounting expertise to our Board. ▶ Financial services industry expertise: Mr. Cecere has deep expertise in the financial services industry, gained through a career of more than ▶ Risk management: Mr. Cecere brings to our Board valuable risk management expertise gained through his work as CFO, Chief Operating Officer, and then CEO of U.S. Bancorp during the challenging regulatory and market environment of recent years. | |
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Proposal 1 — Election of directors |
Committees ▶ Audit ▶ Public Responsibility | Business experience: Ms. Ellison-Taylor, 50, is the Executive Director of Finance Thought Leadership of Oracle Corporation, a Fortune 100 company that provides products and services for enterprise information technology environments. She has served in this position since April 2019. Ms. Ellison-Taylor served as the Global Strategy Leader in the Cloud Business Group of Oracle from September 2018 to March 2019 and as the Global Strategy Director in the Financial Services Industry Group of Oracle from July 2015 until September 2018. From 2016 to 2018, she also served as the chairman of the American Institute of CPAs, the world's largest member association representing the accounting profession. From 2004 to July 2015, she served as the Executive Director and Global Leader for Health, Human and Workforce Industry solutions at Oracle. Prior to joining Oracle in 2004, she held roles at KPMG and served as the Chief Information Technology Officer for Prince George's County Government in Maryland. Skills and qualifications: ▶ Financial reporting and accounting: Ms. Ellison-Taylor's experience as a CPA and former chairman of the American Institute of CPAs provides valuable financial reporting and accounting expertise to our Board. ▶ Technological transformation: Through her current experience at a company providing innovative technology products and services, her past experience as a Chief Information Technology Officer and her current role teaching Emerging Technologies and Innovation at Carnegie Mellon University, Ms. Ellison-Taylor brings to our Board vast expertise of innovative technology that is particularly relevant to our company. | |
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Committees ▶ Chair, ▶
▶ Executive | Business experience: Ms. Harris, Other public company directorships: ▶ American Water Works Company, Inc. since 2019 (Executive Development and Compensation, and Safety, Environmental, Technology and Operations Committees) ▶ Puget Energy, Inc. and Puget Sound Energy, Inc. Skills and qualifications: ▶ Chief executive experience: Ms. Harris's experience as a ▶
▶ Risk management: As the |
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13 | | U.S. Bancorp 2021 Proxy Statement |
Proposal 1 — Election of directors |
Committees ▶ Chair, ▶
▶ Executive | Business experience: Mr. Hernandez, Other public company directorships: ▶ MGM Resorts International since 2002 ▶ Fox Corporation since 2019 (Audit Committee Chair; Nominating and Corporate Governance Committee) ▶ Take-Two Interactive Software, Inc. since 2019 (Compensation Committee) ▶ Belmond Ltd. (formerly Orient Express Hotels Ltd.) from 2013 to 2019 ▶ Vail Resorts, Inc.
Skills and qualifications: ▶
Corporate governance: ▶ Financial reporting and accounting: With his extensive past and current experience on the audit committees of the boards of |
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Committees
▶ Compensation and Human Resources ▶ Governance ▶ Executive | Business experience: Ms. Kirtley, Other public company directorships:
▶ Papa John's International, Inc. since 2003 ▶ Randgold Resources Ltd. Skills and qualifications: ▶ Corporate governance: Ms. Kirtley brings to our Board a deep understanding of a wide range of current governance issues gained by her work as a corporate governance consultant and a faculty member of The Conference Board Directors' Institute. ▶ Financial reporting and accounting:
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Proposal 1 — Election of directors |
Committees ▶ Chair, Audit ▶
▶ Executive | Business experience: Ms. Lynch, Other public company directorships: ▶ CVS Health Corporation since 2021 Skills and qualifications: ▶ Chief executive experience: Ms. Lynch brings valuable leadership expertise as a current CEO of a Fortune 10 company in the health care field during the current pandemic and economic environment. ▶ Financial reporting and accounting: Ms. Lynch's past experience as a CPA and public company auditor provides valuable financial reporting and accounting expertise to our Board. ▶ Financial services industry expertise: Ms. Lynch's ▶ Risk management: Ms. Lynch contributes valuable risk management expertise in the financial services industry through her experience leading a large health care benefits company. | |
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Committees ▶
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▶ Executive | Business experience: Mr. McKenney, Other ▶ Unum Group since 2015 Skills and qualifications: ▶ Chief executive experience: Mr. McKenney's experience as a current CEO provides valuable ▶ Financial reporting and accounting: Through his past experience as CFO of several companies, Mr. McKenney brings extensive financial reporting and accounting expertise to our Board. ▶ Financial services industry expertise: As the current President and CEO of a financial services company, Mr. McKenney brings to our Board discussions expertise in managing the business environment facing financial services companies. ▶ Risk management: Through his experience as the leader of a financial services company, Mr. McKenney brings experience identifying, assessing and managing risk exposures of large, complex financial firms. |
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Proposal 1 — Election of directors |
Committees ▶
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| Business Other public company directorships: ▶ Donaldson Company, Inc. since 2003 (Audit Committee Chair) ▶ Polaris Industries, Inc. since 2007 (Chairman; Corporate Governance and Nominating Committee Chair; Compensation Committee) ▶ C.H. Robinson Worldwide, Inc. from 2002 to 2020 Skills and qualifications: ▶
▶ Corporate governance: Mr. Wiehoff's experience as the Chairman of a public company and on the governance committee of a different public company provides valuable corporate governance expertise to our Board. ▶ Financial reporting and accounting: Mr. Wiehoff gained broad financial reporting and accounting expertise through his experience as an audit manager for a large accounting firm. ▶ Technological transformation: Through his experience |
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Proposal 1 — Election of directors |
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Committees ▶
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▶ Executive | Business experience: Mr. Wine, Other public company directorships: ▶ CNH Industrial N.V. since 2021 ▶ Polaris Industries Inc. ▶ Terex Corporation Skills and qualifications: ▶ Chief executive experience: Mr. Wine's experience as the CEO of a large international manufacturing company gives him broad and valuable experience in a business focused on growing operations within domestic and overseas markets. ▶
▶ Customer experience: Mr. Wine contributes to our Board a current perspective on retail business gained from his leadership of a consumer-focused company. |
FOR |
The Board of Directors recommends a vote "FOR" election of the 1413 director nominees to serve until the next annual meeting and the election of their successors.
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Corporate governance |
Our Board of Directors and management are dedicated to exemplary corporate governance. Good corporate governance is vital to our continued success. Our Board of Directors has adopted Corporate Governance Guidelines to provide a corporate governance framework for our directors and management to effectively pursue our objectives for the benefit of our shareholders. The Board reviews and updates these guidelines and the charters of the Board committees at least annually in response to evolving best practices and the results of annual Board and committee evaluations.
Our Corporate Governance Guidelines as well as our Code of Ethics and Business Conduct, can be found at www.usbank.com by clicking on "About Us" and thenus", "Investor Relations" and thenrelations", "Corporate Governance" and then as applicable, "Corporate Governance Guidelines" or "Code of Ethics."Governance documents."
Our Board of Directors has determined that each of the following directors, comprising all of our current non-employee directors, has no material relationship with U.S. Bancorp and is independent: Douglas M. Baker, Jr., Warner L. Baxter, Dorothy J. Bridges, Elizabeth L. Buse, Marc N. Casper, Arthur D. Collins, Jr.,Kimberly N. Ellison-Taylor, Kimberly J. Harris, Roland A. Hernandez, Doreen Woo Ho, Olivia F. Kirtley, Karen S. Lynch, David B. O'Maley, Richard P. McKenney, O'dell M. Owens, M.D., M.P.H., Craig D. SchnuckYusuf I. Mehdi, John P. Wiehoff and Scott W. Wine. Andrew Cecere is not independent because he is currently an executive officer of U.S. Bancorp,Bancorp. The Board had determined that each of Arthur D. Collins, Jr., Doreen Woo Ho, David B. O'Maley, O'dell M. Owens, M.D., M.P.H and Richard K. Davis is notCraig D. Schnuck was an independent because he is a current employee and a former executive officer of U.S. Bancorp.director prior to their retirement from the Board in April 2020.
Our Board has adopted a set of standards in our Corporate Governance Guidelines to assist it in assessing the independence of each of our non-employee directors. A director of U.S. Bancorp who meets the independence qualifications of the New York Stock Exchange (the "NYSE") listing standards may be deemed "independent" by the Board of Directors after consideration of the relationships between U.S. Bancorp or any of ourits affiliates and the director or any of his or her immediate family members or other related parties. Our Board deems the following relationships to be categorically immaterial such that they will not, by themselves, affect an independence determination:
The only relationshiprelationships between U.S. Bancorp and our directors or the directors' related interests that waswere considered by the Board when assessing the independence of our non-employee directors isare the relationshiprelationships between U.S. Bancorp and each of Microsoft Corporation, a corporation with which our director Yusuf I. Mehdi is affiliated, Oracle Corporation, a corporation with which our director Kimberly N. Ellison-Taylor is affiliated, and Schnuck Markets, Inc., a corporation with which our director Craig D. Schnuck, a former director who retired in April 2020, is affiliated.
The Board determined that this relationship,these relationships, which isare described later in this proxy statement under the heading "Certain Relationships and Related Transactions — Related Person Transactions," do not or did not impair Mr. Mehdi's, Ms. Ellison-Taylor's or Mr. Schnuck's independence becauseindependence. This determination was based on the Board's conclusion that the amounts involved in transactions between U.S. Bancorp and Microsoft, Oracle or Schnuck Markets, as the case may be, are immaterial to Microsoft's, Oracle's and Schnuck Markets' gross revenues, respectively, and that the relationshiprelationships had no unique characteristics that could influence Mr. Mehdi's, Ms. Ellison-Taylor's or Mr. Schnuck's impartial judgment as a director of U.S. Bancorp.
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U.S. Bancorp 2021 Proxy Statement | | 18 |
Corporate governance |
The Board of Directors conducts its business through meetings of the Board and the following standing committees: Audit, Capital Planning, Compensation and Human Resources, Governance, Public Responsibility, Risk Management, and Executive. The standing committees report on their deliberations and actions at each full Board meeting. Each of the standing committees has the authority to engage outside experts, advisers and counsel to the extent it considers appropriate to assist the committee in its work. Each of the standing committees has adopted and operates under a written charter. These charters can be found on our website at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Corporate Governance" and then "Board Committees."
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The independent directors meet in executive session (without the CEO or any other member of management present) at the end of each regularly scheduled Board meeting and may also meet in executive session at any other time. The Lead Director presides over these executive sessions. See "Board Leadership Structure." During each committee meeting, the committees have the opportunity to hold executive sessions without members of management present.
The Board of Directors held eighteleven meetings during 2017.2020. Each director attended at least 75% of the total meetings of the Board and Board committees on which he or she served during the year. The average attendance rate of all directors at Board and Board committee meetings in 20172020 was 99%.
Directors are expected to attend all meetings of shareholders. All directors serving at the time attended the 2020 annual meeting.
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19 | | U.S. Bancorp 2021 Proxy Statement |
Corporate governance |
Our Governance Committee conducts an annual assessment of the Board's performance to determine whether the Board, its committees and its members are functioning effectively and to identify areas for growth and improvement. The annual process is as follows:
Based on director feedback received over the last several years through this annual evaluation process and through less formal channels, including feedback provided by directors at meetings, management has adjusted the content and style of its written materials and oral presentations for committee meetings. In addition, the Governance Committee has received information about the skills and qualifications that directors would like future Board or committee members to have. Director feedback has also led to discussion of how to appropriately balance oversight responsibility for critical matters affecting our company among the Board and its committees, and how committee action is most effectively communicated to the full Board.
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U.S. Bancorp | | 20 |
Corporate governance |
We believe that itIt is of utmost importance thatimportant for our directors to continually receive additional information and training about issues that are criticalwill help them to exercising prudent oversight ofeffectively oversee the management of our company. We have implemented a robust director education program that begins with in-depth training covering our industry financial reporting, and each of our lines of business, and that continues with special education sessions throughout the year that highlight current business, industry, regulatory and governance topics presented by internal and external experts. Directors are encouraged to attend continuing training sessions offered by outside providers on topics related to general corporate governance as well as specialized areas in risk management, audit, compensation and other matters, at the company's expense.
We value the views of our investors and welcome feedback from them. Our standard engagement practice is to haveinitiate conversations about corporate governance and executive compensation matters with our largest investors each fall. We expanded our efforts in 2017 by conducting two shareholder outreach campaigns:In the fall of 2020, we reached out to our top 50 shareholders in the springand invited them to invite a conversation beforetalk to us about corporate governance, our annual meeting,COVD-19 response, executive compensation and we reached outdisclosure matters, and any other topics they wish to our top 50discuss. We also consider requests for engagement from shareholders again in the fall. The investors we invited to speak with us hold more than 50%outside of our outstanding shares, and those that accepted our invitation to speak in the spring and/or the fall hold approximately 30% of our outstanding shares.outreach effort.
All of the meetings were held telephonically. The meetings were attended by members of management from the following functions: executive compensation, investor relations, and the Corporate Secretary's office. During the spring outreach campaign, one shareholder requested inclusion of the Lead Director on the call, and Mr. O'Maley participated. We proactively offered participation by an independent director to our top ten shareholders for our fall outreach campaign, and one such shareholder accepted that offer and spoke with Mr. O'Maley alongside management; no other requests for participation by a director were made in the fall.
The primary topic of conversation for both the spring and fall conversations was our executive compensation program. In the spring, we asked shareholders about concerns they might have when considering their Say on Pay vote and provided information in response to their questions. Feedback was shared with our Compensation and Human Resources Committee. Our shareholder conversations in the fall focused on the changes we were planning to make to the program for 2018. The Compensation and Human Resources Committee was updated on messages from our shareholders in the fall, including their responses to the planned changes. Please see the Compensation Discussion and Analysis starting on page 32 for more information about the compensation messages we received from our shareholders and the program changes we have made in response.
The conversations we had with shareholders in 2017 also covered the topics of board composition, board leadership, corporate financial performance, and corporate social responsibility. Management sharedshares the feedback received on these topicsfrom shareholders with the Governance Committee, as it was received.and feedback that relates to matters that are specifically overseen by a different Board committee are also provided to those committees. The committees take the views expressed by our shareholders into consideration when making decisions. Management also considers shareholder feedback about disclosure practices when preparing our company's public filings.
We are deeply committed to maintaining the highest standards of ethical conduct that reflect our purpose and core values. In recognition of that commitment, we were named one of the World's Most Ethical Companies® in 2021 by the Ethisphere Institute.
Our Code of Ethics and Business Conduct, which is available on our website at usbank.com by clicking on "About us", "Investor relations", "Corporate Governance" and then "Governance documents", outlines the responsibilities of every employee and director to our customers, our shareholders, our community and each other.
All of the Audit Committee members meet the independence and experience requirements of the NYSE and the Securities and Exchange Commission (the "SEC"). As part of those requirements, our Board of Directors has determined that each member of the Audit Committee is independent and financially literate. The Audit Committee charter generally prohibits Audit Committee members from serving on more than two other public company audit committees. Currently, no Audit Committee member exceeds this limitation.
All of the Governance Committee members and Compensation and Human Resources Committee members also meet the independence requirements of the NYSE, including, with respect to the Compensation and Human Resources Committee members, the NYSE's independence requirements specific to members of compensation committees.
The Audit Committee charter generally prohibits Audit Committee members from serving on more than two other public company audit committees. Currently, no Audit Committee member exceeds this limitation. At all times, one or more members of our Audit Committee possess the education or experience required to qualify as an "audit committee financial expert" as defined by the SEC, and one or more members of our Risk Management Committee have experience identifying, assessing and managing the risk exposures of large, complex financial firms, in accordance with rules promulgated by the Federal Reserve Board.
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21 | | U.S. Bancorp |
Corporate governance |
The charter of each of our standing committees fully describes that committee's responsibilities. These charters can be found on our website at www.usbank.com by clicking on "About us", "Investor relations", "Corporate Governance" and then "Board committees." The following summary highlights the committees' key areas of oversight.
Committee | Primary responsibilities and membership | |
Audit Held 13 meetings during | ▶ Assisting the Board of Directors in overseeing the quality and integrity of our financial statements and the adequacy and reliability of disclosures to shareholders and bank regulatory agencies, including matters related to accounting, financial reporting and internal controls; our compliance with legal and regulatory requirements; and the qualifications, performance and independence of our independent external auditor; ▶ appointing, compensating, retaining and overseeing the work of the independent auditor; ▶ reviewing the effectiveness of systems that implement ▶ overseeing the internal audit function and approving the appointment, evaluation and compensation of the Chief Audit Executive. | |
Current members: | ||
Audit committee financial experts: | ||
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Capital Planning Held | ▶ Overseeing the capital planning and capital management processes and actions, including stress testing processes, scenarios and results; ▶ reviewing ▶ monitoring our company's capital adequacy; ▶
▶ reviewing and approving the issuance or repurchase of equity or debt securities and other significant financial transactions | |
Current members: | ||
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Compensation and Human Resources Held | ▶ Discharging the Board's responsibilities relating to our compensation programs and employee benefit plans, including reviewing and approving our executive officers' compensation; ▶ overseeing our human capital strategy and talent management program, including recruitment, evaluations and development activities; ▶ overseeing and reviewing the ▶ recommending to the Board for approval
▶ recommending to the independent directors for approval the compensation program for our non-employee directors; ▶ evaluating and discussing with the appropriate officers of our company the incentives for risk taking contained in our incentive compensation plans and ▶ evaluating the CEO's performance in light of approved goals and objectives and overseeing succession planning for executive officers other than our CEO. | |
Current members: |
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U.S. Bancorp | | 22 |
Corporate governance |
Committee | Primary responsibilities and membership | |
Governance Held |
▶ Discharging the Board's responsibilities relating to corporate governance matters, including developing and recommending to the Board a set of corporate governance guidelines; ▶
evaluating and making recommendations to the Board with respect to the size, composition and leadership of the Board and its committees, including identifying and recommending to the Board individuals qualified to become directors; ▶ overseeing succession planning for our CEO; ▶ evaluating related person transactions; ▶ conducting an annual performance evaluation of the Board, its committees and its members; ▶ overseeing our engagement with and disclosure to shareholders and other interested parties concerning corporate governance, environmental and ▶ making recommendations to the Board regarding any shareholder proposals. | |
Current members: | ||
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Public Responsibility Held | ▶ Overseeing our management of reputation risk and reviewing our company's reputation, culture and brand management activities; ▶ reviewing and considering our position and practices on matters of public interest and public responsibility and similar social issues involving our relationship with the community at large; ▶ reviewing our community reinvestment and fair and responsible banking activities ▶ reviewing public policy matters that impact our ▶ reviewing policies and ▶ overseeing our policies and programs related to other corporate ▶ reviewing our diversity, equity and inclusion strategy and progress against goals. | |
Current members: | ||
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Risk Management Held | ▶ Overseeing our overall risk management function, which governs the management of credit, interest rate, liquidity, market, ▶ reviewing and approving our company's ▶ monitoring our company's risk profile relative to its risk ▶ reviewing and evaluating significant capital expenditures and potential mergers and acquisitions. | |
Current members | ||
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Executive
| ▶ The Executive Committee has authority to exercise all powers of the Board of Directors, as permitted by law and our bylaws, between regularly scheduled Board meetings. |
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23 | | U.S. Bancorp |
Corporate governance |
Board-level oversight of risk management structure
As part of its responsibility to oversee the management, business and strategy of our company, the Board of Directors has approved a risk management frameworkRisk Management Framework that establishes governance and risk management requirements for all risk-taking activities. This framework includes company-level and business unit risk appetite statementsRisk Appetite Statements that set boundaries for the types and amount of risk that may be undertaken in pursuing business objectives and initiatives.
The Board of Directors oversees management's performance relative to the risk management framework, risk appetite statements,Risk Management Framework, Risk Appetite Statements, and other policy requirements. While management is responsible for defining the various risks facing our company, formulating risk management policies and procedures, and managing risk exposures on a day-to-day basis, ourthe Board's responsibility is to oversee our company's risk management processes by informing itself concerningabout our material risks and evaluating whether management has reasonable risk management and control processes in place to address those material risks.
The Board's risk oversight responsibility is primarily carried out through its standing committees, as follows:
In addition, the Board has created a special committee dedicated to overseeing the company's work to enhance its Bank Secrecy Act/anti-money laundering compliance program.
The Risk Management, Audit, and Capital Planning Committees meet annually in joint session to give each committee the opportunity to review the risk areas primarily overseen by the other.other, and all Board members attend this meeting to benefit from the discussion. Finally, at each meeting of the full Board of Directors, each committee gives a detailed reviewreport of the matters it discussed and conclusions it reached during its recent meetings.
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U.S. Bancorp 2021 Proxy Statement | | 24 |
Corporate governance |
The Board is very focused on the risks that cybersecurity threats pose to our company as a major financial services institution. The Board has established a comprehensive oversight framework to address those increasing risks:
The COVID-19 pandemic is profoundly affecting our customers, our employees and the communities we serve. At the onset of the pandemic we activated our crisis management plans, which are tested annually under the oversight of the Board. The Board was highly engaged in overseeing management's pandemic response, and increased its communications and interactions with management as the crisis developed and as the company adjusted its operations to provide critical financial support, through both private and government programs, to our communities.
As the crisis continues to evolve, our customers rely on us to provide essential financial services and our employees rely on us to provide a safe working environment. The Board has continued to actively monitor management's response to this crisis, which has included:
Management and the Board of Directors will continue to actively oversee our response and the risks related to the COVID-19 pandemic.
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25 | | U.S. Bancorp 2021 Proxy Statement |
Corporate governance |
Management-level risk structure underlying Board oversight
Each Board committee carries out its risk management responsibilities using reports from management containing information relevant to the risk areas under that committee's oversight. The committees must therefore be confident that an appropriate risk
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monitoring structure is in place at the management level in order to be provided accurate and useful informational reports. The management-level risk oversight structure is robust. Our company relies on comprehensive risk management processes to identify, aggregate and measure, manage, and monitor risks. This system enables the Board of Directors to establish a mutual understanding with management of the effectiveness of our company's risk management practices and capabilities, to review our company's risk exposure and to elevate certain key risks for discussion at the Board level. A framework exists to account for the introduction of emerging risks or any increase in risks routinely taken, which would either be largely controlled by the risk limits in place or identified through the frequent risk reporting that occurs throughout our company.
TheExecutive Risk Committee, which is chaired by the company'sour Chief Risk Officer and which includes the CEO and other members of the executive management team, oversees execution against the risk management frameworkRisk Management Framework and risk appetite statement.company-level Risk Appetite Statement. The Executive Risk Committee meets monthly, and more frequently when circumstances merit, to provide executive management oversight of our risk management framework,Risk Management Framework, assess appropriate levels of risk exposure and actions that may be required for identified risks to be adequately mitigated, promote effective management of all risk categories, and foster the establishment and maintenance of an effective risk culture. The Executive Risk Committee members manage large, sophisticated groups within our company that are dedicated to controlling and monitoring risk to the levels deemed appropriate by the Board of Directors and executive management. These individuals, together with our company's controller, treasurerController, Treasurer and others, also provide the Board's committees with the information the committees need and request in order to carry out their oversight responsibilities.
The Executive Risk Committee focuses on current and emerging risks, including strategic and reputational risks, directing timely and comprehensive actions. The following senior operating committees have also been established to support the work of the Executive Risk Committee, each responsible for overseeing a specified category of risk:
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U.S. Bancorp 2021 Proxy Statement | | 26 |
Corporate governance |
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The company'sOur Board and management-level committees are supported by a "three lines of defense" model for establishing effective checks and balances. The first line of defense, primarily the revenue-generating business lines, manages risks in conformity with established limits and policy requirements. In turn, business leaders and their risk officers establish programs to ensure conformity with these limits and policy requirements. The second line of defense, primarily the Chief Risk Officer's organization, but also including the policy and oversight activities of corporate support functions, translates risk appetite and strategy into actionable risk limits and policies. The second line of defense monitors the first line of defense's compliance with limits and policies, and provides reporting and escalation of emerging risks and other concerns to senior management and the Risk Management Committee of the Board of Directors. The third line of defense, internal audit, is responsible for providing the Audit Committee and senior management with independent assessment and assurance regarding the effectiveness of theour company's governance, risk management and control processes.
Board leadership policies and practices
Our Board believes that a strong, independent Board of Directors is critical to effective oversight of management. The Board regularly and carefully considers the critical issue of the best independent leadership structure for the Board, and maintains a flexible policy regarding the issue of whether the position of Chairman should be held by an independent director. At least annually, the Board reviews the Board's and company's needs and the leadership attributes of its directors and executives to determine whether our company is best served at that particular time by having the CEO or another director hold the position of Chairman.
In order to ensureprovide strong independent Board leadership, the independent directors elect a Lead Director with the substantial leadership responsibilities detailed below when the position of Chairman is not held by an independent director. The Lead Director is elected annually upon the recommendation of the Governance Committee, with the expectation that he or she will generally serve three, and may serve up to five, consecutive terms.
In addition to strong independent leadership of the full Board, each of the Audit Committee, Governance Committee, and Compensation and Human Resources Committee is composed solely of independent directors. This means that independentIndependent directors, therefore, oversee critical, risk-sensitive matters such as the quality and integrity of our financial statements; the compensation of our executive officers, including the CEO; the nomination of directors; and the evaluation of the Board, its committees, and its members. Each of the Capital Planning Committee, Risk Management Committee and Public Responsibilityremaining committees, aside from the Executive Committee, is chaired by an independent director. EachThe full Board and each of the standingits committees as well as the full Board, meet in executive session on a regular basis.
Leadership decisions in 2018Current leadership structure
Richard K. Davis has served as the Chairman of our Board since December 2007. For most of that time he was also our CEO, and since stepping down from the CEO position in April 2017, he has continued his Board leadership role as Executive Chairman. On the date of this year's annual meeting, Mr. Davis will retire from the Board and Andrew Cecere, our current President and Chief Executive Officer, and a memberbecame Chairman of the Board will become Chairmanon the date of the Board. David B. O'Maley will continue serving2018 annual meeting. Olivia F. Kirtley has served as the Board's independent Lead Director a position he has held since January 2017.
The independent directors, led by the Governance Committee, thoughtfully explored the question of what leadership structure would be most appropriate for the Board and the company upon Mr. Davis's retirement. They considered the challenges and opportunities facing the company at this time, the viewpoints of various stakeholders, and prevalent leadership practices and trends within the financial services industry and among large corporations more generally. The independent directors concluded that Mr. Cecere's leadership of the Board will provide valuable continuity of governance and that he is best suited to contribute to long-term shareholder value through this role.our 2020 annual meeting.
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Corporate governance |
More information about the Chairman and Lead Director roles and the leaders who currently are, or shortly will be, in those positions follows.
The independent directors believe that Mr. Cecere our President and Chief Executive Officer,is the member of the Board best suited to contribute to long-term shareholder value by serving as Chairman, because he has the knowledge, expertise and experience to understand and clearly articulate to the Board the opportunities and risks facing U.S. Bancorpour company and to lead discussions on important matters affecting our business.
When the Chairman is also the CEO, that person's primary responsibilities as Chairman are as follows:
Mr. O'MaleyMs. Kirtley brings a wealth of business and board leadership experience in the financial services industry and on our Board to hisher role as Lead Director.Director of our Board. As the former Chairmana corporate governance consultant and CEOfaculty member of The Conference Board Directors' Institute, she has a large financial services company, Mr. O'Maley contributes substantial financial industry and risk management expertise to the Board. Heparticular strength in understanding current corporate governance issues. She has served as Chair of the CompensationAudit and Human Resources Committee,Risk Management Committees, and she is currently a member of the Compensation and Human Resources, Governance and Governance Committees, as well as the Executive Committee.Committees.
The independent directors entrust the Lead Director with the following responsibilities and authority:
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Corporate governance |
Our bylaws provide that in uncontested elections, a nominee for director will be elected to the Board if the number of votes cast "FOR" the nominee's election exceeds the number of votes cast "AGAINST" that nominee's election. The voting standard for directors in a contested election is a plurality of the votes cast at the meeting.
Our Corporate Governance Guidelines provide that director nominees must submit a contingent resignation in writing to the Governance Committee, which becomes effective if the director fails to receive a sufficient number of votes for re-election at the annual meeting of shareholders and the Board accepts the resignation. The Board will nominate for election or re-election as director only candidates who have tendered such a contingent resignation.
Our Corporate Governance Guidelines further provide that if an incumbent director fails to receive the required vote for re-election, our Governance Committee will act within 90 days after certification of the shareholder vote to determine whether to accept the director's resignation, and will submit a recommendation for prompt consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding his or her resignation. The Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director's resignation.
If each member of the Governance Committee fails to receive the required vote in favor of his or her election in the same election, then those independent directors who did receive the required vote will appoint a committee amongst themselves to consider the resignations and recommend to the Board whether to accept them. However, if the only directors who received the required vote in the same election constitute three or fewer directors, all directors may participate in the decision regarding whether to accept the resignations.
Each director nominee named in this proxy statement has tendered an irrevocable, contingent resignation as a director in accordance with our Corporate Governance Guidelines, which resignation will become effective if he or she fails to receive the required vote for election at the annual meeting and the Board accepts his or her resignation.
A primary responsibility of the Board is planning for CEO succession, with respect to our company's CEO, as well as overseeing succession planning for other senior management positions. The Board's process targets the building of enhanced management depth and skills, considers continuity and stability within our company, and responds to our company's evolving needs and changing circumstances. To achieve these goals, the executive talent development and succession planning process is integrated into the Board's annual activities.
The Board works with the Governance Committee to evaluate a number of potential internal and external candidates as successors to the CEO, and considers emergency, temporary scenarios as well as long-term succession. The Compensation and Human Resources Committee is responsible for reviewing succession planning for executive officer positions other than the CEO. The CEO makes available to the Board his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for those individuals.
Key corporate social responsibility initiatives include The Compensation and Human Resources Committee is responsible for reviewing succession planning for executive officer positions other than the following:
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customers, vendors and community members with respect. Over 60% of our workforce is women, and we employed more than 1,700 military veterans in 2017. In the past year, we also kicked off an extensive multicultural marketing campaign, increased our spending with diverse suppliers, built strong community partnerships and signed the CEO Pledge with other Fortune 500 companies to promote diversity and inclusion across industries. Additionally, U.S. Bank Business Resource Groups, which work to bring together employees who have similar backgrounds, experiences, or interests and their allies, play a critical role in engaging employees and driving business growth. Our current Business Resource Groups include: Women, Veterans, African American, Asian, Hispanic, LGBT, Disabilities, Native American, Alumni, and our Development Network.
To learn more about our corporate social responsibility efforts, visit our website at www.usbank.com, then click on "About Us" and then "Corporate Social Responsibility."CEO.
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29 | | U.S. Bancorp |
Certain relationships and related transactions |
Certain relationships and related transactions
The Board has adopted a written Related Person Transactions Policy for the review, evaluation and approval or ratification of transactions between our company and its related persons. "Related persons" under this policy include our directors, director nominees, executive officers, holders of more than 5% of our common stock, and their respective immediate family members. Their "immediate"Immediate family members" include children, stepchildren, parents, stepparents, spouses, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and any person (other than a tenant or employee) sharing the person's household.
Except as described below, the policy requires the Governance Committee of the Board to review and evaluate and either approve or disapprove all transactions or series of transactions in which:
The Board has determined that the Governance Committee does not need to review or approve certain transactions even if the amount involved will exceed $120,000, including the following transactions:
When considering whether to approve or ratify a transaction, the Governance Committee will consider facts and circumstances that it deems relevant to its determination, including:
No director is allowed to participate in the deliberations or vote on the approval or ratification of a transaction if that director is a related person with respect to the transaction under review. On an annual basis, the Governance Committee assesses all ongoing relationships with related persons to confirm that the transactions are still appropriate.
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U.S. Bancorp | | 30 |
Certain relationships and related transactions |
During 2017,2020, U.S. Bancorp and our banking and investmentbroker-dealer subsidiaries engaged in transactions in the ordinary course of business with some of our directors, executive officers and the persons that we know beneficially owned more than 5% of our common stock on December 31, 2017,2020, and the entities with which they are associated. All loans and loan commitments and any transactions involving other financial products and services in connection with these transactions were made in the ordinary course of business, on substantially the same terms, including current interest rates and collateral, as those prevailing at the time for comparable transactions with others not related to our banking and investmentbroker-dealer subsidiaries and did not involve more than the normal risk of collectibilitycollectability or present other unfavorable features.
Transactions with entities affiliated with directors or executive officers
Our director Yusuf I. Mehdi currently serves as a Corporate Vice President of Microsoft Corporation. During 2017,2020, we paid approximately $30 million to Microsoft for software and services in the ordinary course of business, including desktop software, server and cloud enrollment services, and support and development of products. Microsoft's annual revenue was approximately $143 billion for fiscal year 2020.
Kimberly Ellison-Taylor is the Executive Director of Finance Thought Leadership for Oracle Corporation. During 2020, we paid approximately $21 million to Oracle for software, hardware and professional services, including backend database, middleware and end-user applications. Oracle's annual revenue was approximately $39 billion for fiscal year 2020.
The son of our Vice Chair, Payment Services, Shailesh M. Kotwal, is a non-executive employee in U.S. Bank's corporate and commercial banking business line, who received $137,163 in compensation during 2020. We established the compensation paid to Mr. Kotwal's son in 2020 in accordance with our employment and compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions. In addition to this compensation, he also received employee benefits generally available to all of our employees.
During 2020, U.S. Bank operated 32 branches and 6770 ATMs in grocery stores owned by Schnuck Markets, Inc., of which Craig D. Schnuck, one ofwho retired from our directors,Board in April 2020, beneficially owns approximately 13% of the outstanding capital stock. Mr. Schnuck's sister, Nancy A. Diemer, and his four brothers, Scott C. Schnuck, Todd R. Schnuck, Mark J. Schnuck and Terry E. Schnuck, each beneficially own approximately 13% of the outstanding capital stock of Schnuck Markets as well. In addition, each of Mr. Schnuck's brothers is a director of Schnuck Markets, and holds the followingthree of his brothers hold officer positions with, Schnuck Markets: Scott C. Schnuck, Chairman of the Executive Committee;positions: Todd R. Schnuck is the Chairman and Chief Executive Officer; Mark J. Schnuck is the Vice President; and Terry E. Schnuck is the Assistant Secretary. Rent and fee payments by U.S. Bank to Schnuck Markets were approximately $2.8$1.3 million in 2017.2020. The consolidated gross revenues of Schnuck Markets in 20172020 were approximately $2.7$3 billion.
These transactions were conducted at arm's length in the ordinary course of business ofby each party to the transaction.transactions. As discussed above under the heading "Corporate Governance — Director Independence," the Board of Directors has determined that this relationship isthese relationships are immaterial to Mr. Mehdi, Ms. Ellison-Taylor, and Mr. Schnuck, and that Mr. Mehdi, Ms. Ellison-Taylor and Mr. Schnuck is anwere all determined to be independent director.
Prior to joining the company as Vice Chairman, Consumer Banking Sales and Support, on July 10, 2017, Timothy A. Welsh served as a Senior Partner at McKinsey and Company, a management consulting firm. From January 1, 2017 to July 10, 2017, U.S. Bank paid McKinsey and Company approximately $800,000 for financial services consulting. Certain of the consulting services were provided by Mr. Welsh directly. The fees U.S. Bank paid to McKinsey were negotiated on an arm's length basis.directors.
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31 | | U.S. Bancorp |
Compensation discussion and analysis |
Compensation discussion and analysis
This section explains how we compensated the individuals who served as our CEO or CFO for all or a part of 20172020 and each of our three other most highly compensated executive officers for 20172020 (our named executive officers, or "NEOs"):.
The NEOs are as follows for 2020:
Reference guide |
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Philosophy and objectives of our executive compensation program | ||
Base salary | ||
Annual cash incentive awards | ||
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▶ Setting the Target Award Amounts | ||
▶ Calculating the Bonus Funding Percentage | ||
▶ Factoring in individual performance and risk sensitivity | ||
Long-term incentive awards | ||
▶ Establishing the structure of the equity awards | ||
▶ Setting the value of the equity awards | ||
▶ Selecting the performance metrics | ||
▶ Setting the levels of absolute and relative ROE for the PRSU performance matrix | ||
Decision making and policies | ||
▶ Who is involved in making executive compensation decisions | ||
▶ How executive compensation is determined | ||
▶ Compensation peer group | ||
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▶ Stock ownership and retention requirements | ||
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▶ Hedging and pledging policy | 45 | |
▶ Risk considerations |
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Compensation discussion and analysis |
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In light of the feedback received from our shareholdersProgram structure in 2017, the2020
Our Compensation and Human Resources Committee (referred to as the "Committee" in this "Compensation Discussion and Analysis" section) considers the views of our shareholders, along with industry trends and the specific strategic needs of our company, when designing the executive compensation program. The Committee considers the high support for our recent Say on Pay votes — 95% in each of the last three years — as a strong endorsement that the program is structured effectively. There were no significant structural changes made to the program in 2020.
2020 performance-based compensation results
Our corporate results were challenged by the economic effects of the COVID-19 pandemic during 2020, but the Committee did not make any pandemic-specific modifications to the structure of the NEOs' performance-based compensation awards. Any adjustments applied to the performance metric calculations were made in accordance with the terms of the awards, which had been established before COVID-19 became a pandemic, and are described in detail in this "Compensation Discussion and Analysis" section.
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On January 16, 2017,In 2020 our company once again demonstrated strong performance relative to its financial peer group in the Board of Directors appointed Mr. Cecere, who was Chief Operating Officer atmost commonly used performance metrics for the time, to become Chief Executive Officer, effective April 18, 2017. Mr. Davis, who had been serving as Chief Executive Officer, became Executive Chairman at the time of the CEO transition. The Committee's decisions with respect to CEO compensation in 2017 are summarized below. Please read the remainder of this Compensation Discussion and Analysis for more information about these decisions.
The Committee prorated Mr. Cecere's and Mr. Davis's cash compensation as follows:banking industry.
The Committee also granted each of them a long-term incentive award in February, which was structured in the same manner as the long-term incentive awards made to all other executive officers at the time: 75% of the value was delivered as PRSUs and 25% as stock options. Mr. Cecere's award had a value of $6,000,000, and Mr. Davis's award had a value of $10,000,000.
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| | U.S. Bancorp |
Compensation discussion and analysis |
In 2017 our company once again led its financial peer group in the most commonly used performance metrics for the banking industry.
Our executive compensation program incorporates many strong governance features, including the following:
What we do | |||||
We may cancel unvested equity awards and reduce cash incentive compensation for executives who demonstrate inadequate sensitivity to risk | |||||
We have a | |||||
We have meaningful stock ownership and hold-until-retirement requirements | |||||
The Committee retains an independent compensation consultant that provides no other services to our company | |||||
What we don't do | ||
We do not allow executive officers to hedge or pledge their company stock | ||
We do not have single-trigger accelerated vesting of equity awards upon a change-in-control of the company | ||
We do not provide tax gross-ups (except in relation to relocation expenses) | ||
We do not pay dividends on | ||
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U.S. Bancorp | | |
Compensation discussion and analysis |
Compensation program objective
The Committee has designedstructured the executive compensation program to create long-term shareholder value by attracting and retaining talented leaders and rewarding them for top performance. The Committee achieves this objective through a compensation packageprogram that:
U.S. Bancorp operates in a highly complex business environment, where it competes with many well-established financial institutions.institutions and, increasingly, with non-banks offering products and services that traditionally were offered only by banks. Our long-term business objective is to maximize shareholder value by consistently delivering superior returns on common equity that exceed the cost of equity. If we are successful in achieving this objective, the Committee believes the results will benefit our shareholders.
Accordingly, our executive compensation program is designed to reward our executives for achieving annual and long-term financial results that further our long-term business objective.objectives. The annual cash incentive plan rewards performance relative to corporate EPS and business line financial planspretax income targets established at the beginning of the fiscal year, and the PRSUs are earned based on achievement of ROE targets over a three-year period that directly measure the return generated by the company on its shareholders' investment. The ultimate value of both the PRSUs and RSUs is dependent on our long-term financial success as reflected in the price of U.S. Bancorp stock.
At the same time, the Committee carefully weighs the risks inherent in these programs against the goals of the programs and the company's risk appetite. Additional discussion of the risk oversight undertaken by the Committee can be found below under "Decision Making and Policies — Risk Considerations in Setting Compensation Plans and Programs.Considerations."
When determining executive compensation levels each year, the Committee considers the value of each compensation element as well as the value of the total direct compensation package. Key factors that inform pay levels include the following:
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35 | | U.S. Bancorp 2021 Proxy Statement |
Compensation discussion and analysis |
Our executive officers'NEOs' total direct compensation consists of three elements: base salary, annual cash incentive compensation, and long-term incentive compensation. In 2017, 75%compensation (60% of the value of each executive officer's long-term incentive award waswhich is delivered in PRSUs and 25% was delivered40% in stock options.RSUs). Each of these elements of total direct compensation is described in detail below. When evaluating an executive officer's compensation compared to market levels and those of other members of our company's executive officer group, the Committee considers both the value of each element and of the total direct compensation package.
Executive officersNEOs are also eligible to receive health benefits under the same plans available to our other employees, matching contributions to their U.S. Bank 401(k) Savings Plan accounts on the same basis as our other employees, and retirement benefits that are earned over their career with the company. Perquisites for executive officers are limited, consisting primarily of financial planning expenses, home security, parking and executive physicals. Executive officersNo NEO has an employment or standalone change-in-control agreement. NEOs do not receive gross-up payments for tax liabilities resulting from perquisites.
Equity awards can be accelerated on a double-trigger basis, as describedperquisites, except in "Potential Payments Upon Termination or Change-in-Control," but the executive officers are not entitledrelation to receive any cash benefits upon any employment termination scenario that does not involve death or disability.relocation expenses.
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Base salary |
Base salary is the only component of the NEO's total direct compensation not at risk. The Committee considers the salary of executive officers relative to comparable executives in our compensation peer group and will make market-based adjustments as it deems appropriate. Salaries can also be adjusted to reflect experience and tenure in a position, internal pay equity within the executive officer group, promotions or increased scope of responsibilities, individual performance, and retention considerations.
January 20172020 salary actions: WhenThe Committee made no changes to Mr. Dolan was promotedCecere's salary for 2020. Each of the other NEOs' salaries were increased by $25,000 — $80,000 to CFO in the middle of 2016, the Committee increased his base salary from $525,000 to $575,000, as reported in our 2017 proxy statement. In January 2017, the Committee further increased his base salary to $650,000 to address a significant misalignment that remained between his base salary and the salaries of chief financial officers at companies in our compensation peer group. No other NEO received a salary adjustment at that time.reflect market considerations.
NEO | Base salary paid in 2016 | Base salary set in January 2017 | | 2019 base salary | 2020 base salary | ||||||||||||||||||
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Andrew Cecere | | | $ | 800,000 | | | $ | 800,000 | | | | | $ | 1,200,000 | | | $ | 1,200,000 | | | |||
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Richard K. Davis | | | $ | 1,400,000 | | | $ | 1,400,000 | | | |||||||||||||
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Terrance R. Dolan | | | $ | 545,833 | | | $ | 650,000 | | | | | $ | 700,000 | | | $ | 725,000 | | | |||
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P.W. (Bill) Parker | | | $ | 625,000 | | | $ | 625,000 | | | |||||||||||||
Jeffry H. von Gillern | | | $ | 625,000 | | | $ | 675,000 | | | |||||||||||||
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Jeffry H. von Gillern | | | $ | 575,000 | | | $ | 575,000 | | | |||||||||||||
Timothy A. Welsh | | | $ | 575,000 | | | $ | 655,000 | | | |||||||||||||
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Gunjan Kedia | | | $ | 525,000 | | | $ | 525,000 | | | | | $ | 575,000 | | | $ | 655,000 | | | |||
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April 2017 salary actions: Effective April 18, 2017, Mr. Cecere's annual base salary increased from $800,000 to $1,000,000 to reflect the increased responsibilities tied to his promotion to CEO, and Mr. Davis's annual base salary decreased from $1,400,000 to $1,000,000 in accordance with his decreased responsibilities.
Annual cash incentive awards |
How we determine our NEOs' annual cash incentive awards
All management-level employees, including the NEOs and our other executive officers have the opportunity to earn annual cash incentive awards that reflect their responsibility levels and reward achievement of corporate and business line goals, as well as reflect individual performance and risk sensitivity.goals. The awards made to our NEOs arefor 2020 performance were granted under our 2006Annual Executive Incentive Plan (the "EIP""AEIP").
The formula for calculating each NEO'sAnnual Cash Incentive Payout consists of the following elements:
Setting the Target Award Amounts
The Target Award Amount for each executive officer is based on the officer's level of responsibility within the organization as well as market-based and internal pay equity considerations.
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U.S. Bancorp | | |
Compensation discussion and analysis |
Setting the Target Award Amounts
The Target Award Amount (% of base salary) for each executive officer is based on the officer's level of responsibility within the organization as well as market-based and internal pay equity considerations. The Target Award Amount is considered by the Committee to be an important component of total compensation that is established to provide an appropriate balance between short-term, cash-based compensation and long-term, equity-based compensation in each NEO's total compensation package.
January 20172020 target award actions: The Committee increasedmade adjustments to the Target Award Percentages in 2020 for all ofNEOs other than the NEOs except for Mr. Davis in January 2017. Mr. Cecere's Target Award Percentage was increasedCEO to reflect the growing responsibility he had been assuming in his role as President and Chief Operating Officer. The other NEOs' Target Award Percentages (other than Mr. Davis's) increased to better alignensure those executives' cashtarget compensation levels with the cash compensation levels of corresponding executives at companies inremain competitive within our compensation peer group.
NEO | | Target Award Percentage used in 2016 | | Target Award Percentage set in January 2017 | | Target Award Amount set in January 2017 | ||||
Andrew Cecere | 150 | % | 175 | % | $ | 1,400,000 | ||||
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Richard K. Davis | 225 | % | 225 | % | $ | 3,150,000 | ||||
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Terrance R. Dolan | $ | 910,000 | ||||||||
P.W. (Bill) Parker | 125 | % | 140 | % | $ | 875,000 | ||||
Jeffry H. von Gillern | $ | 805,000 | ||||||||
Gunjan Kedia | $ | 735,000 | ||||||||
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April 2017 target award actions: When Mr. Cecere became President and Chief Executive Officer in April 2017, his Target Award Percentage was increased to 225% of his new base salary of $1,000,000. The Target Award Amount adjustment was effective starting in May 2017. The Committee increased his Target Award Percentage to reflect his increased responsibilities as CEO and to more closely align his cash compensation opportunity with the cash compensation paid to CEOs at companies in our compensation peer group. The Committee also determined that Mr. Davis would not be eligible to receive an Annual Cash Incentive Award for the portion of the year that he served as Executive Chairman because he was no longer an executive officer at that time.
NEO | | Target Award Percentage set in May 2017 | | Target Award Amount set in May 2017 (annual amount) | | Blended Target Award Amount for all of 2017 | Target Award Percentage for 2019 | Target Award Percentage for 2020 | Target Award Amount for 2020 | ||||||||||||||||||
Andrew Cecere | 225 | % | $ | 2,250,000 | $ | 1,966,667 | | | 265 | % | | 265 | % | | $ | 3,180,000 | | | |||||||||
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Richard K. Davis | 0 | % | $ | 0 | $ | 1,050,000 | |||||||||||||||||||||
Terrance R. Dolan | | | 150 | % | | 180 | % | | $ | 1,305,000 | | | |||||||||||||||
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Jeffry H. von Gillern | | | | | | | $ | 1,080,000 | | | |||||||||||||||||
Timothy A. Welsh | | | 150 | % | | 160 | % | | $ | 1,048,000 | | | |||||||||||||||
Gunjan Kedia | | | | | | | $ | 1,048,000 | | | |||||||||||||||||
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Calculating the Bonus Funding Percentage
Each year, the Committee targets an aggregate amount of annual cash incentive awards to be granted to all management-level employees in each business line. The actual size of the pool that funds payouts can range from 0% to 200% of the target amount (theBonus Funding Percentage) consists of two evenly weighted factors: the Corporate Result, which is based on the company'sEPS performance, and the Business Line Result, which is based on business line's performance against earnings per share ("EPS") andline pretax income performance. Both the EPS and business line pretax income results are assessed relative to targets included in theour company's annual financial plan. The Board establishes these financial targets at the beginning of the fiscal year with the intent that they beare challenging yet reasonably achievable goals.
The Bonus Funding PercentageFor executives with leadership responsibilities for each of our revenue-producing business lines is based on the company's EPS performance compared to the target amount in the annual financial plan (weighted 35%)entire company, including Messrs. Cecere and that business line's pretax income performance compared to the target amount in the annual financial plan (weighted 65%);Dolan, or for each of the business lines in a corporate-wide support function, including Mr. von Gillern, the 65% of the Bonus Funding Percentage assigned to pretax income performanceBusiness Line Result is calculated based on the weighted average of the pretax income results of all the company's business lines. For executives who lead a revenue-producing group, including Mr. Welsh and Ms. Kedia, the Business Line Result is based on the weighted average pretax income results of the revenue-producing business lines in their group. The calculation is described in detail below.within the group he or she leads.
For purposes of computing the Bonus Funding Percentage, our standard practice is towe adjust EPS results to remove the impact of any variation in our loan loss reserve build or release on an after-tax basis, while including net charge-offs to capture actual credit losses experienced. The Committee established this approach at the beginning of 2020 in connection with our adoption of the Current Expected Credit Losses ("CECL") accounting standard in January 2020, which created significant potential accounting volatility and uncertainty with our loan loss reserve that would be dependent upon a number of judgmental factors and economic assumptions.
For business line pretax income, the results include a component for changes in the loan loss reserve driven by loan balances and changes in loan portfolio credit quality. The Committee adjusts the results, however, so that the effect of any variation in our loan loss reserve build or release driven by changes in loan portfolio credit quality is reduced by 50%. We routinely adjust to align bonus funding with changes in credit quality while reducing some of the volatility caused by judgmental factors. In previous years, before we had adopted CECL, we had made the 50% modification for both EPS in this manner, whether theand business line pretax income results.
These adjustments for loan loss reserve variation maintain accountability for credit quality and are applied consistently whether the adjustment is favorablepositive or unfavorable.negative. The Committee will also consider in any year whether EPS should be further adjusted from reported amounts to normalize any notable items; suchitems and whether other normalizing adjustments areshould be made infrequently.to business line pretax income results.
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Compensation discussion and analysis |
The Committee believes that EPS and business line pretax income are appropriate performance metrics for the executive officers' annual cash incentive awards for the following reasons:
The Bonus Funding Percentage for each business line is calculated as follows:
The Bonus Funding Percentage used for most annual cash incentive plan participants in corporate-wide support functions that do not produce revenue — theOverall Bonus Funding Percentage — is calculated slightly differently, with 35% based on the EPS Bonus Funding Result and 65% based on the weighted average Pretax Income Bonus Funding Results of all of the company's business lines.
20172020 Corporate Component resultsResult:: The Corporate Result was 58.7%, which was calculated as follows:
2020 Business Line Results:. Pretax income results, inclusive of the regular adjustments described above, ranged from 40.6% to 224.6% of target performance across our company's 23 revenue-producing business lines. These results generated Business Line Results of 0% to 200% following application of the leverage factor and the 0% floor and 200% ceiling. The company reported EPSweighted average Business Line Result of $3.51 for 2017, including notable items fromall the fourth quarter related to the estimated impacts of tax reform, a specialcompany's business lines was 63.8%.
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U.S. Bancorp | | |
Compensation discussion and analysis |
employee bonus, a charitable contribution to the U.S. Bank Foundation, and a regulatory and legal accrual. Combined, these notable items had a net positive impact of $0.09 on EPS for the year.
The Committee determined the EPS value to be used to calculate the Corporate Component of the Annual Cash Incentive Payouts for members of the executive team as follows:
2017 Business Line Component results: Pretax income results ranged from 87.2% to 134.0% of target performance across our company's 26 revenue-producing business lines, which generated Pretax Income Bonus Funding Results of 48.9% to 200.0% following application of the leverage factor and the 200% earn-out cap. The weighted average Pretax Income Bonus Funding Results of all of the company's business lines, which was used to calculate the Overall Bonus Funding Percentage, was 99.4%.
2017 bonus funding results:The Bonus Funding Percentage used to calculate the payouts for executive officers with leadership responsibilities for the entire company or for a corporate-wide support function was the Overall Bonus Funding Percentage as adjusted for the decreased EPS value applied to executive awards, or theOverall Executive Bonus Funding Percentage. Accordingly, the awards granted to Messrs. Davis, Cecere, Dolan and Parker were calculated by using the Overall Executive Bonus Funding Percentage, which was 84.4%: [(56.6% × 35%) + (99.4% × 65%)].
The Bonus Funding Percentage for each executive officer who leads a revenue-producing group, including Ms. Kedia, equaled a weighted average of the Bonus Funding Percentages of all of the business lines for which he or she has responsibility, using the decreased EPS value applied to executive awards.
The Bonus Funding Percentage for the Technology and Operations Services business line, led by Mr. von Gillern, is calculated differently from all other business lines in that 35% is based on the EPS Bonus Funding Result (decreased for Mr. von Gillern's award as with all other executive awards), 50% is based on the weighted average Pretax Income Bonus Funding Results of all of the company's revenue-producing business lines, and 15% is based on that business line's expense management performance compared to plan. The Committee considers expense management to be particularly important to Technology and Operations Services because this business line has responsibility for a significant portion of the company's overall expenditures.
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The resulting Bonus Funding Percentages were as follows for the NEOs:
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Gunjan Kedia | | 63.2% (based on weighted average pretax income results for the business lines within the Wealth Management and Investment Services | | |
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Factoring in individual performance and risk sensitivity
The Committee considers the performance of the business lines managed by each executive officer and that executive officer's individual performance during the year. Individual performance criteria for all executive officers include performance relative to risk management, leadership, employee engagement, community involvement, involvement in special projects and new initiatives, and talent management, as well as factors including credit quality and audit, regulatory and compliance results. The Bonus Funding Percentage to be applied to an executive's Target Award Amount can be adjusted downward as well as upward based on these performance reviews.
The Committee also uses a formal "risk scorecard" analysis,assessment, which can result in downward or upward adjustments to the Bonus Funding Percentage to reflect the executives' demonstrated sensitivity to risk.
The Committee believes that it is important to retain the ability to recognize outstanding individual performance and risk mitigation in determining Annual Cash Incentive Payouts, as well as to acknowledge circumstances where individual performance improvements are suggested or where inappropriate risk-taking behaviors have occurred.
Finally, the Committee reviews the level of our corporate performance relative to our financial peer group in the principal profitability measures used by the Board in assessing corporate performance, as well as in relative levels of total shareholder return, as a check on the appropriateness of the award levels in the context of these operational performance measures.
Individual performance and risk sensitivity modifications have been used sparingly
Modifications to our NEOs' Bonus Funding Percentage based on their individual performance and risk sensitivity have been used only occasionally, however, and have historically been modest in scope and have resulted in decreased award payouts more often than increased payouts.
Since 2013,scope. During the five-year period preceding 2020, NEOs collectively received increases fourtwo times and decreases two times, resulting in modifications of +4%, +5% (two awards, including one in 2017, as described below), andranging from –5% to +10%, and received decreases six times, resulting in modifications of –3%, –5% (three awards), and –7% (two awards).
20172020 individual performance and risk sensitivity actions: The Committee determined that each NEO's applicableincreased the Bonus Funding Percentage appropriately reflected that executive's performance and contributionapplicable to Ms. Kedia's Target Award Amount by 5% to recognize her significant leadership outside her normal responsibilities in supporting the companycompany's participation in 2017. Accordingly, nothe CARES Act's Paycheck Protection Program in 2020. The Committee did not make any other modifications for individual performance-based modifications were made to the NEOs' Bonus Funding Percentages.performance. Following an analysis of the NEOs' risk scorecard results, the Committee increaseddid not make any risk-based modifications to the NEOs' Bonus Funding Percentage applicable to Mr. Parker's Target Award Amount by 5% in recognition of the substantial improvementsPercentages.
2020 Annual Cash Incentive Payout results: The resulting payouts made to the company's risk management functionNEOs in March 2021 for 2020 performance under his leadership.the AEIP were as follows:
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Compensation discussion and analysis |
2017 Annual Cash Incentive Payout results: The resulting payouts made to the NEOs in February 2018 for 2017 performance under the annual cash incentive plan were as follows:
NEO | Percentage of Target Award Amount paid out | Dollar value of payout | | ||||||||
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Andrew Cecere | | | 84.4 | % | | | $ | 1,659,867 | | | |
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Richard K. Davis | | | 84.4 | % | | | $ | 886,200 | | | |
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Terrance R. Dolan | | | 84.4 | % | | | $ | 786,040 | | | |
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P.W. (Bill) Parker | | | 89.4 | % | | | $ | 782,250 | | | |
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Jeffry H. von Gillern | | | 81.4 | % | | | $ | 655,270 | | | |
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Gunjan Kedia | | | 83.2 | % | | | $ | 611,520 | | | |
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As described above, the calculation of Mr. Cecere's Annual Cash Incentive Payout of $1,659,867 was based on a blended Target Award Amount of $1,966,667 corresponding to the portions of 2017 he served as Chief Operating Officer and as CEO: [(175% × $800,000) × 84.4% for January through April] + [(225% × $1,000,000) × 84.4% for May through December].
The calculation of Mr. Davis's Annual Cash Incentive Payout of $886,200 was based on a prorated Target Award Amount applicable to the portion of 2017 he served as CEO, with no payout for the time he served as Executive Chairman: (225% × $1,400,000) × 84.4% for January through April.
Establishing the structure of the equity awards
Long-term, stock-based compensation represents the most significant portion of our NEOs' total compensation package. In 2020, 67% of our CEO's target total direct compensation and 60% of our other NEOs' target total direct compensation (on average) consisted of equity awards. The Committee grants the executive officersuses equity awards to align theirthe NEOs' interests with those of long-term shareholders. As in each of
The Committee grants equity awards to executive officers under the last several years, 75%U.S. Bancorp 2015 Stock Incentive Plan. In 2020, 60% of the value of each NEO'sexecutive officer's long-term incentive award in 2017 was granted in the form of PRSUs that will cliff vest (if earned) on the third anniversary of the grant date, following a three-year performance period, and 25%40% was granted in the form of stock options. These awards were granted under the U.S. Bancorp 2015 Stock Incentive Plan.
The PRSUs granted in 2017 were earned according to a formula tied to our one-year ROE performance, as described in detail below. Both the earned PRSUs and stock options granted in 2017RSUs that will vest ratably over four years from the grant date, and the PRSU awards will be settled in shares of our common stock.three years. Cash dividends on unvested PRSUs are accrued during the performance period but accrued dividends are only paid after the end of the performance periodat vesting on shares actually earned, if any, by the executives.
Based on feedback we received though our shareholder engagement process,The mix of performance-based and time-based equity vehicles, with the Committee structured the long-term incentive awards granted in February 2018 differently: 60%mix more heavily weighted toward performance-based equity, is designed to motivate achievement of the value for each NEO was granted as PRSUs that will be earned over a three-year period (instead of a one-year period)financial objectives while encouraging retention and will cliff vest at the end of the performance period, and 40% were granted as restricted stock units that will vest ratably over three years. The Committee replaced stock options with restricted stock units to reduce the program's risk profile while providing increased ownership and retention value.ownership.
Setting the value of the equity awards
Each year in January, the Committee determines the dollar value of the long-term incentive awards to be granted to the executive officers, and the grants are made on a pre-determined date in mid-February.February or March. In setting each year's award amounts, the Committee considers the relative market position of the awards and the total compensation for each executive, the proportion of each executive's total direct compensation to be delivered as a long-term incentive award, internal pay equity, executive performance and changes in responsibility, retention considerations, and corporate performance.
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20172020 equity value actions: The Committee increased the value of equitythe long-term incentive awards granted to the NEOs in 2017 over2020 to reward strong performance during 2019 and to align those NEOs' total compensation more closely with the prior year's values as follows (values reflect the fair market value of the award on the date of grant):opportunities available to executives in similar roles at companies in our peer group.
NEO | Value of equity awards granted in 2016 | Value of equity awards granted in 2017 | | Value of equity awards granted in 2019 | Value of equity awards granted in 2020 | ||||||||||||||||||
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Andrew Cecere | | | $ | 5,775,000 | | | $ | 6,000,000 | | | | | $ | 8,100,000 | | | $ | 8,600,000 | | | |||
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Richard K. Davis | | | $ | 8,525,000 | | | $ | 10,000,000 | | | |||||||||||||
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Terrance R. Dolan | | | $ | 1,640,000 | | | $ | 3,100,000 | | | | | $ | 3,500,000 | | | $ | 3,600,000 | | | |||
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P.W. (Bill) Parker | | | $ | 2,420,000 | | | $ | 2,500,000 | | | |||||||||||||
Jeffry H. von Gillern | | | $ | 2,500,000 | | | $ | 2,750,000 | | | |||||||||||||
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Jeffry H. von Gillern | | | $ | 1,760,000 | | | $ | 2,300,000 | | | |||||||||||||
Timothy A. Welsh | | | $ | 2,100,000 | | | $ | 2,300,000 | | | |||||||||||||
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Gunjan Kedia | | | $ | 1,400,000 | | | $ | 1,600,000 | | | | | $ | 2,100,000 | | | $ | 2,300,000 | | | |||
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The Committee substantially increased the value of Mr. Dolan's equity awards to address a significant misalignment with his total compensation level compared to that of chief financial officers at companies in our compensation peer group, and to provide appropriate retention. The increases to the other NEOs' award levels correspond to adjustments that continue to align their long-term incentive opportunities with market levels.
Selecting the performance metrics and performance period for the PRSU awards
The number of PRSUs earned is determined according to a formula that uses a comparison of our actual ROE result to target results,target-level ROE, as well as our ROE performance relative to that of our peer financial institutions. ROE is used as the performance metric because:
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U.S. Bancorp 2021 Proxy Statement | | 40 |
Compensation discussion and analysis |
The Committee uses a performance matrix, reflectingillustrated below, that reflects both the absolute and relative ROE scales to determine the final PRSU award amounts earned during the performance period. Target levels of both absolute and relative ROE are established, with maximum and minimum levels also identified. Earn-out amounts are determined using interpolation.
The Committee believes that the PRSU earn-out structure provides an important balance between rewarding the achievement of absolute performance goals and strong relative performance. Executives are not rewarded for poor performance simply because members of our financial peer group have even worse performance, nor are they rewarded for exceeding expectations if performance relative to peers is substandard. In addition, by using a sliding scale for each ROE performance metric, the matrix takes into account the amount of variance from the ROE target and peer group ROE results, rewarding performance while mitigating the incentive for excessive risk taking that may result from an "all-or-nothing" award.
The PRSUs granted in 2017 used a one-year performance period because the Committee believed that a short performance period would provide executives a clear line of sight linking pay and performance, and the longer vesting period would require subsequent service to receive the benefit of the awards. Based on the feedback received from our shareholders, however, the Committee changed the performance period to three years for the PRSUs granted in February 2018 to further align pay with long-term performance.
Setting the levels of absolute and relative ROE for the PRSU performance matrix
The one-year absolute ROE target selected for the 2017 PRSU awards aligns with the company's annual financial plan, which was approved by the company's Board of Directors. The ROE goal the company sets for itself in its annual
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financial plan is aggressive; over the last several years, the company's ROE goal has been higher than the actual performance of all of the members of its financial peer group for the corresponding year. The Committee believes it is beneficial for the company's stakeholders that the executive team be challenged to achieve a reasonably attainable but stretch level of performance. This goal-setting approach might appropriately require a target level reduction in years when external pressures on the performance metric are expected to push it downward, an approach the Committee views more favorably than setting a lower level of performance as the target with the expectation that it cannot be lowered in future years.
As part of the executive compensation program changes we made beginning in 2018, the absolute ROE target will now be consistent with our long-range financial goal as provided to investors. The Committee made this change to provide additional consistency and transparency about our goal setting. The target and maximum ROE levels selected by the Committee for the three-year performance period contained in the PRSU awards granted in February 2018 wereeach year are based on the ROE range included in the company's profitability goals announced at its most recentthe last Investor Day conference held before the grant or changes to profitability goals that are publicly communicated prior to the grant date. ROE may be adjusted from reported results to normalize the effect of significant notable items, e.g. merger-related changes in September 2016. While the Investor Day presentation providedevent there were an acquisition integration occuring. Beginning in 2020, ROE rangeresults include adjustments related to the impacts of 13.5%the CECL accounting standard. The adjustments eliminate the volatility of the accounting standard related to 16.5%,changes in the allowance for credit losses, while including net charge-offs related to actual credit losses experienced. These CECL-related adjustments to the ROE calculation for the PRSU awards were adopted by the Committee adjustedin January 2020, when we adopted the goals contained in the PRSUs upward to reflect the impact tax reform is expected to have on the company's ROE results over the awards' three-year performance period.accounting standard, and before COVID-19 became a pandemic.
The Committee also establishedestablishes a sliding scale of ROE achieved relative to the ROE of our financial peer group, which consists of the following institutions: Bank of America, BB&T,Citizens, Fifth Third, J.P. Morgan, KeyCorp, PNC, Regions, SunTrust,Truist Financial, and Wells Fargo. This group is used by the company for financial comparison purposes because these companies, along with U.S. Bancorp, are the ten largest financial services companies based in the United States that provide broadly comparable retail and commercial banking services. PerformanceThe ROE performance matrix provides that performance above the median of peers will result in increases inincrease the award payout otherwise earned based on our absolute ROE result, while performance below the median of peers will result in decreases inreduce the award payout.
2017The company's absolute and relative ROE results for each of the three years within the performance setting actions: The Committee establishedperiod are applied to the following performance matrix atto produce a percentage of target PRSUs result for that year. At the timeend of the 2017 PRSU awards were granted, providingperformance period, the percentage results for the actual award amountsthree years will be averaged to range from 0%determine the percentage of target PRSUs earned and eligible to 125%vest upon the third anniversary of the target number of units in each award.
The target level of absolute ROE for 2017 (13.5%) was set slightly higher than the actual level of ROE performance in 2016 (13.4%). When the company established the ROE target to be included in its annual financial plan for 2017, which was approved by the Board and then adopted by the Committee when setting the target level of absolute ROE for the PRSU awards, it continued to be aggressive relative to its peer financial institutions but also mindful of external pressures on that performance metric. The industry pressures on ROE over the past several years have included revenue headwinds due to persistent low interest rates and regulatory limitations on fee revenues, increased regulatory costs, and higher liquidity and capital requirements.
grant date.
2017 ROE performance results:Results of PRSUs earned 2018-2020: In accordance withFebruary 2018, PRSUs were granted for the terms of2018-2020 performance period using the PRSU award agreements, the Committee determined our absolutefollowing ROE performance based on the result included in our 2017 audited financial statements.Our reported ROE result in 2017 was 13.8%, compared to thetarget absolute level of 13.5%. In relation to its financial peer group,U.S. Bancorp's 2017 ROE ranked above the 75th percentile. The final calculation resulted in the number of PRSUs earned being equal to113.4% of the target number of units granted.matrix:
The number of units earned by each NEO for 2017 performance, as well as the number of stock options granted to each NEO in 2017, are reported in the Outstanding Equity Awards at 2017 Fiscal Year-End table later in this proxy statement.
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| | U.S. Bancorp |
Compensation discussion and analysis |
The absolute and relative ROE performance during the three-year period was as follows:
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Year | | ROE1 | | Peer group ranking | | Earn out percentage | ||||||||||
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2018 | 15.4% | At or above 75th %ile | 132.5% | |||||||||||||
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2019 | 14.1% | At or above 75th %ile | 120.6% | |||||||||||||
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2020 | 13.0% | At or above 75th %ile | 108.4% | |||||||||||||
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| Final earn out percentage for PRSU awards granted in 2018 | | 120.5% | | ||||||||||||
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Based on performance through the end of 2020, 120.5% of the target number of units that had been granted in February 2018 were earned, and those units vested on the third anniversary of their grant date. The number of units earned by each NEO for performance during the 2018-2020 period is reported in the Outstanding Equity Awards at 2020 Fiscal Year-End table later in this proxy statement.
The ROE performance matrix applicable to PRSUs granted in early 2020 for the 2020-2022 performance period is consistent with the one set forth above for the 2018-2020 performance period.
Decision making and policies |
Who is involved in making executive compensation decisions
Executive compensation policy, practices and amounts are determined by the Committee, which is composed entirely of independent outside directors. The Committee has responsibility for setting each component of compensation for our CEO with the assistance and guidance of its independent compensation consultant. The Committee hadhas retained Frederic W. Cook & Co., Inc.,Meridian Compensation Partners, LLC ("Meridian") as its independent compensation consultant through the first part of 2017, and then engaged Meridian Compensation Partners, LLC, for the second half of the year.consultant.
Our CEO and senior members of our human resources group, alsofunction, with the assistance of the compensation consultant,Meridian, develop initial recommendations for all components of compensation for the executive officers other than the CEO and present their recommendations to the Committee for review and approval. The Committee also annually reviews the total amount and types of compensation paid to non-employee members of the Board of Directors and recommends any changes to the independent directors for approval.
The Committee retains an independent compensation consultant to:
Neither Frederic W. Cook & Co., Inc., nor Meridian Compensation Partners, LLC,does not provide any other services to our company. Following a review of the relationship between the company and each of these consultantsits independent compensation consultant in 2017,2020, the Committee concluded that theirMeridian's work for the Committee does not raise any conflicts of interest.
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U.S. Bancorp | | |
Compensation discussion and analysis |
How executive compensation is determined
The executive compensation outcomes described in the preceding pages are the culmination of a year's worth of analysis and decision makingdecisions made by the Committee, as follows:
January–February | ||||
Review the company's recent performance in several key financial metrics and compare it to the performance of its peer institutions in the financial services industry |
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Determine the cash incentive payouts to be made under the |
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Calculate the percentage of target PRSU awards earned for the last completed performance period |
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Set the |
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Establish the structure and performance targets for the |
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Set the structure and amount of the executive officers' long-term incentive awards |
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Establish performance targets for the upcoming PRSU awards and |
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Consider risks arising from the company's incentive compensation plans (see below for more information about the risk consideration process) |
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April | ||||
Review total realizable compensation |
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Review Say on Pay voting recommendations from proxy advisors and consider the results of the shareholder vote |
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July–October | ||||
Review comparative compensation information from peer institutions (see below for more information about our compensation peer group), as well as a larger group of diversified financial companies |
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Review market information and recommend non-employee director compensation for approval by the independent directors |
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December | ||||
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Establish design of executive compensation program for the upcoming year and make preliminary decisions about target levels of compensation |
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Ongoing | ||||
Review the company's year-to-date financial performance relative to the targets included in its incentive compensation plans |
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Evaluate the structure of the executive compensation program and assess its effectiveness in creating long-term shareholder value |
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| | U.S. Bancorp |
Compensation discussion and analysis |
For several years, theThe Committee does not "benchmark" pay to a particular market level but instead aims to establish compensation that is at a competitive level within a reasonable range of median amounts, taking into consideration an NEO's performance, tenure in his or her position, and comparability of his or her role with corresponding roles in peer institutions. The Committee used the same peerfollowing group of financial services companies to perform market checks onwhen setting the level of compensation of our executive officers that management and the Board use for financial performance comparisons. The Committee altered this compensation peer group in 2017 by removing Regions Financial Corporation and KeyCorp and adding Citigroup and Capital One Financial.
The Board does not use Citigroup and Capital One Financial for financial comparison purposes because both companies have a business mix that is very different from our company's, but the Committee decided to adopt the different peer group for compensation purposes because it believes that these two institutions are more meaningful competitors2020 (listed in the marketplace for executive talent than are the two smallest institutions in our financial peer group. The Committee continues to use the financial peer group (which had been the compensation peer group from 2009 through 2016) to measure the company's absolute ROE performance in the PRSU earn-out matrix.
As shown below, U.S. Bancorp occupies a median position in its compensation peer group with respect to significant financial metrics.descending order of assets held at December 31, 2020):
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Company name | | Assets1 ($ in millions) | | Market capitalization1 ($ in millions) | | Revenue2 ($ in millions) | ||||
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JPMorgan Chase & Co. | $3,386,071 | $387,335 | $102,063 | |||||||
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Bank of America Corporation | $2,819,627 | $262,205 | $74,208 | |||||||
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Citigroup Inc. | $2,260,321 | $128,374 | $58,369 | |||||||
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Wells Fargo & Company | $1,955,163 | $124,779 | $58,211 | |||||||
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Truist Financial Corporation | $509,228 | $64,615 | $20,370 | |||||||
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The PNC Financial Services Group, Inc. | $466,679 | $63,131 | $13,726 | |||||||
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Capital One Financial Corporation | $421,602 | $45,214 | $18,259 | |||||||
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Fifth Third Bancorp | $204,680 | $19,641 | $6,515 | |||||||
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Citizens Financial Group, Inc. | $183,349 | $15,272 | $5,289 | |||||||
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U.S. Bancorp | | $553,905 | | $70,185 | | $19,420 | ||||
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U.S. Bancorp percentile ranking | | 50% | | 51% | | 44% | ||||
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The Committee selects companies for the compensation peer group that it believes represent our most meaningful competitors in the marketplace for executive talent. The Committee also reviews and uses compensation data from a large group of diversified financial services companies as an additional point of comparison. As a result of this ongoing analysis and resulting compensation adjustments, our executive compensation positioning is generally within market range, recognizing that several positions are unique to our company and do not have clear market comparisons.
Stock ownership and retention requirements
The Committee believes that ownership of our common stock by our executive officers directly aligns their interests with those of our other shareholders and helps balance the incentives for risk taking inherent in equity-based awards. We require our executives to hold significant amounts of company stock. We also require that they retain until retirement a substantial portion of their vested stock awards (net of shares withheld to satisfy tax obligations), even after minimum ownership levels have been met. The current ownership and retention requirements are as follows:
Vested PRSUs, all RSUs and stock received and held after exercise of stock options are included in determining whether an executive officer satisfies his or her applicable minimum ownership level. As of December 31, 2020, all our executive officers were in compliance with the stock ownership and retention requirements except for one, whose holdings fell slightly below the applicable minimum level due to the reduced price of our stock.
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U.S. Bancorp | | |
Compensation discussion and analysis |
Clawback and forfeiture provisions applicable to executive awards
Change-in-control provisions for executive officers
The company's Insider Trading Policy prohibits executive officers and directors of the company from hedging shares of the company's common stock, including, but not limited to, engaging in short sales or trading in puts, calls, covered calls or other derivative products. The policy also prohibits executive officers and directors from pledging shares of the company's common stock as collateral for a loan.
Risk considerations in setting compensation plans and programs
Overview: Prudent risk taking is an integral part of any business strategy, and our compensation program is not intended to encourage management decisions that completely eliminate risk. Rather, the combination of various elements in our program is designed to encourage appropriate sensitivity to risk and mitigate the potential to reward risk taking that may produce short-term results that appear in isolation to be favorable, but that may undermine the successful execution of our long-term business strategy and negatively affect shareholder value. Our compensation practices are also designed to reward performance while maintaining our core commitment to customer service and ethical principles. Together with the company's processes for strategic planning, its internal control over financial reporting and other financial and compliance policies and practices, the design of our compensation program helps to discourage management actions that demonstrate insensitivity to risk.
Role of the Incentive Review Committee:management: As a large financial services company, we have been subject to a continuing horizontal industry review of incentive compensation policies and practices undertaken by the Federal Reserve Board since 2009.Board. We routinely undertake a thorough risk analysis of every incentive compensation plan of the company, the individuals covered by each plan and the risks inherent in each plan's design and implementation. We also conduct validation and back-testing activities to ensure that compensation plans are correctly risk rated, the plans are designed to adequately mitigate risk inherent therein, and the plans are administered effectively. The Incentive Review Committee was created to oversee that review and to provide more comprehensive oversight of the relationship between the various kinds of risk we manage and our company's incentive compensation plans and programs. The Incentive Review Committee meets throughout the year and is responsible for the ultimate reviewreviews and approval ofapproves all company incentive plans.
ThisThe Incentive Review Committee reviews incentive plan elements such as risk controls, plan participants, performance measures, performance and payout curves or formulas, how target level performance is determined (including whether any thresholds and caps exist), how frequently payouts occur, and the mix of fixed and variable compensation that the plan delivers. The plans and programs are also reviewed from the standpoint of reasonableness (for example, how target pay levels compare to similar plans for similar employee groups at other companies, and how payout amounts relate to the results that generate the payments), how well the plans and programs are aligned with U.S. Bancorp'sthe company's goals and objectives and with the company'sits risk appetite, and from an overall standpoint, whether these plans and programs represent an appropriate mix of short-term and long-term compensation.
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45 | | U.S. Bancorp 2021 Proxy Statement |
Compensation discussion and analysis |
As part of this review by ourthe Incentive Review Committee, our management team, including senior risk officers and individuals from the compensation department, have identified the risks inherent in these programs and have modified plans and controls where appropriate to mitigate certain potential risks. For example, most business line incentive compensation plans with a credit component track early defaults, or defaults that occur within the first 12 months, and must include a provision that allows the company to offset future payments by the amount of the previously paid incentives related to the early default.
In addition, a "risk scorecard" analysisassessment measuring adequacy of risk management is undertaken for senior management-level employees who have the individual ability to pose material risk to the company, including the executive officers; all employees who have credit responsibility and who participate in annual corporate cash incentive plans; and all employees who, as part of a group, can engage in risk-taking behavior that could be material to the company and who participate in annual corporate cash incentive plans. This analysis serves as the basis for annual cash incentive plan adjustments for these employees. Annually, the Incentive Review Committee also addresses risk events that pose a material adverse impact to the company or business line to determine whether an event should trigger cancellation of equity awards. The Incentive Review Committee has reviewed its process with the Compensation and Human Resources Committee and discussed the areas where compensation-related risks were being addressed by plan modifications, or were mitigated by internal controls or otherwise.
Role of the Compensation and Human Resources Committee:Board: The Compensation and Human Resources Committee also conducts an annual review of the compensation packages and components for the executive officers. The Committee assesses the incentives for risk taking contained in the compensation program and balances them with the other goals of the compensation program. The Committee meets at that time with members of senior management for a discussion of the material risks our company faces, in order to assess those risks and the overall risk tolerance of the company approved by the Board of Directors in relation to the levels of risk inherent in the compensation plans and programs and the performance targets set each year.
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In evaluating the incentives for risk taking in compensation plans and policies for executive officers, the Committee considered the following risk-mitigating aspects of those plans and policies:
Overall executive compensation program risk mitigation factors | ||||
Long-term incentive focus: The majority of the total compensation received by executive officers is in the form of equity awards with multi-year vesting schedules, which helps to ensure that executives have significant value tied to long-term stock price performance and mitigates incentives to manage the company with an excessive focus on short-term gain. |
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Annual cash incentive risk mitigation factors | ||||
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Specific risk sensitivity analysis: A "risk scorecard" |
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Clawback policy: The company's incentive compensation |
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Cap on award value: The maximum annual cash incentive award payable to an executive officer is equal to 200% of that officer's target award value, which limits the potential incentive to take excessive risk to maximize award value. | ||||
Long-term incentive risk mitigation factors | ||||
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Choice of performance metric: The PRSUs use ROE as the measure of corporate performance for determining the final number of units earned under the award. Achieving a high ROE requires an appropriate balance between achieving the highest return on invested capital and managing risk within the company's established risk tolerance levels. |
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Maximum PRSU payout limited: The number of units that may be earned under the performance formula |
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Sliding scale earn-out calculation: The PRSU performance matrix takes into account the amount of variance from the ROE target and peer group ROE results, mitigating the incentive for excessive risk taking that may result from an "all-or-nothing" award. |
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Meaningful stock ownership and retention requirements: |
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Policy prohibiting hedging of shares: |
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U.S. Bancorp 2021 Proxy Statement | | 46 |
Compensation discussion and analysis |
Based on a consideration of the foregoing reviews and factors, the Committee has determined that risks arising from the company's compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the company.
Stock ownership and retention requirements
The Committee believes that significant ownership of our common stock by our executive officers directly aligns their interests with those of our other shareholders and also helps balance the incentives for risk taking inherent in equity-based awards. We have had a requirement for many years that our executives hold significant amounts of company stock, and as part of the executive compensation program changes we made beginning in 2018, we have recently added a requirement that our executives retain a substantial portion of the net value of their vested stock awards and exercised stock options, even after minimum ownership levels have been attained and until retirement. The current ownership and retention requirements are as follows:
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Vested PRSUs, exercised stock options, and all restricted stock units are included in determining whether an executive officer satisfies the minimum ownership levels. Until the applicable ownership level is met, the executive officers must hold 75% of the net value of any vested stock award or exercised option.
As of December 31, 2017, all of our executive officers were in compliance with the stock ownership requirements. Most executive officers complied by holding stock valued in excess of their applicable salary multiple, and those who have not yet reached those levels (the most recently appointed executive officers) complied by holding at least 75% of the after-tax value of any vested stock award or exercised option.
Recoupment ("clawback") of annual cash incentive payouts
The Committee has a clawback policy and will evaluate the facts and circumstances surrounding a restatement of earnings, if any, and, in its sole discretion, may adjust and recoup cash incentive amounts paid to our CEO, any executive officers or any other employees as it deems appropriate, if attributable to incorrectly reported earnings.
Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for certain executive officers. The annual cash incentive awards and equity awards granted to the NEOs in 2017 were designed in a manner intended to qualify them as "performance-based" compensation under Section 162(m), which would exempt them from the deduction limit.
Annual cash incentive awards granted to the NEOs in 2017 were granted under the EIP. The EIP sets the maximum award level that can be given to any NEO under the plan for any year at 0.2% of the company's net income for the year to satisfy Section 162(m)'s performance-based exemption. The Committee then used negative discretion to reduce the payout amount of each executive's cash incentive award to an amount that was determined based on the formula described above: Target Award Amount × (Bonus Funding Percentage +/- Individual Performance and Risk Sensitivity). The maximum award amount under the EIP was established principally to position these awards to comply with the performance-based exemption under Section 162(m), and is not indicative of the expected payout amounts.
Equity awards granted to the NEOs in 2017 were granted under the U.S. Bancorp 2015 Stock Incentive Plan. Based on the design of that plan and the steps that the Committee took to establish performance goals for the PRSUs and then later certify the results, the PRSUs and stock options were also intended to qualify as performance-based compensation under Section 162(m).
The exemption from Section 162(m)'s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017. Accordingly, compensation in excess of $1 million paid to executive officers covered by Section 162(m)'s deduction limit will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The application and interpretation of Section 162(m) and the regulations issued thereunder as they currently stand, including the scope of the transition relief under the legislation repealing Section 162(m)'s exemption from the deduction limit, are uncertain. Therefore, despite the Committee's efforts to structure the NEOs' annual cash incentive awards and equity awards in 2017 in a manner intended to be exempt from Section 162(m)'s deduction limits, no assurance can be given that compensation intended to satisfy the requirement for exemption from those limits will in fact be deductible.
The Committee reviews all executive compensation programs and payments to determine the tax impact on the company as well as on the executive officers. Tax impact is one of many factors considered by the Committee as it designs a compensation program whose objectives include rewarding high performance, shareholder alignment, market competitiveness, accounting impact, and perceived value to executives. Because many different factors influence a well-rounded, comprehensive executive compensation program, the Committee retains the discretion and flexibility to award compensation that is not deductible under Section 162(m) and to modify compensation that was initially intended to be exempt under Section 162(m) if it determines that such modifications are consistent with the overall objectives of the executive compensation program.
The Compensation and Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation and Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in our 20172020 Annual Report on Form 10-K.
Compensation and Human Resources Committee of the Board of Directors of U.S. Bancorp
Olivia F. Kirtley | ||||
Karen S. Lynch |
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| | U.S. Bancorp |
Executive compensation |
The following table shows the cash and non-cash compensation awarded to or earned by our NEOs for 2017.in 2020.
Name and | | Year | | Salary ($) | | Stock awards ($)1 | | Option awards ($)2 | | Non-equity incentive plan compensation ($)3 | | Change in pension value and non-qualified deferred compensation earnings ($)4 | | All other compensation ($)5 | | Total ($) | |||||||||
Andrew Cecere6 | 2017 | 941,538 | 4,500,000 | 1,500,000 | 1,659,867 | 3,381,404 | 31,947 | 12,014,756 | |||||||||||||||||
President and | 2016 | 800,000 | 4,331,250 | 1,443,750 | 1,160,400 | 884,538 | 31,478 | 8,651,416 | |||||||||||||||||
Chief Executive Officer | 2015 | 750,000 | 3,750,000 | 1,250,000 | 920,250 | 43,399 | 28,053 | 6,741,702 | |||||||||||||||||
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Richard K. Davis7 | 2017 | 1,116,923 | 7,500,000 | 2,500,000 | 886,200 | 3,369,557 | 24,525 | 15,397,205 | |||||||||||||||||
Executive Chairman and | 2016 | 1,400,000 | 6,393,750 | 2,131,250 | 3,046,050 | 2,359,264 | 15,680 | 15,345,994 | |||||||||||||||||
former Chief Executive | 2015 | 1,300,000 | 5,812,500 | 1,937,500 | 2,304,900 | 202,478 | 27,632 | 11,585,010 | |||||||||||||||||
Officer | |||||||||||||||||||||||||
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Terrance R. Dolan8 | 2017 | 650,000 | 2,325,000 | 775,000 | 768,040 | 579,394 | 16,188 | 5,113,622 | |||||||||||||||||
Vice Chairman and | 2016 | 545,833 | 1,230,000 | 410,000 | 695,031 | 357,515 | 15,672 | 3,254,051 | |||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||
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P.W. (Bill) Parker | 2017 | 625,000 | 1,875,000 | 625,000 | 782,250 | 325,854 | 23,971 | 4,257,075 | |||||||||||||||||
Vice Chairman and | 2016 | 625,000 | 1,815,000 | 605,000 | 755,469 | 163,105 | 24,868 | 3,988,442 | |||||||||||||||||
Chief Risk Officer | 2015 | 625,000 | 1,500,000 | 500,000 | 678,125 | 241,507 | 24,545 | 3,569,177 | |||||||||||||||||
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Jeffry H. von Gillern | 2017 | 575,000 | 1,725,000 | 575,000 | 655,270 | 186,832 | 31,935 | 3,749,037 | |||||||||||||||||
Vice Chairman, Technology | 2016 | 575,000 | 1,320,000 | 440,000 | 692,156 | 133,795 | 18,595 | 3,179,546 | |||||||||||||||||
and Operations Services | 2015 | 550,000 | 1,125,000 | 375,000 | 587,125 | 57,651 | 21,589 | 2,716,365 | |||||||||||||||||
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Gunjan Kedia8 | 2017 | 525,000 | 1,200,000 | 400,000 | 611,520 | — | (9) | 69,327 | 2,805,847 | ||||||||||||||||
Vice Chairman, Wealth Management | |||||||||||||||||||||||||
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Name and | | Year | | Salary ($) | | Stock awards ($)1 | | Option awards ($) | | Non-equity incentive plan compensation ($)2 | | Change in pension value and non-qualified deferred compensation earnings ($)3 | | All other compensation ($)4 | | Total ($) | |||||||||
Andrew Cecere | 2020 | 1,200,000 | 8,600,000 | — | 1,946,160 | 4,945,337 | 61,256 | 16,752,753 | |||||||||||||||||
Chairman, President and | 2019 | 1,200,000 | 8,100,000 | — | 2,718,900 | 6,713,623 | 52,503 | 18,785,026 | |||||||||||||||||
Chief Executive Officer | 2018 | 1,100,000 | 7,260,000 | — | 2,663,760 | 2,369,125 | 44,243 | 13,437,128 | |||||||||||||||||
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Terrance R. Dolan | 2020 | 725,000 | 3,600,000 | — | 798,660 | 1,431,911 | 30,757 | 6,586,328 | |||||||||||||||||
Vice Chair and | 2019 | 700,000 | 3,500,000 | — | 897,750 | 1,380,957 | 32,810 | 6,511,517 | |||||||||||||||||
Chief Financial Officer | 2018 | 675,000 | 3,250,000 | — | 953,505 | 234,766 | 23,451 | 5,136,722 | |||||||||||||||||
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Jeffry H. von Gillern | 2020 | 675,000 | 2,750,000 | — | 660,960 | 327,942 | 30,802 | 4,444,704 | |||||||||||||||||
Vice Chair, Technology | 2019 | 625,000 | 2,500,000 | — | 835,313 | 358,150 | 37,764 | 4,356,227 | |||||||||||||||||
and Operations Services | 2018 | 600,000 | 2,300,000 | — | 838,320 | 15,670 | 25,226 | 3,779,216 | |||||||||||||||||
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Timothy A. Welsh5 | 2020 | 655,000 | 2,300,000 | — | 918,048 | 96,634 | 37,203 | 4,006,885 | |||||||||||||||||
Vice Chair, Consumer and | 2019 | 575,000 | 2,100,000 | — | 731,400 | 129,709 | 37,693 | 3,573,802 | |||||||||||||||||
Business Banking | |||||||||||||||||||||||||
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Gunjan Kedia | 2020 | 655,000 | 2,300,000 | — | 690,632 | 146,287 | 162,040 | 3,953,959 | |||||||||||||||||
Vice Chair, Wealth | 2019 | 575,000 | 2,100,000 | — | 646,013 | 132,614 | 113,128 | 3,566,755 | |||||||||||||||||
Management and | 2018 | 550,000 | 2,000,000 | — | 739,970 | 140,101 | 94,821 | 3,524,892 | |||||||||||||||||
Investment Services | |||||||||||||||||||||||||
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The amounts in this column are calculated based on the number of time-based restricted stock units, or RSUs, and performance-based restricted stock units, or PRSUs, awarded and the fair market value of U.S. Bancorp common stock on the date the award was made in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718. See Note 17 to our consolidated financial statements included in our 2020 Annual Report on Form 10-K for assumptions used to calculate our stock awards.
The 20172020 values in this table reflect the fair market value of each officer's RSUs plus the target payout for the 2017 PRSUs on the grant date. The number of unitsPRSUs subject to each of these awards that were earned basedwill be determined after a three-year performance period beginning on January 1, 2020 and ending December 31, 2022. Depending on our actual 2017company performance is equalduring this time, 0% to 113.4%150% of the awards' respective target amounts.number of PRSUs granted to the executive officers can be earned. The fair market value of RSUs plus the maximum potential payout amounts for these awardsthe PRSUs on the grant date waswere as follows: (i) Mr. Cecere, $5,625,000;$11,180,000; (ii) Mr. Davis, $9,375,500;Dolan, $4,680,000; (iii) Mr. Dolan, $2,906,250; (iv) Mr. Parker, $2,343,750; (v) Mr. von Gillern, $2,156,250; and (vi)$3,575,000; (iv) Mr. Welsh, $2,990,000; (v) Ms. Kedia, $1,500,000.$2,990,000.
The amounts in this column are based on the fair value of the stock option awards as estimated using the Black-Scholes option-pricing model in accordance with FASB ASC Topic 718. The assumptions used to arrive at the Black-Scholes value are disclosed in Note 17 to our consolidated financial statements included in our 2017 Annual Report on Form 10-K.
The 2020 amounts in this column relate to awards granted under our EIP in January 2017,the Annual Executive Incentive Plan, or AEIP, award determined in January 20182021 based on 20172020 performance, and paid out in February 2018.March 2021. The EIPAEIP and these awards are discussed above in the Compensation"Compensation Discussion and AnalysisAnalysis" section of this proxy statement.
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The amounts in this column represent the increase in the actuarial net present value of all future retirement benefits under the U.S. Bank Pension Plan and the U.S. BancorpBank Non-Qualified Retirement Plan. A number of factors can cause the amounts reflected in this column to vary significantly, including volatility in the discount rate applied to determine the value of future payment streams and changes to mortality assumptions.
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U.S. Bancorp 2021 Proxy Statement | | 48 |
Executive compensation |
The change in present value amounts reported for 2017 are larger2020 is smaller than those reported for 20162019 for the respective NEOs. These larger "change" valuesMessrs. Cecere, von Gillern and Welsh. The smaller increases in value are partiallyprimarily due to the lowersmaller decline in discount rates used for year-end 2017, which are approximately 40in 2020. For Mr. Dolan and Ms. Kedia, the larger increase in value was due to 45 basis points lower than for year-end 2016. Other drivers include increases in pay, age and service, as well as updated lump-sum mortality factors. The primary driver ofpartially offset by the increasesmaller decline in Mr. Cecere's change value is the increase in compensation that accompanied his promotion to the role of CEO. discount rates.
The net present values of the pension benefits as of December 31, 2017,2020, used to calculate the net change in pension benefits were determined using the same assumptions used to determine our pension obligations and expense for financial statement purposes. See Note 16 to our consolidated financial statements included in our 20172020 Annual Report on Form 10-K for these specific assumptions. Additional information about our Pension Plan and Non-Qualified Retirement Plan is included below under the heading "Pension Benefits." We have not provided above-market or preferential earnings on any nonqualified deferred compensation and, accordingly, no such amounts are reflected in this column.
The following table describes each component of the All Other Compensation column for 2017:2020:
Name | | Parking reimbursement ($) | | Matching contribution into 401(k) savings plan ($) | | Reimbursement of financial planning expenses ($) | | Executive physical ($) | | Home security system expenses ($) | | Moving/ commuting expenses ($)a | | Other ($)b | | Total ($) | | Parking reimbursement ($) | | Matching contribution into 401(k) savings plan ($) | | Reimbursement of financial planning expenses ($) | | Home security system expenses ($) | | Commuting expenses ($)a | | Housing expenses ($)a | | Club dues | | Other ($)b | | Total ($) | |||||||||||||||||||
Mr. Cecere | 4,800 | 10,800 | 13,490 | — | 2,857 | — | — | 31,947 | 5,400 | 11,400 | 24,970 | 7,546 | — | — | 6,209 | 5,731 | 61,256 | ||||||||||||||||||||||||||||||||||||
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Mr. Davis | 4,800 | 10,800 | — | — | 6,567 | — | 2,358 | 24,525 | |||||||||||||||||||||||||||||||||||||||||||||
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Mr. Dolan | 4,800 | 10,800 | — | — | 588 | — | — | 16,188 | 5,400 | 11,400 | 7,000 | 700 | — | — | 6,257 | — | 30,757 | ||||||||||||||||||||||||||||||||||||
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Mr. Parker | 4,800 | 10,800 | 1,635 | 6,736 | — | — | — | 23,971 | |||||||||||||||||||||||||||||||||||||||||||||
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Mr. von Gillern | 4,800 | 10,800 | 9,364 | 3,401 | 570 | — | 3,000 | 31,935 | 5,400 | 11,400 | 7,000 | 742 | — | — | 6,210 | 50 | 30,802 | ||||||||||||||||||||||||||||||||||||
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Mr. Welsh | 5,400 | 11,400 | 14,375 | — | — | — | 6,028 | — | 37,203 | ||||||||||||||||||||||||||||||||||||||||||||
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Ms. Kedia | 5,200 | — | 13,490 | 1,950 | — | 48,667 | 20 | 69,327 | — | 11,400 | 21,375 | — | 94,621 | 34,644 | — | — | 162,040 | ||||||||||||||||||||||||||||||||||||
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The aggregate incremental cost for corporate-owned aircraft is determined by multiplying the total number of personal flight hours by the direct variable operating costs of the aircraft per hour including costs related to fuel, landing and parking fees, and crew expenses. As the aircraft are used primarily for business travel, we do not include fixed costs that do not change based on usage, such as crew salaries and acquisition costs of the aircraft. For fractionally-owned aircraft, the incremental cost is determined by multiplying the total number of personal flight hours by the contracted hourly and fuel charges, plus a proportional share of the monthly management fee.
Our company occasionally allows its executives the personal use of tickets for sporting and specialcultural events previously acquired by our company for the purpose of business entertainment. In addition, an executive's spouse might accompany him or her on a business-related flight aboard a company-owned aircraft if a seat on that aircraft would otherwise be empty. There is no incremental cost to our company for the use.use of such tickets or such flights.
Messrs. Cecere, Dolan and von Gillern each received an executive physical that was covered by company-provided medical insurance. In certain instances the insurance policy does not cover these expenses for non-executive employees.
The following table summarizes the equity and non-equity plan-based awards granted in 20172020 to the NEOs. The first line of information for each executive contains information about the 20172020 annual cash incentive awards that each executive was granted under our EIP,AEIP, and the remaining information relates to PRSUs and stock optionsRSUs granted in 20172020 under the U.S. Bancorp 2015 Stock Incentive Plan.
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Executive compensation |
Grants of plan-based awards for fiscal 20172020
| | Date of compensation committee meeting at | | Estimated future payouts under non-equity incentive plan awards1 | | Estimated future payouts under equity incentive plan awards4 | | All other option awards: number of securities underlying | | Exercise or base price of option | | Grant date fair value of stock and option | |||||||||||||||||||
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Name | | Grant date | | which grant was approved | | Target ($)2 | | Maximum ($)3 | | Threshold (#) | | Target (#) | | Maximum (#) | | options (#)5 | | awards ($/Sh) | | awards ($)6 | |||||||||||
Andrew | — | — | 1,966,667 | 12,436,000 | — | — | — | — | — | — | |||||||||||||||||||||
Cecere | 2/16/17 | 1/16/17 | — | — | 0 | 81,803 | 102,253 | — | — | 4,500,000 | |||||||||||||||||||||
2/16/17 | 1/16/17 | — | — | — | — | — | 102,251 | 55.01 | 1,500,000 | ||||||||||||||||||||||
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Richard K. | — | — | 1,050,000 | 12,436,000 | — | — | — | — | — | — | |||||||||||||||||||||
Davis | 2/16/17 | 1/16/17 | — | — | 0 | 136,338 | 170,422 | — | — | 7,500,000 | |||||||||||||||||||||
2/16/17 | 1/16/17 | — | — | — | — | — | 170,419 | 55.01 | 2,500,000 | ||||||||||||||||||||||
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Terrance R. | — | — | 910,000 | 12,436,000 | — | — | — | — | — | — | |||||||||||||||||||||
Dolan | 2/16/17 | 1/16/17 | — | — | 0 | 42,265 | 52,831 | — | — | 2,325,000 | |||||||||||||||||||||
2/16/17 | 1/16/17 | — | — | — | — | — | 52,829 | 55.01 | 775,000 | ||||||||||||||||||||||
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P.W. (Bill) | — | — | 875,000 | 12,436,000 | — | — | — | — | — | — | |||||||||||||||||||||
Parker | 2/16/17 | 1/16/17 | — | — | 0 | 34,084 | 42,605 | — | — | 1,875,000 | |||||||||||||||||||||
2/16/17 | 1/16/17 | — | — | — | — | — | 42,607 | 55.01 | 625,000 | ||||||||||||||||||||||
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Jeffry H. von | — | — | 805,000 | 12,436,000 | — | — | — | — | — | — | |||||||||||||||||||||
Gillern | 2/16/17 | 1/16/17 | — | — | 0 | 31,357 | 39,196 | — | — | 1,725,000 | |||||||||||||||||||||
2/16/17 | 1/16/17 | — | — | — | — | — | 39,199 | 55.01 | 575,000 | ||||||||||||||||||||||
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Gunjan | — | — | 735,000 | 12,436,000 | — | — | — | — | — | — | |||||||||||||||||||||
Kedia | 2/16/17 | 1/16/17 | — | — | 0 | 21,814 | 27,267 | — | — | 1,200,000 | |||||||||||||||||||||
2/16/17 | 1/16/17 | — | — | — | — | — | 27,267 | 55.01 | 400,000 | ||||||||||||||||||||||
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| | Date of compensation committee meeting at | | Estimated future payouts under non-equity incentive plan awards1 | | Estimated future payouts under equity incentive plan awards4 | | All other stock awards: number of shares of stock or | | Grant date fair value of stock | ||||||||||||||||||
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Name | | Grant date | | which grant was approved | | Target ($)2 | | Maximum ($)3 | | Threshold (#) | | Target (#) | | Maximum (#) | | units (#)5 | | awards ($)6 | ||||||||||
Andrew Cecere | — | — | 3,180,000 | 6,360,000 | — | — | — | — | — | |||||||||||||||||||
2/10/20 | 1/20/20 | — | — | 0 | 94,436 | 141,654 | — | 5,159,983 | ||||||||||||||||||||
2/10/20 | 1/20/20 | — | — | — | — | — | 62,958 | 3,440,025 | ||||||||||||||||||||
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Terrance R. Dolan | — | — | 1,305,000 | 2,610,000 | — | — | — | — | — | |||||||||||||||||||
2/10/20 | 1/20/20 | — | — | 0 | 39,531 | 59,296 | — | 2,159,974 | ||||||||||||||||||||
2/10/20 | 1/20/20 | — | — | — | — | — | 26,354 | 1,439,983 | ||||||||||||||||||||
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Jeffry H. von Gillern | — | — | 1,080,000 | 2,160,000 | — | — | — | — | — | |||||||||||||||||||
2/10/20 | 1/20/20 | — | — | 0 | 30,198 | 45,297 | — | 1,650,019 | ||||||||||||||||||||
2/10/20 | 1/20/20 | — | — | — | — | — | 20,132 | 1,100,012 | ||||||||||||||||||||
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Timothy A. Welsh | — | — | 1,048,000 | 2,096,000 | — | — | — | — | — | |||||||||||||||||||
2/10/20 | 1/20/20 | — | — | 0 | 25,256 | 37,884 | — | 1,379,988 | ||||||||||||||||||||
2/10/20 | 1/20/20 | — | — | — | — | — | 16,837 | 919,974 | ||||||||||||||||||||
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Gunjan Kedia | — | — | 1,048,000 | 2,096,000 | — | — | — | — | — | |||||||||||||||||||
2/10/20 | 1/20/20 | — | — | 0 | 25,256 | 37,884 | — | 1,379,988 | ||||||||||||||||||||
2/10/20 | 1/20/20 | — | — | — | — | — | 16,837 | 919,974 | ||||||||||||||||||||
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These columns show the potential payments for each of these executive officersthe NEOs under our EIPAEIP for 20172020 performance. Actual annual cash incentive payout amounts are determined in accordance with a formula based on corporate EPS performance and business line pretax income performance, in each case ranging from 0% to 200% of target levels, subject to adjustment for individual performance and risk sensitivity. Additional information regarding how the payout amounts for these awards are determined is included above in "Compensation Discussion and Analysis — Annual Cash Incentive Awards," and the actual amounts paid based on 20172020 performance are reported above in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table.
As described above in "Compensation Discussion and Analysis — Annual Cash Incentive Awards," the Compensation and Human Resources Committee establishes a target cash incentive amount for each NEO, each year, expressed as a percentage of the executive'sthat NEO's base salary.
The Target Award Amount shown for Mr. Cecere in this column is a prorated amount reflecting the base salary and Target Award Percentage applicable to him for the portions of 2017 he spent as President and Chief Operating Officer and as President and Chief Executive Officer. The target amount shown for Mr. Davis in this column reflects the base salary and Target Award Percentage applicable to him for the portion of 2017 he spent as Chairman and Chief Executive Officer; he was not eligible to receive an annual cash incentive award for the portion of the year he served as Executive Chairman.
Our EIP provides the opportunity for each participant in the plan to earn a maximum cash incentive amount equal to 0.2% of our net income for the performance year. Our net income for the 2017 fiscal year was $6.218 billion, and 0.2% of net income was $12.436 million. As described above in "Compensation Discussion and Analysis — Deductibility of Performance-Based Compensation,Annual Cash Incentive Awards," the maximum amounts calculated in accordance with the EIP are not indicativecash incentive amount for each NEO equals 200% of amounts the Compensation and Human Resources Committee expects to pay out.that NEO's target amount.
TheseThe threshold, target and maximum columns each show the potential number of PRSUs that could have beenbe earned by each of these executive officers in 2017. Depending onNEOs during the three-year performance 0%period of January 1, 2020, to 125% of the targetDecember 31, 2022. The number of PRSUs granted to the executive officers could have been earned. The numberearned will be between 0 and 150% of units earned is determined using a sliding scaletarget based on (i) our 2017the company's absolute and relative ROE result versus a predetermined target and (ii) our 2017 ROE ranking within our financial peer group. Based on our actual 2017 performance compared to the targetsduring that period, as set in the applicable award agreements for each executive, the number of units earned is equal to 113.4% of their respective targets.agreements. Additional information regarding how the PRSU awards are earned is included above in "Compensation Discussion and Analysis — Long-Term Incentive Awards,Awards."
Any PRSUs earned during the performance period will vest on February 10, 2023, the third anniversary of the grant date. Cash dividends on unvested PRSUs are accrued during the performance period, but accrued dividends are only paid at vesting on shares earned, if any, by the executives.
These RSUs vest at the rate of 33% on the first and second anniversaries of the grant date and 34% on the third anniversary of the grant date, with vesting dates of February 10, 2021, 2022, and 2023. The RSUs pay an amount equal to the dividends paid on our shares of common stock.
The grant date fair value of the PRSUs and the actualRSUs was calculated using the target number of units earnedmultiplied by each NEO is included in the Outstanding Equity Awards at 2017 Fiscal Year-End table below.closing market price of a share of our common stock on the grant date.
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U.S. Bancorp | | |
Executive compensation |
The earned PRSUs vest at 25% per year, with vesting dates of February 16, 2018, 2019, 2020 and 2021 to coincide with the anniversaries of the grant date for the annual awards. The PRSUs accrue an amount equal to the dividends paid on our shares of common stock, which is paid at the end of the performance period on the number of units earned.
These stock options vest at 25% per year, with vesting dates of February 16, 2018, 2019, 2020 and 2021 to coincide with the anniversaries of the grant date for the awards.
The grant date fair value of the PRSUs was calculated using the target number of units multiplied by the closing market price of a share of our common stock on the grant date. The Black-Scholes option pricing model was used to estimate the grant date fair value of the options in this column. Use of this model should not be construed as an endorsement of its accuracy. All stock option pricing models require predictions about the future movement of the stock price.
The assumptions used to develop the grant date valuations for the options granted on February 16, 2017, were as follows: risk-free rate of return of 2.03%, dividend rate of 2.6%, volatility rate of 34.98%, quarterly reinvestment of dividends, and an average term of 5.5 years. No adjustments have been made for non-transferability or risk of forfeiture. The real value of the stock options in this table will depend on the actual performance of our common stock during the applicable period and the fair market value of our common stock on the date the options are exercised.
The following table shows the unexercised stock options and the unvested restricted stock unitsRSUs and PRSUs held at the end of fiscal year 20172020 by the NEOs.
Outstanding equity awards at 2017 fiscal year-end
| Option awards | | Stock awards | | Option awards | | Stock awards | |||||||||||||||||||||||||||||||||||||
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Name | | Number of securities underlying unexercised options (#) exercisable | | Number of securities underlying unexercised options (#) unexercisable | | Option exercise price ($) | | Option expiration date | | Number of stock units that have not vested (#) | | Market value of stock units that have not vested ($)1 | | Number of securities underlying unexercised options (#) exercisable | | Number of securities underlying unexercised options (#) unexercisable | | Option exercise price ($) | | Option expiration date | | Number of stock units that have not vested (#) | | Market value of stock units that have not vested ($)1 | | Equity incentive plan awards: number of unearned stock units that have not vested (#) | | Equity incentive plan awards: market or payout value of unearned stock units that have not vested ($)1 | ||||||||||||||||
Andrew Cecere | — | 102,251 | (2) | 55.01 | 2/16/2027 | — | — | 76,688 | 25,563 | (2) | 55.01 | 2/16/2027 | — | — | — | — | ||||||||||||||||||||||||||||
35,111 | 105,334 | (3) | 39.49 | 2/18/2026 | — | — | 140,445 | — | 39.49 | 2/18/2026 | — | — | — | — | ||||||||||||||||||||||||||||||
51,022 | 51,022 | (4) | 44.32 | 2/19/2025 | — | — | 102,044 | — | 44.32 | 2/19/2025 | — | — | — | — | ||||||||||||||||||||||||||||||
70,024 | 23,342 | (5) | 40.32 | 2/20/2024 | — | — | 93,366 | — | 40.32 | 2/20/2024 | — | — | — | — | ||||||||||||||||||||||||||||||
84,948 | — | 33.99 | 2/14/2023 | — | — | 84,948 | — | 33.99 | 2/14/2023 | — | — | — | — | |||||||||||||||||||||||||||||||
184,187 | — | 28.63 | 2/15/2022 | — | — | 184,187 | — | 28.63 | 2/15/2022 | — | — | — | — | |||||||||||||||||||||||||||||||
165,564 | — | 28.70 | 2/16/2021 | — | — | — | — | — | — | 62,958 | (3) | 2,933,213 | — | — | ||||||||||||||||||||||||||||||
183,374 | — | 25.35 | 10/22/2019 | — | — | — | — | — | — | — | — | 141,654 | (4) | 6,599,660 | ||||||||||||||||||||||||||||||
— | — | — | — | 92,764 | (6) | 4,970,295 | — | — | — | — | 43,021 | (5) | 2,004,348 | — | — | |||||||||||||||||||||||||||||
— | — | — | — | 87,278 | (7) | 4,676,355 | — | — | — | — | — | — | 144,471 | (6) | 6,730,904 | |||||||||||||||||||||||||||||
— | — | — | — | 44,124 | (8) | 2,364,164 | — | — | — | — | 17,852 | (7) | 831,725 | — | — | |||||||||||||||||||||||||||||
— | — | — | — | 20,712 | (9) | 1,109,749 | — | — | — | — | 94,900 | (8) | 4,421,391 | — | — | |||||||||||||||||||||||||||||
— | — | — | — | 23,192 | (9) | 1,080,515 | — | — | ||||||||||||||||||||||||||||||||||||
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Richard K. Davis | — | 170,419 | (2) | 55.01 | 2/16/2027 | — | — | |||||||||||||||||||||||||||||||||||||
Terrance R. Dolan | 39,621 | 13,208 | (2) | 55.01 | 2/16/2027 | — | — | — | — | |||||||||||||||||||||||||||||||||||
51,830 | 155,490 | (3) | 39.49 | 2/18/2026 | — | — | 2,331 | — | 41.88 | 7/18/2026 | — | — | — | — | ||||||||||||||||||||||||||||||
79,082 | 79,083 | (4) | 44.32 | 2/19/2025 | — | — | 37,455 | — | 39.49 | 2/18/2026 | — | — | — | — | ||||||||||||||||||||||||||||||
123,574 | 41,192 | (5) | 40.32 | 2/20/2024 | — | — | 26,531 | — | 44.32 | 2/19/2025 | — | — | — | — | ||||||||||||||||||||||||||||||
144,152 | — | 33.99 | 2/14/2023 | — | — | 26,583 | — | 40.32 | 2/20/2024 | — | — | — | — | |||||||||||||||||||||||||||||||
294,696 | — | 28.63 | 2/15/2022 | — | — | 24,918 | — | 33.99 | 2/14/2023 | — | — | — | — | |||||||||||||||||||||||||||||||
260,172 | — | 28.70 | 2/16/2021 | — | — | — | — | — | — | 26,354 | (3) | 1,227,833 | — | — | ||||||||||||||||||||||||||||||
300,122 | — | 23.86 | 2/16/2020 | — | — | — | — | — | — | — | — | 59,296 | (4) | 2,762,601 | ||||||||||||||||||||||||||||||
305,625 | — | 25.35 | 10/22/2019 | — | — | — | — | — | — | 18,590 | (5) | 866,108 | — | — | ||||||||||||||||||||||||||||||
— | — | — | — | 154,607 | (6) | 8,283,843 | — | — | — | — | — | — | 62,425 | (6) | 2,908,381 | |||||||||||||||||||||||||||||
— | — | — | — | 128,838 | (7) | 6,903,140 | — | — | — | — | 7,992 | (7) | 372,347 | — | — | |||||||||||||||||||||||||||||
— | — | — | — | 68,392 | (8) | 3,664,443 | — | — | — | — | 42,483 | (8) | 1,979,283 | — | — | |||||||||||||||||||||||||||||
— | — | — | — | 36,551 | (9) | 1,958,403 | — | — | — | — | 11,985 | (9) | 558,381 | — | — | |||||||||||||||||||||||||||||
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Jeffry H. von Gillern | 29,399 | 9,800 | (2) | 55.01 | 2/16/2027 | — | — | — | — | |||||||||||||||||||||||||||||||||||
42,802 | — | 39.49 | 2/18/2026 | — | — | — | — | |||||||||||||||||||||||||||||||||||||
30,614 | — | 44.32 | 2/19/2025 | — | — | — | — | |||||||||||||||||||||||||||||||||||||
29,000 | — | 40.32 | 2/20/2024 | — | — | — | — | |||||||||||||||||||||||||||||||||||||
27,183 | — | 33.99 | 2/14/2023 | — | — | — | — | |||||||||||||||||||||||||||||||||||||
— | — | — | — | 20,132 | (3) | 937,950 | — | — | ||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | 45,297 | (4) | 2,110,387 | ||||||||||||||||||||||||||||||||||||
— | — | — | — | 13,279 | (5) | 618,669 | — | — | ||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | 44,590 | (6) | 2,077,448 | ||||||||||||||||||||||||||||||||||||
— | — | — | — | 5,656 | (7) | 263,513 | — | — | ||||||||||||||||||||||||||||||||||||
— | — | — | — | 30,064 | (8) | 1,400,682 | — | — | ||||||||||||||||||||||||||||||||||||
— | — | — | — | 8,891 | (9) | 414,232 | — | — | ||||||||||||||||||||||||||||||||||||
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Executive compensation |
| Option awards | | Stock awards | | Option awards | | Stock awards | |||||||||||||||||||||||||||||||||||||
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Name | | Number of securities underlying unexercised options (#) exercisable | | Number of securities underlying unexercised options (#) unexercisable | | Option exercise price ($) | | Option expiration date | | Number of stock units that have not vested (#) | | Market value of stock units that have not vested ($)1 | | Number of securities underlying unexercised options (#) exercisable | | Number of securities underlying unexercised options (#) unexercisable | | Option exercise price ($) | | Option expiration date | | Number of stock units that have not vested (#) | | Market value of stock units that have not vested ($)1 | | Equity incentive plan awards: number of unearned stock units that have not vested (#) | | Equity incentive plan awards: market or payout value of unearned stock units that have not vested ($)1 | ||||||||||||||||
Terrance R. Dolan | — | 52,829 | (2) | 55.01 | 2/16/2027 | — | — | |||||||||||||||||||||||||||||||||||||
582 | 1,749 | (3) | 41.88 | 7/18/2026 | — | — | ||||||||||||||||||||||||||||||||||||||
9,363 | 28,092 | (3) | 39.49 | 2/18/2026 | — | — | ||||||||||||||||||||||||||||||||||||||
13,265 | 13,266 | (4) | 44.32 | 2/19/2025 | — | — | ||||||||||||||||||||||||||||||||||||||
19,937 | 6,646 | (5) | 40.32 | 2/20/2024 | — | — | ||||||||||||||||||||||||||||||||||||||
24,918 | — | 33.99 | 2/14/2023 | — | — | |||||||||||||||||||||||||||||||||||||||
— | — | — | — | 47,928 | (6) | 2,567,982 | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | 1,425 | (7) | 76,352 | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | 23,275 | (7) | 1,247,075 | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | 11,472 | (8) | 614,670 | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | 5,897 | (9) | 315,961 | ||||||||||||||||||||||||||||||||||||||
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P.W. (Bill) Parker | — | 42,607 | (2) | 55.01 | 2/16/2027 | — | — | |||||||||||||||||||||||||||||||||||||
14,713 | 44,139 | (3) | 39.49 | 2/18/2026 | — | — | ||||||||||||||||||||||||||||||||||||||
20,409 | 20,410 | (4) | 44.32 | 2/19/2025 | — | — | ||||||||||||||||||||||||||||||||||||||
28,833 | 9,612 | (5) | 40.32 | 2/20/2024 | — | — | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | 38,651 | (6) | 2,070,921 | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | 36,574 | (7) | 1,959,635 | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | 17,648 | (8) | 945,580 | ||||||||||||||||||||||||||||||||||||||
— | — | — | — | 8,528 | (9) | 456,930 | ||||||||||||||||||||||||||||||||||||||
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Jeffry H. von Gillern | — | 39,199 | (2) | 55.01 | 2/16/2027 | — | — | |||||||||||||||||||||||||||||||||||||
10,700 | 32,102 | (3) | 39.49 | 2/18/2026 | — | — | ||||||||||||||||||||||||||||||||||||||
15,307 | 15,307 | (4) | 44.32 | 2/19/2025 | — | — | ||||||||||||||||||||||||||||||||||||||
21,750 | 7,250 | (5) | 40.32 | 2/20/2024 | — | — | ||||||||||||||||||||||||||||||||||||||
Timothy A. Welsh | — | — | — | — | 16,837 | (3) | 784,436 | — | — | |||||||||||||||||||||||||||||||||||
27,183 | — | 33.99 | 2/14/2023 | — | — | — | — | — | — | — | — | 37,884 | (4) | 1,765,016 | ||||||||||||||||||||||||||||||
13,508 | — | 28.63 | 2/15/2022 | — | — | — | — | 11,154 | (5) | 519,665 | — | — | ||||||||||||||||||||||||||||||||
— | — | — | — | 35,558 | (6) | 1,905,198 | — | — | — | — | — | — | 37,455 | (6) | 1,745,028 | |||||||||||||||||||||||||||||
— | — | — | — | 26,599 | (7) | 1,425,174 | — | — | — | — | 3,935 | (7) | 183,332 | — | — | |||||||||||||||||||||||||||||
— | — | — | — | 13,236 | (8) | 709,185 | — | — | — | — | 20,915 | (8) | 974,430 | — | — | |||||||||||||||||||||||||||||
— | — | — | — | 6,433 | (9) | 344,680 | — | — | — | — | 3,811 | (10) | 177,554 | — | — | |||||||||||||||||||||||||||||
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Gunjan Kedia | — | 27,267 | (2) | 55.01 | 2/16/2027 | — | — | 20,450 | 6,817 | (2) | 55.01 | 2/16/2027 | — | — | — | — | ||||||||||||||||||||||||||||
— | — | — | — | 24,737 | (6) | 1,325,408 | — | — | — | — | 16,837 | (3) | 784,436 | — | — | |||||||||||||||||||||||||||||
— | — | — | — | 20,357 | (10) | 1,090,728 | — | — | — | — | — | — | 37,884 | (4) | 1,765,016 | |||||||||||||||||||||||||||||
— | — | — | — | 11,154 | (5) | 519,665 | — | — | ||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | 37,455 | (6) | 1,745,028 | ||||||||||||||||||||||||||||||||||||
— | — | — | — | 4,918 | (7) | 229,130 | — | — | ||||||||||||||||||||||||||||||||||||
— | — | — | — | 26,143 | (8) | 1,218,002 | — | — | ||||||||||||||||||||||||||||||||||||
— | — | — | — | 6,187 | (9) | 288,252 | — | — | ||||||||||||||||||||||||||||||||||||
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U.S. Bancorp | | |
Executive compensation |
The following table summarizes information with respect to stock option awards exercised and restricted stock unitsRSUs and PRSUs vested during fiscal 20172020 for each of the NEOs.
Option exercises and stock vested during fiscal 20172020
| Option awards | | Stock awards | | Option awards | | Stock awards | |||||||||||||||||||
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Name | | Number of shares acquired on exercise (#) | | Value realized on exercise ($)1 | | Number of shares acquired on vesting (#) | | Value realized on vesting ($)2 | | Number of shares acquired on exercise (#) | | Value realized on exercise ($) | | Number of shares acquired on vesting (#) | | Value realized on vesting ($)1 | ||||||||||
Andrew Cecere | 374,636 | 8,020,245 | 96,986 | 5,303,751 | — | — | 90,799 | 5,006,629 | ||||||||||||||||||
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Richard K. Davis | 707,726 | 15,154,749 | 156,323 | 8,547,034 | ||||||||||||||||||||||
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Terrance R. Dolan | 101,334 | 2,225,639 | 27,232 | 1,488,965 | — | — | 37,127 | 2,047,253 | ||||||||||||||||||
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P.W. (Bill) Parker | 29,449 | 528,559 | 38,251 | 2,092,683 | ||||||||||||||||||||||
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Jeffry H. von Gillern | — | — | 29,954 | 1,637,846 | — | — | 29,785 | 1,642,293 | ||||||||||||||||||
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Timothy A. Welsh | — | — | 13,122 | 723,805 | ||||||||||||||||||||||
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Gunjan Kedia | — | — | 6,785 | 375,007 | — | — | 23,235 | 1,218,293 | ||||||||||||||||||
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Value determined by subtracting the exercise price per share from the market value per share of our common stock at the time of exercise and multiplying the difference by the number of shares acquired on exercise.
Value determined by multiplying the number of vested shares by the market value on the vesting date (determined for these purposes as the closing market price of a share of our common stock on the date prior to the vesting date, or on the most recent prior business day in the event the date prior to the vesting date is not a business day).
Our company sponsors two defined benefit pension plans: the U.S. Bank Pension Plan and the U.S. Bank Legacy Pension Plan. The U.S. Bank Legacy Pension Plan was established effective January 1, 2020, to receive a transfer from the U.S. Bank Pension Plan of the accrued benefits of participants who terminated employment prior to January 1, 2020. The U.S. Bank Legacy Pension Plan and the U.S. Bank Pension Plan have substantively identical terms. If an employee whose pension was transferred to the U.S. Bank Legacy Pension Plan is rehired, the employee will participate in the U.S. Bank Legacy Pension Plan on the same terms as the employee would have participated in the U.S. Bank Pension Plan prior to the spinoff. Employees may only participate in the U.S. Bank Pension Plan or the U.S. Bank Legacy Pension Plan — under no circumstance may an employee participate in both plans.
Because the U.S. Bank Legacy Pension Plan received accrued benefits transferred from the U.S. Bank Pension Plan, the history of the U.S. Bank Pension Plan is relevant to both plans. The U.S. Bank Pension Plan was created through the merger of the former U.S. Bancorp's career average pay defined benefit plan, known as the "U.S. Bancorp Cash Balance Pension Plan," and the former Firstar Corporation's non-contributory defined benefit plan, which was primarily a final average pay plan. UnderOn July 3, 2008, the U.S. Bank Pension Plan was frozen to new hires and on November 15, 2009, the U.S. Bank Pension Plan was frozen to rehires. Employees who were hired prior to July 3, 2008, or rehired prior to November 15, 2009, could elect to continue to accrue benefits under the final average pay formula of the U.S. Bank Pension Plan, or could elect to accrue benefits under the cash balance portion of the U.S. Bank Pension Plan known as the U.S. Bank 2010 Cash Balance Plan. If no election was made, those employees defaulted into the U.S. Bank 2010 Cash Balance Plan. For employees who elected to accrue benefits under the final average pay formula, benefits are calculated using a final average pay formula, based upon the employee's years of service and average salary during the five consecutive years of service in which compensation was the highest during the ten years prior to retirement, with a normal retirement age of 65.
Effective January 1, 2010, our company established a new cash balance formula for certain current and all future eligible employees. Participants willemployees known as the U.S. Bank 2010 Cash Balance Plan. Under the cash balance formula, participants receive annual pay credits based on eligible pay multiplied by a percentage determined by their age and years of service. Participants will also receive an annual interest credit. Participants in the pension plan that elected to receive pension benefits using the cash balance formula or defaulted into the cash balance formula had their existing benefits in the pension plan frozen and will earn future benefits under the cash balance formula.
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53 | | U.S. Bancorp 2021 Proxy Statement |
Executive compensation |
Substantially all employees are eligible to receive benefits under the U.S. Bank Pension Plan.Plan or the U.S. Bank Legacy Pension Plan, as applicable. Participation requires one year of service with U.S. Bancorp or its affiliates, and vesting of benefits requires five years of service for benefits under the final average pay formula and three years of service for benefits under the post-2009 cash balance formula. Messrs. Cecere, Parker and von Gillern wereformula (and certain legacy plans). Mr. Dolan is the only NEOsNEO (of those eligible at the time) who elected to receive pension benefits usingremain covered by the final average pay formula; all other NEOs are covered by the cash balance formula.
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Although no new benefits are accrued under the former U.S. Bancorp Cash Balance Pension Plan formula and Firstar Corporation's plan formula for service after 2001, benefits previously earned under those plans have been preserved and will be part of a retiree's total retirement benefit. In order to preserve the relative value of benefits that use the final average pay formula, subsequent changes in compensation (but not in service) may increase the amount of those benefits.
Federal laws limit the amount of compensation we may consider when determining benefits payable under qualified defined benefit pension plans. We also maintain a non-contributory, non-qualified retirement plan (the U.S. Bank Non-Qualified Retirement Plan) that pays the excess pension benefits that would have been payable under our current and prior qualified defined benefit pension plans if the federal limits were not in effect.
Mr. Davis earned benefits under the former Firstar Corporation plan that will be included in his ultimate retirement benefit. Messrs. Cecere, Dolan Parker and von Gillern earned benefits under the former U.S. Bancorp Cash Balance Pension Plan that will be included in their ultimate retirement benefits.
As part of her compensation package agreed to at hire, Ms. Kedia receives an additional 23 years of service when calculating her pay credits in the non-qualified plan. The additional years of service represent her service with her prior employer.
Supplemental retirement benefits
Certain of our executive officers, including all of the NEOs except for Ms. Kedia,Messrs. Cecere, Dolan and von Gillern are eligible for a supplemental benefit, which is also paid under the U.S. Bank Non-Qualified Retirement Plan, that augments benefits earned under the U.S. Bank Pension Plan and the non-qualified excess benefits discussed above. The supplemental benefit ensures that eligible executives receive a total retirement benefit equal to a fixed percentage of the executive's final average cash compensation. In the case of Messrs. Dolan Parker and von Gillern, their supplemental benefits were frozen in 2001. For purposes of this supplemental benefit, final average cash compensation includes annual base salary, annual cash bonuses and other cash compensation awards as determined by the Compensation and Human Resources Committee. Eligibility for these supplemental benefits has been determined by the Committeethis committee based on individual performance and level of responsibility.
Vesting of the supplemental benefit is generally subject to certain conditions, including that an executive officer provide a certain number of years of service determined by the Compensation and Human Resources Committee. Mr. Davis is eligible for an amount of total retirement benefits at age 62 equal to 60% of the average cash compensation during his five consecutive years of service in which he is most highly compensated, and he is fully vested in these benefits. Mr. Cecere is eligible for an amount of total retirement benefits at age 65 equal to 55% of the average cash compensation during his final three years of service, reduced by his estimated retirement benefits from Social Security. Mr. Cecere is fully vested in a portion of his supplemental benefit, with his vested portion increasing on a pro rata basis up to age 60.benefit. Mr. Dolan has a frozen monthly annuity of $522 in which he is fully vested, payable as early as his termination date. Mr. Parker has a frozen monthly annuity benefit of $1,761 in which he is fully vested, payable as early as his termination date. Mr. von Gillern also has a frozen monthly annuity benefit of $138 in which he is fully vested, payable as early as his termination date.
For Mr. Davis, the standard form of payment of the supplemental benefit is a ten-year certain, single life annuity. For a portion ofIn accordance with his election, Mr. Cecere's supplemental benefit will be paid in the standard form is eitherof a lump sum or a joint and survivor annuity, depending on the present value of the lump sum at retirement, and for the remaining portion of the benefit, the standard form is a joint and survivor annuity.sum. For the supplemental benefits forpayable to Messrs. Dolan Parker and von Gillern, the standard form is either a lump sum or a joint and survivor annuity, depending on the present value of the lump sum at retirement. Each of Messrs. Davis and Cecere has the option of electing to receive his supplemental benefit in other various forms of annuity benefits. In general, this election must be made prior to the applicable officer's retirement date. In addition, Mr. Davis has the option to elect to receive the pre-2005 portion of his supplemental benefit as a lump sum distribution, and Mr. Cecere has the option to elect to receive his entire supplemental benefit as a lump sum. This election must be made at least 12 months prior to the applicable officer's retirement date, and Mr. Cecere has made such an election.
The present value of the supplemental benefit for Messrs. Dolan Parker and von Gillern is currently less than $400,000, so in accordance with plan rules, their supplemental benefit will default to payment in a lump sum. Each of Messrs. Dolan Parker and von Gillern has the option to make an election to receive his supplemental benefit as an annuity if the election is made 12 months prior to the applicable officer's termination date, the officer is over age 55, and the present value of the supplemental benefit exceeds $50,000. The amount of the lump sum distribution equals the actuarial equivalent of the annuity form of payment and is calculated using substantially similar actuarial assumptions as for our pension plan obligations discussed in Note 16 to our consolidated financial statements included in our 20172020 Annual Report on Form 10-K. The means of calculating the various annuity benefits are described in the pension plan.
Ms. Kedia was hired in December 2016 and became a participant in the pension plan on January 1, 2018. Accordingly, she had no pension benefit as of December 31, 2017, to report in this proxy statement.
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U.S. Bancorp | | |
Executive compensation |
Pension benefits for fiscal 20172020
The following table summarizes information with respect to each plan that provides for payments or other benefits at, following, or in connection with the retirement of any of the NEOs.
Name | Plan name | | Number of years credited service (#) | | Present value of accumulated benefits ($)1, 2 | | Payments during last fiscal year ($) | Plan name | | Number of years credited service (#) | | Present value of accumulated benefits ($)1, 2 | | Payments during last fiscal year ($) | ||||||||||
Andrew Cecere | U.S. Bancorp Non-Qualified Retirement Plan: | U.S. Bank Non-Qualified Retirement Plan: | ||||||||||||||||||||||
Supplemental benefits | 32 | 5,780,318 | — | |||||||||||||||||||||
Excess benefit | 32 | 3,840,357 | — | |||||||||||||||||||||
U.S. Bank Pension Plan | 32 | 628,096 | — | |||||||||||||||||||||
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Total | 10,248,771 | (3) | — | |||||||||||||||||||||
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Richard K. Davis | U.S. Bancorp Non-Qualified Retirement Plan: | |||||||||||||||||||||||
Supplemental benefits | 24 | 23,958,171 | — | Supplemental benefits | 35 | 16,401,089 | — | |||||||||||||||||
Excess benefit | 24 | 11,322,485 | — | Excess benefit | 35 | 7,021,660 | — | |||||||||||||||||
U.S. Bank Pension Plan | 24 | 926,676 | — | U.S. Bank Pension Plan | 35 | 854,107 | — | |||||||||||||||||
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Total | 36,207,332 | (4) | — | Total | 24,276,856 | (3) | — | |||||||||||||||||
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Terrance R. Dolan | U.S. Bancorp Non-Qualified Retirement Plan: | U.S. Bank Non-Qualified Retirement Plan: | ||||||||||||||||||||||
Supplemental benefits | 3 | 66,497 | — | Supplemental benefits | 3 | 90,603 | — | |||||||||||||||||
Excess benefit | 19 | 2,310,465 | — | Excess benefit | 22 | 4,970,233 | — | |||||||||||||||||
U.S. Bank Pension Plan | 19 | 616,540 | — | U.S. Bank Pension Plan | 22 | 980,300 | — | |||||||||||||||||
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Total | 2,993,502 | (5) | — | Total | 6,041,136 | — | ||||||||||||||||||
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P.W. (Bill) Parker | U.S. Bancorp Non-Qualified Retirement Plan: | |||||||||||||||||||||||
Jeffry H. von Gillern | U.S. Bank Non-Qualified Retirement Plan: | |||||||||||||||||||||||
Supplemental benefits | 18 | 257,341 | — | Supplemental benefits | 1 | 21,384 | — | |||||||||||||||||
Excess benefit | 34 | 2,200,682 | — | Excess benefit | 20 | 1,271,233 | — | |||||||||||||||||
U.S. Bank Pension Plan | 34 | 763,357 | — | U.S. Bank Pension Plan | 20 | 467,255 | — | |||||||||||||||||
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Total | 3,221,380 | (5) | Total | 1,759,872 | — | |||||||||||||||||||
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Jeffry H. von Gillern | U.S. Bancorp Non-Qualified Retirement Plan: | |||||||||||||||||||||||
Timothy A. Welsh | U.S. Bank Non-Qualified Retirement Plan: | |||||||||||||||||||||||
Supplemental benefits | 1 | 14,803 | — | Supplemental benefits | — | — | — | |||||||||||||||||
Excess benefit | 17 | 731,687 | — | Excess benefit | 4 | 176,452 | — | |||||||||||||||||
U.S. Bank Pension Plan | 17 | 311,620 | — | U.S. Bank Pension Plan | 4 | 49,891 | — | |||||||||||||||||
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Total | 1,058,110 | (5) | Total | 226,343 | — | |||||||||||||||||||
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Gunjan Kedia | U.S. Bancorp Non-Qualified Retirement Plan: | U.S. Bank Non-Qualified Retirement Plan: | ||||||||||||||||||||||
Supplemental benefits | — | — | — | Supplemental benefits | — | — | — | |||||||||||||||||
Excess benefits | — | — | — | Excess benefit | 27 | 368,530 | — | |||||||||||||||||
U.S. Bank Pension Plan | — | — | — | U.S. Bank Pension Plan | 4 | 50,472 | — | |||||||||||||||||
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Total | — | (6) | — | Total | 419,002 | — | ||||||||||||||||||
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The amounts in this column were calculated based on the earliest age at which the applicable officer is entitled to receive unreduced retirement benefits and ignore any vesting requirements. The earliest age of unreduced retirement benefits is 65 for Messrs. Cecere, Dolan, Parker,all our NEOs, and von Gillern and 62 for Mr. Davis.all are currently vested in 100% of their pension benefits.
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Executive compensation |
retirement. If any of the vested benefits are paid before Mr. Cecere reachedreaches age 65, the benefits are reduced by certain early retirement benefit formulas specified in the applicable plan for each year prior to Mr. Cecere's reaching age 65. These early retirement benefit formulas reduce the annual pension benefit amount payable to Mr. Cecere due to the longer benefit payment period related to the earlier commencement of benefits.
Under the U.S. Bank Executive Employees Deferred Compensation Plan (2005 Statement) (the "Executive Deferred Compensation Plan"), members of our senior management, including all of our executive officers, may choose to defer all or a part of their annual base salary and annual cash incentive payments. The minimum amount that can be deferred in any calendar year is $1,000. Cash compensation that is deferred is deemed to be invested in one of several investment funds, including a U.S. Bancorp common stock fund, as selected by the participant.
Shown below are the rates of return for each of the investment options (also known as measurement funds) available under the Executive Deferred Compensation Plan for the period from January 1, 2017,2020 through December 31, 2017:2020:
Fund Name | ||
Stable Value Fund | ||
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Bond Index Fund | ||
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US Large Cap Equity Index Fund | ||
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US Small-Mid Equity Index Fund | ||
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International Equity Index Fund | ||
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Deferred Savings U.S. Bancorp Stock Fund | ||
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Amounts deferred under the Executive Deferred Compensation Plan are credited with earnings and investment gains and losses by assuming that deferred amounts were invested in one or more of the hypothetical investment options selected by the plan participant. Plan participants are allowed to change their investment elections at any time, but the changes are only effective at the beginning of the following calendar quarter. The measurement funds are merely measuring tools to determine the amount by which account balances will be debited or credited to reflect deemed investment returns on deferred compensation.
Although the plan administrator has established procedures permitting a plan participant to reallocate deferred amounts among these investment alternatives after the initial election to defer, the election to defer is irrevocable, and the deferred compensation will not be paid to the executive officerplan participant until his or her retirement or earlier termination of employment. At that time, the participant will receive, depending upon the payment choice and investment alternatives selected by the executive officer,him or her, payment of the amounts credited to his or her account under the plan in a lump-sum cash payment or in annual installments over 5, 10, 15 or 20 years. Payments are made ratably in cash from each of the investment alternatives in which the officerparticipant has a balance, except the U.S. Bancorp stock fund, which is generally paid in shares. If a participant dies before the entire deferred amount has been distributed, the undistributed portion will be paid to the participant's beneficiary.beneficiary in a single lump sum. The benefits under the plan otherwise are not transferable by the participant.
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U.S. Bancorp | | |
Executive compensation |
Prior to the establishment of the Executive Deferred Compensation Plan, members of our senior management could defer annual salary and annual cash incentive compensation into a prior U.S. Bancorp deferred compensation plan. Messrs. Davis and Parker have deferred amounts under our prior plan.
The following table summarizes information with respect to the participation of the NEOs in any defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.
Nonqualified deferred compensation for fiscal 20172020
Name | | Executive contributions in last FY ($)1 | | Registrant contributions in last FY ($) | | Aggregate earnings in last FY ($)2 | | Aggregate withdrawals/ distributions ($) | | Aggregate balance at last FYE ($) | | Executive contributions in last FY ($) | | Registrant contributions in last FY ($) | | Aggregate earnings in last FY ($)1 | | Aggregate withdrawals/ distributions ($) | | Aggregate balance at last FYE ($) | ||||||||||||
Andrew Cecere | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
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Richard K. Davis | — | — | 245,303 | — | 4,009,999 | (3) | ||||||||||||||||||||||||||
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Terrance R. Dolan | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
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P.W. (Bill) Parker | 377,735 | — | 66,246 | — | 1,769,259 | (4) | ||||||||||||||||||||||||||
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Jeffry H. von Gillern | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
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Timothy A. Welsh | 137,932 | — | 64,373 | — | 409,026 | (2) | ||||||||||||||||||||||||||
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Gunjan Kedia | — | — | — | — | — | — | — | 31,657 | — | 158,322 | (3) | |||||||||||||||||||||
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Any NEO whose employment is voluntarily or involuntarily terminated is entitled to the payments or other benefits that the officer has accrued and is vested in under the benefit plans discussed above in this proxy statement, including under the heading "Pension Benefits." Except as is specifically described below with respect to disability, death or termination of employment following a change-in-control of U.S. Bancorp, no NEO is entitled to any other benefits upon any employment termination or change-in-control scenario.
Cash payments: Under the terms of the U.S. BancorpBank Non-Qualified Retirement Plan, Messrs. Davis andMr. Cecere areis eligible for an annual disability benefit that is equal to 60% of theirhis current annual cash compensation. The definition of disability is similar to that used for the broad-based disability plan covering all employees.program described below. The definition of annual cash compensation is the same definition as is used to calculate supplemental pension benefits under this plan, without using a five-year average. Their agreementsHis agreement under the non-qualified retirement plan provideprovides that Messrs. Davis andMr. Cecere areis eligible to receive disability payments through the earlier of the cessation of theirhis disability or reaching theirhis normal retirement age.
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Messrs. Dolan, Parkervon Gillern, and von GillernWelsh and Ms. Kedia are eligible for an annual disability benefit of $150,000 (equal to 50% of their annual cash compensation, up tocapped at $300,000 of compensation) under the terms of the U.S. Bank Long-Term Disability Insurance Plan insured by Hartford Life and Accident Insurance Company, our broad-based disability program. Optional additional disability insurance is available for purchase by those NEOs. The definition of disability is generally that a participant is unable to perform material duties of his or her own occupation for 24 months following the six-month elimination period, or any occupation after 24 months, and suffers a loss of at least 20% in predisability earnings. The definition of annual cash compensation is actual cash compensation for a one-year period ending
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57 | | U.S. Bancorp 2021 Proxy Statement |
Executive compensation |
September 30. The disability benefit for any of the officers would be reduced by any benefits payable under the U.S. Bank Pension Plan, Social Security or worker's compensation. The duration of disability payments under this broad-based program is dependent upon the age of the participant when the disability occurs. Because each of Messrs. Dolan, Parkervon Gillern, and von GillernWelsh and Ms. Kedia is under age 63, payments would continue through the earlier of the cessation of their disability or reaching their normal retirement age, (or for 42 months if greater than normal retirement age), assuming all other plan conditions are met.
Effect on equity awards: If the employment of any of our officersNEOs who have received equity compensation awards is terminated due to disability, the terms of our stock option, PRSU, and PRSUmost RSU agreements provide that the vesting and other terms of those awards will continue as if the termination of employment did not occur. With the exception of Ms. Kedia, noNo financial information for the event of disability is set forth below in the Potential Payments Upon Disability, Death, or Termination After a Change-in-Control table below for the equity awards held by our NEOs other than Mr. Welsh, as there is no immediate financial impact upon the occurrence of any of these events. Ms. Kediathis event. Mr. Welsh holds unvested restricted stock units sheRSUs he was granted when initially hired, and the agreement governing that award provides for the acceleration of any unvested restricted stock unitsRSUs in the event of long-term disability.
Cash payments: NEOs are eligible to receive life insurance benefits under the same plans available to our other employees. Their benefit is equal to their annual cash compensation, up tocapped at $300,000. In addition, optional term life insurance is available for purchase. As this benefit is generally available to all salaried employees and does not discriminate in scope, terms, or operation in favor of the officers,NEOs, the value has not been quantified in the Potential Payments Upon Disability, Death, or Termination After a Change-in-Control table.
Effect on equity awards: AllMost of our equity award agreements with NEOs provide for the acceleration of any unvested award upon the death of the NEO.death. For all RSUs and for PRSUs the target number ofother than those granted in 2018, outstanding units will vest ifupon death. All of our stock option agreements also provide for the acceleration of vesting upon death, occurs before the performance period has ended, and the earned number of units will vest if the death occurs on or after the last day of the performance period. The stock option agreements generally provide that the administrator of the officer'sNEO's estate has a three-year period after death during which to exercise the options.
For PRSUs granted in 2018, the vesting and other terms of the award will continue as if the death did not occur. The value of the PRSUs granted in 2018 is accordingly not included in the amounts payable upon death in the Potential Payments Upon Disability, Death, or Termination After a Change-in-Control table below.
Payments upon termination after a change-in-control
Cash payments: None of our NEOs is entitled to any cash payments in connection with a change-in-control of U.S. Bancorp.
Effect on equity awards: AllMost of our equity award agreements provide for acceleration of the vesting of any unvested award if an NEO's employment is involuntarily terminated within 12 months after a change-in-control of U.S. Bancorp other than for cause. For all RSUs and for PRSUs the target number ofother than those granted in 2018, outstanding units will vest if theupon a qualifying termination. All of our stock option agreements also provide for acceleration after a qualifying termination, occurs before the performance period has ended, and the earned number of units will vest if the qualifying termination occurs on or after the last day of the performance period. Acceleratedaccelerated stock options may be exercised at any time during the 12 months following the NEO's termination.
For PRSUs granted in 2018, the vesting and other terms of the award will continue as if the termination following a change-in-control did not occur. The value of the PRSUs granted in 2018 is accordingly not included in the amounts payable upon involuntary termination (other than for cause) after a change-in-control in the Potential Payments Upon Disability, Death, or Termination After a Change-in-Control table below.
Quantification of estimated payments and benefits
The following table shows potential annual cash payments to the NEOs upon disability and the potential benefits the NEOs could accrue through accelerated equity vesting upon death or involuntary termination of employment (other than for cause) following a change-in-control of U.S. Bancorp. The table also shows the potential benefit Ms. KediaMr. Welsh could accrue through accelerated vesting of restricted stock unitsRSUs upon disability. No information regarding pension amounts payable to the NEOs is shown in the following table; applicable pension amounts payable to these executive officers are discussed above under the heading "Pension Benefits."
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U.S. Bancorp | | |
Executive compensation |
The amounts shown assume that termination was effective as of December 29, 2017, the last business day of the year,31, 2020, and are estimates of the amounts that would be paid to the executivesNEOs upon termination, in addition to the base salary and cash incentive payments earned by the executivesthem during 2017.2020. The actual amounts to be paid can only be determined at the time of an executive'sNEO's termination.
Potential payments upon disability, death, or termination after a change-in-control
Name | Type of payment | | Annual disability payments ($) | | Payments upon death ($) | | Payments upon termination (other than for cause) after a change-In-control ($) | Type of payment | | Annual disability payments ($) | | Payments upon death ($) | | Payments upon involuntary termination (other than for cause) after a change-In-control ($) | ||||||||||
Andrew Cecere | ||||||||||||||||||||||||
Base pay | 564,923 | — | — | |||||||||||||||||||||
Bonus | 995,920 | — | — | |||||||||||||||||||||
Acceleration of unvested equity awards: | ||||||||||||||||||||||||
Stock options1 | — | 2,266,135 | 2,266,135 | |||||||||||||||||||||
PRSUs2 | — | 13,120,563 | 13,120,563 | |||||||||||||||||||||
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Total | 1,560,843 | 15,386,698 | 15,386,698 | |||||||||||||||||||||
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Richard K. Davis | ||||||||||||||||||||||||
Base pay | 670,154 | — | — | Base pay | 720,000 | — | — | |||||||||||||||||
Bonus | 531,720 | — | — | Bonus | 1,167,696 | — | — | |||||||||||||||||
Acceleration of unvested equity awards: | Acceleration of unvested equity awards: | |||||||||||||||||||||||
Stock options1 | — | 3,469,369 | 3,469,369 | Stock options1 | — | 0 | 0 | |||||||||||||||||
PRSUs2 | — | 20,809,829 | 20,809,829 | RSUs and PRSUs2 | — | 15,736,844 | 15,736,844 | |||||||||||||||||
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Total | 1,201,874 | 24,279,198 | 24,279,198 | Total | 1,887,696 | 15,736,844 | 15,736,844 | |||||||||||||||||
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Terrance R. Dolan | ||||||||||||||||||||||||
Base pay | 150,000 | — | — | Base pay | 150,000 | — | — | |||||||||||||||||
Bonus | — | — | — | Bonus | — | — | — | |||||||||||||||||
Acceleration of unvested equity awards: | Acceleration of unvested equity awards: | |||||||||||||||||||||||
Stock options1 | — | 627,249 | 627,249 | Stock options1 | — | 0 | 0 | |||||||||||||||||
PRSUs2 | — | 4,822,039 | 4,822,039 | RSUs and PRSUs2 | — | 6,805,355 | 6,805,355 | |||||||||||||||||
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Total | 150,000 | 5,449,288 | 5,449,288 | Total | 150,000 | 6,805,355 | 6,805,355 | |||||||||||||||||
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P.W. (Bill) Parker | ||||||||||||||||||||||||
Base pay | 150,000 | — | — | |||||||||||||||||||||
Bonus | — | — | — | |||||||||||||||||||||
Acceleration of unvested equity awards: | ||||||||||||||||||||||||
Stock options1 | — | 938,370 | 938,370 | |||||||||||||||||||||
PRSUs2 | — | 5,433,066 | 5,433,066 | |||||||||||||||||||||
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Total | 150,000 | 6,371,436 | 6,371,436 | |||||||||||||||||||||
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Jeffry H. von Gillern | ||||||||||||||||||||||||
Base pay | 150,000 | — | — | Base pay | 150,000 | — | — | |||||||||||||||||
Bonus | — | — | — | Bonus | — | — | — | |||||||||||||||||
Acceleration of unvested equity awards: | Acceleration of unvested equity awards: | |||||||||||||||||||||||
Stock options1 | — | 690,195 | 690,195 | Stock options1 | — | 0 | 0 | |||||||||||||||||
PRSUs2 | — | 4,384,237 | 4,384,237 | RSUs and PRSUs2 | — | 5,026,269 | 5,026,269 | |||||||||||||||||
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Total | 150,000 | 5,074,432 | 5,074,432 | Total | 150,000 | 5,026,269 | 5,026,269 | |||||||||||||||||
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Timothy A. Welsh | ||||||||||||||||||||||||
Base Pay | 150,000 | — | — | |||||||||||||||||||||
Bonus | — | — | — | |||||||||||||||||||||
Acceleration of Unvested Equity Awards: | ||||||||||||||||||||||||
Stock options1 | — | 0 | 0 | |||||||||||||||||||||
RSUs and PRSUs2 | 177,554(3 | ) | 4,005,016 | 4,005,016 | ||||||||||||||||||||
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Total | 327,554 | 4,005,016 | 4,005,016 | |||||||||||||||||||||
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Gunjan Kedia | ||||||||||||||||||||||||
Base Pay | 150,000 | — | — | |||||||||||||||||||||
Bonus | — | — | — | |||||||||||||||||||||
Acceleration of Invested Equity Awards: | ||||||||||||||||||||||||
Stock options1 | — | 0 | 0 | |||||||||||||||||||||
RSUs and PRSUs2 | — | 4,161,512 | 4,161,512 | |||||||||||||||||||||
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Total | 150,000 | 4,161,512 | 4,161,512 | |||||||||||||||||||||
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Executive compensation |
Name | Type of payment | | Annual disability payments ($) | | Payments upon death ($) | | Payments upon termination (other than for cause) after a change-In-control ($) | |||||
Gunjan Kedia | ||||||||||||
Base pay | 150,000 | — | — | |||||||||
Bonus | — | — | — | |||||||||
Acceleration of unvested equity awards: | ||||||||||||
Stock options1 | — | — | — | |||||||||
Restricted stock units and PRSUs2 | 1,090,728 | (3) | 2,416,137 | 2,416,137 | ||||||||
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Total | 1,240,728 | 2,416,137 | 2,416,137 | |||||||||
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Total compensation amounts and ratio for 20172020
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following information about the relationship between the annual total compensation of our employees and the annual total compensation of our CEO.
The ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. It is based on the methodologies, assumptions and estimates described belowS-K and is not necessarily comparable to the ratios reported by other companies.
Median employee identification and compensation calculation
We identified our median employee based on compensation paid during 20172020 to all 71,728 of our U.S.-based employees, other than our CEO, who were employed by us on December 31, 2017.2020. We considered any person to whom we delivered a Form W-2 Wage and Tax Statement for services performed in 20172020 to be a U.S.-based employee, and this group includes full-time, part-time, and temporary workers. In accordance with the "de minimis" exemption provided in Item 402(u) of Regulation S-K, we excluded from consideration all 2,693 of our non-U.S. employees working for us on December 31, 2017, representing approximately 3.6% of our total U.S. and non-U.S. workforce. The excluded employees work in the following jurisdictions: Ireland (792), Poland (720), Mexico (388), United Kingdom (340), Canada (165), Germany (102), Spain (102), Norway (42), Belgium (41), and Cayman Islands (1). We did not exclude from consideration any U.S. employees who joined our company during the year as the result of a business acquisition or combination.
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For purposes of determining the compensation paid to the employees under consideration, we used earnings subject to Medicare tax as reported in Box 5, "Medicare wages and tips," on each employee's 20172020 Form W-2. We did not annualize the compensation of anyone who was employed by us for only part of the year.
OnceIn accordance with the "de minimis" exemption provided in Item 402(u) of Regulation S-K, we identifiedexcluded from consideration all of our median employee,non-U.S. employees. As of December 31, 2020, we thenhad 2,686 non-U.S. employees, representing approximately 3.9% of our total U.S. and non-U.S. workforce of 68,989 active employees on that date. The excluded employees work in the following jurisdictions: Ireland (995), Poland (764), United Kingdom (492), Canada (180), Spain (103), Germany (69), Norway (37), Lithuania (26), Sweden (10), Luxembourg (8), Belize (1), and Cayman Islands (1).
We determined thatour median employee's total compensation in the same manner that we determinedetermined the totalCEO's compensation of our NEOs for purposes of the Summary Compensation Table. The median employee's total compensation for 2017 consisted of the following elements: hourly wages plus overtime, an annual cash incentive earned in 2017 and paid in February 2018, change in pension value, and matching contribution into the 401(k) savings plan. We did not include the value of any non-discriminatory benefit plans in the total compensation amount.
Andrew Cecere served as our CEO for most of 2017, including on December 31, 2017, and we consider him to be our 2017 CEO for purposes of this pay ratio calculation. Mr. Cecere began the year as our President and Chief Operating Officer, and on January 16, 2017, he was appointed to be President and Chief Executive Officer, effective April 18, 2017.disclosure.
To calculate Mr. Cecere's annual total compensation as CEO for purposes of this pay ratio calculation, we assumed that the cash compensation arrangements that became effective when he began serving as CEO were in place starting on January 1, 2017. His annual base salary became $1,000,000 on April 18, and we included this amount in his annual total compensation. The annualized target award value used to calculate his payout under the annual cash incentive plan became $2,250,000 starting in May. Based on the bonus funding percentage of 84.4% that was applied to his target award amount for 2017 performance, his annualized non-equity incentive plan compensation for a full year of service as CEO would have been $1,899,000, and we included this amount in his annual total compensation.
We also re-calculated the increase in the actuarial net present value of all future retirement benefits under the U.S. Bank Pension Plan and the U.S. Bancorp Non-Qualified Retirement Plan to reflect how much the value would have increased had Mr. Cecere received the annualized salary and non-equity incentive plan compensation amounts imputed to him for this pay ratio calculation. If Mr. Cecere's annual base salary had been $1,000,000 staring on January 1, the value of his pension at that time would have been higher as well. This higher hypothetical starting point yielded a lower change in pension value accrued in 2017 for purposes of this pay ratio calculation than the actual compensation values yielded.
When the Compensation and Human Resources Committee determined the value of Mr. Cecere's long-term incentive award in January, his promotion to CEO had been approved although not yet effective. The equity awards granted to Mr. Cecere in February were therefore determined in contemplation of his upcoming change in role, and the Committee decided not to grant him an additional award when his promotion became effective. Accordingly, when calculating Mr. Cecere's annual total compensation for purposes of the pay ratio, we did not make any annualizing adjustments to his stock award and option award amounts from what is reported in the Summary Compensation Table. We also did not make any adjustments to the amount of all other compensation reported for Mr. Cecere, and we did not include the value of any non-discriminatory benefit plans in the total compensation amount.
The following table shows the amounts used in the calculation of Mr. Cecere's annual total compensation for this pay ratio presentation as compared to the amounts reported in the Summary Compensation Table.
| Salary ($) | | Stock awards ($) | | Option awards ($) | | Non-equity incentive plan compensation ($) | | Change in pension value and non-qualified deferred compensation earnings ($) | | All other compensation ($) | | Total ($) | |||||||||
Pay ratio amount | 1,000,000 | 4,500,000 | 1,500,000 | 1,899,000 | 3,029,707 | 31,947 | 11,960,654 | |||||||||||||||
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Summary compensation table amount | 941,538 | 4,500,000 | 1,500,000 | 1,659,867 | 3,381,404 | 31,947 | 12,014,756 | |||||||||||||||
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Director compensation |
Determining compensation for non-employee directors
The Compensation and Human Resources Committee retained its independent compensation consultant to provide advice regarding non-employee director compensation in 2020. Before recommending a non-employee director compensation program to the independent members of the Board for 2017approval, the Committee reviewed director compensation information for our compensation peer group companies to check the alignment of our compensation package with market practice and current trends. The detailed peer data that was reviewed included information about compensation paid per director, total board compensation cost, the absolute and relative amounts attributable to various compensation components, additional retainers paid to lead independent directors and committee chairs, and stock ownership requirements.
Cash compensation for Board and committee service in the April 2020 – April 2021 term
Our non-employee directors received the following cash fees for serving on the Board in 2017:and committees this term:
| Retainer | | Retainer | |||||
Annual retainer for service on the Board | $ | 90,000 | $ | 100,000 | ||||
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Additional annual retainer for Lead Director | $ | 50,000 | $ | 50,000 | ||||
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Additional annual retainer for chairs of Capital Planning, Compensation and Human Resources, Governance, and Public Responsibility Committees | $ | 20,000 | $ | 25,000 | ||||
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Additional annual retainer for chairs of Audit and Risk Management Committees | $ | 32,500 | $ | 40,000 | ||||
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Additional annual retainer for other members of Audit and Risk Management Committees | $ | 7,500 | $ | 15,000 | ||||
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Each non-employee director who served on U.S. Bancorp's primary banking subsidiary's board of directors or on any ad hoc committee of the U.S. Bancorp Board of Directors received $1,500 per meeting for that service. Each non-employee director was also paid $1,500 for each meeting he or she attended that was not a regularly scheduled Board or committee meeting.
In addition, eachEquity award for Board service in the April 2020 – April 2021 term
As part of the non-employee director receivedcompensation program for Board service during the April 2020 – April 2021 term that the independent members of the Board had approved in late 2019, each of our non-employee directors was entitled to receive an annual award of restricted stock units with a grant date fair value of approximately $150,000$160,000 under the U.S. Bancorp 2015 Stock Incentive Plan. This planIn April 2020, the non-employee directors elected to reduce their equity award for the term by 33% to recognize the impacts of the COVID-19 pandemic on the company and the economy. Accordingly, each non-employee director received an award of restricted stock units with a grant date fair value of approximately $106,667 for his or her Board service in the April 2020 – April 2021 term.
The U.S. Bancorp 2015 Stock Incentive Plan provides that no non-employee director may receive an equity award or awards with an aggregate grant date fair value in excess of $600,000 in any calendar year. The restricted stock units were fully vested at the time of grant, but the underlying shares will not be delivered until the director ceases to serve on the board.Board. Each non-employee director may elect to have all of his or her shares delivered promptly following cessation of service or to have the shares delivered throughin ten annual installments. Each non-employee director is entitled to receive additional fully vested restricted stock units having a fair market value equal to the amount of dividends he or she would have received had restricted stock been awarded instead of restricted stock units.
The Compensation and Human Resources Committee retained its independent compensation consultant to provide advice regarding competitive compensation practices, peer analysis and recommendations to the Committee for guidance with respect to director compensation in 2017. To determine director compensation for 2017, the Committee reviewed director compensation information for our compensation peer group companies to check the alignment of our compensation package with market practice and current trends.
Director stock ownership requirements
The Compensation and Human Resources Committee has established stock ownership requirements for each non-employee director equal to five times the value of the annual cash retainer. New directors must satisfy this minimum ownership level within five years after joining the Board. As of December 31, 2017,2020, all of the directors had sufficient holdings to meet or exceed the stock ownership requirements, or had not yet served on our Board for five years.
Deferred compensation plan participation
Under the U.S. Bank Outside Directors Deferred Compensation Plan (2005 Statement) (the "Director Deferred Compensation Plan"), our non-employee directors may choose to defer all or a part of their cash fees. The minimum
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61 | | U.S. Bancorp 2021 Proxy Statement |
Director compensation |
amount that can be deferred in any calendar year is $1,000. Cash fees that are deferred are deemed to be invested in one of several investment funds, including a U.S. Bancorp common stock fund, as selected by the participant.
These investment alternatives are the same as those available under the Executive Deferred Compensation Plan. See "Executive Compensation — Nonqualified Deferred Compensation" above for the rates of return for 20172020 for each of these investment options (also known as measurement funds). The terms of the Director Deferred Compensation Plan are substantially the same as the terms of the Executive Deferred Compensation Plan described in that section.
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Director compensation for fiscal 20172020
The following table shows the compensation of the individuals who served as non-employee members of our Board of Directors during any part of fiscal year 2017.2020.
Name1 | | Fees earned or paid in cash ($) | | Stock awards ($)2 | | All other compensation ($) | | Total ($) | | Fees earned or paid in cash ($) | | Stock awards ($)2 | | All other compensation ($) | | Total ($) | ||||||||||
Douglas M. Baker, Jr. | 117,500 | 150,009 | 3,000 | (4) | 270,509 | |||||||||||||||||||||
Warner L. Baxter | 119,500 | 106,651 | — | 226,151 | ||||||||||||||||||||||
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Warner L. Baxter | 117,500 | 150,009 | — | 267,509 | ||||||||||||||||||||||
Dorothy J. Bridges | 128,500 | 106,651 | — | 235,151 | ||||||||||||||||||||||
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Elizabeth L. Buse | 133,000 | 106,651 | — | 239,651 | ||||||||||||||||||||||
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Marc N. Casper | 90,000 | (3) | 150,009 | 5,000 | (4) | 245,009 | 129,500 | (4) | 106,651 | — | 236,151 | |||||||||||||||
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Arthur D. Collins, Jr. | 111,500 | (3) | 150,009 | 5,000 | (4) | 266,509 | ||||||||||||||||||||
Arthur D. Collins, Jr.3 | 3,000 | (4) | 0 | 5,000 | (5) | 8,000 | ||||||||||||||||||||
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Kimberly J. Harris | 110,000 | 150,009 | 2,000 | (4) | 262,009 | 131,000 | 106,651 | — | 237,651 | |||||||||||||||||
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Roland A. Hernandez | 122,500 | (3) | 150,009 | 1,000 | (4) | 273,509 | 144,500 | (4) | 106,651 | — | 251,151 | |||||||||||||||
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Doreen Woo Ho | 115,500 | (3) | 150,009 | — | 265,509 | |||||||||||||||||||||
Doreen Woo Ho3 | 4,500 | 0 | — | 4,500 | ||||||||||||||||||||||
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Olivia F. Kirtley | 124,000 | (3) | 150,009 | — | 274,009 | 156,000 | (4) | 106,651 | — | 262,651 | ||||||||||||||||
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Karen S. Lynch | 103,500 | (3) | 150,009 | — | 253,509 | 143,000 | (4) | 106,651 | — | 249,651 | ||||||||||||||||
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Richard P. McKenney | 24,375 | (3) | 37,459 | 1,000 | (4) | 62,834 | 153,500 | (4) | 106,651 | — | 260,151 | |||||||||||||||
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David B. O'Maley | 141,500 | 150,009 | 3,000 | (4) | 294,509 | |||||||||||||||||||||
Yusuf I. Mehdi | 125,500 | 106,651 | — | 232,151 | ||||||||||||||||||||||
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O'dell M. Owens, M.D., M.P.H. | 109,500 | 150,009 | 1,000 | (4) | 260,509 | |||||||||||||||||||||
David B. O'Maley3 | 3,000 | 0 | 5,000 | (5) | 8,000 | |||||||||||||||||||||
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Craig D. Schnuck | 97,500 | 150,009 | 4,000 | (4) | 251,509 | |||||||||||||||||||||
O'dell M. Owens, M.D., M.P.H.3 | 3,000 | 0 | — | 3,000 | ||||||||||||||||||||||
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Craig D. Schnuck3 | 4,500 | 0 | — | 4,500 | ||||||||||||||||||||||
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John P. Wiehoff | 157,833 | (4) | 159,994 | — | 317,827 | |||||||||||||||||||||
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Scott W. Wine | 106,500 | (3) | 150,009 | — | 256,509 | 144,500 | (4) | 106,651 | — | 251,151 | ||||||||||||||||
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U.S. Bancorp 2021 Proxy Statement | | 62 |
Director compensation |
No non-employee director held any stock options as of December 31, 2017.2020. The non-employee directors held restricted stock units as of December 31, 2017,2020, as follows:
Name | | Restricted stock units | Name | | Restricted stock units | | Restricted stock units | Name | | Restricted stock units | ||||||||||||
Mr. Baker | 67,254 | Ms. Kirtley | 74,840 | |||||||||||||||||||
Mr. Baxter | 18,520 | Ms. Lynch | 18,520 | |||||||||||||||||||
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Mr. Baxter | 7,043 | Ms. Lynch | 7,043 | |||||||||||||||||||
Ms. Bridges | 8,633 | Mr. McKenney | 11,536 | |||||||||||||||||||
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Ms. Buse | 9,735 | Mr. Mehdi | 9,735 | |||||||||||||||||||
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Mr. Casper | 6,412 | Mr. McKenney | 699 | 17,825 | Mr. O'Maley | 86,413 | ||||||||||||||||
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Mr. Collins | 69,962 | Mr. O'Maley | 73,768 | 82,222 | Dr. Owens | — | ||||||||||||||||
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Ms. Harris | 14,143 | Dr. Owens | 65,869 | 26,333 | Mr. Schnuck | — | ||||||||||||||||
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Mr. Hernandez | 23,578 | Mr. Schnuck | 81,474 | 36,719 | Mr. Wiehoff | 4,273 | ||||||||||||||||
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Ms. Woo Ho | 23,575 | Mr. Wine | 11,990 | 24,477 | Mr. Wine | 23,964 | ||||||||||||||||
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Ms. Kirtley | 93,138 | |||||||||||||||||||||
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Audit committee report and payment of fees to auditor |
Audit committee report and payment of fees to auditor
The consolidated financial statements of U.S. Bancorp for the year ended December 31, 2017,2020, were audited by Ernst & Young LLP, independent auditor for U.S. Bancorp.
As part of its activities, the Audit Committee has:
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of U.S. Bancorp for the year ended December 31, 2017,2020, be included in U.S. Bancorp's Annual Report on Form 10-K filed with the SEC.
Audit Committee of the Board of Directors of U.S. Bancorp
Warner L. Baxter | Roland A. Hernandez | |||
Elizabeth L. Buse | Scott W. Wine |
The following aggregate fees were billed to us for professional services by Ernst & Young LLP for fiscal years 20172020 and 2016:2019:
($ in millions) | | 2017 | | 2016 | | 2020 | | 2019 | ||||||
Audit fees | $ | 10.9 | $ | 11.3 | $ | 12.6 | $ | 12.6 | ||||||
Audit-related fees | 5.2 | 4.7 | 6.0 | 6.2 | ||||||||||
Tax fees | 6.1 | 6.0 | 7.1 | 6.8 | ||||||||||
All other fees | 0.9 | 1.4 | 0.0 | (1) | 0.8 | |||||||||
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Total | $ | 23.1 | $ | 23.4 | $ | 25.7 | $ | 26.4 | ||||||
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Audit fees: Audit fees consist of fees billed to us by Ernst & Young LLP for the audit of our consolidated financial statements included in our Annual Reports on Form 10-K, reviews of our financial statements included in each of our Quarterly Reports on Form 10-Q, and audits of financial statements of our subsidiaries required by regulation, as well as procedures required by regulators, comfort letters, consents and assistance provided with our regulatory filings.
Audit-related fees: Audit-related fees consist of fees billed to us by Ernst & Young LLP for audits of pension and other employee benefit plan financial statements, audits of the financial statements of certain of our subsidiaries and affiliated entities, reviews of internal controls not related to the audit of our consolidated financial statements, and internal control reports for various lines of business to support their customers' business requirements.
Tax fees: Tax fees consist of fees billed to us by Ernst & Young LLP for tax compliance and review, tax planning and other tax services. The aggregate fees billed for tax compliance and review services, including the preparation of and assistance with federal, state and local income tax returns, sales and use filings, and foreign and other tax compliance, provided to us by Ernst & Young LLP was $4.1 million in 2017 and $4.5 million in 2016. In addition to fees being paid
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U.S. Bancorp | | |
Audit committee report and payment of fees to auditor |
provided to us by Ernst & Young LLP was $4.9 million in 2020 and $4.6 million in 2019. In addition to fees being paid for tax compliance services, we paid $2.0$2.2 million in each of 2020 and $1.5 million2019 for tax planning and other tax services provided to us by Ernst & Young LLP during 2017 and 2016, respectively.LLP.
All other fees: Other fees billed to us by Ernst & Young LLP in 20172020 and 20162019 primarily related to advisory services for internal control programs.
Administration of engagement of independent auditor
The Audit Committee is responsible for appointing, compensating, retaining and overseeing the work of our independent auditor, including approving the services provided by the independent auditor and the associated fees. The Audit Committee has established a policy for pre-approving the services provided by our independent auditor in accordance with the auditor independence rules of the SEC. This policy requires the review and pre-approval by the Audit Committee of all audit and permissible non-audit services provided by our independent auditor and an annual review of the financial plan for audit fees. To ensure that auditor independence is maintained, the Audit Committee annually pre-approves the audit services to be provided by our independent auditor and the related estimated fees for such services, as well as the nature and extent of specific types of audit-related, tax and other non-audit services to be provided by the independent auditor during the year.
As the need arises, other specific permitted services are pre-approved on a case-by-case basis during the year. A request for pre-approval of services on a case-by-case basis must be submitted by our Controller or Chief Risk Officer. These requests are required to include information on the nature of the particular service to be provided, estimated related fees and management's assessment of the impact of the service on the auditor's independence. The Audit Committee has delegated to its chair pre-approval authority between meetings of the Audit Committee. Any pre-approvals made by the chair must be reported to the Audit Committee. The Audit Committee will not delegate to management the pre-approval of services to be performed by our independent auditor.
All of the services provided by our independent auditor in 20172020 and 2016,2019, including services related to the Audit-Related Fees, Tax Fees and All Other Fees described above, were approved by the Audit Committee under its pre-approval policies after consideration of any impact of these services on the auditor's independence.
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Proposal 2 — Ratification of selection of independent auditor |
Proposal 2 — Ratification of selection of independent auditor
The Audit Committee has selected Ernst & Young LLP as our independent auditor for the 20182021 fiscal year. Ernst & Young LLP began serving as our independent auditor for the fiscal year ended December 31, 2003. Our Audit Committee has carefully considered the selection of Ernst & Young LLP as our independent auditor, and has also considered whether there should be regular rotation of the independent external audit firm.
The Audit Committee annually reviews Ernst & Young LLP's independence and performance in connection with the committee's determination of whether to retain Ernst & Young LLP or engage another firm as our independent auditor. In determining whether to reappoint Ernst & Young LLP as U.S. Bancorp's independent auditor, the Audit Committee took into consideration a number of factors, including including:
In accordance with SEC rules and company policies, lead and concurring audit partners are subject to a maximum of five years of service in that capacity. The process for selecting the audit firm's lead engagement partner involves meetings with the candidates for the role by management; review and discussion with the Chairchair of the Audit Committee, who meets with selected candidates; and further discussion with the full committee.
The members of the Audit Committee believe the continued retention of Ernst & Young LLP to serve as our independent auditor is in the best interests of our company and its shareholders. While we are not required to do so, we are submitting the selection of Ernst & Young LLP to serve as our independent auditor for the 20182021 fiscal year for ratification in order to ascertain the views of our shareholders on this appointment. If the selection is not ratified, the Audit Committee will reconsider its selection. Representatives of Ernst & Young LLP are expected to be present atattend the annual meeting, will be available to answer shareholder questions, and will have the opportunity to make a statement if they desire to do so.
FOR |
The Board of Directors recommends that you vote "FOR" ratification of the selection of Ernst & Young LLP as the independent auditor of U.S. Bancorp for the 20182021 fiscal year.
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U.S. Bancorp | | |
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Proposal 3 — Advisory vote on executive compensation
Proposal 3 — Advisory vote on executive compensation
Executive compensation is an important matter to us. We are asking our shareholders to provide advisory approval of the compensation of our executive officers named in the Summary Compensation Table, as we have described it in the "Compensation Discussion and Analysis" and "Executive Compensation" sections of this proxy statement. We have been conducting annual advisory votes on executive compensation since 2009 and expect to conduct the next advisory vote at our 20192022 annual meeting of shareholders.
We have designed our executive compensation program to create long-term shareholder value by attracting and retaining talented leaders and rewarding them for top performance. Our company is presenting this proposal, which gives you as a shareholder the opportunity to endorse or not endorse our executive pay program by voting "FOR" or "AGAINST" the following resolution:
"RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the named executive officers, as described in the Compensation Discussion and Analysis, the compensation tables and the related disclosure contained in this proxy statement."
As discussed in the "Compensation Discussion and Analysis" section earlier in this proxy statement, the Compensation and Human Resources Committee of the Board of Directors believes that the compensation of our NEOs in 20172020 was reasonable and appropriate, reflected the performance of our company, and aligned our executives' interests with those of our shareholders to support long-term value creation.
This vote, which is required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is not intended to address any specific item of compensation, but rather our overall compensation policies and procedures relating to our NEOs described in this proxy statement. Accordingly, your vote will not directly affect or otherwise limit any existing compensation or award arrangement of any of our NEOs.
Because your vote is advisory, it will not be binding upon the Board of Directors. However, the Board values our shareholders' opinions, and the Compensation and Human Resources Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
FOR |
The Board of Directors recommends that you vote "FOR" approval of the compensation of our named executive officers, as disclosed in this proxy statement.
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Security ownership of certain beneficial owners and management |
Security ownership of certain beneficial owners and management
The following tables show how many shares of our common stock were beneficially owned as of February 6, 2018,4, 2021, by each current director and director nominee, each of the NEOs, all of our directors and executive officers as a group, and each person who is known by us to beneficially own more than 5% of our voting securities.
Unless otherwise noted, the shareholders listed in the tables have sole voting and investment power with respect to the shares of common stock owned by them. None of the shares beneficially owned by our directors or executive officers areis subject to any pledge, in accordance with our company policy prohibiting them from pledging or hedging our common stock.
Directors and executive officers
Name of beneficial owner | | Outstanding shares of common stock1 | | Options exercisable within 60 days of February 6, 2018 | | Restricted stock units2 | | Deferred compensation3 | | Total | | Percent of common stock | | Outstanding shares of common stock1 | | Options exercisable within 60 days of February 4, 2021 | | Restricted stock units2 | | Deferred compensation3 | | Total | | Percent of common stock | ||||||||||||||
Douglas M. Baker, Jr. | 1,000 | — | 68,497 | — | 69,497 | * | ||||||||||||||||||||||||||||||||
Warner L. Baxter | — | — | 18,681 | — | 18,681 | * | ||||||||||||||||||||||||||||||||
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Warner L. Baxter | — | — | 7,970 | — | 7,970 | * | ||||||||||||||||||||||||||||||||
Dorothy J. Bridges | — | — | 8,708 | — | 8,708 | * | ||||||||||||||||||||||||||||||||
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Elizabeth J. Buse | — | — | 9,819 | — | 9,819 | * | ||||||||||||||||||||||||||||||||
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Marc N. Casper | — | — | 7,336 | — | 7,336 | * | — | — | 17,980 | 2,018 | 19,998 | * | ||||||||||||||||||||||||||
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Andrew Cecere | 464,261 | 883,756 | 95,056 | — | 1,443,073 | * | 625,142 | 707,241 | 177,909 | — | 1,510,292 | * | ||||||||||||||||||||||||||
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Arthur D. Collins, Jr. | — | — | 71,219 | 28,719 | 99,938 | * | ||||||||||||||||||||||||||||||||
Terrance R. Dolan | 15,348 | 170,647 | 80,312 | — | 266,307 | * | ||||||||||||||||||||||||||||||||
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Richard K. Davis | 866,173 | 1,734,420 | 152,344 | 74,811 | 2,827,748 | * | ||||||||||||||||||||||||||||||||
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Terrance R. Dolan | 44,523 | 104,498 | 31,847 | — | 180,868 | * | ||||||||||||||||||||||||||||||||
Kimberly N. Ellison-Taylor | — | — | 376 | — | — | * | ||||||||||||||||||||||||||||||||
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Kimberly J. Harris | — | — | 15,108 | — | 15,108 | * | — | — | 26,562 | — | 26,562 | * | ||||||||||||||||||||||||||
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Roland A. Hernandez | — | — | 24,592 | 2,784 | 27,376 | * | — | — | 37,037 | 11,826 | 48,863 | * | ||||||||||||||||||||||||||
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Doreen Woo Ho | — | — | 24,590 | 2,269 | 26,859 | * | ||||||||||||||||||||||||||||||||
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Gunjan Kedia | 4,487 | 6,816 | 6,183 | — | 17,486 | * | 37,161 | 27,267 | 48,298 | — | 112,726 | * | ||||||||||||||||||||||||||
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Olivia F. Kirtley | 10,649 | — | 76,123 | 25,901 | 112,673 | * | 10,649 | — | 93,946 | 34,686 | 139,281 | * | ||||||||||||||||||||||||||
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Karen S. Lynch | — | — | 7,970 | 561 | 8,531 | * | — | — | 18,681 | 6,424 | 25,105 | * | ||||||||||||||||||||||||||
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Richard P. McKenney | — | — | 1,593 | 1,007 | 2,600 | * | — | — | 11,636 | 11,113 | 22,749 | * | ||||||||||||||||||||||||||
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David B. O'Maley | 241,682 | — | 75,045 | 12,351 | 329,078 | * | ||||||||||||||||||||||||||||||||
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O'dell M. Owens, M.D., M.P.H. | — | — | 67,105 | 73,384 | 140,489 | * | ||||||||||||||||||||||||||||||||
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P.W. (Bill) Parker | 219,411 | 109,136 | 39,204 | — | 367,751 | * | ||||||||||||||||||||||||||||||||
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Craig D. Schnuck | — | — | 82,792 | — | 82,792 | * | ||||||||||||||||||||||||||||||||
Yusuf I. Mehdi | — | — | 9,819 | — | 9,819 | * | ||||||||||||||||||||||||||||||||
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Jeffry H. von Gillern | 69,321 | 123,851 | 30,806 | — | 223,978 | * | 68,536 | 168,798 | 57,794 | — | 295,128 | * | ||||||||||||||||||||||||||
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Timothy A. Welsh | 16,334 | — | 39,711 | — | 56,045 | * | ||||||||||||||||||||||||||||||||
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John P. Wiehoff | — | — | 4,310 | 4,373 | 8,683 | * | ||||||||||||||||||||||||||||||||
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Scott W. Wine | 400 | — | 12,943 | 9,280 | 22,623 | * | 400 | — | 24,172 | 20,263 | 44,835 | * | ||||||||||||||||||||||||||
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All directors and executive officers as a group (29 persons) | 2,293,028 | 3,632,526 | 1,056,687 | 241,506 | 7,223,747 | * | ||||||||||||||||||||||||||||||||
All directors and executive officers as a group (25 persons) | 996,155 | 1,424,980 | 891,388 | 90,703 | 3,403,226 | * | ||||||||||||||||||||||||||||||||
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Includes the following shares beneficially owned by the indicated director or executive officer:
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U.S. Bancorp | | |
Security ownership of certain beneficial owners and management |
Restricted stock units (including performance-based restricted stock units held by our executive officers) are distributable in an equivalent number of shares of our common stock upon settlement. Restricted stock units granted to our officers are settled as they vest, and restricted stock units granted to our directors are immediately vested but do not settle until the director ceases to serve on the Board. The number of restricted stock units that are currently vested, or that vest within 60 days of February 6, 2018,4, 2021, is included in this column.
Certain of our directors and executive officers have deferred cash compensation under our deferred compensation plans. Some of these deferred amounts will be paid out in shares of our common stock upon the director's or officer's retirement or other termination of employment or service with U.S. Bancorp. The directors and officers have no voting or investment power as to these shares. The number of shares to which the directors and officers would have been entitled had their employment or service with U.S. Bancorp been terminated as of February 6, 2018,4, 2021, is included in this column.
Name of beneficial Owner | | Shares of common stock | | Percent of common stock | |||
BlackRock, Inc.1 | 108,270,077 | 6.53 | % | ||||
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Warren E. Buffett | 105,329,640 | 6.36 | % | ||||
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The Vanguard Group3 | 107,303,222 | 6.48 | % | ||||
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Name of beneficial owner | | Shares of common stock | | Percent of common stock | |||
Warren E. Buffett, Berkshire Hathaway Inc. and National Indemnity Company1 | 149,450,671 | 9.94 | % | ||||
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The Vanguard Group2 | 107,252,670 | 7.13 | % | ||||
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BlackRock, Inc.3 | 93,501,987 | 6.22 | % | ||||
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Based on Amendment No. 8 to Schedule 13G filed with the SEC on January 23, 2018, by BlackRock, Inc., on behalf of itself and certain of its subsidiaries. BlackRock, Inc. has sole voting power over 93,734,067 shares and sole dispositive power over 108,270,078 shares. The address for BlackRock is 55 East 52nd Street, New York, NY 10055.
Based on Amendment No. 37 to Schedule 13G filed with the SEC on February 14, 2018,16, 2021, by Warren E. Buffett, Berkshire Hathaway Inc., a holding company which Mr. Buffett may be deemed to control, National Indemnity Company, an insurance company which Mr. Buffett may be deemed to control, and other members of the filing group of which none beneficially owns more than 5% of the outstanding shares of U.S. Bancorp common stock. Mr. Buffett has sole voting and dispositive powerspower over 884,230684,230 shares, and shared voting and dispositive powers over 104,445,320148,766,441 shares. Berkshire Hathaway Inc. has sole voting and dispositive powers over no shares, and shared voting and dispositive powers over 104,445,320148,766,441 shares. National Indemnity Company has sole voting and dispositive powers over no shares, and shared voting and dispositive powers over 92,327,823 shares. The address for each of Mr. Buffett and Berkshire Hathaway is 3555 Farnam Street, Omaha, NE 68131. The address for National Indemnity Company is 1314 Douglas Street, Omaha, NE 68102.
Based on Amendment No. 36 to Schedule 13G filed with the SEC on February 9, 2018,10, 2021, by The Vanguard Group, on behalf of itself and certain of its subsidiaries. The Vanguard Group has sole voting power over 2,237,679 shares, shared voting power over 394,1292,197,932 shares, sole dispositive power over 104,735,496101,231,259 shares and shared dispositive power over 2,567,7266,021,411 shares. Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., wholly-owned subsidiaries of The Vanguard Group, beneficially own 1,715,498 and 1,363,571 shares, respectively. The address for The Vanguard Group is 100 Vanguard Boulevard, Malvern, PA 19355.
Based on Amendment No. 11 to Schedule 13G filed with the SEC on February 1, 2021, by BlackRock, Inc., on behalf of itself and certain of its subsidiaries. BlackRock has sole voting power over 81,445,271 shares and sole dispositive power over 93,501,987 shares. The address for BlackRock is 55 East 52nd Street, New York, NY 10055.
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Questions and answers about the annual meeting and voting |
Questions and answers about the annual meeting and voting
Why did I receive the proxy materials?
We have furnished the proxy materials to you over the Internet or mailed you a printed copy of these materials because the Board of Directors of U.S. Bancorp is soliciting your proxy to vote your shares of our common stock at the annual meeting of shareholders to be held on April 17, 2018,20, 2021, or at any adjournments or postponements of the meeting.
It is your designation of another person to vote stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. When you designate a proxy, you also may direct the proxy how to vote your shares. We refer to this as your "proxy vote." Andrew Cecere, our Chairman, President and Chief Executive Officer, and Laura F. Bednarski, our Corporate Secretary, have been designated as the proxies to cast the votes of our shareholders at our 20182021 annual meeting of shareholders.
What is the purpose of the meeting?
At our annual meeting, shareholders will act upon the matters outlined in the notice of annual meeting of shareholders and described in this proxy statement. Management will also report on our 2020 performance and, once the business of the annual meeting is concluded, respond to questions submitted in writing during or before the meeting.
How can I access the proxy materials and vote my shares?
The instructions for accessing the proxy materials and voting can be found in the information you received either by mail or e-mail. Depending on how you received the proxy materials, you may vote by Internet, telephone or mail. We encourage you to vote by Internet.
What isHow do I vote if my shares are held in the purpose of the meeting?U.S. Bank 401(k) Savings Plan?
At our annual meeting, shareholders will act upon the matters outlinedIf you hold any shares in the notice of annual meeting of shareholders and described in thisU.S. Bank 401(k) Savings Plan, you are receiving, or being provided access to, the same proxy statement. Managementmaterials as any other shareholder. However, your proxy vote will also report on our 2017 performance and, onceserve as voting instructions to the business ofplan trustee. Your voting instructions must be received at least five days prior to the annual meeting is concluded, respondin order to questions from shareholders.count. In accordance with the terms of the plan, the trustee will vote all of the shares held in the plan in the same proportion as the actual proxy votes submitted by plan participants at least five days prior to the annual meeting.
Why did I receive a notice regarding the Internet availability of proxy materials instead of a printed copy of the proxy materials?
In accordance with rules adopted by the SEC, we are furnishing our proxy materials to our shareholders primarily over the Internet instead of mailing printed copies of those materials to each shareholder. By doing so, we reduce costs and lessen the environmental impact of our proxy solicitation. On or about March 6, 2018,9, 2021, we mailed a notice of Internet availability of the proxy materials to most of our shareholders who had not previously requested printed materials.shareholders. The notice contains instructions about how to access our
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Questions and answers about the annual meeting and voting |
proxy materials and vote online. This notice is not a proxy card and cannot be used to vote your shares. If you received a notice but would like to receive a paper copy of our proxy materials, please follow the instructions on the notice.
We provided some of ourOur other shareholders, including shareholders who have previously requested to receive paper copies of the proxy materials and some of our shareholders who are participants inpersons holding shares through our benefit plans, withreceived paper copies of the proxy materials instead of a notice. If you received paper copies of the notice or proxy materials, we encourage you to
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sign up to receive all of your future proxy materials electronically, as described under "How can I receive my proxy materials by e-mail in the future?" below.
Who is entitled to vote at the meeting?
The Board has set February 20, 2018,23, 2021, as the record date for the annual meeting. If you were a shareholder of record at the close of business on February 20, 2018,23, 2021, you are entitled to vote at the meeting. As of the record date, 1,650,830,9191,502,573,964 shares of our common stock were issued and outstanding and, therefore, eligible to vote at the meeting.
Holders of our common stock are entitled to one vote per share. Therefore, a total of 1,650,830,9191,502,573,964 votes are entitled to be cast at the meeting. There is no cumulative voting.
How many shares must be present to hold the meeting?
In accordance with our bylaws, shares equal to at least one-third of the voting power of our outstanding shares of common stock as of the record date must be present at the meeting in order to hold the meeting and conduct business. This is called a quorum. Your shares are counted as present at the meeting if:
What is the difference between a shareholder of record and a "street name" holder?
If your shares are registered directly in your name with our transfer agent, Computershare Investor Services, you are considered the shareholder of record with respect to those shares.
If your shares are held in a stock brokerage account or by a bank, trust company or other nominee, then the broker, bank, trust company or other nominee is considered to be the shareholder of record with respect to those shares. However, you still are considered the beneficial owner of those shares and your shares are said to be held in "street name." Street name holders generally cannot vote their shares directly and must instead instruct the broker, bank, trust company or other nominee how to vote their shares using the voting instruction form provided by it.
How do I vote if my shares are held inattend the U.S. Bank 401(k) Savings Plan?virtual meeting?
If you hold any shares in the U.S. Bank 401(k) Savings Plan, you are receiving, or being provided accessDue to the same proxy materials as any other shareholderpublic health concerns regarding the COVID-19 pandemic, we are holding the 2021 Annual Meeting of record. However, your proxy voteShareholders in a virtual-only format. You will serve as voting instructionsnot be able to the plan trustee. Your voting instructions must be received at least five days prior toattend the annual meeting inat a physical location. The meeting will be held virtually at 11:00 a.m., central time, on Tuesday, April 20, 2021.
Both shareholders and non-shareholders may attend our virtual meeting. However, you may vote your shares at the meeting, and ask questions of management before or at the meeting, only if you enter the meeting site as a shareholder. In order to count. In accordance withattend the terms of the plan, the trustee will vote all of the shares held in the plan in the same proportion as the actual proxy votes submitted by plan participants at least five days priormeeting, navigate to the annual meeting.
Can I vote my shares in person at the meeting?
www.virtualshareholdermeeting.com/USB2021. If you are a shareholder of record or street name holder as of the record date, you may attend in your capacity as a shareholder by logging in with the 16-digit control number found on your proxy card, voting instruction form, or notice, as applicable.
If you lost your 16-digit control number or are not a shareholder, you will be able to attend the meeting by registering as a guest. If you enter the meeting as a guest, you will not be able to vote your shares in person by completingor submit questions during the meeting. If you experience any technical difficulties during the meeting, a ballottoll free number will be available on our virtual shareholder meeting site for assistance.
If you are not able to attend the meeting, you will still be able to access an audio replay of the management presentation given at the meeting from our website. You can find instructions on how to access the replay and the
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71 | | U.S. Bancorp 2021 Proxy Statement |
Questions and answers about the annual meeting and voting |
presentation materials on our website at www.usbank.com by clicking on "About us", "Investor relations" and then "Webcasts & Presentations."
How can I ask a question and vote at the virtual meeting?
We value questions from our shareholders. Shareholders who attend the meeting by entering the 16-digit control number may ask questions during the virtual meeting. Questions by those shareholders may be submitted in real time during the meeting at www.virtualshareholdermeeting.com/USB2021 or during the two-week period prior to the meeting by going to the website www.proxyvote.com and following the instructions for logging-in included with your proxy card, voting instruction form, or notice.
Shareholders must also enter the meeting using their 16-digit control number in order to vote. Even if you currently plan to attend the virtual meeting, we recommend that you also submit your proxy as described above so that your vote will be counted if you later decide not to attend the meeting.
If you are a street name holder, you may vote your shares in person at the meeting only if you obtain a signed letter or other document from your broker, bank, trust or other nominee giving you the right to vote the shares at the meeting.
If you are a participant in the U.S. Bank 401(k) Savings Plan or hold your shares in street name, you may submit a proxyyour vote as described above, but you may not vote your 401(k) Savings Plan shares or shares held in person atstreet name during the meeting.
What if I am a shareholder of record and do not specify how I want my shares voted?
If you submit your proxy by Internet or submit a signed proxy card and do not specify how you want to vote your shares, we will vote your shares in accordance with the recommendations of the Board. Our telephone voting procedures do not permit you to submit your proxy vote by telephone without specifying how you want your shares voted.
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What if I hold my shares in street name and do not provide voting instructions?
If you hold your shares in street name and do not provide voting instructions, your broker, bank, trust company or other nominee has discretionary authority to vote your shares on the ratification of the selection of Ernst & Young LLP as our independent auditor. However, in the absence of your specific instructions as to how to vote, your broker, bank, trust company or other nominee does not have discretionary authority to vote on any other proposal. Such a situation results in a "broker non-vote," which does not have an effect on the outcome of the proposal. It is important, therefore, that you provide instructions to your broker, bank, trust company or other nominee so that your vote with respect to the other proposals is counted.
What is the voting standard and what is the effect of abstentions?
You may vote "FOR," "AGAINST" or "ABSTAIN" with respect to each nominee for the Board of Directors (Proposal 1), the ratification of the selection of independent auditor (Proposal 2), and the advisory vote on executive compensation (Proposal 3).
The following table summarizes the voting standard applicable to each proposal and the effect of an "ABSTAIN" vote in each instance.
Proposal | Voting standard | Effect of "ABSTAIN" vote | ||
Election of directors | The nominee is elected if the number of votes cast "FOR" him or her exceeds the number of votes cast "AGAINST" him or her | No effect | ||
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The proposal is approved if "FOR" votes are cast by the majority of shares present and entitled to vote on the matter | Same effect as "AGAINST" vote | |||
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What does it mean if I receive more than one notice of Internet availability of proxy materials, proxy card, voting instruction form, or e-mail with instructions on how to access the proxy materials?
If you receive more than one notice of Internet availability of proxy materials, proxy card, voting instruction form, or e-mail with instructions on how to access the proxy materials, it means that you hold shares in more than one account.
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U.S. Bancorp 2021 Proxy Statement | | 72 |
Questions and answers about the annual meeting and voting |
To ensure that all of your shares are voted, vote separately for each notice of Internet availability of proxy materials, proxy card, voting instruction form, and e-mail you receive.
Can I change my vote after submitting my proxy?
Yes. You may revoke your proxy and change your vote at any time before your proxy is voted at the annual meeting. If you are a shareholder of record, you may revoke your proxy and change your vote by:
Attending the meeting will not revoke your proxy unless you specifically request to revoke it or submit a ballot at the meeting. To request an additional proxy card, or if you have any questions about the annual meeting or how to vote or revoke your proxy, you should write to Investor Relations, U.S. Bancorp, 800 Nicollet Mall, Minneapolis, MN 55402 or call 866.775.9668.
If you hold your shares in street name, contact your broker, bank, trust company or other nominee regarding how to revoke your proxy and change your vote. If you are a participant in the U.S. Bank 401(k) Savings Plan, you may revoke your proxy and change your vote as described above, but only until 11:59 p.m., Eastern Time, on April 12, 2018.15, 2021.
Will my vote be kept confidential?
Yes. We have procedures to ensure that all proxies, ballots and voting tabulations that identify shareholders are kept permanently confidential, except as follows: to meet legal requirements, to assert claims for or defend claims against
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our company, to allow authorized individuals to count and certify the results of the shareholder vote if a proxy solicitation in opposition to the Board takes place, or to respond to shareholders who have written comments on proxy cards or who have requested disclosure. We also have the voting tabulations performed by an independent third party.
Representatives of Broadridge Financial Solutions, Inc., our tabulation agent, will tabulate the votes and act as independent inspectors of election.
You are entitled to attend the annual meeting only if you were, or you hold a valid legal proxy naming you to represent, one of our shareholders on the record date. We will confirm that you are entitled to attend the annual meeting by one of the following means:
At the entrance to the meeting, you must present a valid form of photo identification, such as a driver's license. We will then verify that your name appears in our stock records or will inspect your proof of ownership if you are a street name holder, as described above. If you are acting as a representative of a shareholder, we will inspect the written proxy you present as evidence of your authority to represent the shareholder, along with evidence of the shareholder's ownership, as described above. We will decide in our sole discretion whether the documentation you present for admission to the meeting meets these requirements. The admission of persons who are guests of shareholders is subject to the discretion of management.
Anyone needing special assistance should call Investor Relations at 866.775.9668. Please allow ample time for the admission procedures described above. Please let us know if you plan to attend the meeting by responding affirmatively when prompted during Internet or telephone voting or by marking the attendance box on your proxy card.
If you are not able to attend the meeting, you will still be able to access an audio replay of the management presentation given at the meeting from our website. You can find instructions on how to access the replay and the presentation materials on our website at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Webcasts & Presentations."
Who pays for the cost of proxy preparation and solicitation?
We pay for the cost of proxy preparation and solicitation, including the reasonable charges and expenses of brokerage firms, banks, truststrust companies or other nominees for forwarding proxy materials to street name holders. We have retained Alliance Advisors, LLC, to assist in the solicitation of proxies for the annual meeting for a fee of $20,000, plus associated costs and expenses.
We are soliciting proxies primarily by mail. In addition, our directors, officers and employees may solicit proxies by telephone, facsimile, e-mail or in person. They will not receive any additional compensation for these activities.
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Does the companyDo we "household" annual meeting materials?
The SEC rules allow a single copy of the notice of Internet availability of proxy materials or proxy statement and annual report to be delivered to multiple shareholders sharing the same address and last name, or who we reasonably believe are members of the same family, and who consent to receive a single copy of these materials in a manner provided by these rules. This practice is referred to as "householding." Although we do not household for our registered shareholders, we understand that some brokers, banks, truststrust companies and other nominees household U.S. Bancorp notices of Internet availability of proxy materials or proxy statements and annual reports, delivering a single copy of each to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker, bank, trust company or other nominee that theyit will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent.
If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of our notice of Internet availability of proxy materials or proxy statement or annual report, or if you are receiving multiple copies of any of these documents and wish to receive only one, please notify your broker, bank, trust company or other nominee. We will deliver promptly upon written or oral request a separate copy of our notice of Internet availability of
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73 | | U.S. Bancorp 2021 Proxy Statement |
Questions and answers about the annual meeting and voting |
proxy materials, proxy statement and/or our annual report to a shareholder at a shared address to which a single copy was delivered. For copies of any of these documents, shareholders should write to Investor Relations, U.S. Bancorp, BC-MN-H23K, 800 Nicollet Mall, Minneapolis, Minnesota 55402, or call 866.775.9668.
How can I receive my proxy materials by e-mail in the future?
Instead of receiving future paper copies of the notice of Internet availability of proxy materials or our proxy materials by mail, you can elect to receive an e-mail with links to these documents, your control number and instructions for voting over the Internet. Opting to receive your proxy materials by e-mail will save the cost of producing and mailing documents to you and will also help conserve environmental resources. Your e-mail address will be kept separate from any other company operations and will be used for no other purpose.
If we mailed you a notice of Internet availability of proxy materials or a printed copy of our proxy statement and annual report and you would like to sign up to receive these materials by e-mail in the future, you can choose this option by:
You may revoke this request at any time by following the instructions at http://enroll.icsdelivery.com/usb. Your election will remain in effect unless you revoke it later.
We encourage you to sign up for electronic delivery of our proxy materials. To express our appreciation, we will plant a tree in partnership with the Arbor Day Foundation on behalf of every retail shareholder account that registers for electronic delivery of our proxy materials. The Arbor Day Foundation will plant these trees in Florida's Econfina Watershed to protect Panama City's water source, reforest after damage from Hurricane Michael, and restore wildlife habitat.
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U.S. Bancorp | | |
Other matters |
If you received a paper copy of the proxy materials, our 20172020 Annual Report to Shareholders, including financial statements for the year ended December 31, 2017,2020, accompanied this proxy statement. The 20172020 Annual Report to Shareholders is also available on our website at www.usbank.com by clicking on "About Us"us" and then "Investor Relations.relations." Copies of our 20172020 Annual Report on Form 10-K, which is on file with the SEC, are available to any shareholder who submits a request in writing to Investor Relations, U.S. Bancorp, BC-MN-H23K, 800 Nicollet Mall, Minneapolis, Minnesota 55402. Copies of any exhibits to the Form 10-K are also available upon written request and payment of a fee covering our reasonable expenses in furnishing the exhibits.
Section 16(a) of the Exchange Act requires our executive officers, Controller and directors to file initial reports of ownership and reports of changes in ownership of our securities with the SEC. Our executive officers, Controller and directors are required to furnish us with copies of these reports. Based solely on a review of the Section 16(a) reports furnished to us with respect to 2017 and written representations from our executive officers, Controller and directors, we believe that all Section 16(a) filing requirements applicable to those persons during 2017 were satisfied.
Shareholders or any other interested party may communicate with our Board of Directors by sending a letter addressed to our Board of Directors, non-employee directors, Chairman, Lead Director or specified individual directors to:
The Office of the Corporate Secretary U.S. Bancorp BC-MN-H21O 800 Nicollet Mall Minneapolis, MN 55402 |
Any such letters will be delivered to the Lead Director, or to a specified director if so addressed. Letters relating to accounting matters will also be delivered to our Chief Risk Officer or General Counsel for handling in accordance with the Audit Committee's policy on investigation of complaints relating to accounting matters.
The Lead Director (or, in the Lead Director's discretion, the chair of the relevant Board committee) may be available to meet with shareholders as appropriate. Requests for such a meeting are considered on a case-by-case basis.
Deadlines for nominating directors and submitting proposals |
Submitting aPlease see below for the specific information and deadline requirements applicable to shareholders who want to nominate directors or submit proposals for next year's annual meeting. Note that any director nomination or shareholder proposal for inclusion in our proxy statement
In order for a shareholder proposal towhich notice is received by us after the relevant deadline set forth below may not be considered for inclusion in our proxy statement forpresented at the 20192022 annual meeting of shareholders, we must receive the written proposal at our principal executive offices at U.S. Bancorp, BC-MN-H21O, 800 Nicollet Mall, Minneapolis, Minnesota 55402, Attention: Corporate Secretary, on or before November 6, 2018. The proposal must comply with SEC regulations regarding the inclusion of shareholder proposals in company-sponsored proxy materials.meeting.
Nominating a director for inclusion in our proxy statement (proxy access nominees)
A shareholder or group of up to 20 shareholders that has held at least 3% of the outstanding shares of our company's common stock for at least three years is able to nominate directors to fill up to 20% of the Board seats (but at least two directors) for inclusion in our proxy statement if the shareholder(s) and nominee(s) satisfy the requirements specified in our bylaws and notice is received between 150 and 120 days before the anniversary of the date the proxy statement for the prior year's annual meeting was released to shareholders.
In order for a nominee to be considered for inclusion in our proxy statement for the 2022 annual meeting of shareholders, the Corporate Secretary of U.S. Bancorp must receive written notice of the nomination at our principal executive offices in Minneapolis, Minnesota, at the address provided above, no earlier than October 10, 2021, and no later than November 9, 2021. The notice must contain the specific information required by our bylaws. You can find a copy of our bylaws on our website at www.usbank.com by clicking on "About us", "Investor relations", "Corporate Governance", "Governance documents" and then "Restated Bylaws."
Other shareholder proposals and director nominations
Proper proposals or nominations must be submitted to the Corporate Secretary of U.S. Bancorp at our principal executive offices in Minneapolis, Minnesota, at the address provided above. Shareholder proposals to be considered for inclusion in the proxy statement must comply with SEC regulations regarding the inclusion of shareholder proposals in company-sponsored proxy materials. Notices of director nominations and shareholder proposals to be made from the floor must contain the specific information required by our bylaws (available on our website as described above).
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| | U.S. Bancorp |
Other matters |
In orderThe submission deadlines for a nominee to be considered for inclusion in our proxy statement for the 2019 annual meeting of shareholders, we must receive written notice of the nomination at our principal executive offices at U.S. Bancorp, BC-MN-H21O, 800 Nicollet Mall, Minneapolis, Minnesota, Attention: Corporate Secretary, no earlier than October 7, 2018, and no later than November 6, 2018. The notice must contain the specific information required by our bylaws. You can find a copy of our bylaws on our website at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Corporate Governance" and then "Restated Bylaws."
Other shareholderthese proposals and director nominations (advance notice provisions)are as follows:
Proposal | How presented | Deadline | ||
Nomination of directors | To nominate a director from the floor at the annual meeting | December 21, 2021 | ||
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All other proposals | To have a shareholder proposal be considered for inclusion in the proxy statement or to present the proposal from the floor at the annual meeting | November 9, 2021 | ||
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Our bylaws provide that a shareholder may nominate from the floor a director for election at the annual meeting if proper written notice is received by the Corporate Secretary of U.S. Bancorp at our principal executive offices in Minneapolis, Minnesota, at least 120 days in advance of the anniversary of the prior year's annual meeting. A shareholder may present from the floor a proposal other than a director nomination if proper written notice is received by the Corporate Secretary at least 120 days in advance of the anniversary of the date the proxy statement for the prior year's annual meeting was released to shareholders.
For the 2019 annual meeting of shareholders, notices of director nominations and shareholder proposals to be made from the floor must be received on or before December 18, 2018, and November 6, 2018, respectively. The notice must contain the specific information required by our bylaws. You can find a copy of our bylaws on our website at www.usbank.com by clicking on "About Us" and then "Investor Relations" and then "Corporate Governance" and then "Restated Bylaws."
Shareholder proposals and director nominations for which notice is received by us after November 6, 2018, and December 18, 2018, respectively, may not be presented in any manner at the 2019 annual meeting.
We do not know of any other matters that may be presented for consideration at the 20182021 annual meeting. If any other business does properly come before the annual meeting, the persons named as proxies above under the heading "Questions and Answers About the Annual Meeting and Voting — What is a proxy?" will vote as they deem in the best interests of U.S. Bancorp.
Laura F. Bednarski
Corporate Secretary
Dated: March 6, 20189, 2021
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U.S. Bancorp | | |
Non-GAAP financial measures |
ReturnThis proxy statement contains the following non-GAAP financial measure: efficiency ratio, using net interest income on tangible common equity (ROTCE) is calculated by dividing net earnings applicable to common shareholders, excluding the impact of intangibles amortization, by tangible common shareholders' equity. We believe that ROTCE is a meaningful way for holders of U.S. Bancorp common stock to assess the company's use of equity.taxable-equivalent basis.
We use net interest income on a taxable-equivalent basis to calculate our efficiency ratio. Weratio because we believe that this presentation is the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, we excluded notable items from the presentation in this proxy statement of efficiency ratio, return on average assets and return on average common equity for 2017 for the company and members of our financial peer group because we believe that core results provide a more reliable means of comparison.
The calculationscalculation of this measure for U.S. Bancorp's ROTCE for 2008 through 2017, U.S. Bancorp's efficiency ratio for 2017, using net interest income on a taxable-equivalent basis and excluding notable items, and U.S. Bancorp's return on average assets and return on average common equity for 2017, excluding notable items, follow:Bancorp follows:
Years Ended December 31 | | 2017 | | 2016 | | 2015 | | 2014 | | 2013 | | 2012 | | 2011 | | 2010 | | 2009 | | 2008 | |||||||||||
Net income applicable to U.S. Bancorp common shareholders | $ | 5,913 | $ | 5,589 | $ | 5,608 | $ | 5,583 | $ | 5,552 | $ | 5,383 | $ | 4,721 | $ | 3,332 | $ | 1,803 | $ | 2,819 | |||||||||||
Intangibles amortization (net-of-tax) | 114 | 116 | 113 | 129 | 145 | 178 | 194 | 239 | 252 | 231 | |||||||||||||||||||||
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Net income applicable to U.S. Bancorp common shareholders, excluding intangibles amortization (a) | 6,027 | 5,705 | 5,721 | 5,712 | 5,697 | 5,561 | 4,915 | 3,571 | 2,055 | 3,050 | |||||||||||||||||||||
Average total equity | 49,097 | 47,988 | 45,502 | 43,524 | 41,287 | 38,736 | 33,116 | 28,799 | 27,021 | 23,324 | |||||||||||||||||||||
Less: Average preferred stock | 5,490 | 5,501 | 4,836 | 4,756 | 4,804 | 4,381 | 2,414 | 1,742 | 4,445 | 2,246 | |||||||||||||||||||||
Less: Average noncontrolling interests | 631 | 649 | 689 | 687 | 1,370 | 1,125 | 916 | 750 | 714 | 754 | |||||||||||||||||||||
Less: Average goodwill (net of deferred tax liability)1 | 8,160 | 8,242 | 8,347 | 8,435 | 8,564 | 8,295 | 8,288 | 8,410 | 8,318 | 7,844 | |||||||||||||||||||||
Less: Average intangible assets, other than mortgage servicing rights | 637 | 783 | 764 | 848 | 920 | 1,112 | 1,297 | 1,517 | 1,649 | 1,611 | |||||||||||||||||||||
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Average U.S. Bancorp common shareholders' equity, excluding intangible assets (b) | 34,179 | 32,813 | 30,866 | 28,798 | 25,629 | 23,823 | 20,201 | 16,380 | 11,895 | 10,869 | |||||||||||||||||||||
Return on tangible common equity (a)/(b) | 17.6 | % | 17.4 | % | 18.5 | % | 19.8 | % | 22.2 | % | 23.3 | % | 24.3 | % | 21.8 | % | 17.3 | % | 28.1 | % | |||||||||||
Net interest income | $ | 12,241 | |||||||||||||||||||||||||||||
Taxable-equivalent adjustment2 | 205 | ||||||||||||||||||||||||||||||
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Net interest income, on a taxable-equivalent basis | 12,446 | ||||||||||||||||||||||||||||||
Net interest income, on a taxable-equivalent basis (as calculated above) | 12,446 | ||||||||||||||||||||||||||||||
Noninterest income | 9,611 | ||||||||||||||||||||||||||||||
Less: Securities gains (losses), net | 57 | ||||||||||||||||||||||||||||||
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Total net revenue, excluding net securities gains (losses) (c) | 22,000 | ||||||||||||||||||||||||||||||
Noninterest expense | 12,945 | ||||||||||||||||||||||||||||||
Less: Notable items3 | 825 | ||||||||||||||||||||||||||||||
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Noninterest expense, excluding notable items (d) | 12,120 | ||||||||||||||||||||||||||||||
Efficiency ratio, excluding notable items (d)/(c) | 55.1 | % | |||||||||||||||||||||||||||||
Net income attributable to U.S. Bancorp | $ | 6,218 | |||||||||||||||||||||||||||||
Less: Notable items4 | 150 | ||||||||||||||||||||||||||||||
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Net income attributable to U.S. Bancorp, excluding notable items (e) | 6,068 | ||||||||||||||||||||||||||||||
Average assets (f) | $ | 448,582 | |||||||||||||||||||||||||||||
Return on average assets, excluding notable items (e)/(f) | 1.35 | % | |||||||||||||||||||||||||||||
Net income applicable to U.S. Bancorp common shareholders | $ | 5,913 | |||||||||||||||||||||||||||||
Less: Notable items4 | 150 | ||||||||||||||||||||||||||||||
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Net income applicable to U.S. Bancorp common shareholders, excluding notable items (g) | 5,763 | ||||||||||||||||||||||||||||||
Average common equity (h) | $ | 42,976 | |||||||||||||||||||||||||||||
Return on average common equity, excluding notable items (g)/(h) | 13.4 | % | |||||||||||||||||||||||||||||
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Year Ended December 31 | | 2020 | ||
Net interest income | $ | 12,825 | ||
Taxable-equivalent adjustment1 | 99 | |||
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Net interest income, on a taxable-equivalent basis | 12,924 | |||
Net interest income, on a taxable-equivalent basis (as calculated above) | 12,924 | |||
Noninterest income | 10,401 | |||
Less: Securities gains (losses), net | 177 | |||
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Total net revenue, excluding net securities gains (losses) (a) | 23,148 | |||
Noninterest expense (b) | 13,369 | |||
Efficiency ratio (b)/(a) | 57.8 | % | ||
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| | U.S. Bancorp |
Annual meeting time and location
Tuesday, April 17, 2018, at 11:00 a.m., local time
Hyatt Regency AlbuquerqueGrand Pavilion330 Tijeras NWAlbuquerque, NM 87102
VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern timeTime on April 16, 2018;19, 2021; or April 12, 2018,15, 2021, for shares held in the U.S. Bancorp 401(k) Savings Plan. Have this proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would likeU.S. BANCORP INVESTOR RELATIONS 800 NICOLLET MALL BC-MN-H23K MINNEAPOLIS, MN 55402-7014 During The Meeting - Go to reducewww.virtualshareholdermeeting.com/USB2021 You may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallymeeting via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and when prompted, indicatevote during the meeting. Have the information that you agree to receive or access proxy materials electronicallyis printed in future years.the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern timeTime on April 16, 2018;19, 2021; or April 12, 2018,15, 2021, for shares held in the U.S. Bancorp 401(k) Savings Plan. Have this proxy card in hand when you call and then follow the instructions. U.S. BANCORP INVESTOR RELATIONS 800 NICOLLET MALL BC-MN-H23K MINNEAPOLIS, MN 55402-7014 VOTE BY MAIL Mark, sign and date this proxy card and return it in the postage-paid envelope we have provided, or return it to U.S. Bancorp, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, so that it is received by April 17, 2018.15, 2021. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E36960-P02314-Z71767D31292-P47234 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. U.S. BANCORP The Board of Directors recommends a vote "FOR" each of the following nominees: 1 - ElectionThe election of Directors:the 13 directors named in the proxy statement: For ! ! ! ! ! ! ! ! ! ! ! ! ! ! Against ! ! ! ! ! ! ! ! ! ! ! ! ! ! Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1a. Warner L. Baxter 1b. Marc N. Casper The Board of Directors recommends a vote "FOR" the following proposals: 2 - The ratification of the selection of Ernst & Young LLP as our independent auditor for the 20182021 fiscal year. 3 - An advisory vote to approve the compensation of our executives disclosed in the proxy statement. ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! For Against Abstain 1a. Warner L. Baxter ! ! ! ! ! ! 1b. Dorothy J. Bridges 1c. Elizabeth L. Buse 1d. Andrew Cecere For ! ! Against ! ! Abstain ! ! 1d. Arthur D. Collins, Jr. 1e. Kimberly N. Ellison-Taylor 1f. Kimberly J. Harris 1f.1g. Roland A. Hernandez 1g. Doreen Woo Ho 1h. Olivia F. Kirtley 1i. Karen S. Lynch 1j. Richard P. McKenney 1k. David B. O’MaleyYusuf I. Mehdi 1l. O’dell M. Owens, M.D., M.P.H. For address changes and/or comments, please check this box and write them on the back where indicated. !John P. Wiehoff 1m. Craig D. Schnuck Yes ! No ! Please indicate if you plan to attend this meeting. 1n. Scott W. Wine Note: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on April 17, 2018:20, 2021: Our Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. FOLD AND DETACH HERE E36961-P02314-Z71767D31293-P47234 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE 20182021 ANNUAL MEETING OF SHAREHOLDERS April 17, 201820, 2021 The undersigned, having received the Notice of Annual Meeting of Shareholders and proxy statement, revoking any proxy previously given, hereby appoint(s) Andrew Cecere and Laura F. Bednarski, and either of them, as proxies to vote as directed all shares the undersigned is (are) entitled to vote at the U.S. Bancorp 20182021 Annual Meeting of Shareholders and authorize(s) each to vote in his or her discretion upon other business as may properly come before the meeting or any adjournment or postponement thereof. If this signed proxy card contains no specific voting instructions, these shares will be voted "FOR" all nominees for director, "FOR" Proposals 2 and 3, and in the discretion of the named proxies on all other matters. IF YOU DO NOT VOTE BY INTERNET OR PHONE, PLEASE MARK, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE AND RETURN IT IN THE ENCLOSED ENVELOPE. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Address Changes/Comments: