UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Prudential Financial, Inc.
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2014 P R O X Y S T A T E M E N TPRUDENTIAL FINANCIAL, INC. PROXY STATEMENT
Notice of Annual Meeting of Shareholders to be held on May 13, 2014NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 9, 2017
Rebuilding“The justification of the Town Commonscompany’s existence is its advancement of the efforts of its policyholders and their families for better economic and social condition which confront the [middle] class.”
“These projects areJohn F. Dryden, founder of The Prudential Friendly Society (a predecessor of Prudent al Financial, Inc.)
Prudential was founded more than 140 years ago on the latest examplesbelief that everyone should have the opportunity to achieve financial security and the peace of mind that comes with it.
Today, as Prudential’s global footprint continues to grow, our commitment to shared success remains strong. The company’s approach to creating innovative financial solutions draws on our expertise, our strong stakeholder relationships and the breadth and depth of our deepbusiness model. In 2016, we continued to build upon our efforts to advance the well-being of a broad array of stakeholders. Three examples are highlighted below:
Prudential’s global investment management business, PGIM, is five years into its journey to create employment pathways for opportunity youth, young people who are not in school nor formally employed. Through a partnership with YouthBuild, an international organization that trains opportunity youth in both job and life skills, PGIM Real Estate is leveraging its business relationships, along with associate expertise, to accelerate the job placement of YouthBuild graduates.
Prudential remains committed to closing the insurance protection gap, and in 2016, demonstrated this by building on its relationship with LeapFrog Investments. The partnership’s long-term objective is to partner with local life insurance providers in high-growth African markets such as Ghana, Kenya and Nigeria to provide appropriate and affordable insurance products while simultaneously spurring the growth of the African middle class.
In keeping our commitment to diversity in practice, Prudential was a proud founding donor and sponsor of the Smithsonian National Museum of African American History and Culture’s grand opening in Washington, D.C. The museum’s opening reignited a national dialogue around the rich and complex heritage of the African American community.
Every day, more than 49,000 Prudential employees serve millions of people around the globe, delivering on our founding belief. We know the value we create for our stakeholders, combined with the societal value we create as a company, helps build a shared and lasting commitment to Newark and our neighbors. We are proud to be an active partner in the city that has been our home for more than 138 years.”
John Strangfeld
Prudential’s Chairman and CEO
Rebuilding the Town Commons
Military Park is a six acre green space located in the heart of downtown Newark, NJ. Originally providing space for local troop drills, the Park transitioned into a town commons after the Civil War.
After many years of benign neglect, Military Park is scheduled for a make-over, thanks to significant investments from a number of organizations including Prudential. The $3.2 million project will restore historically significant statues, replace ailing trees and gardens, improve lighting, and create new seating areas and a new café. New programming in the Park will draw residents, local business employees and visitors to Newark to the site.
Rebuilding Military Park into a gathering place for all Newarkers is part of Prudential’s commitment to the city’s redevelopment.
In 2013, Prudential began a targeted campaign of investments and grant making around the site of Prudential’s new office tower. The initiative will provide up to $10 million in grants from The Prudential Foundation and $75 million in social investments that will benefit Newark businesses, community organizations and residents.
These resources will help to transform the physical and social fabric around the new tower and help expand its benefits into the surrounding neighborhoods.
Since 2010, Prudential’s Shareholder Vote Incentive Program has provided registered shareholders who vote their proxy an opportunity to have a tree planted in their name. In early 2014, this partnership between Prudential and its registered shareholders reached an important milestone: More than 500,000 trees have been planted since the program’s inception.
By voting their proxies, or electing electronic delivery of proxy materials or direct deposit of stock dividends, shareholders have supported significant reforestation efforts. Since its inception, the program has helped to restore national forests in California, Minnesota and Florida. In the past two years, efforts have focused on
Osceola National Forest, located in northern Florida, near Prudential’s regional office in Jacksonville. This year, in addition to continued efforts in Osceola National Forest, a portion of the trees selected through the program will be used to plant trees in Newark, New Jersey, in support of “Newark Greenstreets.” This project is helping to improve the environmental health of the city while providing job training for city residents. Planting trees in Newark provides another opportunity to solidify our ongoing commitment to support the city and other communities where our employees live and work.prosperity.
 | Prudential Financial, Inc. 751 Broad Street, Newark, NJ 07102
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Thomas J. Baltimore, Jr.
Gordon M. Bethune
Gaston Caperton
Gilbert F. Casellas
James G. Cullen
March 25, 201421, 2017
LETTER FROM THE BOARD OF DIRECTORSLetter from the Board of Directors
TO OUR SHAREHOLDERSto Our Shareholders
As directors, we are pleased to be stewards of your Company. We strive to govern Prudential in a prudent and transparent manner to helpthat helps the Company achieve sustainable operating and financial performance, and to deliver long-term value for our shareholders. We focus our attention on overseeing the Company’s business strategies, risk management, talent development, and succession planning. We are pleased to share with you our progress and perspectives regardingon specific actions thatundertaken in 2016.
BUSINESS STRATEGY
Our Board has and will continue to be vigilant in the oversight of our firm’s long-term strategy. By focusing on our long-term outlook, we undertookare best able to support our common goal of creating enduring value in our firm and for our shareholdersshareholders. At each Board meeting and during our annual strategy planning session, we contribute to management’s strategic plan by engaging Prudential’s senior leadership in 2013.robust discussions about the Company’s overall strategy, priorities for its businesses, and long-term growth opportunities.
OutreachBOARD RISK OVERSIGHT
Prudent risk-taking is an inherent part of Prudential’s business, and Engagementwe approach our responsibility for oversight of Prudential’s risk profile—in its operations, product development and deployment of capital—very seriously. Fulfilling the Company’s long-term promises is only achievable by developing and maintaining an appropriate risk framework, transparency of risk reporting, and rigorous testing methodologies.
Through our oversight, we set standards for managing risks and monitoring how the Company manages those risks. The Risk Committee is comprised of the chairs of each of the other Board committees, enabling us to more closely coordinate the Board’s risk oversight function. The Risk Committee has metrics in place to monitor and review market, insurance, investment, and operational risk.
TALENT DEVELOPMENT AND DIVERSITY
We greatly appreciate your continued responserecognize that over the long-term, our talent and culture provide our biggest competitive advantage. That is why we consider leadership and talent a priority throughout the Company. This “talent mindset” means embracing collaboration and diversity. We work diligently to build on our success as an organization where top talent across a variety of disciplines, and from a diverse set of backgrounds, aspires to work.
The Board’s composition is indicative of our commitment to diversity and inclusion. Our Directors reflect diverse perspectives, including a complementary mix of skills, experience and backgrounds, which we believe are paramount to our effortsability to engage with ourrepresent your interests as shareholders. In 2013, we received more than 2,500 direct communications from you.
Atthe last year’s annual meeting,two years, four new directors have been elected. The average tenure of our advisory “say on pay” proposal received the support of 78 percentdirectors is now six years, andtwo-thirds of the votes cast,Board is diverse.
ENGAGEMENT AND OUTREACH
Accountability to shareholders is not only a decrease from the previous year. Over the past year, as partmark of good governance, but an important component of Prudential’s success. We value our ongoing effort to align our executive compensation program with the interests of our shareholders, we met with investorsshareholders’ views and other stakeholders to gain a deeper understanding of your opinions about our executive compensation. In response to your feedback, we made several modifications to our executive compensation program including a change in the mix of the long-term incentive program soinsights and believe that participants receive a greater proportion of their long-term awards in performance shares. We believe these actions are responsive to your feedbackpositive,two-way dialogue builds informed relationships that promote transparency and reinforce the link between the interests of our executive officers and our shareholders.accountability.
BUILDING SUSTAINABLE GROWTH
Achieving Sustainable Performance
In 2013, the Company accomplished its goal of delivering a superior return on equity with strong performance across its businesses. This result was achieved through execution of the Company’s strategy of delivering growth organically and through targeted acquisitions in key markets and segments that complement Prudential’s business mix. The combination of organic growth and opportunities presented through the integration of Star Life and Edison Life in Japan that was acquired in 2011 and The Hartford’s Individual Life Insurance business that was acquired in the U.S in 2013, as well as the landmark pension risk transfer agreements we completed in late 2012, have distinguished the Company within the industry.
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In 2016, we spoke with representatives from mutual funds, public pension funds, labor unions and other institutional investors that represent the majority of our outstanding shares. Topics discussed included strategy and performance; corporate governance matters, such as Board composition and refreshment, succession planning and Board leadership structure; and our executive compensation program. This continuous and transparent communication with our shareholders serves as the foundation for our policy development and informs our business strategy.
Mark B. Grier
Constance J. Horner
Martina Hund-Mejean
Karl J. Krapek
Christine A. Poon
Our International Growth Story AnchoredFor more than 140 years, our commitment to helping customers achieve financial security has never wavered. We know that only by Japandoing business the right way, every day, do we continue to earn their trust.
Our International Businessescorporate philosophy and practice of strong ethical values are reflected in the naming of Prudential as a 2016 World’s Most Ethical Company® by the Ethisphere Institute. This recognition is bestowed only on organizations that demonstrate a culture of ethics and transparency at every level.
CORPORATE RESPONSIBILITY
Prudential was founded to address a social need—helping working families afford life insurance to achieve financial security and peace of mind. Since then, we have stayed true to our purpose of powering the ambitions of people, organizations and communities, and to driving social progress.
We believe everyone should have access to financial security. We recognize that equitable access to capital enhances prosperity and accelerates growth. We are committed to enabling economic prosperity through the work we do not only in our core businesses, but also through targeted efforts like our emerging manager program, which invests in women- and minority-owned firms. Through this and other initiatives, these core beliefs permeate our interaction with all of our stakeholders.
OUR INTERNATIONAL BUSINESSES ANCHORED BY JAPAN
Our international businesses present long-term opportunities for our Company. More than half of Prudential’sour employees work in our operations outside of the U.S. Today, Japan is central to our international strategy. Consequently, in April 2013,November 2016, we held the Board’s annual offsiteour Board meeting in Tokyo, thePrudential’s headquarters of Prudential in Japan. Over the course of several days, we met with the senior management of our Asian businesses to discuss their strategies, outlook, challenges and opportunities. We also met many employees, whose observations and experiences reinforced the strength of Prudential’s culture, and our commitment to doing business the right way and maintaining a sharp focus on talent management.
Risk Management and the New Regulatory EnvironmentYOUR VIEWPOINT IS IMPORTANT
Managing and monitoring risks is important to our oversight of Prudential, and we take this responsibility very seriously. We regularly review the Company’s risk profile, including its approach to capital management, its operational footprint, and its investment risks and strategies.
In 2013, we also spent considerable time assessing the global regulatory environment. Last September, Prudential was designated as a non-bank “Systemically Important Financial Institution” (SIFI) by the Financial Stability Oversight Council in the U.S. and a “Global Systemically Important Insurer” (GSII) by the Geneva-based Financial Stability Board. While the capital standards and the requirements associated with leverage, liquidity, stress-testing and overall risk management have not been finalized, we have been working with management over the last year to prepare for federal oversight. We have supported their efforts to advise the Federal Reserve Board and other regulators about the important differences in the risk and operating profiles of banks and insurance companies and to influence the development of smart regulation.
Talent Development and Succession Planning
Recruiting, developing and retaining top industry talent is a key priority for the Company and it is a role in which we are actively engaged. Each fall, we spend the majority of one of our Board meetings discussing talent at all business and functional leadership levels across the Company. This exercise gives us rich insight into the Company’s pool of talent and its succession plans.
Fostering a Strong Worldwide Ethical Culture
We recognize the importance of doing business the right way in all of our locations across the globe. We expect employees, wherever they are located in the world, to adhere to strong ethical values. We work with management to set and communicate the right ethical “tone” for the Company, which guides our conduct and protects the Company’s reputation. The Company recently appointed a new chief corporate ethics officer, who is located in Japan, as a visible reminder of our worldwide commitment.
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Douglas A. Scovanner
John R. Strangfeld
James A. Unruh
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Your Viewpoints
We value your support, and we encourage you to share your opinions, suggestions, interests, and concerns with us. You can do so by writing to us at the address below. You can also send an email to the Independent Directorsindependent directors atindependentdirectors@ prudential.com or provide feedback on executive compensation via our website atwww.prudential.com/executivecompexecutivecomp.
If you would like to write to us, you may do so by writingaddressing your correspondence to Prudential Financial, Inc., Board of Directors, c/o Margaret M. Foran, Chief Governance Officer, Vice President and Corporate Secretary, 751 Broad Street, 21st Floor, Newark, NJNew Jersey 07102.
We suggest you access the two short videos of our Lead Independent Director, Karl Krapek, and the Chair of our Corporate Governance and Business Ethics Committee, Gilbert Casellas, from the Corporate Governance section of our website at www.prudential.com/directorvideos.
The Board of Directors of Prudential Financial, Inc.
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March 25, 2014
DEAR FELLOW SHAREHOLDERS:Dear Fellow Shareholders:
WeYou are pleased to invite youinvited to the Annual Meeting of Shareholders on May 13, 2014,9, 2017, at 751 Broad Street, Newark, NJ, at 2:0030 p.m. We hope that you will attend the meeting, but whether or not you are planning to attend, we encourage you toplease designate the proxies on the proxy card to vote your shares.
We are excited that shareholder voting has increased each year and are again offering a voting incentive to registered shareholders. Because of your active participation, we have planted more than 500,000730,000 trees through the incentive initiative. This year, trees will be planted in Osceola National Forest located in Florida, as well as in residential areas located in Newark, NJ, our Company’s headquarters. These planting sites will help improve the environment we share with our neighbors.
Every shareholder’s vote is important. I thankThank you for your commitment to the Company and urge you toplease vote your shares.
Sincerely,
John R. Strangfeld
Chairman and Chief Executive Officer
| Prudential Financial, Inc. 751 Broad Street Newark, NJ 07102 |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF PRUDENTIAL FINANCIAL, INC.
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AGENDA:
Election of 12 directors named in the proxy statement;
Ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014;
Advisory vote to approve named executive officer compensation;
A shareholder proposal regarding executive stock ownership; and
Transaction of other business that may properly come before the meeting.
Record date: You can vote if you were a shareholder of record on March 14, 2014.
If you are attending the meeting, you will be asked to present your admission ticket and photo identification, such as a driver’s license, as described in the Proxy Statement.
By Order of the Board of Directors,
Margaret M. Foran
Chief Governance Officer, Vice
President and Corporate Secretary
March 25, 2014
Important Notice Regarding the Availability of Proxy Materials for the 2014 Annual Meeting of Shareholders to be held on May 13, 2014: Our 2014 Proxy Statement and Annual Report for the year ended December 31, 2013, are available free of charge on our website at www.prudential.com/governance.
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Notice of Annual Meeting of Shareholders of
Prudential Financial, Inc.
Place: Prudential’s Corporate Headquarters 751 Broad Street Newark, NJ 07102 Date: May 9, 2017 Time: 2:30 p.m. | AGENDA: • Election of 12 directors named in the Proxy Statement; • Ratification of appointment of PricewaterhouseCoopers LLP • Advisory vote to approve named executive officer compensation; • Advisory vote on the frequency of future advisory votes to approve named executive officer compensation; • Shareholder proposal regarding an independent Board Chairman, • Shareholders also will act on such other business as may | |||
Record date: You can vote if you were a shareholder of record on March 10, 2017. If you are attending the meeting, you will be asked to present your admission ticket and valid, government-issued photo identification, such as a driver’s license, as described in the Proxy Statement. By Order of the Board of Directors,
Margaret M. Foran Chief Governance Officer, Senior Vice President and Corporate Secretary March 21, 2017 Prudential Financial, Inc. 751 Broad Street Newark, NJ 07102 | ||||
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Summary Information
To assist you in reviewing the proposals to be acted upon at the Annual Meeting, including the election of directors and the non-binding advisory vote to approve named executive officer compensation, we call your attention to the following information about the Company’s 20132016 financial performance and key executive compensation actions and decisions.decisions, and corporate governance highlights. The following description is only a summary. For more complete information about these topics, please review the Company’s Annual Report on Form10-K and the completethis Proxy Statement.
Business
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Financial Performance.2013 was a year of major progress and accomplishment for our Company on many fronts:
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We reportedafter-tax adjusted operating income of $4.11 billion, or $9.13 per share of Common Stock |
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Dividend.We moved to a quarterly Common Stock dividend schedule beginning in the first quarter of 2013 and declared quarterly dividends totaling $1.73 per share during the year, with our fourth quarter dividend representing a 32.5% increase from prior quarters.
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Assets under management reached $1.264 trillion at December 31, 2016, an increase from $1.184 trillion a year earlier.
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The Compensation Committee took the following actions to improve and maintain the rigor of our executive compensation program:
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COMPENSATION HIGHLIGHTS
The Compensation Committee has instituted a number of changes to our executive compensation program over the last several years to align with evolving competitive and governance practices and to strengthen the link to performance and rigor of our program. Highlights of our program include:
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For additional information, see the Compensation Discussion and Analysis (“CD&A&A”) Section in this Proxy Statement.
The compensation of our NEOs reflects both our 20132016 performance and the increased rigor of our annual incentiveexecutive compensation program.
| Named Executive Officer | 2013 Base Salary ($) | 2013 Annual (as adjusted for ($) | 2013 Long-Term Award Value(2) ($) | 2013 Total Direct ($) | 2016 Base Salary ($) | 2016 Annual Incentive Award (as adjusted for mandatory deferrals)(1) ($) | 2016 Long-Term Incentive Award Value(2) ($) | 2016 Total Direct Compensation ($) | ||||||||||||||||
| John R. Strangfeld | 1,400,000 | 5,460,000 | 10,840,000 | 17,700,000 | $ | 1,400,000 | $ | 4,183,200 | $ | 11,792,800 | $ | 17,376,000 | ||||||||||||
| Robert M. Falzon | 650,000 | 1,393,000 | 3,197,000 | 5,240,000 | $ | 770,000 | $ | 2,093,000 | $ | 4,897,000 | $ | 7,760,000 | ||||||||||||
| Richard J. Carbone | 700,000 | 2,500,000 | — | 3,200,000 | ||||||||||||||||||||
| Mark B. Grier | 1,190,000 | 4,550,000 | 8,950,000 | 14,690,000 | $ | 1,190,000 | $ | 3,556,000 | $ | 9,524,000 | $ | 14,270,000 | ||||||||||||
| Edward P. Baird | 770,000 | 2,835,000 | 4,715,000 | 8,320,000 | ||||||||||||||||||||
| Charles F. Lowrey | 770,000 | 3,920,000 | 6,180,000 | 10,870,000 | $ | 770,000 | $ | 2,789,500 | $ | 6,195,500 | $ | 9,755,000 | ||||||||||||
| Stephen Pelletier | $ | 770,000 | $ | 2,789,500 | $ | 5,695,500 | $ | 9,255,000 | ||||||||||||||||
| The following amounts are not included in the | and $ 1,195,500 for Mr. Pelletier. |
| Represents long-term incentive awards granted in | Amounts include portions of the 2016 Annual Incentive Awards mandatorily deferred into our Book Value Performance Program. |
Response to advisory vote and shareholder feedback
Approximately 78%95% of the votes cast at the 20132016 Annual Meeting of Shareholders on thenon-binding advisory vote on the compensation of our named executive officer compensationofficers were voted in support of our executive compensation program. Consistent with its strong commitment to engagement, communication, and transparency, the Compensation Committee continues to regularly receive feedback from our shareholders and review our executive compensation program to ensure alignment between the interests of our senior executives and shareholders. In part based on feedback from our shareholders, andwe made several modifications to the compensation program for our NEOs as discussed above and in more detail in the CD&A.
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Corporate Governance Highlights
In 2016, management and Board members engaged with shareholders who hold a majority of our shares. During these discussions, shareholders were encouraged to identify potential Board candidates and share feedback on the Company, its governance practices and policies, and its compensation framework and programs. Our 2016 corporate governance highlights include:
| • | Executive Compensation Program.Received 95% shareholder support in 2016. |
| • | Shareholder Engagement.In 2016, management and Board members met with shareholders who own the majority of our shares. |
| • | Board Refreshment.Elected four new directors since 2015, including three in 2016, enhancing the Board’s breadth and depth of experience and diversity. |
| • | Investor Communications.Nominated for Best Proxy Statement for a Large Cap Company by Corporate Secretary Magazine. |
Boards of Directors Nominees and Committees
| Name/Age | Independent | Director Since | Committee Membership | Other Public Boards | ||||||
| Thomas J. Baltimore, 53 | Yes | Oct. 2008 | • Executive • Compensation | • Investment (Chair) • Risk | 2 | |||||
| Gilbert F. Casellas, 64 | Yes | Jan. 2001 | • Corporate Governance & Business Ethics (Chair) | • Executive • Risk | 0 | |||||
| Mark B. Grier, 64 | No | Jan. 2008 | 0 | |||||||
| Martina Hund-Mejean, 56 | Yes | Oct. 2010 | • Audit | 0 | ||||||
| Karl J. Krapek, 68 | Yes | Jan. 2004 | • Lead Independent • Compensation (Chair) | • Executive (Chair) • Risk (Chair) | 1 | |||||
| Peter R. Lighte, 68 | Yes | Mar. 2016 | • Corporate Governance & Business Ethics | • Investment | 0 | |||||
| George Paz, 61 | Yes | Mar. 2016 | • Audit | 2 | ||||||
| Sandra Pianalto, 62 | Yes | Jul. 2015 | • Corporate Governance & Business Ethics | • Finance | 2 | |||||
| Christine A. Poon, 64 | Yes | Sep. 2006 | • Executive • Finance (Chair) | • Investment • Risk | 3 | |||||
| Douglas A. Scovanner, 61 | Yes | Nov. 2013 | • Audit (Chair) • Executive | • Risk | 0 | |||||
| John R. Strangfeld, 63 | No | Jan. 2008 | • Executive | 0 | ||||||
| Michael A. Todman, 59 | Yes | Mar. 2016 | • Compensation | • Finance | 2 | |||||
Annual Meeting Proposals
| Proposal | Recommendation of Board | |
| Election of Directors | FOR each of the nominees | |
| Ratification of Auditors | FOR | |
| Advisory vote to approve named executive officer compensation | FOR | |
| Advisory vote on the frequency of future advisory votes to approve named executive officer compensation | For “EVERY YEAR” | |
| Shareholder proposal regarding an independent Board Chairman | AGAINST |
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ELECTION OF DIRECTORS
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Election of Directors (Item 1)
You will find important information about the qualifications and experience of each of the director nominees whom you are being asked to elect. The Corporate Governance and Business Ethics Committee performs an annual assessment to see that your directors have the skills and experience to effectively oversee the Company. All of your directors have proven leadership ability, sound judgment, integrity and a commitment to the success of our Company.
Ratification of the Appointment of the Independent Registered Public
Accounting Firm (Item 2)
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as the Company’s independent registered public accounting firm (independent auditor) for 2014. While we are not required to have shareholders ratify the selection of PricewaterhouseCoopers as the Company’s independent auditor, we are doing so because we believe it is good corporate practice. If shareholders do not ratify the selection, the Audit Committee will reconsider the appointment, but may nevertheless retain PricewaterhouseCoopers as the Company’s independent auditor.
Advisory Vote to Approve Named Executive Officer Compensation (Item 3)
Shareholders are being asked to cast a non-binding, advisory (“Say on Pay”) vote on our named executive officer compensation. Last year, approximately 78% of the votes cast by our shareholders’ on this proposal supported our executive compensation program. Please see “Consideration of Last Year’s ‘Say on Pay’ Vote” in the CD&A for a discussion of how the Board and the Compensation Committee responded to the results of the 2013 advisory vote.
Consistent with the recommendation of the Board and the preference of our shareholders, we have decided to hold an annual “Say on Pay” vote. In evaluating this year’s “Say on Pay” proposal, we recommend that you carefully review the CD&A, which explains how and why the Compensation Committee arrived at its executive compensation actions and decisions for 2013. We suggest you also refer to our corporate governance policies which are contained in this Proxy Statement.
Shareholder Proposal (Item 4)
Finally, you are also being asked to consider one shareholder proposal regarding executive stock ownership contained in this Proxy Statement.
APPOINTMENT OF THE INDEPENDENT
AUDITORS FOR 2017—RATIFICATION
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| Item 2 – Ratification of the Appointment of the Independent Registered Public Accounting Firm |
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Submission of Shareholder Proposals and Director Nominations | ||||
Proxy Statement
The Board of Directors of Prudential Financial, Inc. (Prudential Financial(“Prudential Financial” or the Company)“Company”) is providing this Proxy Statement in connection with the Annual Meeting of Shareholders to be held on May 13, 2014,9, 2017, at 2:0030 p.m., at Prudential Financial’s Corporate Headquarters, 751 Broad Street, Newark, NJ 07102, and at any adjournment or postponement thereof. Proxy materials or a Notice of Internet Availability were first sent to shareholders on or about March 25, 2014.21, 2017.
ADVISORY VOTES TO APPROVE NAMED
EXECUTIVE OFFICER COMPENSATION
AND FREQUENCY OF VOTE, AND CD&A
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SHAREHOLDER PROPOSAL REGARDING AN INDEPENDENT BOARD CHAIRMAN
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Our Board of Directors has nominated 12 directors for election at this Annual Meeting to hold office until the next annual meeting and the election of their successors. All of the nominees are currently directors. Each agreed to be named in this Proxy Statement and to serve if elected. All of the nominees are expected to attend the 20142017 Annual Meeting. All 1312 directors, then serving on the Board, attended the 20132016 Annual Meeting.
Gaston Caperton,James Cullen, a member of the Board, haswill have attained the age of 74 and will not stand forre-election. As a result, the Board will be reduced to 12 members immediately prior to the Annual Meeting.
We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.
Director Criteria, Qualifications, Experience and ExperienceTenure
Prudential Financial is a financial services company that offers a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. The Corporate Governance and Business Ethics Committee performs an assessment of the skills and the experience needed to properly oversee the interests of the Company. Generally, the Committee reviews both the short- and long-term strategies of the Company to determine what current and future skills and experience are required of the Board in exercising its oversight function. The Committee then compares those skills to the skills of the current directors and potential director candidates. The Committee conducts targeted efforts to identify and recruit individuals who have the qualifications identified through this process, keeping in mind its commitment to diversity.
BOARD HIGHLIGHTS
BOARD DIVERSITY
While the Company does not have a formal policy on Board diversity, diversity is an integral part of our Corporate Governance Principles and Practices place great emphasis on diversity, and the Committee actively considers diversity in recruitment and nominations of directors. The current composition of our Board reflects those efforts and the importance of diversity to the Board:
Two-thirds of our Board is diverse
director nominees haveworked outside |
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| 1 | director nominee is | Asian-American |
| director nominees areHispanic | ||||
| 3 | director nominees areWomen | ||||
| 1 | director nominee is | LGBT |
| Total number of director | nominees |
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The Committee looks for its current and potential directors collectively to have a mix of skills and qualifications, some of which are described below:
| Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | | 9 | |||
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business ethics
business head/
administration
business operations
corporate governance
environmental/
sustainability/corporate
responsibility
finance/capital allocation
financial expertise/literacy
financial services industry
government/public policy
insurance industry
international
investments
marketing/sales
real estate
risk management
talent management
technology/systems
It is of critical importance to the Company that the Committee recruit directors who help achieve the goal of a well-rounded, diverse Board that functions collegially as a unit. The Board has also carefully considered whether the slate of director nominees, taken as a whole, has representatives with the above-listed skills and qualifications.
Additionally, theThe Committee expects each of the Company’s directors to have proven leadership skills, sound judgment, integrity and a commitment to the success of the Company. In evaluating director candidates and considering incumbent directors for nomination to the Board, the Committee considers each nominee’s independence, financial literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors also include attendance, past performance on the Board and contributions to the Board and their respective committees.
Below each nominee’s biography, we have included an assessment of the skills and experience of such nominee. We have also included a chart that covers the assessment for the full Board.
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The Board of Directors recommends that shareholders vote“FOR” alleach of the nominees.
 | Thomas J. Baltimore Age:53 Director Since:October 2008
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| Prudential Committees:
• Executive
•
• Investment (Chair)
• Risk Former Directorships Held During the Past Five Years:
• Integra Life Sciences Corporation (August 2012) |
• RLJ Lodging Trust (May 2016) | Public Directorships:
• Duke Realty Corporation(1) • Park Hotels & Resorts, Inc. | |||||||
(1) Mr. Baltimore will not be standing for re-election at the annual meeting in April 2017. | ||||||||||||
Mr. Baltimorehas been the President and Chief Executive Officer (CEO) of Park Hotels & Resorts, Inc. (a NYSE-listed lodging real estate investment trust) since January 2017. Between May 2016 and January 2017, Mr. Baltimore was the President and CEO of the planned Hilton Real Estate Investment Trust. Previously, he was President and CEO of RLJ Lodging Trust (a NYSE-listed real estate investment company) sincefrom May 2011. Previously, he2011 to May 2016. He served as Co-Founder and President of RLJ Development, LLC (RLJ Lodging’s predecessor company) from 2000 to May 2011. He served as VP, Gaming Acquisitions, of Hilton Hotels Corporation from 1997 to 1998 and later as VP, Development and Finance, from 1999 to 2000. He also served in various management positions with Host Marriott Services, including VP, Business Development, from 1994 to 1996.
Skills and& Qualifications
Business Head/Administration:Over a decade of service as President of RLJ Development.
Administration
Corporate Governance: Experience serving as a director of several public companies in addition to Prudential.
Investments:Through RLJ Lodging Trust, Mr. Baltimore has been responsible for overseeing the management of nearly $2 billion in equity; formerly served as VP, Development and Finance of Hilton Hotels.
Governance
BOARD TENURE FOR 2017 NOMINEES Our directors’ expertise combines to provide a broad mix of skills, qualifications and proven leadership abilities. The Corporate Governance and Business Ethics Committee practices a long-term approach to board refreshment. With the assistance of an independent search firm, the Committee regularly identifies individuals who have expertise that would complement and enhance the current board’s skills and experience. In addition, as part of our shareholder engagement dialogue, we routinely ask our investors for input regarding director recommendations. Director Tenure (Average 6.25 years)
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Mr. Bethune has been Managing Director of g-b1 Partners (a travel advisory firm) since January 2005. He was Chairman and CEO of Continental Airlines, Inc. from 1996 until his retirement in December 2004. Mr. Bethune was the President and CEO of Continental Airlines from November 1994 to 1996 and served as President and Chief Operating Officer (COO) from February 1994 to November 1994. Prior to joining Continental, Mr. Bethune held senior management positions with The Boeing Company, Piedmont Airlines, Western Air Lines, Inc. and Braniff Airlines.
Skills and Qualifications
Business Head/Administration:A decade of service as CEO of Continental Airlines.
Business Operations: Served as CEO and Chief Operating Officer of Continental Airlines.
Corporate Governance:Experience serving as a director of several large public companies in addition to Prudential.
International: Experience in the travel industry, including with g-b1 Partners and several major airlines and as a director of two large public companies with international operations.
Marketing/Sales: As Chairman and CEO of Continental Airlines, transformed the company into an industry leader through innovative marketing initiatives.
Talent Management:Extensive experience in developing and implementing strategies and policies for the acquisition and development of employee talent.
| | Notice of Annual Meeting of Shareholders and | ||||
| Item 1—Election of Directors:Director Nominees |
 |
Age: Director Since:January 2001 (Director of Prudential Insurance since | Prudential Committees:
• Corporate Governance and Business Ethics (Chair) • • Risk | ||||||
Mr. Casellas has been Chairman of OMNITRU (a consulting and investment firm) since 2011. He was the VP, Corporate Responsibility of Dell Inc. (a global computer manufacturer) from 2007 to 2010. He served as a Member of Mintz Levin Cohn Ferris Glovsky & Popeo, PC from June 2005 to October 2007. He served as President of Casellas & Associates, LLC (a consulting firm) from 2001 to 2005. During 2001, he served as President and CEO ofQ-linx, Inc. He served as the President and COO of The Swarthmore Group, Inc. from January 1999 to December 2000. Mr. Casellas served as Chairman, U.S. EEOC from 1994 to 1998, and General Counsel, U.S. Department of the Air Force, from 1993 to 1994.
Skills & Qualifications
Skills and Qualifications
Business Ethics: At Dell Inc., he was responsible for the company’s global sustainability and corporate philanthropy functions.
Business Head/Administration: As former Chairman and CEO of EEOC, he was responsible for an annual budget of approximately $250 million and a business administration serving approximately 3,000 employees.
Business Operations: Former President and CEO of Q-linx; former COO of The Swarthmore Group.
Corporate Governance: Experience serving as a director of a private company, serving on the University of Pennsylvania Board for over 16 years and as VP, Corporate Responsibility at Dell Inc., where he oversaw the company’s global diversity, sustainability and corporate philanthropy functions. Mr. Casellas also has proven diversity experience through his appointment by the President as a civilian member to the Military Leadership Diversity Commission and as a member of the Diversity Advisory Board of Toyota Motor North America Inc., the Joint Diversity Council of Comcast Corporation, and previously as the chair of the Committee on Workplace Diversity for Yale University, a member of the
board of the Hispanic Federation, a member of the board of the University of Pennsylvania, and as a member of The Coca-Cola Company’s Diversity Task Force.
Environmental/Sustainability/Corporate Responsibility: At Dell, he oversaw global diversity, sustainability and corporate philanthropy, and contributed to a company culture recognized for leadership in environmentally conscious packaging, support of diverse suppliers and human rights.
Government/Public Policy: Served as Chairman of the U.S. EEOC and as General Counsel of the U.S. Department of the Air Force.
Investments: Serves as Chairman of OMNITRU, a consulting and investment firm, and served as President and COO of The Swarthmore Group, a registered investment advisor.
• Business Ethics • Business Head/Administration • Business Operations • Corporate Governance • Environmental/Sustainability/Corporate Responsibility • Government/Public Policy • Investments • Risk Management • Talent ManagementRisk Management:Former member of Mintz Levin Cohn Ferris Glovsky & Popeo, PC; former General Counsel of the U.S. Department of the Air Force; former VP, Corporate Responsibility of Dell Inc.
 | Mark B. Grier Age:64 Director Since:January 2008
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| Prudential Committees:
•
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Mr. Cullen served as the President and COO of Bell Atlantic Corporation from December 1998 until his retirement in June 2000. Mr. Cullen was the President and CEO, Telecom Group of Bell Atlantic Corporation from 1997 to 1998 and served as Vice Chairman of Bell Atlantic Corporation from 1995 to 1997. Mr. Cullen has also served as the Non-Executive Chairman of the Board of NeuStar, Inc. since November 2010 and Non-Executive Chairman of the Board of Agilent Technologies, Inc. since March 2005.
Skills and Qualifications
Business Head/Administration: Formerly served as President and CEO of the Telecom Group at Bell Atlantic.
Business Operations: Former President and COO of Bell Atlantic.
Corporate Governance: Experience serving as a director of several large public companies including non-executive chairman and lead director.
International: Experience as a director on the boards of several international companies and held multiple positions at Bell Atlantic.
Marketing/Sales: As Vice Chairman of Bell Atlantic, had accountability for strategic planning, business development and customer-focused network lines of business.
Talent Management: As former President and COO of Bell Atlantic, responsible for acquisition and development of employee talent.
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Mr. Grier has served as Vice Chairman since 2007 and a member of the Office of the Chairman of Prudential Financial since August 2002. From April 2007 through January 2008, he served as Vice Chairman overseeing the International Insurance and Investments divisiondivisions and Global Marketing and Communications. Mr. Grier was Chief Financial Officer (CFO) of Prudential Insurance from 1995 to 1997 and has served in various executive roles. Prior to joining Prudential, Mr. Grier was an executive with Chase Manhattan Corporation.
Skills and Qualifications
Business Head/Administration: Experience as a current and former member of senior management for several large public companies.
Business Operations: As Vice Chairman, Mr. Grier has oversight and responsibility for Finance, Risk Management, Investor Relations, Operations and Systems, Auditing, and Global Marketing and Communications.
Corporate Governance: Mr. Grier has developed corporate governance expertise through his membership on Prudential’s Board since 2008.
Environmental/Sustainability/Corporate Responsibility: As Vice Chairman, he supports ventures that create healthy and sustainable communities around the world and helps non-profit organizations achieve long-term sustainability, solidifying Prudential’s stature as a leading example of corporate citizenship and social responsibility.
Finance/Capital Allocation: Over a decade of financial experience through various roles at Prudential, including Vice Chairman overseeing International Insurance and Investments and CFO of Prudential Insurance; former executive with Chase Manhattan, a leading global financial services firm.
Financial Services Industry:Over two decades in the financial services industry.
Government/Public Policy: Mr. Grier has experience in oversight of Prudential’s public policy and government affairs function.
Insurance Industry:Insurance industry experience through service as a member of senior management.
International: Experience as a current and former member of senior management for large public companies with international operations.
Risk Management: Mr. Grier plays a key role in developing and implementing Prudential’s risk management policies and procedures.
Talent Management: Experience leading large, global teams at Prudential.
Technology/Systems:Mr. Grier has oversight and responsibility for Prudential’s Operations and Systems function.
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Skills & Qualifications
• Business Ethics • Business Head/Administration • Business Operations • Corporate Governance • Environmental/Sustainability/Corporate Responsibility • Finance/Capital Allocation • Financial Services Industry • Government/Public Policy |
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Ms. Horner served as a Guest Scholar at The Brookings Institution from 1993 to 2005, after serving as Assistant to the President of the United States and Director, Presidential Personnel from 1991 to 1993; Deputy Secretary, U.S. Department of Health and Human Services from 1989 to 1991; and Director, U.S. Office of Personnel Management from 1985 to 1989. Ms. Horner was a Commissioner, U.S. Commission on Civil Rights from 1993 to 1998.
Skills and Qualifications
Business Head/Administration:Former Assistant to the President of the U.S. and Director of Presidential Personnel; Deputy Secretary of the U.S. Department of Health and Human Services; Director of the U.S. Office of Personnel Management.
Corporate Governance:Experience serving as a director and Chair of Governance Committees of several large public companies.
Environmental/Sustainability/Corporate Responsibility:In providing oversight of sustainability issues and maintaining responsible business models for several international companies, Ms. Horner has encouraged sustainable product development and strong corporate citizenship initiatives.
Government/Public Policy:Ms. Horner has government/public policy experience through her various senior positions in the federal government, including Commissioner of the U.S. Commission on Civil Rights.
International:Experience as a director on the boards of several international companies.
Talent Management:Former Assistant to the President of the U.S. and Director, Presidential Personnel; former Director, U.S. Office of Personnel Management.
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Age: Director Since:October 2010
| Prudential Committees:
• Audit | ||||||
Ms. Hund-Mejean has served as the Chief Financial Officer (CFO)CFO and a member of the Executive Committee at MasterCard Worldwide (a global transaction processing and consulting services company) since 2007. Ms. Hund-Mejean served as SVPSenior Vice President (SVP) and Corporate Treasurer at Tyco International Ltd. from 2003 to 2007; SVP and Treasurer at Lucent Technologies from 2000 to 2002; and held management positions at General Motors Company from 1988 to 2000. Ms. Hund-Mejean began her career as a credit analyst at Dow Chemical in Frankfurt, Germany.
Skills & Qualifications
Skills and Qualifications
Business Head/Administration: Over a decade of experience in senior positions at multiple Fortune 500 companies.
Business Operations: Has served as CFO of MasterCard Worldwide since 2007; SVP and Corporate Treasurer at Tyco; SVP and Treasurer at Lucent Technologies; and held management positions at General Motors.
Corporate Governance: Experience through her role at MasterCard, where she is responsible for Global Risk Management, Internal Audit and IR.
Finance/Capital Allocation:Over a decade of financial experience through various roles within the financial divisions at MasterCard and other companies.
Financial Services Industry:Experience through her position as CFO of MasterCard.
International: Current and former member of senior management of several public companies with international operations.
Investments: Responsibilities included $30 billion Defined Benefit Plan while serving as SVP and Treasurer of Lucent Technologies Inc. (Alcatel-Lucent).
Risk Management: Experience through her role at MasterCard, where she is responsible for Global Risk Management, including the development and implementation of MasterCard’s risk management policies and procedures.
• Business Head/Administration • Business Operations • Corporate Governance • Finance/Capital Allocation • Financial Services Industry • International • Investments • Risk Management • Talent ManagementTalent Management:Experience leading large global teams at a number of Fortune 500 companies.
| Notice of Annual Meeting of Shareholders and | 11 | |||||
| Item 1—Election of Directors:Director Nominees |
 | Karl J. Krapek Age:68 Director Since:January 2004 Lead Independent Director since May 2014
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| Prudential Committees:
•
• Executive (Chair) • Risk (Chair) Former Directorships Held During the Past Five Years:
• Visteon Corporation (June 2012) • The Connecticut Bank & Trust Company (April 2012) | Public Directorships:
• Northrop Grumman Corporation | ||||||
Mr. Krapek is a co-founder of The Keystone Companies, which was founded in 2002 and develops residential and commercial real estate. Mr. Krapek served as the President and COO of United Technologies Corporation (“UTC”)(UTC) from 1999 until his retirement in January 2002. Prior to that time, Mr. Krapek held other management positions at UTC, which he joined in 1982. Mr. Krapek is also theco-founder
Skills and Qualifications
Business Head/Administration:Formerly served as President and COO of UTC.
Business Operations: Formerly served as President and COO of UTC.
Corporate Governance: Experience serving as a director of several large public companies.
Environmental/Sustainability/Corporate Responsibility:Led the business units of UTC when the company was at the forefront of environmental and industry firsts in sustainable equipment design that achieved increasing efficiencies in the use of energy, water and materials.
Finance/Capital Allocation: President and COO of UTC with two decades of executive level-experience reviewing financial statements and capital structures of UTC and its subsidiaries.
International: Served as current or former director of several public companies with international operations and as a former Chairman, President or CEO of several large public companies with global operations.
Real Estate: Co-founder of The Keystone Companies, which was founded in 2002 and develops residential and commercial real estate.
Skills & Qualifications
Technology/Systems: Two decades
• Business Head/Administration • Business Operations • Corporate Governance • Environmental/Sustainability/Corporate Responsibility • Finance/Capital Allocation • International • Real Estate | • Risk Management • Talent Management • Technology/Systems |
 | Peter R. Lighte Age:68 Director Since:March 2016 | Prudential Committees: • Corporate Governance and Business Ethics • Investment | ||||||
Mr. Lighteserved as the Vice Chairman, J.P. Morgan Corporate Bank, China, from 2010 to 2014, and was the founding Chairman of experience at UTC, which provides high-tech productsJ.P. Morgan Chase Bank China, from 2007 to 2010. Prior to that, he headed the Company’s International Client Coverage for Treasury and supportSecurities Services in J.P. Morgan’s European Global Operating Services Division and was instrumental inre-establishing its corporate bank in London. Mr. Lighte previously served as the President of Chase Trust Bank in Tokyo from 2000 to 2002. He was also the aerospace and building industries, serving as President and Chief Operating Officer. Experience serving as a directorfounding representative in Beijing of Manufacturers Hanover Trust Company. Mr. Lighte has also taught at several companies inacademic institutions, including Middlebury College and the technology industry.University of Santa Clara.
Skills & Qualifications
• Academia/Education • Business Head/Administration • Business Operations • Corporate Governance • Finance/Capital Allocation • Financial Services Industry • Government/Public Policy | • Insurance Industry • International • Investments • Risk Management • Talent Management |
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Director Since:March 2016
| Prudential Committees: • Audit | Public Directorships: • Express Scripts Holding Company • Honeywell International, Inc. | ||||||
Mr. Pazis the Non-Executive Chairman of Express Scripts Holding Company (Express Scripts), a prescription benefit management company, and served as the CEO of Express Scripts from April 2005 to May 2016. Mr. Paz also served as the President of Express Scripts from October 2003 to February 2014 and has been a director since January 2004. He joined Express Scripts in 1998 as SVP and CFO. Prior to joining Express Scripts, Mr. Paz was a partner at Coopers and Lybrand from 1988 to 1993 and 1996 to 1998 and served as Executive Vice President and CFO for Life Partners Group from 1993 to 1995.
Skills & Qualifications
• Business Head/Administration • Business Operations • Corporate Governance • Finance/Capital Allocation • Financial Services Industry • Government/Public Policy • Insurance Industry | • Risk Management • Talent Management |
| 12 | | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | |
| Item 1—Election of Directors:Director Nominees |
 | Sandra Pianalto
Age:62 Director Since:July 2015 | Prudential Committees: • Corporate Governance and Business Ethics • Finance | Public Directorships: • Eaton Corporation plc • The J.M. Smucker Company | |||||
Ms. Pianaltoserved as the President and CEO of the Federal Reserve Bank of Cleveland (the Cleveland Fed) from February 2003 until her retirement in May 2014. She was the First Vice President and COO of the Cleveland Fed from 1993 to 2003 and served as its VP and Secretary to the Board of Directors from 1988 to 1993. Ms. Pianalto also served in various supervisory roles at the Cleveland Fed from 1983 to 1988. Prior to joining the Cleveland Fed, Ms. Pianalto was an economist at the Board of Governors of the Federal Reserve System and served on the staff of the Budget Committee of the US House of Representatives.
Skills & Qualifications
• Academia/Education • Business Head/Administration • Business Operations • Corporate Governance • Finance/Capital Allocation • Financial Services Industry • Government/Public Policy | • Risk Management • Talent Management |
 | Christine A. Poon Age:64 Director Since:September 2006 | Prudential Committees: • Executive • Finance (Chair) • Investment • Risk | Public Directorships: • Koninklijke Philips Electronics NV
• Regeneron Pharmaceuticals
• The Sherwin-Williams Company | |||||
Ms. Poon has served as Dean of Fisher College of Business at The Ohio State University sincefrom May 2009.2009 until November 2014 and is now a member of the faculty. She served as Vice Chairman and a Membermember of the Board of Directors of Johnson & Johnson from 2005 until her retirement in March 2009. Ms. Poon joined Johnson & Johnson in 2000 as Company Group Chair in the Pharmaceuticals Group. She became a Member of Johnson & Johnson’s Executive Committee and Worldwide Chair, Pharmaceuticals Group, in 2001, and served as Worldwide Chair, Medicines and Nutritionals from 2003 to 2005. Prior toPriorto joining Johnson & Johnson, she served in various management positions at Bristol-Myers Squibb for 15 years.
Skills and& Qualifications
Academia/Education: Serving as the Dean of Fisher College of Business at The Ohio State University, an international leader in business education.
Education
Administration
Operations
International: Current or former director of public companies with international operations and as former Worldwide Chair of the Pharmaceuticals Group and the Medicines and Nutritionals Group of Johnson & Johnson.
International
Sales
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Age: Director Since:November 2013
| Prudential Committees:
• Audit (Chair)
• | ||||||
Mr. Scovanner has been the Founder and Managing Member of Comprehensive Financial Strategies, LLC, a management consulting firm, since October 2013. Executive Vice President of Finance and Accounting, on an interim basis, of Hudson’s Bay Company. Previously, he served as the CFO (1994 to 2012) and Executive Vice President (2000 to 2012) of the Target Corporation (a North American retailer). Prior to joining the Target Corporation, Mr. Scovanner held various management positions at The Fleming Companies, Inc., Coca-Cola Enterprises, Inc., The Coca-Cola Company and the Ford Motor Company from 1979 to 1994.
Skills and Qualifications
Business Head/Administration:As CFO of Target, demonstrated business leadership and management insights; previous senior leadership roles in Finance at Fortune 500 companies.
Business Operations: As CFO of Target, led key operational and financial areas including financial planning and analysis, risk management, internal audit, internal and external communications, investor relations, indirect procurement and corporate aviation.
Corporate Governance:Experience serving as a Director and member of the Audit and Asset/Liability Management Committees of a public company; served as Chairman and Vice Chairman of the Board at private organizations.
Finance/Capital Allocation: Extensive financial expertise in cost management, creating value and resource allocation as CFO of Target, as well as previous leadership roles in Finance at other companies.
Financial Services Industry: Extensive experience in financing, mergers, acquisitions, investments and strategic transactions as CFO of Target, as well as serving as a member of the board of directors of TCF Financial Corp., a national bank holding company.Skills & Qualifications
Investments: As CFO of Target, developed extensive experience in capital markets, including capital raising and derivatives.
Real Estate: Implemented and refined capital investment analysis process, which governed cumulative $40 billion-plus investment in real estate and related assets during 18 year tenure as CFO of Target.
Talent Management: Experience leading and developing a multidisciplinary team of 3,000 employees at Target.
• Business Head/Administration • Business Operations • Corporate Governance • Finance/Capital Allocation • Financial Services Industry • Investments • Real Estate | • Risk Management • Talent Management | |
| Notice of Annual Meeting of Shareholders and | 13 | |||
| Item 1—Election of Directors:Director Nominees |
| |
Age: Director Since:January 2008 (Elected Chairman May 2008) | Prudential Committees:
• Executive | ||||||
Mr. Strangfeld has served as CEO and President of Prudential Financial since January 2008 and Chairman of the Board since May 2008. Mr. Strangfeld is a Membermember of the Office of the Chairman of Prudential Financial and served as Vice Chairman of Prudential Financial from 2002 through 2007, overseeing the U.S. Insurance and InvestmentsInvestment divisions. Prior to his position as Vice Chairman, Mr. Strangfeld held a variety of senior investment positions at Prudential, both within the U.S. and abroad.
Skills & Qualifications
• Business Ethics • Business Head/Administration • Business Operations • Corporate Governance • Environmental/Sustainability/Corporate Responsibility • Finance/Capital Allocation • Financial Services Industry • Insurance Industry | • International • Investments • Risk Management • Talent Management • Technology/Systems |
Skills and Qualifications
Business Head/Administration: Held a variety of executive management positions at Prudential, including oversight responsibility for the U.S. Insurance and Investments divisions.
Business Operations: Responsible for developing, implementing and assessing Prudential’s operating plan.
Corporate Governance: Developed corporate governance expertise through his leadership on Prudential’s Board.
Environmental/Sustainability/Corporate Responsibility: As CEO of Prudential, has addressed social, sustainability and environmental concerns and has ensured that the company’s corporate citizenship reflects its core values, through such activities as the company’s efforts to revitalize its home city of Newark, as well as its philanthropic, employee-volunteer and educational initiatives within the country and the international community.
Finance/Capital Allocation: Over a decade of financial experience through various roles at Prudential.
Financial Services Industry: Over three decades in the financial services industry.
Insurance Industry: Previously oversaw the U.S. Insurance and Investments divisions.
International:Held a variety of executive positions at Prudential, both within the U.S. and abroad.
Investments: Held a variety of senior investment positions at Prudential, including oversight responsibility for the U.S. Insurance and Investments divisions.
Risk Management: Ultimately responsible for developing and implementing Prudential’s risk management policies and procedures.
Talent Management: Advocates talent management as key component of Prudential’s corporate strategy. Actively engages the Board of Directors on talent management strategy and succession planning for senior leadership.
Technology/Systems: Oversight and responsibility for Prudential’s Operations and Systems function.
 | Michael A. Todman Age:59 Director Since:March 2016 | Prudential Committees: • Compensation • Finance | Public Directorships: • Brown-Forman Corporation • Newell Rubbermaid, Inc. | |||||
Mr. Todman served as Vice Chairman of the Whirlpool Corporation (Whirlpool), a global manufacturer of home appliances, from November 2014 to December 2015. Mr. Todman previously served as President of Whirlpool International from 2006 to 2007 and 2010 to 2014, as well as President, Whirlpool North America from 2007 to 2010. Mr. Todman held several senior positions including Executive Vice President and President of Whirlpool Europe from 2001 to 2005 and Executive Vice President, Whirlpool North America, in 2001. Prior to joining Whirlpool, Mr. Todman served in a variety of leadership positions at Wang Laboratories Inc. and Price Waterhouse and Co.
Skills & Qualifications
• Business Head/Administration • Business Operations • Corporate Governance • Finance/Capital Allocation • Government/Public Policy • International • Marketing/Sales | • Risk Management • Talent Management |
| 14 | | Notice of Annual Meeting of Shareholders and | |||||
| Item 1—Election of Directors:Director Nominees |
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Mr. Unruh became a founding Member of Alerion Capital Group, LLC (a private equity investment group) in 1998. Mr. Unruh was with Unisys Corporation from 1987 to 1997, serving as its Chairman and CEO from 1990 to 1997. He also held executive positions with financial management responsibility, including serving as Senior Vice President, Finance, Burroughs Corporation from 1982 to 1987. In addition, Mr. Unruh serves as a director of several privately held companies in connection with his position at Alerion Capital Group, LLC.
Skills and Qualifications
Business Head/Administration:Served as Chairman and CEO of Unisys Corporation.
Business Operations:As the CEO of Unisys, was responsible for developing, implementing and assessing the company’s operating plan.
Corporate Governance: Experience serving as a director of public and private companies.
Finance/Capital Allocation:Founding member of Alerion Capital Group, a private equity investment group; former executive with responsibility for financial management at Burroughs Corporation.
International:Former Chairman and CEO of Unisys and current director of several public companies with global operations.
Investments:Experience overseeing financial management at Burroughs Corporation.
Marketing/Sales:Extensive experience in marketing at several large public companies.
Risk Management:As Chairman and CEO of Unisys, he was responsible for the company’s risk management initiatives.
Technology/Systems: Former Chairman and CEO of Unisys and currently at Alerion Capital Group, where he oversees private equity investments in later-stage technology and technology-enabled companies.
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| Notice of Annual Meeting of Shareholders and | | |||
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The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company is governed by a Board of Directors and committees of the Board that meet throughout the year. Directors discharge their responsibilities at Board and committee meetings and also through other communications with management.
The Board has adopted Corporate Governance Principles and Practices to provide a framework for the effective governance of the Company. The Corporate Governance Principles and Practices are reviewed regularly and updated as appropriate. The full text of the Corporate Governance Principles and Practices, which includes the definition of independence adopted by the Board, the charters of the Corporate Governance and Business Ethics, Compensation and Audit Committees, the Lead Independent Director Charter, the Code of Business Conduct and Ethics and the Related Party Transaction Approval Policy can be found at www.prudential.com/governance. Copies of these documents also may be obtained from the Chief Governance Officer and Corporate Secretary.
Governance is a continuing focus at the Company, starting with the Board and extending to management and all employees. Therefore, the Board reviews the Company’s policies and business strategies and advises and counsels the CEO and the other executive officers who manage the Company’s businesses.businesses, including reviewing, on at least an annual basis, the Company’s strategic plans.
In addition, we solicit feedback from shareholders on governance and executive compensation practices and engage in discussions with various groups and individuals on governance issues and improvements.
Process for Selecting Directors
The Corporate Governance and Business Ethics Committee screens candidates and recommends candidates for nomination by the full Board. The Company’sBy-laws provide that the size of the Board may range from 10 to 24 members. The Board’s current view is that the optimal size is between 10 and 15 members. In anticipation of retirements over the next several years, the Committee is seeking one or more candidates who meet the criteria described under “Director Criteria, Qualifications and Experience.” The Committee is being assisted with its recruitment efforts by an independent third party search firm, to recommendwhich recommends candidates whothat satisfy the Board’s criteria. The search firm also provides research and pertinent information regarding candidates, as requested. Mr. Scovanner,
Source Candidate Pool from Independent Search Firms Shareholders Independent Directors Our People In-Depth Review by the Committee Consider Skills Matrix Screen qualifications Consider diversity Review independence and potential conflicts Meet with directors Recommend Selected Candidate for Appointment to our Board Review by full board Select Director(s) 4 new directors since May 2016
| 16 | | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | |
| Corporate Governance |
Shareholder Nominations and Recommendations of Director Candidates
We amended ourBy-laws in March 2015 to permit a group of up to 20 shareholders who was electedhave owned at least 3% of our outstanding capital stock for at least three years to submit director nominees for up to 20% of the Board for inclusion in November 2013, was recommended forour Proxy Statement if the Committee’s consideration by a third party search firm, the directorsshareholder(s) and the CEO.
nominee(s) meet the requirements in ourShareholder-Recommended Director CandidatesBy-laws.
The Committee will consider director candidates recommended by shareholders in accordance with the criteria for director
selection described under “Director Criteria, Qualifications and Experience.” Shareholders recommending candidates for consideration should send their recommendations to the attention of Margaret M. Foran, Chief Governance Officer and Corporate Secretary, at 751 Broad Street, Newark, NJ 07102. Shareholders who wish to nominate directors for inclusion in our Proxy Statement or directly at an Annual Meeting in accordance with the procedures in ourBy-laws should follow the instructions under “Submission of Shareholder Proposals”Proposals and Director Nominations” in this Proxy Statement.
Shareholders who wish to recommend candidates for consideration should send their recommendations to the attention of Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, at 751 Broad Street, Newark, NJ 07102. The Committee will consider director candidates recommended by shareholders in accordance with the criteria for director selection described under “Director Criteria, Qualifications, Experience and Tenure.”
Director Attendance
During 2013,2016, the Board of Directors held 1011 meetings. AllTogether, the directors attended 100%99% of the combined total meetings of the full Board and the committees on which they served in 2016, and no director attended less than 83% of the combined total meetings of the full Board and the committees on which he or she served in 2013 (held during the period they served).2016.
Director Independence
The current Board consists of 13 directors, two of whom are currently employed by the Company (Messrs. Strangfeld and Grier). The Board conducted an annual review and affirmatively determined that all of thenon-employee directors (Ms. Horner, Ms.(Mss. Hund-Mejean, Pianalto and Ms. Poon, and Messrs. Baltimore, Bethune, Caperton, Casellas, Cullen, Krapek, Lighte, Paz, Scovanner and Unruh)Todman) are “independent” as that term is defined in the listing standards of the NYSE and in Prudential Financial’s Corporate Governance Principles.Principles and Practices. In addition, the Board previously determined that Mr. Gray was anBethune and Ms. Horner, who did not stand forre-election at our 2016 Annual Meeting, were “independent” director.directors.
Independent Director Meetings
The independent directors generally meet in an executive session at both the beginning and the end of each regularly scheduled Board meeting, with the Lead Independent Director serving as Chair.
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Board Leadership
Currently, our Board leadership structure consists of a Lead Independent Director, a Chairman (who is also our CEO), a Lead Independent Director, and strong committee chairs. The Board believes that our structure provides independent Board leadership and engagement while providing the benefit of having our CEO, the individual with primary responsibility for managing the Company’sday-to-day operations, chair regular Board meetings as key business and strategic issues are discussed. At this time, the Board believes that the Company is best served by having the same individual as both Chairman of the Board and CEO, but considers the continued appropriateness of this structure at least annually.
In 2016, independent directors and our Chief Governance Officer engaged with shareholders, who held a majority of our shares, on their thoughts on our Board leadership structure. Our Lead Independent Director also met with certain of our shareholders in 2016. The discussions and feedback from these meetings has been given to the Board and will be considered during the annual review of the appropriateness of the Board leadership structure.
Under our Corporate Governance Principles and Practices, the independent directors annually elect an independent director to serve as Lead Independent Director for a term of at least one year, but for no more than three years. Mr. Krapek has served as our Lead Independent Director since May 2014. A new Lead Independent Director will be elected by the independent directors immediately after the 2017 Annual Meeting. The responsibilities and authority of the Lead Independent Director include:
COMPREHENSIVE STEPS TO ACHIEVE BOARD EFFECTIVENESS The Board is committed to a rigorous self evaluation process. Through evaluation, directors review the Board’s performance, including areas where the Board feels it functions effectively, and importantly, areas where the Board believes it can improve.1. Process is Initiated Corporate Governance and Business Ethics Committee Chair Initiates annual board evaluation process with the help of an independent third party consultant and our chief governance officer. 2. Evaluation The evaluation solicits each director’s opinion regarding the board’s effectiveness in monitoring and reviewing topics such as: The strategic planning process The annual budget process and financial performance Management compensation, performance and ethics Risk strategy and management Succession planning 3. Feedback Analysis Directors are encouraged to speak to the independent third party with specific feedback on individual directors, committees or the Board in general. The independent third party synthesizes the results and comments and may have oral interviews with directors regarding the full Board or any committee on which the director serves. 4. Presentation of Findings At the January board meeting, the Corporate Governance and Business Ethics chair, in conjunction with the independent, third party consultant, presents the findings to each Committee, followed by review of the full Board 5. Follow Up Results requiring additional consideration are addressed at subsequent board and committee meetings and reported back to full Board, where appropriate. The Board followed-up on its most recent self-evaluation by reviewing materials about the competitive and regulatory environment as well as discussing talent at almost every scheduled Board meeting. For 2017, the Board has asked for more information in the following areas: Technology and Future Products Product Development Management Succession Planning Executive Compensation
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Letter from the Lead Independent Director
Under Prudential’s Corporate Governance Principles, the independent directors of the Board annually elect a Lead Independent Director for a term of at least one year, but for no more than three years. I am honored that my fellow independent directors elected me to serve for the last three years. My term ends in May 2017, effective at our Annual Meeting. Our directors share my commitment to strong, independent leadership, Board effectiveness and oversight. In this context, I would like to share insights into our philosophy and practices on several important issues.
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Talent Management Talent management and successionStrategic Oversight
As part of the annual strategic planning are critical to excellent performance and achieving shareholder value. Recognizing that talent of all employees is key toprocess, our Board reviews the Company’s success,strategy, opportunities, challenges, capabilities and leadership to ensure the Company is well-positioned to continue creating value for shareholders. My fellow independent directors and I are committed to, and value, our dialogue with management regarding the Company’s disciplined risk assessment, capital allocation strategy and long-term plans for growth.
Board actively engages in discussions with senior management about key talent indicators for the overall workforce, including climate, diversity, recruiting and development programs.Governance
Risk Oversight WhileEffective governance means ongoing and thoughtful evaluation of our governance structure, and constructive shareholder engagement on emerging governance issues. In 2016, our engagement efforts, which included my personal involvement and that of other directors, reached investors holding the majority of our outstanding shares.
Our recent shareholder engagement dialogue about governance has focused on, among other things, Board is proud of Prudential’s business growth overcomposition, refreshment and our Board’s leadership structure. Understanding the past three years, we are cognizantimportance of the complex regulatory environment under whichBoard’s responsibility to provide effective oversight, we operate, includingstrive to maintain an appropriate balance of tenure, diversity, skills, and experience on the Board. Since 2015, four new independent directors have joined our designations as a SIFI and a GSII. This environment challenges theBoard to replace long-tenured directors. In addition, directors from diverse backgrounds comprisetwo-thirds of our Board.
Board Evaluation
We are committed to provide transparency to our robust Board and managementcommittee evaluation process, which is led by an independent third-party consultant. Our proxy statement not only describes each step of the evaluation process, but also provides specific areas where our directors seek improvement.
Governance Policies and Practices
We continue to be vigilant in identifying and assessing risk, and balancing this with the Company’s long-term business objectives.
Engagement and Outreach Our proactive shareholder engagement program provides the Board and management with knowledge about the issuesmaintain our focus on strong governance practices that we believe are important to our shareholders. We consider your opinions seriouslyshareholders and we use your feedbackprotect the long-term vitality of the Company. Our accountability to informyou is indicative in our governancepolicies such as: proxy access, a strong Lead Independent Director, the right of shareholders to call a special meeting, majority vote, annual election of directors, and executive compensation policies. This is reflected in the changes we made toa robust clawback policy.
My board colleague, Gilbert Casellas, chairman of our executive compensation program for 2014.
Sustainability The Board’s commitment to sustainability is evident in the Charter of the Corporate Governance and Business Ethics Committee, which includes oversight of environmental, social and governance (“ESG”) related issues, and ESG skills and expertise are considered a core competency for our Board members. Our annual Sustainability Report articulates, measures and reports our environmental, social and governance activities. In 2013, our pledge to sustainability resultedI address these topics in Prudential receivingtwo short videos. You can access the prestigious New Jersey Governor’s Environmental Excellence Award invideos from the Healthy and Sustainable Businesses category.
To stay competitive in a business and regulatory environment that is undergoing historic changes, the Board continually evaluates and adjusts our governance and oversight processes. The combined skillsCorporate Governance section of our directors create a multi-faceted Boardwebsite at www.prudential.com/directorvideos. We see these videos as an important component of our ongoing efforts to share information with shareholders.
Prudential’s founder, John Dryden, stated that is dedicated to serving the best interests“justification of the Company. I am proud to work side-by-side withcompany’s existence is its advancement of the efforts of its policy holders and their families for better economic and social condition.” More than 140 years after Mr. Dryden’s proclamation, my fellow directors and I are proud to carry on this purpose on your behalf and look forward to continuing to serve you as an independent director.
We remain focused on the needs of our clients, committed to prudent risk management, disciplined about talent management, and determined to build on our leading competitive position. Our people and culture have positioned us to meet these objectives, and we have never been more confident in our ability to create long-term value for our shareholders.
On behalf of the entire Board, thank you for your support and vote of confidence.
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Karl J. Krapek Lead Independent Director |
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The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. At least annually, the Board reviews strategic risks and opportunities facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. In general, the committees oversee the following risks:
Audit Committee:risks related to financial controls, legal, regulatory and compliance issues, and the overall risk management governance structure and risk management function;
Finance Committee:risks involving the capital structure of the enterprise, including borrowing, liquidity, allocation of capital, major capital transactions and expenditures, funding of benefit plans, statutory insurance reserves and policyholder dividends, and the strength of the finance function;
Investment Committee:investment risk, and the strength of the investment function;
Compensation Committee:the design and operation of the Company’s compensation programs so that they do not encourage unnecessary or excessive risk-taking; and
Corporate Governance and Business Ethics Committee:the Company’s political contributions, lobbying expenses and overall political strategy, as well as the Company’s environmental, sustainability and corporate social responsibility to minimize reputational risk and focus on future sustainability.sustainability;
In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, committees hold joint meetings when appropriate and address certain issues at the full Board level.
During 2016, the full Board received a report from the Chief Risk Officer on the important strategic issues and risks facing the Company. In addition, the Board and committees review the performance and functioning of the Company’s overall risk management functionfunction.
The Risk Committee is comprised of the chairs of each of the other Board committees. The principal activities of the Risk Committee are to: oversee the Company’s assessment and management’s establishmentreporting of appropriate systemsmaterial risks by reviewing the metrics used by management to quantify risk, applicable risk limit structures and risk mitigation strategies; review the Company’s processes and procedures for managing risk (including brandassessment and reputational risk), credit/counterparty risk marketmanagement, including the related assumptions used across the Company’s businesses and material risk (including interest ratetypes; and asset/liability matching risk), insurance risk, product risk, operational risk, legal and regulatory/compliance risk, liquidity and capital risk,receive reports from management on material and emerging risk/event risk.
During 2013, the full Board received reports on the most important strategic issues and risks facing the Company. The
Board and committees also received reports fromrisk topics that are reviewed by the Company’s Chief Risk Officer and other seniorinternal management regarding compliance with applicable risk-related policies, procedures and limits.committees.
The Company, under the Board’s oversight, is organized to promote a strong risk awareness and management culture. The Chief Risk Officer sits on many management committees and heads an independent enterprise risk management department; the General Counsel and Chief Compliance Officer also sit on key management committees and the functions they oversee operate independently of the businessbusinesses to separate management and oversight. Employee appraisals evaluate employees with respect to risk and ethics.
We monitor the risks associated with our executive compensation program and individual compensation decisions on an ongoing basis. Each year since 2009, management has undertakenundertakes a review of the Company’s various compensation programs to assess the risks arising from our compensation policies and practices. Management has presentedpresents these risk assessments to the Compensation Committee. The risk assessments have included a review of the primary design features of the Company’s compensation plans, and the process to determine compensation pools and awards for employees and analyzedan analysis of how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s compensation plans allow for discretionary negative adjustments to the ultimate outcomes, which serves to mitigate risk-taking.
Moreover, senior management is subject to a share retention policy, and historically a large percentage of senior management compensation has been paid in the form of long-term equity awards. In addition, senior management compensation is paid over a multiple-year cycle, a compensation structure that is intended to align incentives with appropriate risk-taking. The Company’s general risk management controls also serve to preclude decision-makers from taking excessive risk to earn the incentives provided under our compensation plans. The Compensation Committee agreed with the conclusion that the identified risks were within our ability to effectively monitor and manage, and that our compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company.
In 2013, the Compensation Committee again received an updated risk assessment of our compensation program to supplement and expand on the studies conducted each year since 2009.
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Succession Planning
The Board is actively engaged and involved in talent management. The Board reviews the Company’s “people strategy” in support of its business strategy at least annually.annually and frequently discusses talent issues at its meetings. This includes a detailed discussion of the Company’sCompany���s global leadership bench and succession plans with a focus on key positions at the senior officer level.
In addition, the committees of the Board regularly discuss the talent pipeline for specific critical roles. High potential leaders are given exposure and visibility to Board members through formal presentations and informal events. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs.
Shareholders and other interested parties may communicate with any of the independent directors, including Committee Chairs and the Lead Independent Director, by using the following address:
Prudential Financial, Inc.
Board of Directors
c/o Margaret M. Foran, Chief Governance Officer,
Senior Vice President and Corporate Secretary
751 Broad Street
Newark, NJ 07102
Email: independentdirectors@ prudential.com
Feedback on Executive Compensation:You can also provide feedback on executive compensation at the following websitewebsite: www.prudential.com/executivecomp.
The Chief Governance Officer and Corporate Secretary of the Company reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Corporate Chief Ethics Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain tonon-financial matters will be forwarded promptly. Certain itemsItems that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitation or advertisements; product-related inquiries; junk mail or mass mailings; resumes or otherjob-related inquiries; spam and overly hostile, threatening, potentially illegal or similarly unsuitable communications.
SHAREHOLDER ENGAGEMENT
In 2013,This year, we continued our philosophypractice of engagement, communication, and transparency in a variety of ways, including the following:
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Committees of the Board of Directors
The Board has established various committees to assist in discharging its duties, including: Audit, Compensation, Corporate Governance and Business Ethics, Executive, Finance, Investment and Investment.Risk. The primary responsibilities of each of the committees are set forth below, together with their current membership and the number of meetings. The committeemeetings held in 2016. Committee charters can be found on our website at www.prudential.com/governance. Each member of the Audit, Compensation, and Corporate Governance and Business Ethics Committees has been determined by the Board to be independent for purposes of the NYSE Corporate Governance listing standards.
Audit Committee
The In addition, directors who serve on the Audit Committee provides oversight of the Company’s accounting and financial reporting and disclosure processes, the adequacy of the systems of disclosure and internal control established by management, and the audit ofCompensation Committee meet additional, heightened independence and qualification criteria applicable to directors serving on these committees under the Company’s financial statements. The Audit Committee overseesNYSE listing standards.
| Committees | Members & Meetings in 2016 | Description | ||
Audit Committee Meetings in 2016: 10 | Douglas Scovanner (Chair) Martina-Hund Mejean George Paz | The Audit Committee provides oversight of the Company’s accounting and financial reporting and disclosure processes, the adequacy of the systems of disclosure and internal control established by management, and the audit of the Company’s financial statements. The Audit Committee oversees risks related to financial controls and legal, regulatory and compliance matters, and oversees the overall risk management governance structure and risk management function. Among other things, the Audit Committee: (1) appoints the independent auditor and evaluates its independence and performance; (2) reviews the audit plans for and results of the independent audit and internal audits; and (3) reviews reports related to processes established by management to provide compliance with legal and regulatory requirements. The Board of Directors has determined that all of our Audit Committee members are financially literate and are audit committee financial experts as defined by the SEC. | ||
Compensation Committee Meetings in 2016: 7 | Karl J. Krapek (Chair) Thomas J. Baltimore Michael A. Todman | The Compensation Committee oversees the Company’s compensation and benefits policies and programs. For more information on the responsibilities and activities of the Compensation Committee, including the Committee’s processes for determining executive compensation, see the CD&A. | ||
Corporate Governance & Business Ethics Committee Meetings in 2016: 6 | Gilbert F. Casellas (Chair) Peter R. Lighte Sandra Pianalto | The Corporate Governance and Business Ethics Committee oversees the Board’s corporate governance procedures and practices, including the recommendations of individuals for the Board, making recommendations to the Board regarding director compensation and overseeing the Company’s ethics and conflict of interest policies, its political contributions and lobbying expenses policy, and its strategy and reputation regarding environmental stewardship and sustainability responsibility throughout the Company’s global businesses. | ||
Executive Committee Meetings in 2016: 0 | Karl J. Krapek (Chair) Thomas J. Baltimore Gilbert F. Casellas Christine A. Poon Douglas A. Scovanner John R. Strangfeld | The Executive Committee is authorized to exercise the corporate powers of the Company between meetings of the Board, except for those powers reserved to the Board by our By-laws or otherwise. | ||
Finance Committee Meetings in 2016: 7 | Christine A. Poon (Chair) James G. Cullen Sandra Pianalto Michael A. Todman | The Finance Committee oversees, takes actions, and approves policies with respect to capital, liquidity, borrowing levels, reserves, subsidiary structure and major capital expenditures. | ||
Investment Committee Meetings in 2016: 4 | Thomas J. Baltimore (Chair) James G. Cullen Peter R. Lighte Christine A. Poon | The Investment Committee oversees and takes actions with respect to the acquisition, management and disposition of invested assets; reviews the investment performance of the pension plan and funded employee benefit plans; and reviews investment risks and exposures, as well as the investment performance of products and accounts managed on behalf of third parties. | ||
Risk Committee Meetings in 2016: 7 | Karl J. Krapek (Chair) Thomas J. Baltimore Gilbert F. Casellas Christine A. Poon Douglas A. Scovanner | The Risk Committee oversees the governance of significant risks throughout the enterprise, including by coordinating the risk oversight functions of each Board committee and seeing that matters are appropriately elevated to the Board. |
In addition to the above Committee meetings, the Board held 11 meetings in 2016.
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risks related to financial controls and legal, regulatory and compliance matters, and oversees the overall risk management governance structure and risk management function. Among other things, the Audit Committee: (1) appoints the independent auditor and evaluates its independence and performance; (2) reviews the audit plans for and results of the independent audit and internal audits; and (3) reviews reports related to processes established by management to provide compliance with legal and regulatory requirements. The Board of Directors has determined that all of our Audit Committee members, Messrs. Unruh, Casellas and Scovanner and Ms. Hund-Mejean, are audit committee financial experts as defined by the SEC.
Compensation Committee
The Compensation Committee oversees the Company’s compensation and benefits policies and programs. For more information on the responsibilities and activities of the Compensation Committee, including the Committee’s processes for determining executive compensation, see the “Compensation Discussion and Analysis” section of this Proxy Statement.
Corporate Governance and Business Ethics Committee
The Corporate Governance and Business Ethics Committee oversees the Board’s corporate governance procedures and practices, including the recommendations of individuals for the Board, making recommendations to the Board regarding director compensation and overseeing the Company’s ethics and conflict of interest policies, its political contributions and lobbying expenses policy, and its strategy and reputation regarding environmental stewardship and sustainability responsibility throughout the Company’s global businesses.
Executive Committee
The Executive Committee is authorized to exercise the corporate powers of the Company between meetings of the Board, except for those powers reserved to the Board by our By-laws or otherwise.
Finance Committee
The Finance Committee oversees, takes actions, and approves policies with respect to capital, liquidity, borrowing levels, reserves, subsidiary structure and major capital expenditures.
Investment Committee
The Investment Committee oversees and takes actions with respect to the acquisition, management and disposition of invested assets; reviews the investment performance of the pension plan and funded employee benefit plans; and reviews investment risks and exposures, as well as the investment performance of products and accounts managed on behalf of third parties.
Certain Relationships and Related PersonParty Transactions
The Company has adopted a written Related Party Transaction Approval Policy that applies when:applies:
to any transaction or series of transactions in which the Company or a subsidiary is a participant;
when the amount involved exceeds $120,000; and
when a related party (a director or executive officer of the Company, any nominee for director, any shareholder owning an excess of 5% of the total equity of the Company and any immediate family member of any such person) has a direct or indirect material interest.
The policy is administered by the Corporate Governance and Business Ethics Committee. The Committee will consider relevant facts and circumstances in determining whether or not to approve or ratify such a transaction, and will approve or ratify only those transactions that are, in the Committee’s judgment, appropriate or desirable under the circumstances.
In the ordinary course of business, we may from time to time engage in transactions with other corporations or financial institutions whose officers or directors are also directors of Prudential Financial. In all cases, these transactions are conducted on anarm’s-length basis. In addition, from time to time executive officers and directors of Prudential Financial may engage in transactions in the ordinary course of business involving services we offer, such as insurance and investment services, on terms similar to those extended to employees of Prudential Financial and its subsidiaries and affiliates generally. The Corporate Governance and Business Ethics Committee has determined that certain types of transactions do not create or involve a direct or indirect material interest, including (i) any sales of financial services or products to a related party in the ordinary course of business on terms and conditions generally available in the market place (or at ordinary employee discounts, if applicable) and in accordance with applicable law and (ii) all business relationships between the Company and a 5% shareholder or a business affiliated with a director, director nominee or immediate family member of a director or director nominee made in the ordinary course of business on terms and conditions generally available in the market place and in accordance with applicable law.
Pursuant to our policy, the Corporate Governance and Business Ethics Committee determined that there was one reported transactionwere two transactions that qualified as a related party transaction during 2013. Mr.transactions since the beginning of 2016. The brother of Robert Falzon, becameour Executive Vice President and Chief Financial Officer, and an executive officer of the Company effective March 4, 2013. His brother, Michael Falzon, has been an employee of the Company since 1996. Michael Falzon, is currently a Vice President for Information Systems.Infrastructure Systems Development. In 2013,2016, the total compensation paid to Michael Falzon, including salary, bonus and the grant date value of long-term incentive awards, was less than $300,000. Hisapproximately $480,300. Theson-in-law of Barbara Koster, our Senior Vice President and Chief Information Officer, Joshua D. Howard, is an associate in Quantitative Management Associates, a subsidiary of the Company. In 2016, the total compensation paid to Mr. Howard, including salary and bonus, was approximately $141,500. In both cases the compensation is similar to the compensation of other employees holding equivalent positions. Neither individual is in the reporting chain of the executive officer.
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At Prudential, sustainability represents how the Company anticipates and manages future risks and opportunities to meet its long-term promises. Sustainability advocates have noted Prudential’s work in the field, especially the active involvement of the Board and senior leadership. Sustainability highlights in 2016 include:
ENVIRONMENT AND SUSTAINABILITY
The Board of Directors formalized its oversight of Prudential’s commitment toProviding the environment and sustainability in 2011. TheBoard’s Corporate Governance and Business Ethics Committee added oversightwith a formal report on the Company’s strategy and developments.
In 2013, the Company made significant progress in this area, including:
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Policy on Shareholder Rights Plan
We do not have a shareholder rights plan. The Board will obtain shareholder approval prior to adopting a future shareholder rights plan unless the Board, in the exercise of its fiduciary duties, determines that under the circumstances then existing, it would be in the best interests of the Company and our shareholders to adopt a rights plan without prior shareholder approval. If a rights plan is adopted by the Board without prior shareholder approval, the plan must provide that it will expire within one year of adoption unless ratified by shareholders.
Political Contributions and Lobbying Expenditure Oversight and Disclosure
The Corporate Governance and Business Ethics Committee reviews and approves an annual report on political activities, contributions and lobbying expenses. It monitors and evaluates the Company’s ongoing political strategy as it relates to overall public policy objectives for the next year and provides guidance to the Board. We provide on our website a description of our oversight process for political contributions and a summary of PAC contributions, including those from the federal PAC and two state PACs.contributions. We also include information on annual dues, assessments and contributions of $50,000$25,000 or more to trade associations andtax-exempt advocacy groups and a summary of Company policies and procedures for political activity. This disclosure is available at www.prudential.com/governance under the heading “Political Activity & Contributions.”
In 2016, Prudential received aCPA-Zicklin designation as Trendsetter. This honor represents atop-five ranking for political disclosure and accountability in the 2016CPA-Zicklin Trendsetters Designation Index of Corporate Political Disclosure and Accountability.
Environmental, Sustainability and Corporate Social Responsibility
The Corporate Governance and Business Ethics Committee has oversight of environmental issues and policies. In addition, three of our Board members sit on the Community ResourcesCorporate Social Responsibility Oversight Committee, which oversees
Prudential’s corporate social responsibility work.Committee. These directors inform the Company’s social responsibility efforts in investing for financial and social returns, strategic philanthropy, employee engagement and corporate community involvement and investing for social return.involvement.
CORPORATE COMMUNITY INITIATIVESRESPONSIBILITY
The Office of Corporate Social Responsibility extends the reach of Prudential’s business model to create pathways for all individuals and families to achieve financial and social mobility.
In 2016, Prudential invested:
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$237 million in impact investments toGOOD GOVERNANCE PRACTICESnon-profits
A commitment and businesses that seek to strongcreate both a financial and sustainablesocial return. In 2016, the company reached the halfway mark to achieving its goal of having a $1 billion impact investment portfolio by 2020; and
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Prudential employees continued the Company’s long tradition of corporate community involvement. For these efforts, Prudential has once again been named to the Civic 50 list celebrating America’s most community-minded companies, an honor awarded by thenon-profit organization Points of Light.
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GOOD GOVERNANCE PRACTICES Board Strong Lead Independent Director including charter to guide oversight and independent leadership Majority Independent Directors – 10 of the 12 director nominees are independent Annual Election of Directors by majority votes cast in an uncontested election Shareholder Rights Proactive Adoption of Proxy Access Special Meeting Threshold of 10% No Poison Pill Director Stock Ownership Guidelines – within six years of joining the Board, each director is expected to own common stock or deferred stock units with a value equivalent to six times their annual retainer Annual Board Evaluation – overseen by independent third party every year Board Continuing Education – new director orientation and continuing education on critical topics and issues Compensation Annual Say on Pay Shareholder Vote Clawback Policy Prohibition of Derivatives Trading, and Hedging and Pledging of Our Securities
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Item 2–Ratification of the Appointment of the
Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers” or “PwC”) as the Company’s independent registered public accounting firm (independent auditor) for 2014.2017. We are not required to have the shareholders ratify the selection of PricewaterhouseCoopers as our independent auditor. We nonetheless are doing so because we believe it is a matter of good corporate practice.
If the shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers, but may nevertheless retain suchit as the Company’s independent auditor. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of Prudential Financial and its shareholders. Representatives of PricewaterhouseCoopers will be present at the Annual Meeting and will have the opportunity to make a statement and be available to respond to appropriate questions by shareholders.
Fees Paid To PricewaterhouseCoopersFEES PAID TO PRICEWATERHOUSECOOPERS LLP
The following is a summary and description of fees for services provided by PricewaterhouseCoopers in 20132016 and 2012.2015.
Worldwide Fees (In Millions)
| Service | 2013 | 2012 | 2016 | 2015 | ||||||||||||
| Audit(A) | $ | 45 | $ | 43 | $ | 51 | $ | 50 | ||||||||
| Audit-Related(B) | $ | 4 | $ | 4 | $ | 4 | $ | 4 | ||||||||
| Tax(C) | $ | 1 | $ | 2 | $ | 3 | $ | 2 | ||||||||
| All Other | — | — | — | — | ||||||||||||
| Total | $ | 50 | $ | 49 | $ | 58 | $ | 56 | ||||||||
| (A) | The aggregate fees for professional services rendered for the integrated audit of the consolidated financial statements of Prudential Financial and, as required, audits of various domestic and international subsidiaries, the issuance of comfort letters, agreed-upon procedures required by regulation, consents and assistance with review of documents filed with the SEC. |
| (B) | The aggregate fees for assurance and related services including internal control and financial compliance reports, agreed-upon procedures not required by regulation, and accounting consultation on new accounting standards, acquisitions and |
| (C) | The aggregate fees for services rendered by PricewaterhouseCoopers’ tax department for tax return preparation, tax advice related to mergers and acquisitions and other international, federal and state projects, and requests for rulings. In |
PricewaterhouseCoopers also provides services to domestic and international mutual funds and limited partnerships not consolidated by Prudential Financial, but which are managed by Prudential Financial. PricewaterhouseCoopers identified fees related to audit, audit-related, and tax services paid by these entities of $12M$14M in 20132016 and $12M$14M in 2012 and that these fees relate to audit and tax services.2015.
The Audit Committee has advised the Board of Directors that in its opinion the non-audit services rendered by PricewaterhouseCoopers during the most recent fiscal year are compatible with maintaining theirits independence.
PricewaterhouseCoopersPwC has been the Company’s independent auditor since 1996.2001.
A new Lead Audit Partner is designated at least every five years to provide a fresh perspective. Consistent with this practice, a new Lead Audit Partner was designated for 2012, in consultation with the Audit Committee.
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| Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm |
In determining whether to reappoint the independent auditor, the Audit Committee annually considers several factors including:
recent performance, including the extent and quality of PwC’s communications with the Audit Committee, Pre-Approval Policies and Proceduresthe results of a management survey of PwC’s overall performance;
In accordance with SEC rules, independent audit partners are subject to rotation requirements limiting their number of consecutive years of service to our Company to no more than five. In 2016, Prudential’s Audit Committee oversaw a rigorous process of selecting a new Lead Audit Partner with PwC. PwC provided a list of qualified potential lead audit partners. The candidates were interviewed and assessed based on their related experience and industry expertise. Interviews were conducted and the Chair met with and interviewed the final candidate. The new Lead Audit Partner selected was approved by the Audit Committee and will assume oversight of the external audit of Prudential Financial effective for the 2017 audit.
AUDIT COMMITTEEPRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has established a policy requiring itspre-approval of all audit and permissiblenon-audit services provided by the independent auditor. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the independent auditor’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and thenon-audit services that may not be performed; and sets forth thepre-approval requirements for all permitted services. The policy provides for the generalpre-approval of specific types of Audit, Audit-Related and Tax services and a limited fee estimate range for such services on an annual basis. The policy requires specificpre-approval of all other permitted services. The independent auditor is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with theirpre-approval and the fees for the services performed to date. The Audit Committee’s policy delegates to its ChairmanChair the authority to address requests forpre-approval of services with fees up to a maximum of $250,000 between Audit Committee meetings if the Chief Auditor deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee, and the ChairmanChair must report anypre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibility topre-approve permitted services of the independent auditor.
All Audit, Audit-Related, Tax and All Other services described above were approved by the Audit Committee before services were rendered.
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The boardBoard of directorsDirectors recommends that shareholders vote“FOR” ratification of the appointment of PricewaterhouseCoopers as the Company’s Independent Auditor for 2014.2017.
ENHANCING COMMUNICATION THROUGH
AUDIT COMMITTEE REPORTING
In 2013, The Center for Audit Quality and a group of nationally recognized U.S. corporate governance and policy organizations, jointly released a paper entitled “Enhancing the Audit Committee Report: A Call to Action,” which encouraged audit committees of public companies to proactively consider strengthening their public disclosures to more effectively convey the critical work of audit committees to investors and stakeholders. Prudential was featured as an example of a company exhibiting voluntary practices of strengthenedstrengthening audit committee disclosures.
| Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | | 27 | |||
| Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm |
Report of the Audit CommitteeREPORT OF THE AUDIT COMMITTEE
Four Threenon-management directors comprise the Audit Committee. The Committee operates under a written charter adopted by the Board. The Board has determined that each member of the Committee has no material relationship with the Company under the Board’s independence standards and that each is independent and financially literate under the listing standards of the NYSE and under the SEC’s standards relating to independence of audit committees.
In addition, the Board of Directors has determined that all of our Audit Committee members:members, Messrs. Unruh, CasellasPaz and Scovanner and Ms. Hund-Mejean, satisfy the financial expertise requirements of the NYSE and have the requisite experience to be designated an audit committee financial expert as that term is defined by rules of the SEC.
Management is responsible for the preparation, presentation and integrity of the financial statements of Prudential Financial and for maintaining appropriate accounting and financial reporting policies and practices, and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Prudential Financial’s independent registered public accounting firm (independent auditor), PricewaterhouseCoopers, is responsible for auditing the consolidated financial statements of Prudential Financial and expressing an opinion as to their conformity with generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting in accordance with the requirements of the Public Company Accounting Oversight Board (“PCAOB”).
In performing its oversight function, the Audit Committee reviewed and discussed the audited consolidated financial statements of Prudential Financial as of and for the year ended December 31, 20132016 and Management’s Annual Report on Internal Control Over Financial Reporting with
management and Prudential Financial’s independent auditor. The Audit Committee also discussed with Prudential Financial’s independent auditor the matters required to be discussed by the independent auditor with the Audit Committee under the rules adopted by the PCAOB.
The Audit Committee received from the independent auditor the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence, and has discussed with the independent auditor its independence.
The Audit Committee has discussed with, and received regular status reports from, Prudential Financial’s Chief Auditor and independent auditor on the overall scope and plans for their audits of Prudential Financial, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. The Audit Committee meets with the Chief Auditor and the independent auditor, with and without management present, to discuss the results of their respective audits, in addition to private meetings with the Chief Financial Officer, Chief Risk Officer, General Counsel, Chief Actuary and Chief Compliance Officer. In determining whether to reappoint PricewaterhouseCoopers as Prudential Financial’s independent auditor, the Audit Committee took into consideration a number of factors, including the length of time the firm has been engaged, the qualityfirm’s independence and objectivity, PwC’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the Audit Committee’s ongoing discussions with PricewaterhouseCoopersexpertise and an assessment of the professional qualifications and past performancecapability of the Lead Audit Partner, historical and PricewaterhouseCoopers.recent performance, including the extent and quality of PwC’s communications with the Audit Committee, and the results of a management survey of PwC’s overall performance, data related to audit quality and performance, including recent PCAOB inspection reports on the firm, and the appropriateness of PwC’s fees, both on an absolute basis and as compared with its peers.
In addition, the Audit Committee reviewed and amended its Charter and received reports as required by its policy for the receipt, retention and treatment of financial reporting concerns received from external and internal sources.
Based on the reports and discussions described in this report and subject to the limitations on the roles and responsibilities of the Audit Committee referred to above and in its Charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of Prudential Financial and Management’s Annual Report on Internal Control Over Financial Reporting be included in the Annual Report on Form10-K for the fiscal year ended December 31, 20132016 for filing with the SEC.
THE AUDIT COMMITTEE
JamesDouglas A. Unruh (Chairman)
Gilbert F. CasellasScovanner (Chair)
Martina Hund-Mejean
Douglas A. ScovannerGeorge Paz
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Item 3–Advisory Vote to Approve
Named Executive Officer Compensation
The Board is committed to excellence in governance and recognizes the interest our shareholders have in our executive compensation program. As a part of that commitment, and in accordance with SEC rules, our shareholders are being asked to approve ananon-binding advisory resolution on the compensation of theour named executive officers, as reported in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to endorse or not endorse our fiscal 20132016 executive compensation program and policies for theour named executive officers through the following resolution:
RESOLVED, that the shareholders of Prudential approve, on an advisory basis, the compensation of the Company’s named executive officers set forth in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in this Proxy Statement.
This vote is not intended to address any specific item of compensation, but rather our overall compensation policies and practices relating to theour named executive officers. Accordingly, your vote will not directly affect or otherwise limit any existing
compensation or award arrangement of any of theour named executive officers. Because your vote is advisory, it will not be binding upon the Board. The Board will, however, as it has done in prior years, take into account the outcome of the “Say on Pay” vote when considering future compensation arrangements.
The Board has adopted a policy providing for annual “Say on Pay” advisory votes. Accordingly, subject to the outcome of Item 4 and the decision of the Board, the next “Say on Pay” vote will occur in 2015.2018.
The Board of Directors recommends that shareholders vote“FOR” the advisory vote to approve our named executive officer compensation.
Item 4–Advisory Vote on the Frequency of
Future Advisory Votes to Approve Named
Executive Officer Compensation
As described in Item 3, our shareholders are being asked to vote to approve the compensation of our named executive officers, as reported in this Proxy Statement. In accordance with SEC rules, Item 4 gives you the opportunity to cast anon-binding vote on how often the Company should include an advisory vote on named executive officer compensation in its proxy materials for future annual or other meetings for which the Company must include executive compensation information. Shareholders may vote to have the advisory vote on executive compensation every year, every two years, or every three years. Shareholders may also abstain from voting.
The Board believes that these votes should occur every year so shareholders may annually express their views on our executive compensation program. The Company has been providing an advisory vote on executive compensation on an annual basis. The Board values the opportunity to receive feedback and will continue to consider the outcome of these votes in making executive compensation decisions.
The Board of Directors recommends that shareholders vote For“EVERY YEAR” on the frequency of future advisory votes to approve named executive officer compensation.
| Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | | 29 | |||
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Item 5–Shareholder Proposal Regarding an
Independent Board Chairman
In accordance with SEC rules, we have set forth below a shareholder proposal, along with the supporting statement of the shareholder proponent. The Company is not responsible for any inaccuracies it may contain. The shareholder proposal is required to be voted on at our Annual Meeting only if properly presented. As explained below, our Board unanimously recommends that you vote“AGAINST”the shareholder proposal.
John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California, 90278, beneficial owner of 80100 shares of Common Stock, is the proponent of the following shareholder proposal. The proponent has advised us that a representative will present the proposal and related supporting statement at the Annual Meeting.
Item 4 – Executives To Retain Significant StockIndependent Board Chairman
Resolved: Shareholders urgerequest our Board of Directors to adopt as policy, and amend our governing documents as necessary, to require the Chair of the Board of Directors, whenever possible, to be an independent member of the Board. The Board would have the discretion to phase in this policy for the next CEO transition, implemented so it does not violate any existing agreement. If the Board determines that a Chair who was independent when selected is no longer independent, the Board shall select a new Chair who satisfies the requirements of the policy within a reasonable amount of time. Compliance with this policy is waived if no independent director is available and willing to serve as Chair. This proposal requests that all the necessary steps be taken to accomplish the above.
Caterpillar reversed itself by naming an independent board chairman in October 2016 after Caterpillar opposed a shareholder proposal for an independent board chairman at its June 2016 annual meeting. Wells Fargo also reversed itself and named an independent board chairman in October 2016.
According to Institutional Shareholder Services 53% of the Standard & Poors 1,500 firms separate these 2 positions—“2015 Board Practices,” April 12, 2015. This proposal topic won 50%-plus support at 5 major U.S. companies in 2013 including 73%-support at Netflix.
It is the responsibility of the Board of Directors to protect shareholders’ long-term interests by providing independent oversight of management. By setting agendas, priorities and procedures, the Chairman is critical in shaping the work of the Board.
A board of directors is less likely to provide rigorous independent oversight of management if the Chairman is also the CEO, as is the case with our executive pay committee adoptCompany. Having a policy requiring senior executives to retainboard chairman who is independent of management is a significant percentage of shares acquired through equity pay programs until reaching normal retirement age and to reportpractice that will promote greater management accountability to shareholders regarding the policy before our Company’s next annual meeting. For the purposeand lead to a more objective evaluation of this policy, normal retirement age would be an age of at least 60 and determined by our executive pay committee. Shareholders recommend that the committee adopt a share retention percentage requirement of 50% of net after-tax shares.management.
This single unified policy shall prohibit hedging transactions for shares subject to this policy which are not sales but reduce the risk of lossAccording to the executive. Otherwise our directors would
be able to avoidMillstein Center for Corporate Governance and Performance (Yale School of Management), “The independent chair curbs conflicts of interest, promotes oversight of risk, manages the impactrelationship between the board and CEO, serves as a conduit for regular communication with shareowners, and is a logical next step in the development of this proposal. This policy shall supplement any other share ownership requirementsan independent board.”
A number of institutional investors said that have been established for senior executives, anda strong, objective board leader can best provide the necessary oversight of management. Thus, the California Public Employees’ Retirement System’s Global Principles of Accountable Corporate Governance recommends that a company’s board should be implemented so as not to violate our Company’s existing contractual obligations or the terms of any pay or benefit plan currently in effect.
Requiring senior executives to hold a significant portion of stock obtained through executive pay plans would focus our executives on our company’s long-term success. A Conference Board Task Force report stated that hold-to-retirement requirements give executives “an ever-growing incentive to focus on long-term stock price performance.”
This proposal should also be more favorably evaluated due to our Company’s clearly improvable environmental, social and corporate governance performance as reported in 2013:
GMI Ratings,chaired by an independent investment research firm, rated our company D for executive pay with $33 million for John Strangfeld and shareholders faced a potential 13% dilution. Unvested equity pay would not lapse upon CEO termination. Our company could give long-term incentive paydirector, as does the Council of Institutional Investors. An independent director serving as chairman can help ensure the functioning of an effective board.
Please vote to our CEOenhance shareholder value: Independent Board Chairman—Proposal 5
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| Item Independent Board Chairman |
for below-median performance. Prudential had not linked environmental or social performance to its incentive pay policies. There was a 23% vote against our executive pay in 2013.
GMI rated our board D. Executive Mark Grier (paid $13 million) was on our board in addition to our CEO. Director Karl Krapek was negatively flagged by GMI for his involvement with the Visteon Corporation bankruptcy. James Cullen, our Lead Director, was overcommitted with seats on a total of 4 company boards. All the directors on our executive pay committee were over age 70. Not one member of our audit committee had substantial industry knowledge and not one independent director had expertise in risk management.
Prudential had not yet implemented OSHAS 18001 as its occupational health and safety management system, nor did it disclose its workplace safety record in its annual report. Prudential was rated as having Very Aggressive Accounting & Governance Risk—higher than 99% of companies. Prudential also had higher shareholder class action litigation risk than 98% of all rated companies.
Returning to the core topic of this proposal from the context of our clearly improvable corporate performance, please vote to protect shareholder value: Executives to Retain Significant Stock – Item 4
Board of Directors’ Statement in Opposition to the Proposal
Your Board recommends a vote against this proposal because it believes that it is in the best interest of our shareholders for the Board to have the flexibility to determine the best person to serve as Board Chair, whether that person is an independent director or the CEO.
Every year, the Governance Committee reviews and makes a recommendation on the appropriate governance framework for Board leadership. The Committee takes into consideration governance best practices, the facts and circumstances of our Board and feedback that we receive from our shareholders. Specifically, our Board proactively asks for feedback from our shareholders and regularly meets with our shareholders in various settings. In 2016, independent directors, as well as the Company’s Chief Governance Officer, engaged with many investors on the issue of our Board leadership structure, among other things, and have presented their feedback to the Board as part of its decision-making process on the appropriate Board leadership structure going forward.
The Governance Committee has most recently determined that Board leadership is provided through the combination of a unified Chair and CEO, a clearly defined and significant Lead Independent Director role, active and strong committee chairs, and independent-minded, skilled, engaged, diverse and committed directors.
Our Board believes that its current structure and governance allows it to provide effective oversight of Directors has carefully consideredmanagement. Specifically, we have a strong Lead Independent Director with significant responsibilities that are described in detail in this proposal. While we agree that senior executives should own a significant amountProxy Statement, including approval of company stockall Board agendas and information sent to align their interests with those of our shareholders, the Board, believes the proposal is unnecessary. Our current stock ownership guidelines, stock retention requirements and prohibition on derivative trading, hedging and pledging already accomplish the goalshareholder engagement, oversight of the proposal. In addition,annual Board evaluation process by an independent third party, Board refreshment and succession planning, and guiding the anti-diversification strategy of the proposal would not be considered prudent investment advice for any investors including our senior executives.
Stock Ownership Guidelines
Consistent with our belief in the value and importance oflong-term retention of equity compensation, we have stock
ownership guidelines that encourage our executives to build their ownership position over time. The ownership guidelines range from two times a senior vice president’s salary, to three times a vice chairman and executive vice president’s salary and five times the CEO’s salary. All of our current NEOs, with the exception of Mr. Falzon, who was promoted to CFO and Executive Vice President in March 2013, meet and will exceed individual stock ownership levels. John Strangfeld holds 21 times and Mark Grier holds 20 times their respective base salaries.
Stock Retention Requirements
Board’s overall governance processes. We also have stock retention requirements for our executive officers that require themrefer you to retain 50% of net shares (after payment of the exercise price and taxes) acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. The executive officerLead Independent Director’s letter which is required to hold these shares until the later of one year following the date of acquisition (even ifcontained in this one-year holding period extends beyond termination of employment) or the date the executive satisfies our stock ownership guidelines.
Prohibition of Derivative Trading and Hedging and Pledging
In addition, we prohibit all employees, including the NEOs,Proxy Statement, as well as the Lead Independent Director’s video and Lead Independent Director Charter at www.prudential.com/governance. Mr. Krapek’s skills, experience, commitment and the time he devotes to serve his role all make him well qualified to serve as our Lead Independent Director.
Our independent directors meet regularly in executive sessions, at the beginning and end of each Board members, from engaging in any hedging transactionsmeeting. These are chaired by our Lead Independent Director with respectno member of management present. Independent directors use these executive sessions to any equity securitiesdiscuss matters of concern, as well as evaluations of the Company. We also prohibit our Section 16 officersCEO and senior management, management and Board members from pledging or usingsuccessions, matters to be included on Board agendas, and additional information the Company’s securitiesBoard would like management to provide to them, as collateral to secure personal loans orwell as other obligations, which includes holding shares of common stock in a margin account.relevant matters.
The Chairs and all members of the Board committees are strong, independent directors. These Chairs shape the agenda and information presented to their committees. Oversight of critical issues within these committees is owned by the independent directors.
All directors have full access to all members of management and all employees on a confidential basis.
The proposed policy would unduly impair the Board’s flexibility to annually elect the individual it deems best suited to serve as Board Chair. Shareholders of Prudential are best served when the Board has the flexibility to elect the individual it deems best suited to serve as Board Chair at any particular time, depending on the circumstances. Our Board believes that contrary toa clearly defined and significant Lead Independent Director role, independent and strong committee chairs, experienced, diverse and committed directors, and frequent executive sessions provide a framework for effective direction and oversight by the proposal, our current executive compensation programs coupled with our policies on stock ownership, stock retention and our prohibition on derivatives trading and hedging and pledging our securities, effectively balance the goals of providing executive officers with a focus on long-term stockholder value, creating meaningful retention incentives, permitting for recruitment of executive talent and allowing our executives to prudently manage their personal financial affairs.Board.
Therefore, your board recommends that you voteTHEREFORE, YOUR BOARD RECOMMENDS THAT YOU VOTE“AGAINST” this proposal.THIS PROPOSAL.
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BENEFICIAL OWNERSHIPVoting Securities and Principal Holders
Beneficial Ownership
The following table shows all entities that are the beneficial owners of more than 5% of any class of the Company’s voting securities:Common Stock:
| Name and Address of Beneficial Owner | Amount and Nature | Percent of Class | ||||||||
BlackRock, Inc.
| (1) | |||||||||
| (2) | |||||||||
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| (1) | Based on information as of December 31, |
| (2) |
To our knowledge, except as noted above, no person or entity is the beneficial owner of more than 5% of our Common Stock or more than 5% of the voting power of the combined Common Stock and Class B Stock.
The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 14, 2014,10, 2017, by:
each Directordirector and Named Executive Officer;NEO; and
all Directorsdirectors and Executive Officersexecutive officers of the Company as a group.
NoneVoting Securities and Principal Holders
The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 10, 2017, by:
| Name of Beneficial Owner | Common Stock | Number of shares Subject to Exercisable Options | Total Number of Shares Beneficially Owned(1) | Director Deferred Stock Units / Additional Underlying Units(2),(3),(4), | Total Shares Beneficially Owned Plus Underlying Units | Common Stock | Number of shares Subject to Exercisable Options | Total Number of Shares Beneficially Owned1 | Director Deferred Stock Units2,3,4 | Total Shares Beneficially Owned Plus Underlying Units | ||||||||||||||||||||||||||||||
| Thomas J. Baltimore, Jr. | 250 | 250 | 23,971 | 24,221 | 250 | 250 | 37,710 | 37,960 | ||||||||||||||||||||||||||||||||
| Gordon M. Bethune | 13,935 | 13,935 | 1,831 | 15,766 | ||||||||||||||||||||||||||||||||||||
| Gaston Caperton | 8,648 | 8,648 | 13,892 | 22,540 | ||||||||||||||||||||||||||||||||||||
| Gilbert F. Casellas | 500 | 500 | 27,245 | 27,745 | 500 | 500 | 29,744 | 30,244 | ||||||||||||||||||||||||||||||||
| James G. Cullen | 2,033 | 2,033 | 40,206 | 42,239 | 2,033 | 2,033 | 43,896 | 45,929 | ||||||||||||||||||||||||||||||||
| Constance J. Horner | 6,720 | 6,720 | 4,287 | 11,007 | ||||||||||||||||||||||||||||||||||||
| Martina Hund-Mejean | 128 | 128 | 8,923 | 9,051 | 128 | 128 | 15,505 | 15,633 | ||||||||||||||||||||||||||||||||
| Karl J. Krapek | 1,007 | 1,007 | 39,883 | 40,890 | 1,007 | 1,007 | 44,599 | 45,606 | ||||||||||||||||||||||||||||||||
| Peter R. Lighte | 80 | 80 | 4,180 | 4,260 | ||||||||||||||||||||||||||||||||||||
| George Paz | 500 | 500 | 4,177 | 4,677 | ||||||||||||||||||||||||||||||||||||
| Sandra Pianalto | 200 | 200 | 3,765 | 3,965 | ||||||||||||||||||||||||||||||||||||
| Christine A. Poon | 6,125 | 6,125 | 12,289 | 18,414 | 11,583 | 11,583 | 13,411 | 24,994 | ||||||||||||||||||||||||||||||||
| Douglas A. Scovanner | 4,600 | 4,600 | 1,611 | 6,211 | 12,000 | 12,000 | 11,559 | 23,559 | ||||||||||||||||||||||||||||||||
| James A. Unruh | 27,814 | 27,814 | 7,534 | 35,348 | ||||||||||||||||||||||||||||||||||||
| Michael A. Todman | 450 | 450 | 4,180 | 4,630 | ||||||||||||||||||||||||||||||||||||
| John R. Strangfeld | 321,568 | (5) | 964,720 | 1,286,288 | 440,299 | 1,726,587 | 287,821 | 814,369 | 1,102,190 | 328,995 | 1,431,185 | |||||||||||||||||||||||||||||
| Mark B. Grier | 271,147 | 566,671 | 837,818 | 326,177 | 1,163,995 | 364,887 | 334,973 | 699,860 | 231,322 | 931,182 | ||||||||||||||||||||||||||||||
| Robert M. Falzon | 21,745 | 0 | 44,675 | 83,254 | 104,999 | |||||||||||||||||||||||||||||||||||
| Richard J. Carbone | 4,715 | 119,442 | 124,157 | 70,502 | 194,659 | |||||||||||||||||||||||||||||||||||
| Edward P. Baird | 73,238 | 379,897 | 453,135 | 165,568 | 618,703 | |||||||||||||||||||||||||||||||||||
| Robert Falzon | 44,987 | 34,434 | 79,421 | 112,154 | 191,575 | |||||||||||||||||||||||||||||||||||
| Charles F. Lowrey | 51,365 | 368,773 | 420,138 | 206,676 | 626,814 | 46,358 | 325,337 | 371,695 | 142,313 | 514,008 | ||||||||||||||||||||||||||||||
| All directors and executive officers as a group (23 persons) | 970,175 | 2,899,713 | 3,869,888 | 1,803,803 | 5,673,691 | |||||||||||||||||||||||||||||||||||
| Stephen Pelletier | 7,051 | 0 | 7,051 | 166,861 | 173,912 | |||||||||||||||||||||||||||||||||||
| All directors and executive officers as a group (22 persons) | 973,268 | 1,865,564 | 2,838,832 | 1,582,788 | 4,421,620 | |||||||||||||||||||||||||||||||||||
| (1) | Individual directors and executive officers as well as all directors and executive officers as a group beneficially own less than 1% of the shares of Common Stock outstanding, as of March |
| (2) | Includes the following number of shares or share equivalents in deferred units through the Deferred Compensation Plan for Non-Employee Directors and the Prudential Insurance Company of America Deferred Compensation Plan, as to which no voting or investment power exists: Mr. Baltimore, |
| (3) | Includes the following shares representing the target number of shares to be received upon the attainment of ROE |
| (4) | Includes the following unvested stock options: Mr. Strangfeld, |
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACTCompliance With Section 16(a) of the Exchange Act
Each Director,director, executive officer of the Company and greater than 10% beneficial owner of Common Stock is required to report to the SEC, by a specified date, his or her transactions involving our Common Stock. Based solely on a review of the copies of reports furnished to the Company and written representations that no other reports were required to be filed, the Company believes that during 2013 our Directors, executive officers and greater than 10% beneficial owners of Common Stock timely filed2016 all reports required by Section 16(a), except a report for Nicholas Silitch, an officer, reporting the off-cycle vesting of previously awarded Restricted Stock Units was not were timely filed due to an administrative oversight.filed.
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The Corporate Governance and Business Ethics Committee reviews the compensation of the ournon-employee Directors directors periodically (generally every three years) and recommends changes to the Board, when it deems appropriate. In 2013, the Committee engaged an independent compensation consultant, James F. Reda & Associates, LLC, to review the existing Director compensation program as the program had last been evaluated in 2011. As a result of this review, the Committee recommended to the Board, and the full Board approved, a new compensation program for non-employee Directors which became effective on January 1, 2014. This program is intended to bring the compensation of the non-employee Directors in line with market practice and it is expected to remain in place for approximately three years.
The following table describes the components of thenon-employee Director directors’ compensation program in effect during 2013 and the new compensation program that became effective January 1, 2014:for 2016:
| *Compensation Element | 2013 Compensation Program | 2014 Compensation Program | ||
| Annual Retainer | $120,000, which may be deferred, at the Director’s option | $150,000, which may be deferred, at the Director’s option | ||
| Annual Equity Retainer | $120,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting) | $150,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting) | ||
| Board and Committee Fees | None | None | ||
| Chair Fee | $25,000 for the Audit Committee $20,000 for the Compensation Committee $15,000 for all other committees* | $35,000 for the Audit Committee $30,000 for the Compensation Committee $20,000 for all other committees* | ||
| Lead Director Fee | $50,000 | $50,000 | ||
| Meeting Fee for members of the Company’s Community Resources Oversight Committee** | $1,250 per meeting | $1,250 per meeting | ||
| New Director Equity Award (one-time grant) | $120,000 in restricted stock units that vest after one year | $150,000 in restricted stock units that vest after one year | ||
| Stock Ownership Guidelines | Ownership of Common Stock or deferred stock units that has a value equivalent to six times the annual cash retainer within six years of joining the Board*** | Ownership of Common Stock or deferred stock units that has a value equivalent to six times the annual cash retainer within six years of joining the Board*** |
| Compensation Element | Director Compensation Program | |
| Annual Cash Retainer | $150,000, which may be deferred, at the director’s option | |
| Annual Equity Retainer | $150,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting) | |
| Board and Committee Fees | None | |
| Chair Fee | $35,000 for the Audit and Risk Committees $30,000 for the Compensation Committee $20,000 for all other committees* | |
| Lead Independent Director Fee | $50,000 | |
| Meeting Fee for members of the Company’s Community Resources Oversight Committee** | $1,250 per meeting | |
| New Director Equity Award(one-time grant) | $150,000 in restricted stock units that vest after one year | |
| Stock Ownership Guideline | Ownership of Common Stock or deferred stock units that have a value equivalent to six times the annual cash retainer to be satisfied within six years of joining the Board*** |
| * | Includes anynon-standing committee of the Board that may be established from time to time, but excluding the Executive Committee. |
| ** | This is a committee |
| *** | As of December 31, |
The Company maintains a Deferred Compensation Plan forNon-Employee Directors (the “Plan”). Prior to 2011, 50% of the annual Board and committee retainer was deferred in a notional account that replicates the performance of our Common Stock. Since 2011, 50% of the annual Board and committee retainer washas been awarded in restricted stock units that vest after one year (or if earlier, on the date of the next Annual Meeting). In addition, a Anon-employee Director director can elect to invest the cash portion of his or her retainer, fees and feesequity retainer upon vesting in accounts under the Plan that replicate investments in either shares of our Common Stock or the Fixed Rate Fund, which accrues interest in the same manner as funds invested in the Fixed Rate Fund offered under the Prudential Employee Savings Plan (“PESP”). Prior to 2011, the Plan required that distributions begin in the year a Director reaches the age of 70 1/2. Beginning in 2011, the Plan does not require distributions of fees earned after 2010 to commence when a Director reaches the age of 70 1/2. Instead, theThe Plan provides for distributions to commence upon termination of Board service or retirement or while a Directordirector remains on the Board.
Each Directordirector receives dividend equivalents on the
restricted stock units contained in his or her deferral account under the Plan, which are equal in value to dividends paid on our Common Stock. The dividend equivalents credited to the account are then reinvested in the form of additional share units.
Under the Directordirector compensation program, if anon-employee Director director satisfies the stock ownership guidelines,guideline, the restricted stock units granted as the annual equity retainer are payable upon vesting in cash or shares of our Common Stock (at the Director’sdirector’s option), and may be deferred beyond vesting at the Director’sdirector’s election. If a Directordirector does not satisfy the stock ownership guidelines,guideline, the restricted stock units are automatically deferred until termination of Board service.
DIRECTOR STOCK
OWNERSHIP GUIDELINESGUIDELINE
Each director is expected, within six years of joining the Board, to own Common Stock or deferred stock units that have a value equivalent to six times his or her annual cash retainer.
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| Compensation of Directors |
2013 DIRECTOR COMPENSATION2016 Director Compensation Table
| Fees Earned or Paid in | Fees Earned or Paid in | |||||||||||||||||||||||||||
| Name | Cash($) | Stock Awards($)(1) | Total($) | Cash($) | Stock Awards($)(1) | All Other Compensation($)(2) | Total($) | |||||||||||||||||||||
| Thomas J. Baltimore, Jr. | 135,000 | 120,000 | 255,000 | |||||||||||||||||||||||||
| Thomas J. Baltimore | 170,000 | 150,000 | 320,000 | |||||||||||||||||||||||||
| Gordon M. Bethune | 120,000 | 120,000 | 240,000 | 62,500 | 0 | 62,500 | ||||||||||||||||||||||
| Gaston Caperton | 123,750 | 120,000 | 243,750 | |||||||||||||||||||||||||
| Gilbert F. Casellas | 123,750 | 120,000 | 243,750 | 173,750 | 150,000 | 323,750 | ||||||||||||||||||||||
| James G. Cullen | 190,000 | 120,000 | 310,000 | 150,000 | 150,000 | 5,000 | 305,000 | |||||||||||||||||||||
| William H. Gray III(2) | 60,000 | 120,000 | 180,000 | |||||||||||||||||||||||||
| Constance J. Horner | 138,750 | 120,000 | 258,750 | |||||||||||||||||||||||||
| Constance J. Horner2 | 63,750 | 0 | 25,000 | 88,750 | ||||||||||||||||||||||||
| Martina Hund-Mejean | 120,000 | 120,000 | 240,000 | 150,000 | 150,000 | 5,000 | 305,000 | |||||||||||||||||||||
| Karl J. Krapek | 135,000 | 120,000 | 255,000 | 265,000 | 150,000 | 5,000 | 420,000 | |||||||||||||||||||||
| Peter R. Lighte3 | 125,000 | 300,000 | 5,000 | 430,000 | ||||||||||||||||||||||||
| George Paz3 | 125,000 | 300,000 | 5,000 | 430,000 | ||||||||||||||||||||||||
| Sandra Pianalto | 152,500 | 150,000 | 5,000 | 307,500 | ||||||||||||||||||||||||
| Christine A. Poon | 131,250 | 120,000 | 251,250 | 173,750 | 150,000 | 323,750 | ||||||||||||||||||||||
| Douglas A. Scovanner | 20,000 | 120,000 | 140,000 | 185,000 | 150,000 | 335,000 | ||||||||||||||||||||||
| James A. Unruh | 145,000 | 120,000 | 265,000 | |||||||||||||||||||||||||
| Michael A. Todman3 | 125,000 | 300,000 | 5,000 | 430,000 | ||||||||||||||||||||||||
| (1) | Represents amounts that are in units of our Common Stock. The amounts reported represent the aggregate grant date fair value of the restricted stock units granted during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Stock on the date of grant, which is then recognized, subject to market value changes, over the requisite service period of the award. As of December 31, |
| (2) |
| (3) | Messrs. Lighte, Paz, and |
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Compensation Discussion and Analysis
In this section, we describe the material components of our executive compensation program for our NEOs, whose compensation is set forth in the 20132016 Summary Compensation Table and other compensation tables contained in this Proxy Statement:
NAMED EXECUTIVE OFFICERS (NEOS)
John R. Strangfeld, our Chairman and Chief Executive Officer;
Robert M. Falzon, our Executive Vice President and Chief Financial Officer (effective March 4, 2013);
Richard J. Carbone, our former Executive Vice President and Chief Financial Officer (through March 4, 2013);
Mark B. Grier, our Vice Chairman;
Edward P. Baird,Charles F. Lowrey, our Executive Vice President and Chief Operating Officer, International Businesses; andCharles F. Lowrey,Stephen Pelletier, our Executive Vice President and Chief Operating Officer, U.S. Businesses.
We also provide an overview of our executive compensation philosophy and our executive compensation program. In addition, we explain how and why the Compensation Committee of our Board (the “Committee”) arrived at the specific compensation decisions involving the NEOs for fiscal year 2013.2016.
Executive Summary
Business Highlights
OUR BUSINESS HIGHLIGHTS
Our Business
We are a global financial services business with $1.107$1.264 trillion of assets under management as of December 31, 2013,2016, and with operations in the United States, Asia, Europe, and Latin America. Through our subsidiaries and affiliates, we offer a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. For more information about our business, please see “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form10-K filed with the SEC on February 27, 2014.17, 2017.
2013 Business Highlights2016 BUSINESS HIGHLIGHTS
While financial markets showed signs of recovery over the past 12 months,In 2016, global market conditions and uncertainty and challenges remaincontinued to be factors in the global economy and markets.markets in which we operate. Throughout this period, as a result of our steady leadership, we continued to seize opportunities and further differentiate ourselves from the competition. Our performance in 2013 was strong andWe view 2016 as a successful year for the Company. We continued to reflect our attention tofocus on capital deployment, disciplined risk management, a balanced business mix and effective execution of our individual business strategies.
Consequently, we were able to deliver strongsolid results for our shareholders in a challenging environment of continued low interest rates andfar-reaching regulation of the financial services industry.
We recordedachieved the following significant accomplishments in 2013:2016:
Our Financial Services Businesses reported after-tax adjusted operating income of $4.6 billion and posted earnings per share of Common Stock of $9.67, compared to $3.0 billion, and $6.40 per share, for 2012.
We reported net income of $4.37 billion, or $9.71 per share of Common Stock in 2016, compared to $5.64 billion, or $12.17 per share, in 2015, based on U.S. generally accepted accounting principles (“GAAP”). Net income for 2015 included a greater benefit from gains driven by market impacts including interest rates than in 2016. |
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We reportedafter-tax adjusted operating income of $4.11 billion, or $9.13 per share of Common Stock in 2016, compared to $4.65 billion or $10.04 per share, in 2015.(1) 2016 after-tax adjusted operating income was negatively affected by actuarial assumption updates, compared to a positive impact in 2015. |
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| (1) | Consolidated adjusted operating income (“AOI”) and operating return on average equity are non-GAAP measures of financial performance. Adjusted book value is a non-GAAP measure of financial position. We use earnings per share (“EPS”) based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. For a discussion of these measures and for reconciliations to the nearest comparable GAAP measures, see Appendix A to this Proxy Statement. |
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| Compensation Discussion and Analysis:Executive Summary |
Adjusted book value amounted to $78.95 per share of Common Stock as of December 31, 2016, compared to $73.59 per share as ofyear-end 2015.(1) |
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Based on U.S. generally accepted accounting principles, our Financial Services Businesses reported a net loss of $713 million, or $1.55 per share of Common Stock, for 2013, compared to net income of $479 million, or $1.05 per share, in 2012.
We reported book value for our Financial Services Businesses, excluding accumulated other comprehensive income and the impact of foreign currency exchange rate remeasurement on net income or loss, of $59.99 per share of Common Stock as of December 31, 2013, compared to $58.08 as ofyear-end 2012. Based on U.S. generally accepted accounting principles as of December 31, 2013, we reported book value for our Financial Services Businesses of $72.30 per share of Common Stock, compared to $79.04 per share as of year-end 2012.
We reported operating return on average equity of 12% for 2016, compared to 14.5% for 2015 and to the long term target of 13% to 14% we had set in 2011.(1) Our 2016 return on equity reflects solid core performance from our businesses, partly offset by the impact of a number of inherently variable and episodic items including our annual actuarial review. Given the multi-year impact of very low interest rates in our two largest markets, the U.S. and Japan, and the short term impact of strategic investing in our businesses, we have moderated our ROE expectations to 12% to 13% over the near to intermediate term. | 
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Assets under management reached $1.107 trillion at December 31, 2013, an increase of 4% from a year earlier.
Assets under management reached $1.264 trillion at December 31, 2016, an increase from $1.184 trillion a year earlier. | | |||
We |  |
| reconciliations to the nearest comparable GAAP measures, see Appendix A to this Proxy Statement. |
Also, in 2016:
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We expanded our leading position in the pension risk transfer market, including the completion of approximately $5 billion of new funded cases. We completed the acquisition of |
In 2013, we also continued to benefit from effective capital management, which remains a significant priority. 40% stake in AFP Habitat, a leading provider of retirement services in Chile.
We believe that maintaining robust capital and liquidity positions provides us with a protective cushion during difficult periods, as well as the ability to pursue new opportunities.
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| Compensation Discussion and Analysis: Executive Summary |
Executive Compensation Highlights
The Committee has instituted a number of changes to our executive compensation program over the last several years to align with evolving competitive and governance practices, respond to feedback from our shareholders and strengthen the link to performance and rigor of our program. These changes have included:
| • | Strengthening the rigor of our Annual Incentive Program by setting target and maximum awards for senior executives, including the NEOs. |
| • | Requiring deferral of 30% of each NEO’s annual incentive award into the Book Value Performance Program. |
| • | Beginning in 2014, reducing the maximum performance share award from 150% to 125% of the target level. |
| • | Increasing our CEO’s stock ownership guideline from five to seven times base salary in 2015. |
| • | Expanding the clawback policy for executive officers to cover all incentive-based awards, to address a material financial restatement or misconduct, and to require |
disclosure to shareholders of action taken with regard to compensation recovery following a material restatement or misconduct. |
| • | Diversifying the performance metrics used to determine awards under our Annual Incentive Program and applying a greater weight to relative ROE performance versus peer companies as a factor under our Annual Incentive Program in 2016, and Performance Share Program in 2017. |
| • | Excluding earnings from specified classes of non-coupon investments outside of a range of -10% to +10% of the earnings on these investments that are included in the Company’s EPS guidance range. |
As informed by our ongoing dialogue with our shareholders, and to more closely align with our value proposition to shareholders, this year, the Committee revised our Annual Incentive Program and Long-Term Incentive Program to further balance the financial metrics utilized by those programs between the Company’s absolute performance and its relative performance versus peer companies. Specifically, the Committee modified the Annual Incentive Program to eliminate the relative performance modifier and base the primary driver in determining the amount of the annual incentive awards for our NEOs, the initial annual performance factor, on three equally weighted performance metrics, including one relative metric:
The Committee also revised the Annual Incentive Program to reduce the volatility of outcomes under the plan, by modifying the performance scales and by limiting the contribution of earnings that may come from specified classes of non-coupon investments (e.g., private equity, hedge funds, real estate funds, equity securities, and other real estate investments). Based on our discussions with shareholders and feedback from our engagement efforts, the short-term fluctuations in earnings on these non-coupon investments were generally not viewed by our shareholders as being reflective of true operating performance. The performance of these non-coupon investments is fully reflected under the Book Value Performance Program, a key component of ourLong-Term Incentive Program.
The use of a weighted relative ROE metric, in lieu of a relative performance modifier, provides simplicity and transparency of results under the Annual Incentive Program and more effectively balances absolute and relative performance (e.g.,the weighting of the previous relative performance modifier was limited to 10%).
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| Compensation Discussion and Analysis:Executive Summary |
EXECUTIVE COMPENSATION HIGHLIGHTS
The CompensationSimilarly, the Committee tookeliminated the following actionsrelative performance modifier from the Performance Shares Program under our Long-Term Incentive Program for awards granted in 2017. Instead, the program now uses a relative ROE measure over a three-year performance period compared to improve and maintain the rigormedian ROE performance of the North American Life Insurance subset of our executive compensation program:
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peer group, along with absolute performance versus our long-term ROE target.
CEO Total Direct Compensation Summary
| (1) | 30% of the Annual Incentive Awards were mandatorily deferred into the |
| (2) | Represents long-term awards granted in |
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 | Performance-based compensation |
| (2) | Includes mandatory deferral of 30% of annual incentive |
Long-term Incentives consist of a combination of performance share and unit awards, options to purchase shares of Common Stock and book value units. Each of these award arrangements are performance-based and, thus, aligned with thelong-term interests of our shareholders because the value realized from the performance awards is dependent on our return on equity performance and the value realized from the stock options is tied to the appreciation in the market value of Common Stock. In addition, the value of the book value awards fluctuates based on our net income (or loss), as adjusted to exclude certain items, from year to year.
| (3) | Based on average amounts |
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| Compensation Discussion and Analysis:Executive Summary |
| WHAT WE DO | WHAT WE DON’T DO | |||||
| Establish target and maximum awards in our Annual Incentive Program. |
| CEO participation in our severance plan. | |||
| Executive officer severance payments and benefits exceeding 2.99 times salary and cash bonus without shareholder approval. | |||||
| Apply a formulaic framework based on the Company’s financial | |||||
| Exercise limited or no discretion to increase formulaic incentive compensation awards. |
| Excise tax“gross-ups” upon change in control. | |||
| Use balanced performance metricsfor annual incentive and performance share/unit awards that factor both the Company’s absolute performance and its relative performance versus peers |
| Discounting, reloading orre-pricing of stock options without shareholder approval. | |||
| Rigorous goal setting aligned to our externally disclosed annual and multi-year financial targets. |
| “Single-trigger” vesting of equity-based awards upon change in control. | |||
| 90% or more of our NEOs’ total direct compensation is performance based. |
| Multi-year guaranteed incentive awards for senior executives. | |||
| Defer 30% of our NEOs’ annual incentive awards into the Book Value Performance Program. |
| Employment agreements with executive officers. | |||
| Impose stock ownership requirements, and retention of 50% of equity based awards. |
| Employee hedging or pledging of Company securities. | |||
| Maintain an enhanced clawback policy covering all executive officer incentive-based awards for material financial restatements and misconduct. | |||||
| Limit perquisitesto items that serve a reasonable business purpose. | |||||
| Closely monitor risks associated with our executive compensation program and individual compensation decisions to ensure they do not encourage excessive risk taking. |
Consideration of Most Recent “Say on Pay” Vote Following our 2016 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on executive compensation (the “Say on Pay” Vote) that was held at the meeting with respect to the 2015 compensation actions and decisions for Mr. Strangfeld and the other NEOs. Approximately 95% of the votes cast on the proposal were voted in support of the compensation of our NEOs. |  |
CONSIDERATION OF LAST YEAR’S “SAY ON PAY” VOTE
Following our 2013 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on executive compensation (“Say on Pay”) that was held at the meeting with respect to the 2012 compensation actions and decisions for Mr. Strangfeld and the other NEOs. Approximately 78%95% of the votes cast on the proposal were voted in support of the compensation of our NEOs. This compares with approximately 96%
| Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | | 39 | |||
| Compensation Discussion and Analysis: Executive Summary |
Based on the votes cast in supportresults of the “Say on Pay” proposal submitted for shareholder consideration at the 2012 Annual Meeting of Shareholders. In response to the 2013 vote, as well as our ongoing dialogue with our shareholders, the Committee took several actions to improve and maintain the rigor of our executive compensation program. See “Executive Compensation Highlights” above.
OUR COMMITMENT TO SHAREHOLDER ENGAGEMENT
In 2013, we again demonstratedBoard concluded that, even though our commitment to shareholder engagement, communication and transparency. During the year, representatives of the Company met with holders of more than a majority of the total number of shares of Common Stock outstanding.
ONGOING CORPORATE GOVERNANCE POLICIES
We endeavor to maintain good corporate governance standards, including those which impact the oversight of ouroverall executive compensation policies and practices.practices enjoy favorable shareholder support, it was appropriate to make certain changes to our Annual Incentive Program and Long-Term Incentive Program to further balance the metrics utilized in those programs between the Company’s absolute performance and its performance relative to our peer companies. The following policies and practices wereCommittee modified the Annual Incentive Program so that the primary driver in effect during 2013:determining the amount of the annual incentive awards for our NEOs, the initial annual performance factor, is based on three equally weighted performance metrics:
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The Committee also made other changes to the design of the Annual Incentive and Long-Term Incentive Programs, including:
OPPORTUNITY FOR SHAREHOLDER FEEDBACKOpportunity for Shareholder Feedback
The Committee carefully considers feedback from our shareholders regarding our executive compensation program. Shareholders are invited to express their views to the Committee as described under “Communication with Directors” in this Proxy Statement. In addition, the advisory vote on the compensation of the NEOs provides shareholders with an opportunity to communicate their views on our executive compensation program.
You should read this CD&A in conjunction with the advisory vote that we are conducting on the compensation of the NEOs (see “Item 3 — 3—Advisory Vote to Approve Named Executive Officer Compensation”). This CD&A, as well as the accompanying compensation tables, contains information that is relevant to your voting decision.
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| Compensation Discussion and |
SPECIFIC COMPENSATION AND CORPORATE GOVERNANCE POLICIES AND PRACTICES
Our compensation philosophy and related governance features are complemented by several specific policies and practices that are designed to align our executive compensation with long-term shareholder interests, including:
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Limited Perquisites.Our executive officers, including the NEOs, receive no perquisites or other personal benefits, unless such benefits serve a reasonable business purpose, such as the use of a Company aircraft,Company-provided vehicles and drivers, and, in the case of our CEO and Vice Chairman, security services.
“Clawback” Provision.Currently, we maintain a compensation recovery (“clawback”) provision in our Book Value Performance Program. We intend to adopt a general clawback policy covering our annual andlong-term incentive award programs and arrangements once the SEC adopts final rules implementing the “clawback” provisions of the Dodd-Frank Act.
PHILOSOPHY AND OBJECTIVES OF OUR EXECUTIVE COMPENSATION PROGRAMPhilosophy and Objectives of Our Executive Compensation Program
The philosophy underlying our executive compensation program is to provide an attractive, flexible, and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of executive officers and other key employees necessary to deliver sustained high performance to our shareholders, customers, and communities where we have a strong presence. Our executive compensation program is an important component of these overall human resources policies. Equally important, we view compensation practices as a means for communicating our goals and standards of conduct and performance and for motivating and rewarding employees in relation to their achievements.
Overall, the same principles that govern the compensation of all our salaried employees apply to the compensation of our executive officers. Within this framework, we observe the following principles:
Pay for performance:A significant portion of the annual compensation of our executive officers should vary with annual business performance and each individual’s contribution to that performance;
Reward long-term growth and profitability:Executive officers should be rewarded for achieving long-term results, and such rewards should be aligned with the interests of our shareholders;
Align compensation with shareholder interests:The interests of our executive officers should be linked with those of our shareholders through the risks and rewards of the ownership of our Common Stock;
and
Provide limited perquisites:Perquisites for our executive officers should be minimized and limited to items that serve a reasonable business purpose; and
Reinforce succession planning process:The overall compensation program for our executive officers should reinforce our robust succession planning process.
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20132016 Incentive Programs
To ensure a strong link between our incentive compensation opportunities and our short-term and longer term objectives, we use two specific programs: our Annual Incentive Program and our Long-Term Incentive Program.
Annual Incentive Program.The Annual Incentive Program is designed to reward strong financial and operational performance that furthers our short-term strategic objectives. Financial performance is primarily determined based on three equally-weighted performance metrics: (i) EPS achievement relative to the Company’sour externally disclosed EPS targets.
Long-Term Incentive Program.Our Long-Term Incentive Program consists of three parts that incentivizeincent long-term value creation: performance shares and units that reward the achievement of our long-term ROE goals and increases in the market value of our Common Stock; book value units that reward increases in book value per share; and stock options that reward increases in the market value of our Common Stock; and book value units that reward increases in book value per share.
ANNUAL COMPENSATION-RELATED
RISK EVALUATION
We monitor the risks associated with our executive compensation program, as well as the components of our program and individual compensation decisions, on an ongoing basis. In January 2014,2017, the Committee was presented with the results of a study reviewing our compensation programs, including our executive compensation program, to assess the risks arising from our compensation policies and practices. The Committee agreed with the study’s findings that these risks were within our ability to effectively monitor and manage and that these compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company.
| Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | | 41 | |||
| Compensation Discussion and Analysis |
How We Make Compensation Decisions
Role of the Compensation Committee
The Committee is responsible to our Board for overseeing the development and administration of our compensation and benefits policies and programs. The Committee, which consists of three independent directors, is responsible for the review and approval of all aspects of our executive compensation program. Among its duties, the Committee is responsible for formulating the compensation recommendations for our CEO and approving all compensation recommendations for our officers at the senior vice president level and above, including:
Reviewannual review and approval of corporate incentive program design, goals and objectives relevant to compensation;
Evaluationevaluation of individual performance results in light of these goals and objectives;
Evaluationevaluation of the competitiveness of each executive officer’s total compensation package; and
Approvalapproval of any changes to the total compensation package, including, but not limited to, base salary, annual and long-term incentive award opportunities, and payouts, and retention programs.
Following review and discussion, the Committee submits its recommendations for compensation for these executive officers to the non-employeeindependent members of our Board for approval.
The Committee is supported in its work by the head of the Human Resources Department, her staff, and the Committee’s executive compensation consultant,Compensation Consultant, as described below.
The Committee’s charter, which sets out its duties and responsibilities and addresses other matters, can be found on our website at www.prudential.com/governance.
Role of the Chief Executive Officer
Within the framework of the compensation programs approved by the Committee and based on management’s review of market competitive positions, each year our CEO recommends the level of base salary increase (if any), the annual incentive award, and the long-term incentive award value for our officers at the senior vice president level and above, including the other NEOs. These recommendations are based upon his assessment of each executive officer’s performance, the performance of the individual’s respective business or function, and employee retention considerations. The Committee reviews our CEO’s recommendations and approves any compensation changes affecting our executive officers as it determines in its sole discretion.
Our CEO does not play any role with respect to any matter affecting his own compensation.compensation, and is not present when the Committee discusses and formulates his compensation recommendation.
Role of the Compensation Consultant
The Committee has retained Frederic W. Cook & Co., Inc. as its executive Compensation Consultant. The Compensation Consultant reports directly to the Committee and the Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Committee, as requested, and communicates with the Committee Chair between meetings.
The Compensation Consultant provides various executive compensation services to the Committee pursuant to a written consulting agreement with the Committee. Generally, these
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services include advising the Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program design and our award values in relationship to their performance.
During 2013,2016, the Compensation Consultant performed the following specific services:
Provided an annual competitive evaluation of total compensation for the NEOs, as well as overall compensation program share usage, dilution, and fair value expense.
Reviewed with our CEO his compensation recommendations with respect to the other NEOs.
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| Compensation Discussion and Analysis |
Provided advice on changes to the performance metrics under the Annual Incentive Program and the Long-Term Incentive Program.
Reviewed the peer group used for competitive analyses and recommended changes, if appropriate.
Attended executive sessions ofCommittee meetings when requested by the Committee.Committee Chair.
The Compensation Consultant provided no services to management during 2013.2016.
The Committee retains sole authority to hire the Compensation Consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.
The total amount of fees paid to the Compensation Consultant for services to the Committee in 20132016 was $153,015.$175,723. The Compensation Consultant received no other fees or compensation from us, except for $3,400 to participate in a general industry survey of long-term compensation. The Compensation Committee has assessed the independence of the Compensation ConsultantsConsultant pursuant to the listing standards of The New York Stock Exchange and SEC rules and concluded that no conflict of interest exists that would prevent the Compensation ConsultantsConsultant from serving as an independent consultant to the Compensation Committee.
Compensation Peer Group
The Committee uses compensation data compiled from a group of peer companies in the insurance, asset management, and other diversified financial services
industries generally selected from the Standard & Poor’s 500 Financials Index (the “Peer Group”). The Committee periodically reviews and updates the Peer Group, as necessary, upon recommendation of the Compensation Consultant. We believe the Peer Group represents the industries with which we currently compete for executive talent, and also includes our principal business competitors.
Although included within the broad financial services sector, we exclude from the Peer Group companies such as property and casualty insurers and investment banking firms that predominantly offer different products, have substantially different business models and with whom we have less direct competition for executive talent.
For 2016, the Peer Group consisted of the following 20 companies: | ||||||||
North American Life Insurance Companies | Consumer Finance Companies | Asset Management and Custody Banks | Diversified Banks | |||||
• AFLAC, Incorporated • Lincoln National • Manulife Financial Corporation • MetLife, Inc. • Principal Financial Group • Sun Life Financial Inc. | • American Express Company • Capital One Financial Corporation | • Ameriprise Financial, Inc. • The Bank of New York Mellon Corporation • BlackRock, Inc. • Franklin Resources, Inc. • Northern Trust • State Street Corporation | • Bank of America Corporation • Citigroup Inc. • JPMorgan Chase & Co. • PNC Financial Services Group, Inc. • U.S. Bancorp • Wells Fargo & Company | |||||
Use of Competitive Data
We compete in several different businesses, most of which are involved in helping individuals and institutions grow and protect their assets. These businesses draw their key employees from different segments of the marketplace. Our executive compensation program is designed with the flexibility to be competitive and motivational within the various marketplaces in which we compete for executive talent, while being subject to centralized design, approval, and control.
The Committee relies on various sources of compensation information to ascertain the competitive market for our executive officers, including the NEOs.
| Notice of Annual Meeting of Shareholders and | 43 | |||||
| Compensation Discussion and |
To assess the competitiveness of our executive compensation program, we analyze Peer Group compensation data obtained from peer company proxy materials as well as compensation and benefits survey data provided by national compensation consulting firms, such as Willis Towers Watson, McLagan Partners, and Mercer. As part of this process, we measure actual pay levels within each compensation component and in the aggregate. We also review the mix of our compensation components with respect to fixed versus variable, short-termshort term versus long-term,long term, and cash versus equity-based pay. This information is then presented to the Committee for its review and use.
The Committee generally compares the compensation of each NEO in relation to both the 50th and the 75th percentiles of the Peer Group for similar positions, as we are significantly above the median of the Peer Group in terms of size. In addition, the Committee takes into account various factors such as our performance within the Peer Group, the unique characteristics of the individual’s position, and any succession and retention considerations. In general, compensation levels
for an executive officer who is new to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance who are viewed as critical to retain would be positioned at the higher end of the competitive range.
Generally, differences in the levels of total direct compensation among the NEOs are primarily driven by the scope of their responsibilities, market data for similar positions, and considerations of internal equity.
COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAMComponents of Our Executive Compensation Program
The principal components of our executive compensation program, purpose, key characteristic and the purposetype of each componentperformance measured (if applicable) are presented in the following table. We measure the program’s competitiveness both by comparing relevant market data againstwith the target and actual amounts paid at each executive officer position as well as by salary grades, which are composed of many positions that we consider to have similar responsibilities.
Total Direct Compensation
| Compensation Component | Purpose | Performance Measured | ||||||
| Base Salary | • Compensate executive officers fairly for the responsibility | Individual | ||||||
| Annual Incentive Awards | • Motivate and reward executive officers for achieving ourshort-term • Provide balance by rewarding | Corporate and Individual | ||||||
| Long-Term Incentive Awards | • Motivate executive officers by • Reinforce the link between the interests of our executive officers and | Corporate |
Other Forms of Compensation
| Compensation Component | Purpose | Key Characteristic | ||||
| Health & Welfare, and Retirement Plans | • Provide benefits that promote employee health and support employees in attaining financial | |||||
| Perquisites and Other Personal Benefits | • Provide a business-related benefit to our Company, and to assist in attracting and retaining | |||||
| Post-Employment Compensation | • Provide temporary income following an |
| 44 | | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | |
| Compensation Discussion and Analysis |
The following discussion contains information regarding certain performance measures and goals. These measures and goals are disclosed in the limited context of our executive compensation program. InvestorsShareholders should not apply these performance measures and goals to other contexts.
Direct Compensation Components
Base Salary
Base salary is the principal fixed component of the total direct compensation of our executive officers, including the NEOs, and is determined by considering the relative importance of the position, the competitive marketplace, and the individual’s
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performance and contributions. Base salaries are reviewed annually and, typically, are increased infrequently and then mostly at the time of a change in position or assumption of new responsibilities.
Salary Decisions for 2013
None of the NEOs received an increase to base salary during the Committee’s annual review of our executive compensation program in February 2013. Mr. Falzon received a salary increase upon his promotion to Executive Vice President and Chief Financial Officer in March 2013.
Formulaic Framework for Incentive ProgramsFORMULAIC FRAMEWORK FOR INCENTIVE PROGRAMS
Funding forAwards under each of our annual and long-term incentive programs is based on formulas tied toare funded at the level determined by our financial results.results relative topre-established targets and performance relative to peer companies under formulas for each incentive program. The Board believes it generally should exercise limited or no discretion to increase our NEOs’ formula-based awards. For the annual incentive program, we measurethe formula uses three equally-weighted performance metrics: (i) EPS results relative to our externally disclosed EPS targets based on a performance scale.targets; (ii) year-over-year growth in EPS; and (iii) relative ROE as compared to the North American Life Insurance subset of our peer group. Similarly, under our performance shares program beginning with awards made in 2017, payments arewill be determined based on our average ROE results over the three-year performance period, based onas compared to both a performance scale set at the start of the period and the ROE results of the North American Life Insurance subset of our peer group over that period. The Book Value Performance Program tracks theour adjusted book value per share, excludingwhich excludes the impact on attributed equity of accumulated other comprehensive income and of foreign currency exchange rate remeasurement included in net income or loss, as discloseddescribed in our Quarterly Financial Supplements.Appendix A to this Proxy Statement.
To accurately reflect the operating performance of our business, the Committee has approved apre-determined framework of adjustments to our reported financial results for incentive program purposes. Generally, these adjustments excludeone-time or unusual items and external factors that are inconsistent with the assumptions reflected in our financial plans. The standard adjustments to reported EPS under our formulaic framework may vary from year to year and may have either a favorable or unfavorable impact on the funding of the Annual Incentive Award Pool.
Standard adjustments to reported financial results are made:
to exclude the impact of changes in our assumptions for investment returns, actuarial experience, and customer behavioral expectations (mortality, morbidity, lapse, and similar factors)factors and reserve refinements);
to exclude one-timeintegration costs associated with merger and acquisition activity (for 2013, principally the Hartford and AIG Star and Edison acquisitions)(none in 2016);
| • | for accounting changes not included in our annual operating plan (none in 2016); |
| • | to exclude earnings from specified classes of non-coupon investments outside of a range of -10% to +10% of the earnings on these investments that are included in the Company’s EPS guidance range (for 2016, this did not result in an adjustment); and |
| • | for other items not considered representative of the results of operations for the period or not included in guidance, as approved by the Committee (for 2016, we excluded the benefit from a lower income tax rate in Japan, adopted subsequent to the issuance of 2016 guidance; we also excluded certain costs related to Company-wide initiative spending and theone-time cost of the early extinguishment of debt in 2016). |
for accounting changes not included in our annual operating plan (for 2013, adjustments were made for accounting changes with respect to Asset Management incentive fees and investment earnings on temporary capital supporting Long-Term Care reserves); and
Direct Compensation Components
Annually, the Compensation Committee reviews the competitive analysis of total direct compensation for other items not considered representativethe NEOs. Based on this evaluation, the Committee may selectively adjust the base salary, annual incentive target, and long-term target amounts of the resultsNEOs. In determining any adjustments, the Committee takes into account the following factors: level of operationsexperience and impact in the role; changes in market data; and compensation positioning overall and by component. Executives new to their current roles are positioned towards the lower end of their competitive range while executives with more experience are generally positioned at the higher end of the range.
BASE SALARY
Base salary is the principal fixed component of the total direct compensation of our executive officers, including the NEOs, and is determined by considering the relative importance of the position, the competitive marketplace, and the individual’s performance and contributions. Base salaries are reviewed annually and, typically, are increased infrequently and then mostly at the time of a change in position or assumption of new responsibilities.
SALARY DECISIONS
None of the NEOs received an increase to base salary for the period, as approved by the Committee (inapplicable for 2013).2016 performance year.
| Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | | 45 | |||
| Compensation Discussion and Analysis |
Annual Incentive Awards
For 2013,At least once a year, the Committee in consultation with our managementreviews the Annual Incentive Program and the Compensation Consultant, undertook to reevaluate the design of our annual incentive award program. In February 2013, themakes changes as needed. The Committee approved the 20132016 Annual Incentive Program for our most senior executives, including the NEOs, on the following terms and conditions.
Target Award OpportunitiesTARGET AWARD OPPORTUNITIES
The Compensation Committee left unchanged theestablished target and maximum annual incentive award opportunityopportunities for each NEO in 2012. No adjustments had been made to these award opportunities for NEOs who have held the same role since 2012, namely our Chief Executive Officer and Vice Chairman. Consequently, the positioning of target total direct compensation (i.e., base salary, target annual incentive and target long-term incentive) relative to counterparts at companies in the NEOs for 2013, exceptcompensation peer group had decreased since last calibrated in 2012. To address this decrease, the Committee increased Mr. Strangfeld’s annual incentive target from $5.6 million to reflect$6 million and Mr. Grier’s target from $4.8 million to $5.1 million in 2016.
Considering their compensation positioning and greater level of experience and impact, the Committee also adjusted Mr. Falzon’s promotionannual incentive target from $2.45 million to Executive Vice President and Chief Financial Officer$3 million and Mr. Carbone’s resignation as Chief Financial Officer. ThesePelletier’s target and maximum award levels were establishedfrom $3 million to $4 million in 2012 based on the Committee’s assessment of the scope of each senior executive’s job responsibilities, competitive market data, and our past payment history. 2016.
The specific target and maximum annual incentive award opportunities for each NEO for 20132016 were as follows:
| Named Executive Officers | Target Annual Incentive Award | Maximum Annual Incentive Award Opportunity | ||||||
| John R. Strangfeld | $ | 5,600,000 | $ | 11,200,000 | ||||
| Robert M. Falzon | $ | 1,450,000 | $2,900,000 | |||||
| Richard Carbone | $ | 1,750,000 | $3,500,000 | |||||
| Mark B. Grier | $ | 4,800,000 | $9,600,000 | |||||
| Edward P. Baird | $ | 3,000,000 | $6,000,000 | |||||
| Charles F. Lowrey | $ | 4,000,000 | $8,000,000 | |||||
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Award Formula
| Named Executive Officers | Target Annual Incentive Award | Maximum Annual Incentive Award Opportunity | ||||||
| John R. Strangfeld | $ | 6,000,000 | $ | 12,000,000 | ||||
| Robert M. Falzon | $ | 3,000,000 | $ | 6,000,000 | ||||
| Mark B. Grier | $ | 5,100,000 | $ | 10,200,000 | ||||
| Charles F. Lowrey | $ | 4,000,000 | $ | 8,000,000 | ||||
| Stephen Pelletier | $ | 4,000,000 | $ | 8,000,000 | ||||
Each year, we establishthe Committee establishes an annual performance factor that is the mainprimary driver in determining the amount of the annual incentive awards tofor our NEOs.
For 2013,2016, we used the following process to establishdetermine this Performance Factor:
Step 1. Established Initial Performance Factor Based on EPS.Factor.
Consistent with the formulaic framework for our annual incentive award program, for 2013, the Committee established an Initial Performance Factor based on our the following three financial metrics, giving equal weight to each (i.e., each metric is weightedone-third):
The Initial Performance Factor was applied to the sum of the target annual incentive award opportunities for the NEOseach NEO to determine their annual incentive funding. For purposes of the annual incentive award program,2016 Annual Incentive Program, EPS and AOIROE were calculated as follows:
EPS which is based on AOI, is “EarningsEarnings Per Share of Common Stock (diluted): Financial Services Businesses , based onafter-tax adjusted operating income” as publicly disclosed in our Quarterly Financial Supplements, available on our website.
ROE is determined usingafter-taxAOI is a non-GAAP measure of the performance of our Financial Services Businesses. For a description of how we calculate pre-tax AOIdivided by adjusted book value, and for our peer companies is determined based on the comparable financial metric from each peer company’s quarterly financial reports, in each case, based on a reconciliationrolling quarterly average for the four quarters ended September 30, 2016.
For more information regarding our 2016 annual measures of pre-taxEPS, AOI, ROE, and adjusted book value, see Appendix A to the nearest comparable GAAP measure, see the notes to the consolidated financial statements included in our Annual Report to Shareholders, which can be found on our website at www.prudential.com/governance. After-tax AOI is adjusted operating income before taxes, less the income tax effect applicable to pre-tax AOI, as publicly disclosed in our Quarterly Financial Supplements, also available on our website.this Proxy Statement.
The following table depicts the EPS scale target range for 2013 as established in February 2013. The target range is aligned to our publicly disclosed EPS guidance range.
| 2013 EPS(1) | Initial Performance Factor(2) | |||
| $5.39 or below | .50 | |||
| $5.85 | .60 | |||
| $6.78 | .80 | |||
| $7.70 | 1.00 | |||
| Target Range | $7.90 | 1.10 | ||
| $8.10 | 1.20 | |||
| $8.67 | 1.35 | |||
| $9.24 or above | 1.50 |
We applied ourpre-set formulaic framework to our January 20142017 estimate of our 20132016 reported AOI, EPS, or $9.61 per common share. Our final 2013 reported EPS was $9.67 per common share.and ROE.
TheStandard Adjustments
We make standard adjustments to reportedestimated AOI, EPS, and ROE under our formulaic framework that may vary from year to year and may have either a favorable or unfavorable impact on the funding of the Annual Incentive Award Pool. For 2013, the2016, these standard adjustments resulted in adjusted EPS of $8.78 per share of Common Stock, a decrease of $0.83 per share from our estimated EPS of $9.61. This adjusted EPS amount correspondedthe following changes to an Initial Performance Factor of 1.38.
Step 2. Computed Relative Performance Modifier.To balance absolute and relative performance, the Committee implemented a relative performance modifier in 2013. This modifier may increase or decrease the Initial Performance Factor by up to 10% within the 0.5 – 1.5 payment range, based on the Company’s one and three-year performance against certain quantitative measures relative to the North American Life Insurance subset of the Peer Group.
North American Life Insurance Peer GroupEPS:
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| EPS (January Estimate) | $ | 9.16 | ||
| Market Unlockings | -0.14 | |||
| Actuarial Assumptions | +0.64 | |||
| Other Items | +0.07 | |||
| EPS (Annual Incentive Program) | $ | 9.73 |
The graphic below shows how we arrived atmarket unlockings adjusted our reported results for our Individual Annuities business to exclude the relative performance modifier for 2013. We first assessed ourimpact of actual equity market performance relative to our plan assumption. The adjustment for 2016 market unlockings reduced EPS under the Peer Group under three different quantitative measures. Our overall weighted rankannual incentive program by approximately $0.14.
Annually, based on Company-specific data, industry data, and the current long-term economic outlook, we update our assumptions on long-term market returns (equity and fixed income) and customer behavioral expectations (e.g., mortality, morbidity, and lapses). These updates and related refinements result in a cumulative revaluation of our reserves and the carrying values of our deferred acquisition costs. While GAAP requires these measures was 2.25, and this result put us at the #1 overall rankingupdates to be reported in the Peer Group. Under our pre-set scale,current period, they are not representative of annual performance since they relate to outcomes in both prior and future years. For these reasons, they are excluded from EPS under the #1 ranking producedannual incentive program (regardless of whether they are positive or negative). In 2016, the adjustments to account for these updates had a relative performance modifierpositive EPS impact of +10%.approximately $0.64.
| 46 | ||||
| | Notice of Annual Meeting of Shareholders and | ||||
| Compensation Discussion and |
Other items not considered representative of operating results or included in our 2016 EPS guidance range are also excluded from EPS under the program. In 2016, these excluded items included certain costs related to Company-wide initiative spending and the benefit from a lower income tax rate in Japan adopted subsequent to the issuance of 2016 guidance. These adjustments contributed approximately $0.07 in 2016 EPS under the program.
These standard adjustments under our pre-set formulaic framework had a net positive effect of $0.57 to EPS under the annual incentive program.
Step 3. Determined Final Performance Factor.EPS Target Factor As shown above, we determined that, based on
The following table depicts the EPS scale target range for 2016. This target range is aligned to our publicly disclosed financial results, we ranked first relativeEPS guidance range. Our adjusted EPS for 2016 of $9.73 per share of Common Stock corresponded to an EPS Target Factor of 0.947.
| 2016 EPS(1) | EPS Target Factor(2) | |||||||
| $7.00 or below | 0.50 | |||||||
| $9.75 | 0.95 | |||||||
| Target Range | $10.00 | 1.00 | ||||||
| $10.25 | 1.05 | |||||||
| $13.00 or above | 1.50 | |||||||
| (1) | Determined on an AOI basis, subject to certain adjustments. |
| (2) | The EPS Target Factor is interpolated on a straight-line basis between the EPS data points. |
EPS Growth Factor
Our adjusted EPS for 2016 was $9.73 per share of Common Stock, a decrease of $0.08 per share from our adjusted EPS of $9.81(1) for 2015. This corresponds to an EPS Growth Factor of 0.992.
| (1) | EPS for 2015 was increased by $0.06 to exclude earnings from specified classes of non-coupon investments outside of a range of -10% to +10% of the earnings on these investments that are included in the Company’s EPS guidance range. |
Relative ROE Factor
Our adjusted ROE for 2016 was 12.5%, which is 0.6 percentage points higher than the median 2016 ROE for the North American Life Insurance subset of the Peer Group. AsThis corresponds to a result,Relative ROE Factor of 1.05 based on the Committee could have adjustedscale depicted below.
| ROE +/- Peer Median(1) | Relative ROE Factor(2) | |||||||
| 3% | 1.25 | |||||||
| 2% | 1.17 | |||||||
| 1% | 1.08 | |||||||
| 0% | 1.00 | |||||||
| -1% | 0.92 | |||||||
| -2% | 0.83 | |||||||
| -3% | 0.75 |
| (1) | Determined on an AOI basis, subject to certain adjustments as discussed above. |
| (2) | The Relative ROE Factor is interpolated on a straight-line basis between the ROE +/- Peer Median data points. |
Step 2. Determined Final Performance Factor.
Weighting each of the EPS Target Factor (0.947), the EPS Growth Factor (0.992), and the Relative ROE Factor (1.05) byone-third, we arrived at an Initial Performance Factor by up to 10% from 1.38 to 1.50 (representing the maximum performance factor). Instead, the Committee decided to apply all of the additional funding generated by the relative performance modifier towards funding a one-time cash Associates Award to the broad base of global employees who do not participate in our long-term incentive program to recognize the achievement of our 13% to 14% ROE objective in 2013.
This action moderated the Initial Performance Factor otherwise applicable to the NEOs (and other employees) from 1.50 to 1.38, a reduction of 8%. None of the NEOs or other executive officers received an Associates Award.0.996.
Once the Initial Performance Factor is determined, the Committee mayBoard believes it generally should not exercise itsmeaningful discretion to take into accountincrease the Performance Factor for strategic considerations to determineor other considerations. For the Final Performance Factor. These considerations include capital and liquidity management, risk management, competitive performance, and employee measures (such as employee opinion survey results, talent management and diversity). For 2013,last three years, the Committee determineddid not to make any discretionary adjustments based on these considerations.
Based on the foregoing, the Final Performance Factor for 20132016 was determined to be 1.38.0.996. This factor was then applied to the target award opportunities of each NEO to determine their annual incentive awards, with minor adjustments primarily due to rounding.
The following table summarizes the calculation of thisthe Final Performance Factor.
Summary of 20132016 Performance Factor Mechanics
| Step 1: Establish | ||||
| 2016 EPS (on AOI basis) | $ | 9.16 | ||
| Standard adjustments | $ | 0.57 | ||
| EPS under Annual Incentive Program | $ | 9.73 | ||
| EPS of $9.73 translates to an EPS Target Factor of | 0.947(1) | |||
| Step 2: Establish EPS Growth Factor | ||||
| 2016 EPS (on AOI basis) | $ | 9.16 | ||
| Standard adjustments | $ | 0.57 | ||
| EPS under Annual Incentive Program | $ | 9.73 | ||
| 2015 EPS under Annual Incentive Program | $ | 9.81(2) | ||
| EPS Growth under Annual Incentive Program | ($ | 0.08) | ||
| EPS Growth of ($0.08) translates to an EPS Growth Factor of | 0.992 | |||
| Step 3 : Establish Relative ROE Factor | ||||
| 2016 ROE Performance | 12.5% | |||
| 2016 Peer Median ROE Performance | 11.9% | |||
| ROE performance as compared to median ROE performance for life insurer peers | 0.6%(1) | |||
| Favorable ROE of 0.6% translates to a Relative ROE Factor of | 1.05 | |||
| Step 4: Determine Final Performance Factor | ||||
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EPS | 0.330 | |||
| Relative ROE Factor times 1/3 | 0.350 | |||
| Initial Performance Factor | ||||
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| Final Performance Factor | ||||
| (1) |
| Based on interpolation on the |
ASSOCIATES AWARD
The Board of Directors approved a special one-time cash award, allocated from a portion of the 2013 Annual Incentive Award Pool, of $1,300 (or the local currency equivalent) per person to associates around the world who do not participate in our long-term incentive program, to acknowledge achievement of our objective of a ROE of between 13% and 14% and to recognize the significant contribution of our associates in helping to achieve this objective. No NEO or executive officer received this award.
| Notice of Annual Meeting of Shareholders and | 47 | |||||
| Compensation Discussion and |
Annual Incentive Award Decisions for 20132016
Once the size of the Annual Incentive Award Pool is set, the Committee allocates the pool among eligible executive officers and other employees, including the NEOs. While individual performance and contributions are considered, the mainThe principal driver of the actual annual incentive awards made tofor the NEOs is generally the Final Performance Factor.
The Committee determines the amount of an individual executive officer’s annual incentive award, including the awards of the NEOs, based on its evaluation of their individual contributions during the year. In determining the 2013 annual incentive awards for our executive officers, including the NEOs, the key drivers considered by the Committee were:
the Final Performance Factor based on our financial results;
their collective performance in managing our business; and
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While the Committee did not establish specificalso considers individual performance goals for the NEOs, atand contributions in determining final awards.
At the beginning of 20132016, our CEO met with each of the other NEOs to outline and discuss with them the key financial factors for determining awards under our annual incentive program and their expected contributions to that performance, and how their performance might influence their annual incentive award opportunity.performance.
While the key drivers and related individual performance factors described below were relatively more important than other factors in determining the 2013 annual incentive awards for the NEOs, the Committee did not assign a specific weight to any factor, but, rather, evaluated the totality of the factors in making each award determination.
MR. STRANGFELD
Performance assessment
In assessing the individual performance of Mr. Strangfeld, our CEO, the Committee, and the independent members of our Board, considered the evaluation of his performance that was conducted by the Lead Director of our Board and the Committee Chair. This evaluation identified and examined a broad range of corporate and individual performance factors, including:
After-tax AOI for our Financial Services Businesses of $4.6 billion for 2013, compared to $3.0 billion for 2012;
Growth in book value per share of Common Stock, excluding accumulated other comprehensive income and the impact of foreign currency exchange rate remeasurement on net income or loss, to $59.99 at December 31, 2013 versus $58.08 at December 31, 2012, an increase of $1.91 after payment of four quarterly dividends totaling $1.73 per share;
The acquisition of The Hartford’s Individual Life Insurance business, completed in January 2013, which strengthened our Individual Life Insurance business with the addition of approximately 700,000 policies with net retained face amount in force of approximately $141 billion;
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Annual incentive award decision
Based on these factors, including its own evaluation of his performance, in February 2014, the Committee recommended, and the independent members of our Board approved, an annual incentive award of $7,800,000 for Mr. Strangfeld for 2013, or approximately 1.39 times his target award amount. This award compares to an annual incentive award of $5,630,000 for 2012, representing a 39% increase. Of the $7,800,000, $2,340,000 was mandatorily deferred into the Book Value Performance Program.
Mr. Strangfeld | ||||||||
 | ANNUAL INCENTIVE AWARD DECISION Based on the Final Performance Factor and the Committee’s evaluation of his performance, in February 2017, the Committee recommended, and the independent members of our Board approved, an annual incentive award of $5,976,000 for Mr. Strangfeld for 2016, or approximately 0.996 times his target award amount. This award compares to an annual incentive award of $5,915,000 for 2015, representing an increase of 1.0%. Of the $5,976,000, $1,792,800 was mandatorily deferred into the Book Value Performance Program. | |||||||
KEY PERFORMANCE ACHIEVEMENTS In assessing the individual performance of Mr. Strangfeld, our CEO, the Committee, and the independent members of our Board, considered the evaluation of his performance that was conducted by the Lead Independent Director of our Board and the Committee Chair. This evaluation identified and examined a broad range of corporate and individual performance factors, including: | ||||||||
• After-tax AOI of $4.11 billion, and EPS, based onafter-tax AOI, of $9.13 in 2016; • Operating return on average equity of 12% for 2016, with solid core performance from our businesses partly offset by the impact of a number of inherently variable and episodic items including our annual actuarial review; • Growth in adjusted book value per share of our Common Stock, to $78.95 at December 31, 2016 versus $73.59 per share at December 31, 2015, an increase of $5.36, or 7%, after payment of four quarterly dividends totaling $2.80 per share; • International Division’s 8% increase in constant dollar sales(1) in 2016 versus 2015; • Retirement account values of $386 billion at December 31, 2016, up 5% from a year earlier; • Asset Management’s assets under management of $1.04 trillion at December 31, 2016, up 8% from a year earlier; • Individual Life’s 7% increase in sales in 2016 versus 2015; • Group Insurancepre-tax adjusted operating income of $220 million for 2016, up 25% from 2015; • Completed the acquisition of a 40% stake in AFP Habitat, a leading provider of retirement services in Chile; | • Took actions to restructure the Individual Annuities business to reduce capital volatility and improve earnings and cash flow prospects; • Returned $3.2 billion of capital to shareholders, including $2.0 billion through our share repurchase program and $1.2 billion in the form of Common Stock dividends, compared to a total of $2.1 billion of shareholder distributions in 2015. The Company has one of the highest dividend yields among its peers and targets the allocation of 60% of earnings over time towards capital distributions and accretive actions; • Meaningful progress in our short-term and long-term leadership, talent, and succession planning priorities; • Introduction of new products and rebalancing of product mix in order to adapt to changing market conditions, diversify risks and maintain appropriate returns; • The Company’s ongoing constructive engagement with the Federal Reserve, international regulators, and other supervisory bodies; and • Despite a challenging interest rate environment, the Company’s share price increased 28% and TSR is 33% over the last year versus a 10% increase in the Standard & Poor’s 500. • The Company’s one-year TSR placed it in the 84th percentile relative to the 20 companies in its compensation peer group. | |||||||
(1) As used throughout, sales are based on annualized new business premiums. | ||||||||
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| Compensation Discussion and |
Other NEOsOTHER NEOS
In the case of the other NEOs, Mr. Strangfeld formulated recommendations for each individual based on the Final Performance Factor and his assessment of their performance, and presented these recommendations to the Committee for its consideration. Based on these recommendations,the Final Performance Factor, as well as the key drivers previously describedthese recommendations and its own evaluation of their performance, the Committee recommended, and the independent members of our Board of Directors approved, the following annual incentive awards for each of the other NEOs:
MR. FALZON
Performance assessment
Among the factors the Committee considered in determining the amount of Mr. Falzon’s award were:
His leadership in corporate financing activities, including the issuance of long-term debt totaling $2.3 billion for general corporate purposes and the repayment, prior to maturity, of high coupon debt totaling $1.5 billion;
His acumen in capital management and cash flow planning, including the return of $750 million to shareholders during 2013 through our share repurchase program, transition to a quarterly Common Stock dividend schedule, and a 32.5% increase in the quarterly dividend in the fourth quarter;
His instrumental role in the enhancement of our financial flexibility through a ground-breaking transaction in November providing a $1.5 billion source of liquidity to Prudential Financial, Inc. through
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 | ANNUAL INCENTIVE AWARD DECISION Consistent with the Final Performance Factor, Mr. Falzon’s annual incentive award was $2,990,000 or approximately 0.997 times his target award amount. This award compares to an annual incentive award of $2,600,000 for 2015, representing an increase of 15.0%. Of the $2,990,000, $897,000 was mandatorily deferred into the Book Value Performance Program. | |||||||
KEY PERFORMANCE ACHIEVEMENTS In assessing the individual performance of Mr. Falzon, the Committee identified and examined a broad range of corporate and individual performance factors, including: | ||||||||
• After-tax AOI of $4.11 billion and EPS, based onafter-tax AOI, of $9.13 in 2016; • Operating return on average equity of 12% for 2016, with solid core performance from our businesses partly offset by the impact of a number of inherently variable and episodic items including our annual actuarial review; • His acumen in capital management and cash flow planning, including the return of $3.2 billion to shareholders during 2016, through our share repurchase program and Common Stock dividends, representing over a 50% increase from 2015; • His leadership on initiatives to reduce the Company’s use of financial leverage, resulting in a reduction of total debt outstanding by $1.6 billion in 2016; • His effective oversight of our liquidity position, including the maintenance of $4.5 billion* of cash and highly liquid assets at the parent company level at December 31, 2016; | • His instrumental role in restructuring our Individual Annuities business, which resulted in the initial distribution of approximately $1 billion to the parent company from the restructuring and a further distribution of approximately $1 billion driven by earnings and is expected to reduce capital volatility and improve earnings and cash flow prospects; • His key role in management of the statutory capital position of our insurance companies, resulting in a risk-based capital ratio | |||||||
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His effective supervision of internal financial and accounting functions; and • His leadership in the Company’s ongoing engagement with the Federal Reserve, international regulators and other supervisory bodies. |
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Annual incentive award decision
Mr. Falzon’s annual incentive award was $1,990,000 or approximately 1.37 times his target award amount. This award compares to an annual incentive award of $910,000 for 2012, representing an increase of 119%. Of the $1,990,000, $597,000 was mandatorily deferred into the Book Value Performance Program.
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MR. CARBONE
Performance Assessment
Mr. Carbone resigned as Chief Financial Officer effective March 4, 2013 and was succeeded in this position by Mr. Falzon. In determining Mr. Carbone’s annual incentive award the Committee considered Mr. Carbone’s contributions as Chief Financial Officer early in 2013, including in many of the areas noted above with respect to Mr. Falzon, his assistance with the transition of his responsibilities as Chief Financial Officer to Mr. Falzon and his effective performance on certain projects subsequent to his resignation as Chief Financial Officer.
Annual incentive award decision
Mr. Carbone’s annual incentive award was $2,500,000 or approximately 1.43 times his target award amount. The award compares to an annual incentive award of $2,475,000 for 2012, representing an increase of 1%.
| Notice of Annual Meeting of Shareholders and | 49 | |||||
| Compensation Discussion and |
MR. GRIER
Performance assessment
Among the factors the Committee considered in determining the amount of Mr. Grier’s award were:
His leadership in enhanced capital management, including our transition to a quarterly Common Stock dividend schedule, a 32.5% increase in the quarterly dividend in the fourth quarter, and the return of $750 million to shareholders under our share repurchase program during 2013;
His acumen in capital deployment and business development, including a key role in our completion of the acquisition of The Hartford’s Individual Life Insurance Business;
Mr. Grier | ||||||||
 | ANNUAL INCENTIVE AWARD DECISION Consistent with the Final Performance Factor, Mr. Grier’s incentive award was $5,080,000 or approximately 0.996 times his target award amount. This award compares to an annual incentive award of $5,100,000 for 2015, representing a decrease of 0.4%. Of the $5,080,000, $1,524,000 was mandatorily deferred into the Book Value Performance Program. | |||||||
KEY PERFORMANCE ACHIEVEMENTS In assessing the individual performance of Mr. Grier, the Committee identified and examined a broad range of corporate and individual performance factors, including: | ||||||||
• After-tax AOI of $4.11 billion and EPS, based onafter-tax AOI, of $9.13 in 2016; • Operating return on average equity of 12% for 2016, with solid core performance from our businesses partly offset by the impact of a number of inherently variable and episodic items including our annual actuarial review; • His leadership in enhanced capital management, including the return of $3.2 billion to shareholders during 2016, through our share repurchase program and Common Stock dividends, representing over a 50% increase from 2015. The Company has one of the highest dividend yields among its peers and targets the allocation of 60% of earnings towards capital distributions and accretive actions over time; • His oversight of risk management, including | • His acumen in capital deployment and business development, including a key role in the | |||||||
• | His successful service as our Company’s and an industry spokesperson | |||||||
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| Compensation Discussion and Analysis |
Mr. Lowrey | ||||||||
 | ANNUAL INCENTIVE AWARD DECISION Consistent with the Final Performance Factor, Mr. Lowrey’s incentive award was $3,985,000 or approximately 0.996 times his target award amount. This award compares to an annual incentive award of $4,250,000 for 2015, representing a decrease of 6.2%. Of the $3,985,000, $1,195,500 was mandatorily deferred into the Book Value Performance Program. | |||||||
KEY PERFORMANCE ACHIEVEMENTS In assessing the individual performance of Mr. Lowrey, the Committee identified and examined a broad range of corporate and individual performance factors, including: | ||||||||
• His efforts in leading our International Businesses to earnpre-tax AOI of $3.1 billion for 2016, a 3% increase from 2015 before the impact of changes in currency exchange rates; • His role in achieving an 8% increase in constant dollar sales in 2016 compared to 2015; • His oversight of our • His leadership in the active management of proprietary and third party distribution at Gibraltar Life, which achieved constant dollar sales of $1.7 billion in 2016, representing a 7% increase from 2015; | ||||||||
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Annual incentive award decision
Mr. Grier’s annual incentive award was $6,500,000 or approximately 1.35 times his target award amount. This award compares to an annual incentive award of $4,825,000 for 2012, representing an increase of 35%. Of the $6,500,000, $1,950,000 was mandatorily deferred into the Book Value Performance Program.
MR. BAIRD
Performance assessment
Among the factors the Committee considered in determining the amount of Mr. Baird’s award were:
His efforts in leading our International businesses to a 17% increase in pre-tax AOI for 2013, compared to 2012;
His leadership in the business integration of the acquired AIG Star Life Insurance Co., Ltd. and AIG Edison Life Insurance Company, resulting in realization of substantially all of the targeted $250 million in annualized cost savings as of December 31, 2013;
| • | His contributions to the successful adaptation to current market conditions of major product lines serving death protection and retirement needs in our key international |
• |
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His role in helping drive expansion into new markets outside of • His overall leadership of the International Businesses including comprehensive succession planning. | ||||||||
Annual incentive award decision
Mr. Baird’s annual incentive award was $4,050,000 or approximately 1.35 times his target award amount. This award compares to an annual incentive award of $3,300,000 for 2012, representing an increase of 23%. Of the $4,050,000, $1,215,000 was mandatorily deferred into the Book Value Performance Program.
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| Compensation Discussion and |
MR. LOWREY
Performance assessment
Among the factors the Committee considered in determining the amount of Mr. Lowrey’s award were:
His efforts in leading our U.S. Retirement business to achievement of record-high pretax adjusted operating income of $1,039 million for 2013 and strong sales and net flows, resulting in record-high Retirement account values of approximately $323 billion as of December 31, 2013;
His instrumental role in the successful adaptation of key products in our Annuities business to the current market environment, with the Annuities business surpassing the $150 billion milestone in account values as of December 31, 2013;
Mr. Pelletier | ||||||||
 | ANNUAL INCENTIVE AWARD DECISION Consistent with the Final Performance Factor, Mr. Pelletier’s incentive award was $3,985,000 or approximately 0.996 times his target award amount. This award compares to an annual incentive award of $3,200,000 for 2015, representing an increase of 24.5%. Of the $3,985,000, $1,195,500 was mandatorily deferred into the Book Value Performance Program. | |||||||
KEY PERFORMANCE ACHIEVEMENTS In assessing the individual performance of Mr. Pelletier, the Committee identified and examined a broad range of corporate and individual performance factors, including: | ||||||||
• His efforts in leading our Retirement business to achieve account values of $386 billion at December 31, 2016, a 5% increase from a year earlier; • His instrumental role in the expansion of our leading position in the pension risk transfer market, including the completion of approximately $5 billion of new funded cases in 2016; • His contributions to the success of our Asset Management business, which • His oversight of our Individual Life Insurance business, which produced a 7% increase in sales in 2016, as compared to a year earlier; | ||||||||
• His |
• | His • His overall leadership of the U.S. Businesses including | |||||||
Annual incentive award decision
Mr. Lowrey’s annual incentive award was $5,600,000 or approximately 1.40 times his target award amount. This award compares to an annual incentive award of $4,050,000 for 2012, representing an increase of 38%. Of the $5,600,000, $1,680,000 was mandatorily deferred into the Book Value Performance Program.
Long-Term Incentive Program
We provide a long-term incentive opportunity to motivate and reward our executive officers for their contributions toward achieving our business objectives by tying these incentives to the performance of our Common Stock and book value over the long term, to further reinforce the link between the interests of our executive officers and our shareholders, and to motivate our executive officers to improve our multi-year financial performance. Our practice is to grant long-term incentive awards annually in the form of a balanced mix of performance shares and units, stock options, and book value units to our officers at the level of senior vice president and above, including the NEOs, in amounts that are consistent with competitive practice.
In February 2014,The mix of long-term incentives granted in 2016 to align to changes in market practice and to achieve a more strongly performance-based program, the Committee changed the long-term incentive mix to provide a greater portion in performance shares and units and less in stock options for awards made with respect to 2013 performance. The shift in this mixNEOs is shown in the table below:
| For Awards in 2013 | For Awards in 2014 | |||||||
| Performance Shares and Units | 40 | % | 60 | % | ||||
| Stock Options | 40 | % | 20 | % | ||||
| Book Value Units | 20 | % | 20 | % | ||||
| Performance Shares and Units | 60 | % | ||
| Stock Options | 20 | % | ||
| Book Value Units | 20 | % |
In determining the amount of individual long-term incentive awards, the Committee considers a senior executive’s individual performance during the immediately preceding year, potential future contributions, his or her prior year’s award value, and retention considerations, as well as market data for the executive officer’s position at the companies in the Peer Group. In addition, in the case of long-term incentive awards to any NEO who is subject to Section 162(m), the total amount of performance shares and units, restricted stock units, and book value units, as well as the annual incentive payment in any tax year, may not exceed 0.6% of our pre-tax AOI for the prior year.
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Long-term incentive awards may also be granted when an individual is promoted to or within, a senior executive position to recognize the increase in the scope of his or her role and responsibilities. From time to time, we may make special awards in the form of restricted stock units, to recognize major milestones, or selective awards in situations involving a leadership transition.
Performance SharesIn addition, for all long-term incentive awards granted in 2014 or earlier to any NEO who is subject to Section 162(m), the total payout amount for performance shares and Unitsunits, restricted stock units, and book value units, as well as the 2016 annual incentive payment, may not exceed 0.6% of ourpre-tax AOI for the prior year. For all such long-term awards granted in 2015 and subsequent years, the total payout amount to any NEO subject to Section 162(m) may not exceed 0.4% of the highestpre-tax AOI reported for any of the three fiscal years ended prior to the year of payment, provided that there is positive AOI in at least one fiscal year during which the award is outstanding for at least 276 days of that year. For annual incentive payments relating to 2017 and subsequent performance years, there is a separate limit for any NEO subject to Section 162(m) of 0.4% of ourpre-tax AOI for the applicable performance year.
PERFORMANCE SHARES AND UNITS
Performance shares and units align a portionthe majority of our long-term incentive values to the achievement of our key ROE goals over a three-year performance period. AwardStarting with the February 2014 awards with respect to the 2014 to 2016 performance period, award payouts generally range from 0% to 150%125% of the target number of shares and units. However, forIn past years, maximum awards ranged up to 150% of the target number of shares. Beginning with the February 2014 awards with respect to the Committee
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limited the maximum award to 125% of target consistent2016 performance period and ending with the Company’s publicly disclosed sustainable ROE objective of 13%February 2016 awards with respect to 14%. Thethe 2016 to 2018 performance period, the preliminary payout iswill be based on the average ROE achievement over the three-year performance period relative to the goals set at the start of the period as established by the Committee.
Also, for the February 2015 awards with respect to the 2015 to 2017 performance period and the February 2016 awards with respect to the 2016 to 2018 performance period, we used a relative performance modifier. The modifier provided a balance between absolute performance and performance relative to the North American Life Insurance subset of the Peer Group and is based on the Company’s three-year performance in ROE, book value per share growth and EPS growth. The modifier increases or decreases the award payment by up to 10% within the 0% to 125% range.
Beginning with the February 2017 awards with respect to the 2017 to 2019 performance period, the preliminary payout will be based on two equally-weighted financial metrics: (i) average ROE achievement over the three-year performance period relative to the goals set at the start of the period as established by the Committee and (ii) average ROE achievement over the three-year performance period relative to the median ROE results over this period of the North American Life Insurance subset of the Peer Group. This change to the performance shares and units program further solidifies the balance between absolute performance and performance relative to life insurer peers. Accordingly, the use of a relative performance modifier was eliminated starting with the February 2017 awards.
Performance unit awards are denominated in share equivalents and have the same value as the performance share awards on the award payment date. Dividend equivalents are paid retroactively on the final number of performance shares and units paid out, up to the target number of shares and units.
ROE is determined usingafter-tax AOI divided by adjusted book value. The ROE figures are also subject to standard adjustments for one-time items and Standard & Poor’s 500 performance as part of ourpre-set established formulaic framework.
For awards commencing in 2013 and thereafter and payouts in respect of certain years within the performance periods of outstanding awards, ROE will also be adjusted to exclude the non-economic effects as of December 31, 2012 and for subsequent periods of foreign exchange remeasurement of non-yen liabilities and assets.
While the program allows the Committee to make a discretionary adjustment by up to 15% of the earned awardsshares and units based on quantitative and qualitative factors, the Committee generally has chosen not to exercise thisrarely exercised discretion and did not exercise discretion for 2013 awards. In the event of any extraordinary circumstances2014 awards that it determinespaid out in its sole discretion, the Committee may make additional adjustments to the final award values, either collectively or on an individual basis.February 2017.
Stock OptionsSTOCK OPTIONS
Stock options provide value based solely on stock price appreciation. Stock options are granted with a maximum term of ten years.One-third of the option grants vest on each of the first three anniversaries of the date of grant. The exercise price is based on the closing market price of a share of our Common Stock on theThe New York Stock Exchange on the date of grant.
Book Value Performance Program
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| Compensation Discussion and Analysis |
Our
BOOK VALUE PERFORMANCE PROGRAM
The Book Value Performance Program is part of our long-term incentive program. This program is intended to link the incentive payments to a measure of book value per share — share—a key metric in valuing insurance companies, banks, and investment firms
that is closely followed by investors. BookWe calculate adjusted book value per share is calculated by dividing our adjusted book value by the number of shares of our Common Stock outstanding. Our calculations of adjusted book value and adjusted book value per share, as described in Appendix A to this Proxy Statement, exclude certain balance sheet items that doare not, and may never flow throughbe, reflected in the income statement. Unlike the financial measures based on AOI that are used in other aspects of our executive compensation program, the adjusted book value per share metric takes into consideration realized gains and losses in our investment portfolio. The key features of the Book Value Performance Program for our NEOs are:
Awards are granted and denominated in book value units that are funded from two sources:
| – | the allocation of 20% of a participant’s long-term incentive award value for the year as determined by the Committee; and |
| – |
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Once granted, the value of these book value units then tracks changes in book value per share for each participant.
For purposes of the Book Value Performance Program, book value units are based on the equity attributable to our Financial Services Businesses divided by the number of shares of our Common Stock outstanding at the end of the period, on a fully diluted basis. For 2013 and thereafter, theseThese units track the value of “bookbook value per share of Common Stock, excluding total accumulated other comprehensive income and thenon-economic effects as of December 31, 2012 and for subsequent periods of foreign currency exchange rate remeasurement ofnon-yen liabilities and assets” as noted included in our Quarterly Financial Supplements.
One-third of a participant’s annual award of book value units is distributed in cash in each of the three years following the year of grant.
The book value units of participants, including the NEOs, are subject to forfeiture (or “clawback”) in the event that the Committee determines, in its discretion, that a participant has engaged in conduct, or omitted taking appropriate action, which was a contributing factor to any material restatement of our consolidated annual financial statements.
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| (1) | Excluding total accumulated other comprehensive income and the cumulative impact of gains and losses resulting from foreign currency exchange rate remeasurement included in net income (loss). |
| (2) | Does not include the impact of changes in share |
| (3) | Includes realized investment gains and losses and related charges and adjustments, and results from divested businesses. |
| (4) |
For a reconciliation of Adjusted Book Value to the most comparable GAAP measure, see Appendix A to this Proxy Statement.
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The NEO’sNEOs’ awards, distributions and accumulated holdings under the Book Value Performance Program are as follows:
| Named Executive Officer | Number of Book Value January 1, 2013 | Value of Book Value Units Held at January 1, 2013(1) ($) | Value of Book Value Units | Value of Book Value Units | Number of Book Value Units Held at December 31, 2013 (#) | Value of Book Value Units Held at December 31, 2013(4) | ||||||||||||||||||||||||||||||||||||||||||
| Number of Book Value Units Held at January 1, 2016 (#) | Value of Book Value Units Held at January 1, 2016(1) ($) | Value of Book Value Units | Value of Book Value Units Awarded in 2016(3) ($) | Number of Book Value Units Held at December 31, 2016 (#) | Value of Book ($) | |||||||||||||||||||||||||||||||||||||||||||
| John R. Strangfeld | 88,655 | 5,152,629 | 2,349,097 | 3,389,035 | 106,548 | 6,391,815 | 126,729 | $ | 9,325,987 | $ | 4,612,768 | $ | 3,774,578 | 115,339 | $ | 9,106,014 | ||||||||||||||||||||||||||||||||
| Robert M. Falzon | 6,574 | 382,081 | 178,139 | 491,056 | 11,958 | 717,360 | 39,789 | $ | 2,928,073 | $ | 1,266,410 | $ | 1,580,124 | 44,052 | $ | 3,477,905 | ||||||||||||||||||||||||||||||||
| Richard J. Carbone | 25,103 | 1,458,986 | 624,212 | 1,142,581 | 34,022 | 2,040,980 | ||||||||||||||||||||||||||||||||||||||||||
| Mark B. Grier | 71,200 | 4,138,144 | 1,883,496 | 2,847,589 | 87,788 | 5,266,402 | 105,300 | $ | 7,749,027 | $ | 3,840,736 | $ | 3,130,077 | 95,643 | $ | 7,551,015 | ||||||||||||||||||||||||||||||||
| Edward P. Baird | 36,998 | 2,150,324 | 933,526 | 1,690,071 | 50,015 | 3,000,400 | ||||||||||||||||||||||||||||||||||||||||||
| Charles F. Lowrey | 46,290 | 2,690,375 | 1,143,455 | 2,115,103 | 63,008 | 3,779,850 | 79,723 | $ | 5,866,816 | $ | 2,902,390 | $ | 2,225,067 | 70,519 | $ | 5,567,475 | ||||||||||||||||||||||||||||||||
| Stephen Pelletier | 44,059 | $ | 3,242,302 | $ | 1,356,705 | $ | 1,860,061 | 50,899 | $ | 4,018,476 | ||||||||||||||||||||||||||||||||||||||
| Represents the aggregate market value of the number of book value units held at January 1, |
| Represents the aggregate market value distributed on February 19, 2016 for all NEOs and also for Mr. Pelletier on April 12, 2016. |
| 3 | Represents the aggregate market value awarded on February 9, 2016 for all NEOs. |
| 4 | Represents the aggregate market value of the |
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Long-Term Incentive Award Decisions for 2013LONG-TERM INCENTIVE AWARD DECISIONS FOR 2016
In February 2014,2017, the Committee granted long-term incentive awards to the NEOs based on updated market data and its assessment of their individual performance during 2013.2016. These awards were granted in the form of performance shares (30%), performance units (30%), stock options (20%), and book value units (20%) under the Book Value Performance Program (in addition to the mandatory deferral of 30% of each NEO’s annual incentive award). The Committee determined that this long-term incentive mix would appropriately reward the NEOs for their 20132016 performance, motivate them to work towards achieving our long-term objectives, further reinforce the link between their interests and the interests of our shareholders, and provide a balanced portfolio composed of performance
shares and units (which provide value based upon attainment of specific performance goals)goals and performance relative to peers), stock options (which provide value based solely on stock price appreciation) and book value units (which provide value based on changes in our book value per share).
The following table presents the long-term incentive awards granted to each NEO in February 2014,2017, including our Book Value Performance Program, and includes the mandatory deferrals of 30% of thetheir annual incentive award. Awards are expressed as dollar compensation values in the table. These awards generally will not be reported in the Summary Compensation Table until 2015.2018. For discussion of the long-term incentive awards granted in February 20132016 for 20122015 performance and included in this year’s Summary Compensation Table, see the CD&A in our 20132016 Proxy Statement.
| Named Executive��Officer | | Compensation Value of Book Value Units | (1) | | Compensation Value of Stock Options | | | Compensation Value of Performance Shares | | | Compensation Value of Performance Units | | Total | |||||||
| John R. Strangfeld | $ | 4,040,000 | $ | 1,700,000 | $ | 2,550,000 | $ | 2,550,000 | $ | 10,840,000 | ||||||||||
| Robert M. Falzon | $ | 1,117,000 | $ | 520,000 | $ | 780,000 | $ | 780,000 | $ | 3,197,000 | ||||||||||
| Richard J. Carbone | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
| Mark B. Grier | $ | 3,350,000 | $ | 1,400,000 | $ | 2,100,000 | $ | 2,100,000 | $ | 8,950,000 | ||||||||||
| Edward P. Baird | $ | 1,915,000 | (2) | $ | 700,000 | $ | 1,050,000 | (2) | $ | 1,050,000 | (2) | $ | 4,715,000 | |||||||
| Charles F. Lowrey | $ | 2,580,000 | $ | 900,000 | $ | 1,350,000 | $ | 1,350,000 | $ | 6,180,000 |
| Named Executive Officer | | Compensation Value of Book Value Units(1) | | | Compensation Value of Stock Options | | | Compensation Value of Performance Shares | | | Compensation Value of Performance Units | | Total | |||||||
| John R. Strangfeld | $ | 3,792,800 | $ | 2,000,000 | $ | 3,000,000 | $ | 3,000,000 | $ | 11,792,800 | ||||||||||
| Robert M. Falzon | $ | 1,697,000 | $ | 800,000 | $ | 1,200,000 | $ | 1,200,000 | $ | 4,897,000 | ||||||||||
| Mark B. Grier | $ | 3,124,000 | $ | 1,600,000 | $ | 2,400,000 | $ | 2,400,000 | $ | 9,524,000 | ||||||||||
| Charles F. Lowrey | $ | 2,195,500 | $ | 1,000,000 | $ | 1,500,000 | $ | 1,500,000 | $ | 6,195,500 | ||||||||||
| Stephen Pelletier | $ | 2,095,500 | $ | 900,000 | $ | 1,350,000 | $ | 1,350,000 | $ | 5,695,500 |
| Includes amounts that were mandatorily deferred from the Annual Incentive |
Performance Share Awards
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| Compensation Discussion and Analysis |
PERFORMANCE SHARE AND PERFORMANCE UNIT AWARDS
The NEOs currently have three performance share and unit awards outstanding. In February 2014,2017, the Committee granted the 2014 performance share awards.and unit awards for the 2017 to 2019 performance period. The key features of these three awards are as follows:
Performance Period | Performance Measures | Performance Measure Target Levels | Target Number of Units to be Awarded | Actual Number of | ||||
ROE | ||||||||
Book value per share growth EPS growth | Average ROE of 13.5% for the | 100% at target
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125% if average ROE is 14% or | To be determined between 0% and 125% of the target number by the Committee in February | |||||||
| 2016–2018 | - ROE - Relative Performance: ROE Book value per share growth EPS growth | Average ROE of 13% for the 2016 through 2018 performance period. Weighted average relative performance ranking of 4 on relative ROE, book value per share growth and EPS growth. | 100% at target level and 125% if average ROE is 14% or more, in each case, assuming a relative performance modifier of zero. | To be determined between 0% and 125% of the target number by the Committee in February 2019 based on average ROE over the 2016-2018 performance period compared to the Company’s ROE targets, as modified by the relative performance modifier. | ||||
| 2017–2019 | - ROE - Relative ROE versus life insurer peer group | Average ROE of 12% and ROE performance equal to the median performance of the North American Life Insurance subset of the Peer Group for the 2017 through 2019 performance period. | 100% at target level and 125% if average ROE is 13.5% or more and ROE performance exceeds the median performance of the North American Life Insurance subset of the Peer Group by 3% or more. | To be determined between 0% and 125% of the target number by the Committee in February 2020 based on average ROE over the 2017-2019 performance period compared to the Company’s ROE targets and ROE performance as compared to the median performance of the North American Life Insurance subset of the Peer Group. |
In February 2014,2016, for the 2016 awards, the Committee aligned the target award opportunity to 13% average ROE during the performance period, recognizing that 13% ROE represents second quartile performance relative to the North American Life Insurance subset of the Peer Group.
In February 2017, for the 2017 awards, the Committee aligned the target award opportunity to 12% average ROE during the performance period, recognizing that the Company has changed its near-to-intermediate term ROE target from 13% to 14% to 12% to 13%, reflecting a sustained low interest rate environment, and that 12% ROE exceeds the estimated ROEs of its closest comparable peers within the North American Life Insurance subset of the Peer Group.
In February 2017, the NEOs received payouts with respect to the performance share and unit awards that were granted in February 20112014 for the three-year performance period ended December 31, 2013.2016. These awards were paid at 126.55% of1.25 times the target number of shares and units initially awarded based on our actual performanceaverage ROE relative to the annual goalsour ROE targets for ROE and EPS during the three-year performance period.
| 2011 | 2012 | 2013 | ||||||||||||||||||||||
| EPS | ROE | EPS | ROE | EPS | ROE | |||||||||||||||||||
Goal(1): | $ | 6.15 | 9-11% | $ | 6.50 | 10.9-11.9% | $ | 7.70 | 12.7-13.7% | |||||||||||||||
Actual(2): | $ | 7.12 | 11.39% | $ | 6.54 | 11.26% | $ | 8.80 | 14.9% | |||||||||||||||
Annual Earnout | 1.3674 | 1.1951 | 1.0303 | 1.0 | 1.5000 | 1.5 | ||||||||||||||||||
| Annual Blended Earnout | 1.2812 | 1.0152 | 1.5000 | |||||||||||||||||||||
Average ROE over the 2014-2016 Performance Period | ||||
Goal: | 13.5% | |||
Actual(1): | 14.3% | |||
Earnout Factor: | 1.25 | |||
| (1) |
| Actual figures adjusted forone-time items and Standard & Poor’s 500 performance as under the Annual Incentive Program for each year. |
The final award payments to the NEOs in February 2017 for the 2014 to 2016 performance period were:
| Named Executive Officers | Target Number of Shares/Units Awarded(1) | Actual Number of Shares/Units Awarded(1) | ||||||
John R. Strangfeld | 57,726 | 72,158 | ||||||
Robert M. Falzon | 17,658 | 22,074 | ||||||
Mark B. Grier | 47,540 | 59,426 | ||||||
Charles F. Lowrey | 30,562 | 38,204 | ||||||
Stephen Pelletier | 20,674 | 25,844 | ||||||
| 1 | Target and actual number of awards are 50% shares and 50% units. |
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| Supplemental Compensation |
The final award payments to the NEOs were:
| Named Executive Officer | Target Number of Shares/Units Awarded | Actual Number of Shares/Units Awarded | ||||||
John R. Strangfeld | 52,272 | 66,150 | ||||||
Robert M. Falzon | 3,268 | 4,136 | ||||||
Richard J. Carbone | 9,148 | 11,578 | ||||||
Mark B. Grier | 40,510 | 51,268 | ||||||
Edward P. Baird | 19,602 | 24,808 | ||||||
Charles F. Lowrey | 22,870 | 28,944 | ||||||
SUPPLEMENTAL COMPENSATION ANALYSISSupplemental Compensation Analysis
Total Direct CompensationTOTAL DIRECT COMPENSATION
The following table illustrates the Committee’s perspective on the total direct compensation (base salary, annual incentive award, and long-term incentives) of the NEOs for the 20122015 and 20132016 performance years. This table is not a substitute for the compensation tables required by the SEC and included under “Compensation of Named Executive Officers” contained in this Proxy Statement. However, we believe it provides a more accurate picture of how the Committee viewed its compensation actions for the NEOs based on our performance for each of these two years:
Named Executive Officer | 2012 Compensation | 2013 Compensation | Percentage Change | 2015 Compensation | 2016 Compensation | Percentage Change | ||||||||||||||||||
John R. Strangfeld | ||||||||||||||||||||||||
Base Salary | $ | 1,400,000 | $ | 1,400,000 | 0% | $ | 1,400,000 | $ | 1,400,000 | 0.00% | ||||||||||||||
Annual Incentive | $ | 5,630,000 | (1) | $ | 7,800,000 | (3) | 39% | $ | 5,915,000 | (1) | $ | 5,976,000 | (2) | 1.03% | ||||||||||
Long-Term Incentive(4) | $ | 8,500,000 | $ | 8,500,000 | 0% | |||||||||||||||||||
Long-Term Incentive(3) | $ | 10,000,000 | $ | 10,000,000 | 0.00% | |||||||||||||||||||
Total | $ | 15,530,000 | $ | 17,700,000 | 14% | $ | 17,315,000 | $ | 17,376,000 | 0.35% | ||||||||||||||
Robert M. Falzon | ||||||||||||||||||||||||
Base Salary | $ | 330,000 | $ | 650,000 | 97% | $ | 700,000 | (4) | $ | 770,000 | 10.00% | |||||||||||||
Annual Incentive | $ | 910,000 | (2) | $ | 1,990,000 | (3) | 119% | $ | 2,600,000 | (1) | $ | 2,990,000 | (2) | 15.00% | ||||||||||
Long-Term Incentive(4) | $ | 2,000,000 | $ | 2,600,000 | 30% | |||||||||||||||||||
Total | $ | 3,240,000 | $ | 5,240,000 | 62% | |||||||||||||||||||
Richard J. Carbone | ||||||||||||||||||||||||
Base Salary | $ | 700,000 | $ | 700,000 | 0% | |||||||||||||||||||
Annual Incentive | $ | 2,475,000 | (1) | $ | 2,500,000 | 1% | ||||||||||||||||||
Long-Term Incentive(4) | $ | 2,000,000 | $ | 0 | -100% | |||||||||||||||||||
Long-Term Incentive(3) | $ | 4,000,000 | $ | 4,000,000 | 0.00% | |||||||||||||||||||
Total | $ | 5,175,000 | $ | 3,200,000 | -38% | $ | 7,300,000 | $ | 7,760,000 | 6.30% | ||||||||||||||
Mark B. Grier | ||||||||||||||||||||||||
Base Salary | $ | 1,190,000 | $ | 1,190,000 | 0% | $ | 1,190,000 | $ | 1,190,000 | 0.00% | ||||||||||||||
Annual Incentive | $ | 4,825,000 | (1) | $ | 6,500,000 | (3) | 35% | $ | 5,100,000 | (1) | $ | 5,080,000 | (2) | -0.39% | ||||||||||
Long-Term Incentive(4) | $ | 7,000,000 | $ | 7,000,000 | 0% | |||||||||||||||||||
Total | $ | 13,015,000 | $ | 14,690,000 | 13% | |||||||||||||||||||
Edward P. Baird | ||||||||||||||||||||||||
Base Salary | $ | 770,000 | $ | 770,000 | 0% | |||||||||||||||||||
Annual Incentive | $ | 3,300,000 | (1) | $ | 4,050,000 | (3) | 23% | |||||||||||||||||
Long-Term Incentive(4) | $ | 3,500,000 | $ | 3,500,000 | 0% | |||||||||||||||||||
Long-Term Incentive(3) | $ | 8,000,000 | $ | 8,000,000 | 0.00% | |||||||||||||||||||
Total | $ | 7,570,000 | $ | 8,320,000 | 10% | $ | 14,290,000 | $ | 14,270,000 | -0.14% | ||||||||||||||
Charles F. Lowrey | ||||||||||||||||||||||||
Base Salary | $ | 770,000 | $ | 770,000 | 0% | $ | 770,000 | $ | 770,000 | 0.00% | ||||||||||||||
Annual Incentive | $ | 4,050,000 | (1) | $ | 5,600,000 | (3) | 38% | $ | 4,250,000 | (1) | $ | 3,985,000 | (2) | -6.24% | ||||||||||
Long-Term Incentive(4) | $ | 4,500,000 | $ | 4,500,000 | 0% | |||||||||||||||||||
Long-Term Incentive(3) | $ | 4,750,000 | $ | 5,000,000 | 5.26% | |||||||||||||||||||
Total | $ | 9,320,000 | $ | 10,870,000 | 17% | $ | 9,770,000 | $ | 9,755,000 | -0.15% | ||||||||||||||
Stephen Pelletier | ||||||||||||||||||||||||
Base Salary | $ | 770,000 | $ | 770,000 | 0.00% | |||||||||||||||||||
Annual Incentive | $ | 3,200,000 | (1) | $ | 3,985,000 | (2) | 24.53% | |||||||||||||||||
Long-Term Incentive(3) | $ | 4,500,000 | $ | 4,500,000 | 0.00% | |||||||||||||||||||
Total | $ | 8,470,000 | $ | 9,255,000 | 9.27% | |||||||||||||||||||
| (1) | Thirty percent of this amount was mandatorily deferred into the Book Value Performance Program, which is part of the Long-Term Incentive Program. These amounts total |
| (2) |
| Thirty percent of this amount was mandatorily deferred into the Book Value Performance Program, which is part of the Long-Term Incentive Program. These amounts total |
| (3) | Represents the compensation value of long-term awards for each performance year. For example, the long-term values under the |
Total Shareholder Return
| (4) | Reflects annualized salary as of December 31, 2015. Effective February 22, 2016, Mr. Falzon received a salary increase of $70,000, resulting in an annualized salary of $770,000. |
REPORTED CHANGES IN PENSION VALUES
As part of its compensation review, the Compensation Committee considered the dollar amount change in pension value for Mr. Strangfeld and the other NEOs. The Company’s absolute and relative Total Shareholder Return (TSR) was very strong overchange in the last one, three and five-year time periods. Itpresent value of Mr. Strangfeld’s pension for 2016 reflects a number of factors, including his 39 years of service, his age, his average earnings, changes in interest rates and life expectancy assumptions used to calculate the pension plan obligations. These factors, as well as our plan design that updates average earnings every other year, resulted in an increase in Mr. Strangfeld’s pension accrual for 2016. Pension values may fluctuate significantly from year to year and it is expected that in 2017, should interest rates remain unchanged, the change in Mr. Strangfeld’s pension accrual will be substantially lower. Alternatively, if the discount rate were to rise, it is possible that Mr. Strangfeld’s change in our valuation duepension value in future years could be a negative amount, as it was for the years 2015 and 2013. Given this inherent volatility, the Compensation Committee will continue to earnings growth, expansion in our pricemonitor future accruals for Mr. Strangfeld and the other NEOs. The Traditional Pension Formula that applies to book multiple and dividend increases, including a 32.5% quarterly dividend increase announced in late 2013. Mr. Strangfeld was closed to employees hired on or after January 1, 2001.
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TOTAL SHAREHOLDER RETURN
The chart below shows our absolute TSRTotal Shareholder Return (“TSR”) and percentile ranking relative to the 2120 companies in our compensation peer groupPeer Group over multiplethe three time periods.periods indicated.
| Total Shareholder Return | Total Shareholder Return | |||||||||||||||||||||||
| 1-Year | 3-Year | 5-Year | 1-Year | 3-Year | 5-Year | |||||||||||||||||||
| Cumulative TSR | 77.17% | 70.62% | 243.30% | 33% | 24% | 135% | ||||||||||||||||||
| Annualized TSR | 77.17% | 19.49% | 27.98% | 33% | 7% | 19% | ||||||||||||||||||
| Percentile Rank | 90th | 76th | 91st | 84% | 49% | 56% | ||||||||||||||||||
With respect to our three-year TSR, and to a lesser extent our five-year TSR, Prudential is the only life insurer among our Peer Group that is subject to Federal regulation as anon-bank systemically important financial institution (“SIFI”).
The discussion of our SIFI status and our subsequent designation began in 2012 with our designation occurring in 2013. We believe this occurrence, as well as the questions on the additional regulatory requirements that might accompany this designation, among other factors, may have negatively impacted our three-year and five-year TSR.
CEO Realized and Realizable Pay AnalysisREALIZED AND REALIZABLE PAY ANALYSIS
The total compensation of our NEOs as reported in the 20132016 Summary Compensation Table is calculated in accordance with SEC rules. Under these rules, we are required to show the grant date fair value of equity and equity-based awards, even though the ability of our executivesexecutive officers to realize value from thesesuch awards is contingent on the achievement of certain performance conditions (for example,(including, in the case of stock options, the sustained increase in our stock price must appreciate for any value to be realized from stock options)price). The accompanying charts comparechart compares our CEO’s total compensation, as measured based on actual compensation received (or, with regard to pending awards, realizable pay based on the applicable performance elements and stock value at a relatively current time), to the amountamounts reported for him in the 2013 Summary Compensation Table for the periods shown.
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These charts illustrateThe chart illustrates that our executive compensation program is designed so that the amount of compensation that our CEO actually receives, or is expected to receive, may be higher or lower than the amount we are required to report in the Summary Compensation Table, depending on the performance of our Common Stock. They demonstrateStock and our performance relative to our key financial objectives. It demonstrates the strong alignment of the interests of our executivesexecutive officers with those of our shareholders.
CEO Total CompensationTOTAL COMPENSATION
Grant Date Fair Value vs. Realized and Realizable Gains (in thousands)
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• Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, book value units and stock options awarded each year. • Total compensation based on realized and realizable pay is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); | • Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, |
• | Total compensation based on realized and realizable | |||
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performance shares and units awarded in |
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WHY WE USE ADJUSTED OPERATING INCOME (“AOI”) INSTEAD OF GAAP NET INCOME(1)
Why don’t we use GAAP net income as our compensation performance measure?
We seek to compensate our senior executive officers based on their success in building shareholder value through the operation of the Company’s businesses. The Committee and the investment community do not believe GAAP net income optimally measures the creation of shareholder value because it may be significantly affected by items with limited economic impact, or that are otherwise not indicative of ongoing trends.
Why do we use AOI as our compensation performance measure?
The Committee believes AOI is superior to GAAP net income as a measure of our performance because AOI includes only our results of operations from ongoing operations and the related underlying profitability factors, and excludes items that are not indicative of ongoing trends. Among other things, AOI excludes items where the timing of the impact is subject to management discretion, items with limited economic impact, items that we expect to reverse over time, and items that are otherwise not indicative of our ongoing performance.
What are some examples of items included in GAAP net income, but excluded from AOI, and why are they excluded?
accumulated othercomprehensive income (loss) on our balance sheet under GAAP. Given that the gains and losses on the income statement for these insurance liabilities are offset by changes to accumulated other comprehensive income (loss) on our balance sheet, the impact on the Company isnon-economic and therefore not a reflection of shareholder value created or lost. The Company has taken steps to mitigate the impact of foreign currency exchange rate liability remeasurement on GAAP net income or loss, commencing in 2015. |
| • | Divested businesses. The contribution to GAAP net income or loss of divested businesses that have been or will be sold or exited or are in wind-down status are excluded from AOI since the results of divested businesses are not relevant to an understanding of the |
| (1) | For more information, see Appendix A to this Proxy Statement. |
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| Compensation Discussion and |
Post-Employment Compensation
Retirement Plans
We view retirement benefits as a key component of our executive compensation program because they encourage long-term service. Accordingly, we offer our employees, including the NEOs, a comprehensive benefits program that provides the opportunity to accumulate adequate retirement income. This program includes both defined benefit and defined contribution plans, as well as two supplemental retirement plans which allow highly compensated employees (that is employees whose compensation exceeds the limits established by the Internal Revenue Code for covered compensation and benefit levels) to receive the same benefits they would have earned but for these limitations. Further, we sponsor twothree supplemental executive retirement plans (SERPs)(“SERPs”) for certain eligible executive officers, including the NEOs, to offset the potential loss or forfeiture of retirement benefits under certain limited circumstances.circumstances or to provide additional benefits to certain key executives. For descriptions of these plans, including their titles, see “Pension Benefits.”
We also maintain the Prudential Insurance Company of America Deferred Compensation Plan (the “Deferred Compensation Plan”). We offer this plan to our executive officers, including the NEOs, as a competitive practice.
For a description of this plan, see “Nonqualified Deferred Compensation.”
We periodicallyPeriodically, we compare the competitiveness of our benefits programs for our employees, including retirement benefits, against other employers with whom we broadly compete for talent. It is our objective to provide our employees with a benefits package that is at or around the median of the competitive market when compared to other employers.
Severance and Change in Control Arrangements
Our Board has adopted a policy prohibiting us from entering into any severance or change in control agreement with any of our executive officers, including the NEOs, that provides for payments and benefits that exceed 2.99 times the sum of the executive officer’s base salary and most recently earned cash bonus, without shareholder approval or ratification. We do not provide excise tax payments, reimbursements, or“gross-ups” to any of our executive officers.
While our other executive officers are eligible for severance payments in the event of an involuntary termination of employment without “cause,” our CEO is not a participant in the severance program providing this benefit.
To enable us to offer competitive total compensation packages to our executive officers, as well as to ensure the ongoing retention of these individuals when considering potential takeoverstransactions that
may create uncertainty as to their future employment with us, we
offer certain post-employment payments and benefits to our executive officers, including the NEOs, upon the occurrence of several specified events. These payments and benefits are provided under two separate programs:
the Prudential Severance Plan for Senior Executives (the “Severance Plan”); and
the Prudential Financial Executive Change in Control Severance Program.
We have not entered into individual employment agreements with our executive officers. Instead, the rights of our executive officers with respect to post-employment compensation upon specific events, including death, disability, severance or retirement, or a change in control of the Company, are covered by these two programs.
We use plans, rather than individually negotiated agreements, to provide severance and change in control payments and benefits for several reasons. First, a “plan” approach provides us with the flexibility to change the terms of these arrangements from time to time. An employment agreement would require that the affected executive officer consent to any changes. Second, this approach is more transparent, both internally and externally. Internal transparency eliminates the need to negotiate severance or other employment separation payments and benefits on acase-by-case basis. In addition, it assures each of our executive officers that his or her severance payments and benefits are comparable to those of other executive officers with similar levels of responsibility and tenure.
OurAs previously noted, our executive officers, including the NEOs, except for our CEO, are eligible for severance payments and benefits in the event of an involuntary termination of employment without “cause.” These executive officers and our CEO are also eligible for “double trigger” severance payments and benefits in the event of an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a change in control of the Company. Our equity awards are also designed to be “double trigger,” so long as such awards are allowed to continue in effect following any change in control transaction on substantially equivalent terms and conditions to those applicable prior to such transaction.
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The payment of these awards at target achievement rewards the executive officer for his or her expected performance prior to the change in control transaction.
For detailed information on the estimated potential payments and benefits payable to the NEOs in the event of their termination of employment, including following a change in control of the Company, see “Potential Payments Upon Termination or Change in Control.”
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Perquisites and Other Personal Benefits
We do not provide our executive officers, including the NEOs, with perquisites or other personal benefits, except for the use of Company aircraft, Company-provided vehicles and drivers, and, in the case of our CEO and Vice Chairman, security services. These items are provided because we believe that they serve a necessary business purpose and represent an immaterial element of our executive compensation program. The cost allocated to the personal use of Company-provided vehicles and drivers, including commuting expenses, and the incremental cost associated with the security services, to the extent not reimbursed to us, are reported in the Summary Compensation Table. Our executive officers, including the NEOs, are required to reimburse us for the incremental cost of any personal use of Company aircraft.
We do not provide tax reimbursements or any other tax payments, including excise tax“gross-ups”,to any of our executive officers.
Perquisites and other personal benefits represent an immaterial element of our executive compensation program. In 2013, the NEOs received perquisites with an average incremental cost to the Company of under $21,000.
OTHER COMPENSATION RELATED POLICIESOther Compensation Related Policies
In addition to the other components of our executive compensation program, we maintain the policies described below. These policies are consistent with evolving best practices and help ensure that our executive compensation program does not encourage our executive officers to engage in behaviors that are beyond our ability to effectively identify and manage risk.
In 2015, we strengthened our clawback policy to cover all incentive compensation and to address material financial restatements and improper conduct (including failure to report).
The revised clawback policy covers all executive officers (including the NEOs) and applies to all incentive-based compensation (including stock options and other equity awards) paid to or in respect of an executive officer. The policy provides that if (i) the Company is required to undertake a material restatement of any financial statements filed with the SEC or (ii) an executive officer engages in improper conduct that either has had, or could reasonably be expected to have, a significant adverse reputational or economic impact on the Company or any of its affiliates or divisions, then the Board may, in its sole discretion, after evaluating the associated costs and benefits, seek to recover all or any portion of the incentive-based compensation paid to any such executive officer during the three-year period preceding the restatement, or the occurrence of the improper conduct, as the case may be.
The policy also requires us to disclose to our shareholders, not later than the filing of the next proxy statement the action taken by the Board, or the Board’s decision not to take action, with regard to compensation recovery following the occurrence of a material restatement or improper conduct, so long as such event has been previously disclosed in our SEC filings.
For purposes of the policy a “restatement” means any material restatement (occurring after the effective date of this policy) of any of the Company’s financial statements that have been filed with the SEC under the Exchange Act or the Securities Act of 1933, as amended. “Improper conduct” means willful misconduct (including, but not limited to, fraud, bribery or other illegal acts) or gross negligence, which, in either case, includes any failure to report properly, or to take appropriate remedial action with respect to, such misconduct or gross negligence by another person.
Other Long-Term Compensation Recovery Policies
In 2015, we adopted a “resignation notice period” requirement as part of the terms and conditions of all long-term incentive awards granted to certain designated grades of executives, including the NEOs. The requirement is applicable to awards granted
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in 2015 and subsequent years. The requirement is intended to reduce the adverse and disruptive effect of a sudden voluntary departure of an executive subject to the requirement, and requires him or her to provide notice for a specified period prior to the effective date of a voluntary resignation, or otherwise risk forfeiting his or her outstanding long-term incentive awards.
The terms and conditions of long-term incentive awards also provide for forfeiture in the event a recipient violates applicablenon-solicitation ornon-competition agreements.
Process for Approving Long-Term Incentive Awards
The Committee approves long-term incentive awards (including stock options, book value units, performance shares, performance units and, restricted stock units) on an annual basis at its regularly scheduled February meeting.
The Committee has delegated authority to management to approve long-term incentive awards for new hires, promotions, and retention purposes within specified limits to employees below the level of senior vice president. These awards are effective on the 15th of the month following the applicable event. The Committee approves any long-term incentive awards to newly hired or promoted senior executives. The grant date for these awards is the applicable meeting date of the Committee at which the awards are approved.
Under the terms of our 2016 Omnibus Incentive Plan, (the “Omnibus Plan”), which was approved by shareholders in 2003,2016, stock options are required to be priced at the fair market value of our Common Stock on the date of grant, which is based on the closing
market price of our Common Stock on the date of grant. The number of shares of our Common Stock subject to a stock option grant to an individual is determined by dividing the compensation value of the grant by the fair value of each stock option based on the average closing market price of our Common Stock on the NYSE for the final20-day trading period in the month prior to the grant date.
The number of performance shares and units or restricted stock units awarded to an individual is determined by a formula that divides the compensation value of the award by the average closing market price of our Common Stock on the NYSE for the final20-day trading period in the month prior to the grant date.
Stock Ownership Guidelines
We have adopted stock ownership guidelines for our executive officers to encourage them to build their ownership position in our Common Stock over time by direct market purchases, making investments available through the PESP and the Deferred Compensation Plan, and retaining shares they earn under long-term incentive awards. TheseIn 2015, we revised the guidelines to increase the CEO stock ownership level from 500% to 700% of base salary. The guidelines are framed in terms of stock value as a percentage of base salary as follows:
| Position | Stock Value as Percentage | |||
Chief Executive Officer | ||||
Vice Chairman and Executive Vice Presidents | 300% | |||
Senior Vice Presidents | 200% | |||
Each of the NEOs with the exception of the new CFO, meets his individual stock ownership level. Under the current stock ownership guidelines, once an executive officer attains his or her individual ownership level, he or she will remain in compliance with the guidelines despite future changes in stock price and base salary, as long as his or her holdings do not decline below the number of shares at the time the stock ownership guidelines were met.
Stock Retention Requirements
We have adopted stock retention requirements for our executive officers. Each executive officer is required to retain 50% of the net shares (after payment of the applicable exercise price (if any), fees, and taxes) acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. The executive officer is required to hold such shares until the later of one year following the date of acquisition of such shares (even if thisone-year holding period extends beyond termination of employment) or the date that he or she satisfies our stock ownership guidelines.
Prohibition of Derivatives Trading, and Hedging and Pledging of Our Securities
Our Board has adopted a policy prohibiting all employees, including the NEOs, and members of the Board from
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engaging in any hedging transactions with respect to any of our equity securities of the Company held by them, which includes the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) designed to hedge or offset any decrease in the market value of such equity securities.
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Our Board has also adopted a policy prohibiting our Section 16 officers and members of the Board from pledging, or using as collateral, the Company’sour securities to secure personal loans or other obligations, which includes holding shares of our Common Stock in a margin account.
POLICY ON RULE 10B5-110b5-1 TRADING PLANS
We have a policy governing the use by executive officers ofpre-established trading plans for sales of our Common Stock and exercises of stock options for shares of our Common Stock. We believe our Rule10b5-1 policy reflects best practices and is effective in ensuring compliance with legal requirements. Under the policy:
| • | All Rule10b5-1 trading plans must bepre-cleared by law and compliance. |
| • | A trading plan may be entered into, modified or terminated only during an open trading window and while not in possession of materialnon-public information. |
| • | No trade may occur for the first 30 days after the trading plan is established. No modification or termination of a plan may affect any trade scheduled to occur within 30 days. |
Impact of Tax Policies
Deductibility of Executive CompensationDEDUCTIBILITY OF EXECUTIVE COMPENSATION
It is our policy to structure and administer our annual and long-term incentive compensation plans and stock option grants for our CEO and the other NEOs to maximize the tax deductibility of the payments as “performance-based compensation” underfor purposes of Section 162(m) to the extent practicable. In 2013,2016, all such performance-based compensation was deductible. The Committee may provide compensation that is not tax deductible if it determines that such action is appropriate.appropriate and in the best interests of the Company. Further, the rules and regulations promulgated under Section 162(m) are complicated, and may change from time to time, sometimes with retroactive effect. As such, there can be no guarantee that any compensation intended to qualify as “performance-based compensation” will so qualify.
The 2016 Omnibus Plan contains an overall limit on compensation paid to each executive officercovered executives to comply with the conditions for determining “performance-based compensation” under Section 162(m). Under the terms of the 2016 Omnibus Plan, payment on annual incentive awards to an NEO who is subject to Section 162(m) in a taxable year may not exceed 0.4% of ourpre-tax AOI for the year ended prior to the year in which payment is due. Awards of restricted stock units, performance shares, performance units and book value units and associated dividend equivalents have a performance condition that ourpre-tax AOI must be positive in at least one fiscal year during which the award is outstanding for at least 276 days of that year, and a maximum limitation that the amount payable in any year may not exceed 0.4% of the highest amount of ourpre-tax AOI for any of the three years ended prior to the year payment on those awards is due. For awards granted prior to May 2016 under the Omnibus Incentive Plan, the total amountpayout on awards of annual incentives, restricted stock units, performance shares, performance units and book value units performance shares and units, and restricted stock units awarded to aassociated dividend equivalents for an NEO who is subject to Section 162(m) in a taxable year cannot exceed 0.6% of our pre-tax AOI for the prior year.
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The Compensation Committee of our Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on its review and these discussions, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form10-K for the year endedDecember 31, 2013.2016.
THE COMPENSATION COMMITTEE
James G. Cullen,Karl J. Krapek, Chair
Gordon M. BethuneThomas J. Baltimore
Constance J. Horner
Michael A. Todman
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Executive Compensation
2013 SUMMARY COMPENSATION TABLE2016 Summary Compensation Table
The following table presents, for the years ended December 31, 2013, December 31, 2012,2016, 2015, and December 31, 2011,2014, the compensation of Mr. Strangfeld, our principal executive officer, Mr. Falzon, our principal financial officer, Mr. Carbone, our former chief financial officer who stepped down in March 2013, and Messrs. Grier, Baird,Lowrey and Lowrey,Pelletier, our three most highly compensated executive officers (other than the principal executive officer and principal financial officer) who were serving as executive officers as of December 31, 2013.2016.
For information on the role of each compensation component within the total compensation packages of the NEOs, please see the relevant description in the “Compensation Discussion and Analysis (“CD&A”).” The compensation data in this table is presented in accordance with the SEC disclosure rules. For the Compensation Committee’s view of 20132016 performance year compensation, see the “Supplemental Compensation Analysis”Analysis — Total Direct Compensation” in the CD&A.
| (1) | The amounts reported in theSalarycolumn for |
| (2) |
| The amounts reported in theStock Awards column represent the aggregate grant date fair value for performance shares and performance units at target in each respective year. The maximum number of performance shares and performance units payable for |
| For |
| For |
| For |
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| Executive Compensation |
| (3) | The amounts reported in theOptions Awards column represent the aggregate grant date fair value for stock options granted in each respective year for the prior year’s performance as calculated under ASC Topic 718. The assumptions made in calculating the grant date fair value amounts for these stock options are incorporated herein by reference to the discussion of those assumptions and found below in the Grants of Plan-Based Awards Table. Note that the amounts reported in this column do not necessarily correspond to the actual economic value that will be received by the Named Executive Officers from the options. |
| (4) | The aggregate amounts reported in theNon-Equity Incentive Plan Compensation column for 2016 represent annual incentives paid in February 2017 for performance in 2016, excluding 30% of the total annual incentive carved out to the Book Value Performance Program; and the value of the book value units paid in February 2017, and additionally in April 2016 for Mr. Pelletier; for 2015 represent annual incentives paid in February 2016 for performance in 2015, excluding 30% of the total annual incentive carved out to the Book Value Performance Program; and the value of the book value units paid in February 2016, and additionally in April 2015 for Mr. Pelletier; for 2014 represent annual incentives paid in February 2015 for performance in 2014, excluding 30% of the total annual incentive carved out to the Book Value Performance Program; and the value of the book value units paid in February 2015: |
| 2016 | 2015 | 2014 | ||||||||||||||||||||||
| Name | Annual Incentive Award | Book Value Units Value Paid | Annual Incentive Award | Book Value Units Value Paid | Annual Incentive Award | Book Value Units Value Paid | ||||||||||||||||||
| Strangfeld | $ | 4,183,200 | $ | 4,764,238 | $ | 4,140,500 | $ | 4,612,768 | $ | 5,460,000 | $ | 3,813,192 | ||||||||||||
| Falzon | $ | 2,093,000 | $ | 1,701,452 | $ | 1,820,000 | $ | 1,266,410 | $ | 2,310,000 | $ | 658,637 | ||||||||||||
| Grier | $ | 3,556,000 | $ | 3,950,580 | $ | 3,570,000 | $ | 3,840,736 | $ | 4,550,000 | $ | 3,151,901 | ||||||||||||
| Lowrey | $ | 2,789,500 | $ | 2,951,704 | $ | 2,975,000 | $ | 2,902,390 | $ | 3,780,000 | $ | 2,346,216 | ||||||||||||
| Pelletier | $ | 2,789,500 | $ | 1,866,128 | $ | 2,240,000 | $ | 1,341,969 | $ | 2,800,000 | $ | 614,542 | ||||||||||||
| For Mr. Falzon, 2015, and 2014 also include the value of carried interest payments of $4,747 and $15,600, respectively. |
| For Mr. Lowrey, 2016, 2015, and 2014 also include the value of carried interest payments of $64,393, $197,029, and $237,147, respectively. |
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2013 Summary Compensation Table
| The amounts reported in theChange in Pension Valuecolumn represent the change in the actuarial present value of each NEO’s accumulated benefit under the Merged Retirement Plan, the Supplemental Retirement Plan, and the SERPs, as applicable, determined using interest rate and mortality rate assumptions consistent with those used for our consolidated financial statements on December 31, |
| Messrs. Strangfeld and |
| The amounts reported in this column include payments from the Supplemental Retirement Plan of |
| The actual change in pension value for Mr. Strangfeld in |
| The amounts reported in theAll Other Compensation column are itemized in the supplemental “All Other Compensation” table below. |
| Mr. |
All Other Compensation
| Year | Perquisites(1) | PESP Contributions(2) | SESP Contributions(2) | Total | ||||||||||||||||
| John R. Strangfeld | 2016 | $ | 47,964 | $ | 8,615 | $ | 45,400 | $ | 101,979 | |||||||||||
| 2015 | $ | 32,371 | $ | 8,615 | $ | 45,400 | $ | 86,386 | ||||||||||||
| 2014 | $ | 32,437 | $ | 8,615 | $ | 45,800 | $ | 86,852 | ||||||||||||
| Robert M. Falzon | 2016 | $ | 17,478 | $ | 8,173 | $ | 19,769 | $ | 45,420 | |||||||||||
| 2015 | $ | 14,800 | $ | 8,308 | $ | 17,092 | $ | 40,200 | ||||||||||||
| 2014 | $ | 15,047 | $ | 8,000 | $ | 15,600 | $ | 38,647 | ||||||||||||
| Mark B. Grier | 2016 | $ | 33,041 | $ | 10,600 | $ | 37,000 | $ | 80,641 | |||||||||||
| 2015 | $ | 30,175 | $ | 10,600 | $ | 37,000 | $ | 77,775 | ||||||||||||
| 2014 | $ | 39,243 | $ | 10,400 | $ | 37,200 | $ | 86,843 | ||||||||||||
| Charles F. Lowrey | 2016 | $ | 17,330 | $ | 10,600 | $ | 20,200 | $ | 48,130 | |||||||||||
| 2015 | $ | 14,395 | $ | 10,600 | $ | 20,200 | $ | 45,195 | ||||||||||||
| 2014 | $ | 15,470 | $ | 10,392 | $ | 20,400 | $ | 46,262 | ||||||||||||
| Stephen Pelletier | 2016 | $ | 35,806 | $ | 8,292 | $ | 20,200 | $ | 64,298 | |||||||||||
| 2015 | $ | 29,849 | $ | 8,173 | $ | 19,769 | $ | 57,791 | ||||||||||||
| 2014 | $ | 20,661 | $ | 8,077 | $ | 14,908 | $ | 43,646 | ||||||||||||
| (1) | ||||
|
|
| Year | Perquisites(1) | PESP Contributions(2) | SESP Contributions(2) | Total | ||||||||||||||||
| John R. Strangfeld | 2013 | $ | 33,508 | $ | 8,615 | $ | 45,800 | $ | 87,923 | |||||||||||
| 2012 | $ | 50,691 | $ | 8,615 | $ | 46,000 | $ | 105,306 | ||||||||||||
| 2011 | $ | 40,380 | $ | 7,692 | $ | 46,200 | $ | 94,272 | ||||||||||||
| Robert M. Falzon | 2013 | $ | 12,838 | $ | 7,785 | $ | 13,585 | $ | 34,208 | |||||||||||
| Richard J. Carbone | 2013 | $ | 3,841 | $ | 8,885 | $ | 17,800 | $ | 30,526 | |||||||||||
| 2012 | $ | 23,397 | $ | 10,000 | $ | 18,000 | $ | 51,397 | ||||||||||||
| 2011 | $ | 22,729 | $ | 9,800 | $ | 18,200 | $ | 50,729 | ||||||||||||
| Mark B. Grier | 2013 | $ | 36,292 | $ | 10,200 | $ | 37,400 | $ | 83,892 | |||||||||||
| 2012 | $ | 35,272 | $ | 10,000 | $ | 37,600 | $ | 82,872 | ||||||||||||
| 2011 | $ | 49,574 | $ | 9,800 | $ | 37,800 | $ | 97,174 | ||||||||||||
| Edward P. Baird | 2013 | $ | 21,613 | $ | 10,200 | $ | 20,600 | $ | 52,413 | |||||||||||
| 2012 | $ | 25,722 | $ | 10,000 | $ | 20,800 | $ | 56,522 | ||||||||||||
| 2011 | $ | 24,227 | $ | 9,800 | $ | 21,000 | $ | 55,027 | ||||||||||||
| Charles F. Lowrey | 2013 | $ | 17,577 | $ | 10,200 | $ | 20,600 | $ | 48,377 | |||||||||||
| 2012 | $ | 18,311 | $ | 9,892 | $ | 20,800 | $ | 49,003 | ||||||||||||
| 2011 | $ | 16,613 | $ | 9,800 | $ | 21,000 | $ | 47,413 | ||||||||||||
| For Messrs. Strangfeld and Grier, the amounts reported in thePerquisitescolumn for |
| (2) | The amounts reported in thePESPandSESP Contributionscolumns represent our contributions to the account of each NEO under (a) The Prudential Employee Savings Plan (the “PESP”), a defined contribution plan which provides employees with the opportunity to contribute up to 50% of eligible earnings in any combination ofbefore-tax, Roth 401(k) and/orafter-tax contributions (subject to Internal Revenue Code limits) and (b) the Prudential Supplemental Employee Savings Plan, |
| | Notice of Annual Meeting of Shareholders and | ||
| Executive Compensation |
Grants of Plan-basedPlan-Based Awards
The following table presents, for each of the NEOs, information concerning awards under our Long-Term Incentive Program (including our Book Value Performance Plan)Program) and grants of equity awards made during 20132016 for 20122015 performance.
20132016 Grants of Plan-basedPlan-Based Awards Table
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($) (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Option Awards; Number of Securities Underlying Options (#) (3) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) (4) | ||||||||||||||||||||||||
| Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||
| John R. Strangfeld | 02/12/13 | 29,571 | 44,357 | 1,685,547 | ||||||||||||||||||||||||||
| 02/12/13 | 29,571 | 44,357 | 1,685,547 | |||||||||||||||||||||||||||
| 02/12/13 | 247,094 | 57.00 | 3,380,246 | |||||||||||||||||||||||||||
| 02/12/13 | 3,389,035 | |||||||||||||||||||||||||||||
| Robert M. Falzon | 02/12/13 | 6,958 | 10,437 | 396,606 | ||||||||||||||||||||||||||
| 02/12/13 | 6,958 | 10,437 | 396,606 | |||||||||||||||||||||||||||
| 02/12/13 | 58,140 | 57.00 | 795,355 | |||||||||||||||||||||||||||
| 02/12/13 | 491,056 | |||||||||||||||||||||||||||||
| Richard J. Carbone | 02/12/13 | 6,958 | 10,437 | 396,606 | ||||||||||||||||||||||||||
| 02/12/13 | 6,958 | 10,437 | 396,606 | |||||||||||||||||||||||||||
| 02/12/13 | 58,140 | 57.00 | 795,355 | |||||||||||||||||||||||||||
| 02/12/13 | 1,142,581 | |||||||||||||||||||||||||||||
| Mark B. Grier | 02/12/13 | 24,353 | 36,530 | 1,388,121 | ||||||||||||||||||||||||||
| 02/12/13 | 24,353 | 36,530 | 1,388,121 | |||||||||||||||||||||||||||
| 02/12/13 | 203,489 | 57.00 | 2,783,730 | |||||||||||||||||||||||||||
| 02/12/13 | 2,847,589 | |||||||||||||||||||||||||||||
| Edward P. Baird | 02/12/13 | 12,177 | 18,266 | 694,089 | ||||||||||||||||||||||||||
| 02/12/13 | 12,177 | 18,266 | 694,089 | |||||||||||||||||||||||||||
| 02/12/13 | 101,745 | 57.00 | 1,391,872 | |||||||||||||||||||||||||||
| 02/12/13 | 1,690,071 | |||||||||||||||||||||||||||||
| Charles F. Lowrey | 02/12/13 | 15,655 | 23,483 | 892,335 | ||||||||||||||||||||||||||
| 02/12/13 | 15,655 | 23,483 | 892,335 | |||||||||||||||||||||||||||
| 02/12/13 | 130,814 | 57.00 | 1,789,536 | |||||||||||||||||||||||||||
| 02/12/13 | 2,115,103 | |||||||||||||||||||||||||||||
Grant Date | Estimated Future Payouts UnderNon-Equity Incentive Plan Awards ($)(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Option Awards; Number of Securities Underlying Options (#)(3) | Exercise | Grant Date | |||||||||||||||||||||||||||||||||||
| Number of Book Value Units (#) | Target ($) | Maximum ($) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||
John R. Strangfeld, Chairman and Chief Executive Officer | | Annual Incentive | | n/a | 6,000,000 | 12,000,000 | ||||||||||||||||||||||||||||||||||
| PS | 2/9/2016 | 41,558 | 51,948 | 2,642,673 | ||||||||||||||||||||||||||||||||||||
| PU | 2/9/2016 | 41,558 | 51,948 | 2,642,673 | ||||||||||||||||||||||||||||||||||||
| Option | 2/9/2016 | 126,183 | $ | 63.59 | 1,864,985 | |||||||||||||||||||||||||||||||||||
| BVU | 2/9/2016 | 51,292 | 3,774,578 | |||||||||||||||||||||||||||||||||||||
Robert M. Falzon, Executive Vice President and Chief Financial Officer | | Annual Incentive | | n/a | 3,000,000 | 6,000,000 | ||||||||||||||||||||||||||||||||||
| PS | 2/9/2016 | 16,623 | 20,779 | 1,057,057 | ||||||||||||||||||||||||||||||||||||
| PU | 2/9/2016 | 16,623 | 20,779 | 1,057,057 | ||||||||||||||||||||||||||||||||||||
| Option | 2/9/2016 | 50,474 | $ | 63.59 | 746,006 | |||||||||||||||||||||||||||||||||||
| BVU | 2/9/2016 | 21,472 | 1,580,124 | |||||||||||||||||||||||||||||||||||||
Mark B. Grier, Vice Chairman | | Annual Incentive | | n/a | 5,100,000 | 10,200,000 | ||||||||||||||||||||||||||||||||||
| PS | 2/9/2016 | 33,246 | 41,558 | 2,114,113 | ||||||||||||||||||||||||||||||||||||
| PU | 2/9/2016 | 33,246 | 41,558 | 2,114,113 | ||||||||||||||||||||||||||||||||||||
| Option | 2/9/2016 | 100,947 | $ | 63.59 | 1,491,997 | |||||||||||||||||||||||||||||||||||
| BVU | 2/9/2016 | 42,534 | 3,130,077 | |||||||||||||||||||||||||||||||||||||
Charles F. Lowrey, Executive Vice President and Chief Operating Officer, International Businesses | | Annual Incentive | | n/a | 4,000,000 | 8,000,000 | ||||||||||||||||||||||||||||||||||
| PS | 2/9/2016 | 19,740 | 24,675 | 1,255,267 | ||||||||||||||||||||||||||||||||||||
| PU | 2/9/2016 | 19,740 | 24,675 | 1,255,267 | ||||||||||||||||||||||||||||||||||||
| Option | 2/9/2016 | 59,937 | $ | 63.59 | 885,869 | |||||||||||||||||||||||||||||||||||
| BVU | 2/9/2016 | 30,236 | 2,225,067 | |||||||||||||||||||||||||||||||||||||
Stephen Pelletier, Executive Vice President and Chief Operating Officer, U.S. | | Annual Incentive | | n/a | 4,000,000 | 8,000,000 | ||||||||||||||||||||||||||||||||||
| PS | 2/9/2016 | 18,701 | 23,377 | 1,189,197 | ||||||||||||||||||||||||||||||||||||
| PU | 2/9/2016 | 18,701 | 23,377 | 1,189,197 | ||||||||||||||||||||||||||||||||||||
| Option | 2/9/2016 | 56,783 | $ | 63.59 | 839,253 | |||||||||||||||||||||||||||||||||||
| BVU | 2/9/2016 | 25,276 | 1,860,061 | |||||||||||||||||||||||||||||||||||||
| (1) | The amounts reported in the Estimated Future Payouts UnderNon-Equity Incentive Plan Awards column represent the potential amounts for annual incentives for the 2016 performance year. Actual amounts earned by the NEOs are reflected in the Summary Compensation Table. In addition, individual amounts are reported by grant date to represent the value of the book value units awarded to the NEOs under the Omnibus Plan on February |
| (2) | The amounts reported in the Estimated Future Payouts Under Equity Incentive Plan Awards columns represent performance shares and performance units awarded to the NEOs under the Omnibus Plan in |
| (3) | The amounts reported in the All Other Option Awards column represent the number of stock options granted to |
| date. The exercise price for |
| (4) | The amounts in the Grant Date Fair Value column have been calculated in the case of performance shares and performance units as the target number of performance shares and performance units multiplied by the closing price of our Common Stock on the grant date of February |
For stock options, the grant date fair values are hypothetical values developed under a binomial option pricing model, which is a complex, mathematical formula to determine fair value of stock options on the date of grant. The binomial option pricing model is a flexible, lattice-based valuation model that takes into consideration transferability, fixed estimate of volatility, and expected life of the options. As such, the amounts reported in the table are hypothetical values and may not reflect the actual economic value a Named Executive Officer would realize upon exercise.
We made the following assumptions when calculating the grant date fair value of the stock option grants: exercise price is equal to our share price on the grant date, 5.52and for the grants of February 9, 2016, 5.61 year life expected for each option, expected dividend yield is 3%3.92%, risk-free rate of return of 1.01%1.25%, and expected price volatility of 36.44%38.36%.
| Notice of Annual Meeting of Shareholders and | | |||
| Executive Compensation |
Outstanding Equity Awards
The following table provides information on the NEOs’ outstanding equity awards as of December 31, 2013.2016. The equity awards reported in the Stock Awards columns consist of performance share and performance unit awards. The equity awards reported in the Option Awards columns consist ofnon-qualified stock options.
20132016 Outstanding Equity Awards at Fiscal Year-endYear-End Table
| Option Awards (1) | Stock Awards | |||||||||||||||||||||||||||
| Name | Grant Date | | Number of Securities Underlying Unexercised Options (# Exercisable) | | | Number of Securities Underlying Unexercised Options (# Unexercisable) | |
| Option Exercise Price ($ | ) | | Option Expiration Date | |
| Equity Incentive Plan Awards: Number of Unearned Shares, Units or Rights That Have Not Vested (#) (2) |
| | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Rights That Have Not Vested ($) (2) | | |||||||||
| John R. Strangfeld | 2/12/2013 | 0 | 247,094 | 57.00 | 2/12/2023 | 59,142 | 5,454,075 | |||||||||||||||||||||
| 2/14/2012 | 74,561 | 149,124 | 59.41 | 2/14/2022 | 61,540 | 5,675,219 | ||||||||||||||||||||||
| 2/8/2011 | 113,778 | 56,889 | 64.01 | 2/8/2021 | 52,272 | 4,820,524 | ||||||||||||||||||||||
| 2/9/2010 | 135,136 | 0 | 48.36 | 2/9/2020 | ||||||||||||||||||||||||
| 2/12/2008 | 146,315 | 0 | 69.03 | 2/12/2018 | ||||||||||||||||||||||||
| 1/18/2008 | 143,177 | 0 | 80.00 | 1/18/2018 | ||||||||||||||||||||||||
| 2/13/2007 | 66,310 | 0 | 91.73 | 2/13/2017 | ||||||||||||||||||||||||
| 2/14/2006 | 71,628 | 0 | 76.15 | 2/14/2016 | ||||||||||||||||||||||||
| 2/8/2005 | 95,026 | 0 | 55.75 | 2/8/2015 | ||||||||||||||||||||||||
| Robert M. Falzon | 2/12/2013 | 0 | 58,140 | 57.00 | 2/12/2023 | 13,916 | 1,283,334 | |||||||||||||||||||||
| 2/14/2012 | 0 | 8,772 | 59.41 | 2/14/2022 | 3,620 | 333,836 | ||||||||||||||||||||||
| 2/8/2011 | 0 | 3,556 | 64.01 | 2/8/2021 | 3,268 | 301,375 | ||||||||||||||||||||||
| Richard J. Carbone | 2/12/2013 | 0 | 58,140 | 57.00 | 2/12/2023 | 13,916 | 1,283,334 | |||||||||||||||||||||
| 2/14/2012 | 0 | 35,088 | 59.41 | 2/14/2022 | 14,480 | 1,335,346 | ||||||||||||||||||||||
| 2/8/2011 | 0 | 9,956 | 64.01 | 2/8/2021 | 9,148 | 843,629 | ||||||||||||||||||||||
| 1/18/2008 | 45,393 | 0 | 80.00 | 1/18/2018 | ||||||||||||||||||||||||
| 2/13/2007 | 27,169 | 0 | 91.73 | 2/13/2017 | ||||||||||||||||||||||||
| Mark B. Grier | 2/12/2013 | 0 | 203,489 | 57.00 | 2/12/2023 | 48,706 | 4,491,667 | |||||||||||||||||||||
| 2/14/2012 | 57,895 | 115,790 | 59.41 | 2/14/2022 | 47,784 | 4,406,640 | ||||||||||||||||||||||
| 2/8/2011 | 88,178 | 44,089 | 64.01 | 2/8/2021 | 40,510 | 3,735,832 | ||||||||||||||||||||||
| 1/18/2008 | 120,806 | 0 | 80.00 | 1/18/2018 | ||||||||||||||||||||||||
| 2/13/2007 | 66,310 | 0 | 91.73 | 2/13/2017 | ||||||||||||||||||||||||
| 2/14/2006 | 63,669 | 0 | 76.15 | 2/14/2016 | ||||||||||||||||||||||||
| Edward P. Baird | 2/12/2013 | 0 | 101,745 | 57.00 | 2/12/2023 | 24,354 | 2,245,926 | |||||||||||||||||||||
| 2/14/2012 | 30,702 | 61,404 | 59.41 | 2/14/2022 | 25,340 | 2,336,855 | ||||||||||||||||||||||
| 2/8/2011 | 42,666 | 21,334 | 64.01 | 2/8/2021 | 19,602 | 1,807,696 | ||||||||||||||||||||||
| 2/9/2010 | 41,581 | 0 | 48.36 | 2/9/2020 | ||||||||||||||||||||||||
| 2/10/2009 | 55,918 | 0 | 25.30 | 2/10/2019 | ||||||||||||||||||||||||
| 2/12/2008 | 33,765 | 0 | 69.03 | 2/12/2018 | ||||||||||||||||||||||||
| 1/18/2008 | 44,743 | 0 | 80.00 | 1/18/2018 | ||||||||||||||||||||||||
| 2/13/2007 | 12,895 | 0 | 91.73 | 2/13/2017 | ||||||||||||||||||||||||
| 2/14/2006 | 13,928 | 0 | 76.15 | 2/14/2016 | ||||||||||||||||||||||||
| 2/8/2005 | 17,748 | 0 | 55.75 | 2/8/2015 | ||||||||||||||||||||||||
| Charles F. Lowrey | 2/12/2013 | 0 | 130,814 | 57.00 | 2/12/2023 | 31,310 | 2,887,408 | |||||||||||||||||||||
| 2/14/2012 | 35,088 | 70,176 | 59.41 | 2/14/2022 | 28,960 | 2,670,691 | ||||||||||||||||||||||
| 2/8/2011 | 49,778 | 24,889 | 64.01 | 2/8/2021 | 22,870 | 2,109,071 | ||||||||||||||||||||||
| 2/9/2010 | 41,581 | 0 | 48.36 | 2/9/2020 | ||||||||||||||||||||||||
| 2/10/2009 | 68,966 | 0 | 25.30 | 2/10/2019 | ||||||||||||||||||||||||
| 2/12/2008 | 41,644 | 0 | 69.03 | 2/12/2018 | ||||||||||||||||||||||||
| 1/18/2008 | 35,795 | 0 | 80.00 | 1/18/2018 | ||||||||||||||||||||||||
| 2/13/2007 | 7,369 | 0 | 91.73 | 2/13/2017 | ||||||||||||||||||||||||
| 2/14/2006 | 7,959 | 0 | 76.15 | 2/14/2016 | ||||||||||||||||||||||||
| 2/8/2005 | 6,988 | 0 | 55.75 | 2/8/2015 | ||||||||||||||||||||||||
| Option Awards(1) | Stock Awards | |||||||||||||||||||||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options (# Exercisable) | Number of Securities Underlying Unexercised Options (# Unexercisable) | Option ($) | Option Date | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Rights That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Rights That Have Not Vested ($)(2) | |||||||||||||||||||||
| John R. Strangfeld | 2/9/2016 | — | 126,183 | 63.59 | 2/9/2026 | 103,896 | 10,811,418 | |||||||||||||||||||||
| 2/10/2015 | 28,634 | 57,268 | 78.08 | 2/10/2025 | 77,556 | 8,070,478 | ||||||||||||||||||||||
| 2/11/2014 | 49,062 | 24,532 | 84.53 | 2/11/2024 | 72,158 | 7,508,762 | ||||||||||||||||||||||
| 2/12/2013 | 247,094 | — | 57.00 | 2/12/2023 | ||||||||||||||||||||||||
| 2/14/2012 | 223,685 | — | 59.41 | 2/14/2022 | ||||||||||||||||||||||||
| 2/8/2011 | 170,667 | — | 64.01 | 2/8/2021 | ||||||||||||||||||||||||
| Robert M. Falzon | 2/9/2016 | — | 50,474 | 63.59 | 2/9/2026 | 41,558 | 4,324,526 | |||||||||||||||||||||
| 2/10/2015 | — | 20,213 | 78.08 | 2/10/2025 | 27,374 | 2,848,539 | ||||||||||||||||||||||
| 2/11/2014 | — | 7,504 | 84.53 | 2/11/2024 | 22,074 | 2,297,021 | ||||||||||||||||||||||
| Mark B. Grier | 2/9/2016 | — | 100,947 | 63.59 | 2/9/2026 | 83,116 | 8,649,051 | |||||||||||||||||||||
| 2/10/2015 | 23,581 | 47,162 | 78.08 | 2/10/2025 | 63,870 | 6,646,313 | ||||||||||||||||||||||
| 2/11/2014 | 40,404 | 20,202 | 84.53 | 2/11/2024 | 59,426 | 6,183,870 | ||||||||||||||||||||||
| 2/12/2013 | 135,660 | — | 57.00 | 2/12/2023 | ||||||||||||||||||||||||
| 2/14/2012 | 57,895 | — | 59.41 | 2/14/2022 | ||||||||||||||||||||||||
| Charles F. Lowrey | 2/9/2016 | — | 59,937 | 63.59 | 2/9/2026 | 49,350 | 5,135,361 | |||||||||||||||||||||
| 2/10/2015 | 15,159 | 30,319 | 78.08 | 2/10/2025 | 41,060 | 4,272,704 | ||||||||||||||||||||||
| 2/11/2014 | 25,974 | 12,988 | 84.53 | 2/11/2024 | 38,204 | 3,975,509 | ||||||||||||||||||||||
| 2/12/2013 | 130,814 | — | 57.00 | 2/12/2023 | ||||||||||||||||||||||||
| 2/14/2012 | 105,264 | — | 59.41 | 2/14/2022 | ||||||||||||||||||||||||
| Stephen Pelletier | 2/9/2016 | — | 56,783 | 63.59 | 2/9/2026 | 46,754 | 4,865,222 | |||||||||||||||||||||
| 2/10/2015 | 13,475 | 26,950 | 78.08 | 2/10/2025 | 36,498 | 3,797,982 | ||||||||||||||||||||||
| 4/7/2014 | 8,909 | 4,455 | 81.17 | 4/7/2024 | 13,108 | 1,364,019 | ||||||||||||||||||||||
| 2/11/2014 | 8,658 | 4,330 | 84.53 | 2/11/2024 | 12,736 | 1,325,309 | ||||||||||||||||||||||
| 2/14/2012 | 17,105 | — | 59.41 | 2/14/2022 | ||||||||||||||||||||||||
| 2/8/2011 | 11,733 | — | 64.01 | 2/8/2021 | ||||||||||||||||||||||||
| 2/9/2010 | 2,599 | — | 48.36 | 2/9/2020 | ||||||||||||||||||||||||
| (1) | The options reported in theOption Awards column vest at the rate ofone-third per year on the anniversary of the date of |
| (2) | TheEquity Incentive Plan Awards columns reflect the number of outstanding performance shares and performance units that would be received by each Named Executive Officer at the |
Grants were made for three-year performance cycles with the 20112014 grant as the 2011-20132014-2016 performance cycle, the 20122015 grant as the 2012-20142015-2017 performance cycle, and the 20132016 grant as the 2013-20152016-2018 performance cycle.
| | Notice of Annual Meeting of Shareholders and | ||
| Executive Compensation |
Option Exercises and Stock Vested
The following table provides information on the value realized by each of the NEOs as a result of the exercise of options and stock awards that vested from January 1, 20132016 through December 31, 2013.2016.
20132016 Option Exercises and Stock Vested Table
| Name | Option Awards | Stock Awards | ||||||||||||||
| Number of Shares Acquired on Exercise (#) | Value Realized ($) | Number of Shares (#)(1) | Value Realized ($)(2) | |||||||||||||
| John R. Strangfeld | 354,122 | 10,105,406 | 81,553 | 4,663,829 | ||||||||||||
| Robert M. Falzon | 21,893 | 743,165 | 4,314 | 245,898 | ||||||||||||
| Richard J. Carbone | 164,319 | 3,599,405 | 15,358 | 877,894 | ||||||||||||
| Mark B. Grier | 309,007 | 9,595,610 | 70,345 | 4,024,973 | ||||||||||||
| Edward P. Baird | 18,344 | 382,890 | 17,248 | 983,136 | ||||||||||||
| Charles F. Lowrey | 0 | 0 | 17,248 | 983,136 | ||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized On Exercise ($) | Number of Shares
(#)1 | Value
(#)2 | ||||||||||||
| John R. Strangfeld | 490,938 | 11,052,346 | 44,357 | 2,820,662 | ||||||||||||
| Robert M. Falzon | 63,873 | 934,172 | 10,437 | 663,689 | ||||||||||||
| Mark B. Grier | 66,310 | 152,158 | 36,530 | 2,322,943 | ||||||||||||
| Charles F. Lowrey | 201,056 | 4,331,934 | 23,483 | 1,493,284 | ||||||||||||
| Stephen Pelletier | 42,657 | 904,350 | 7,829 | 497,846 | ||||||||||||
| (1) | The amounts in theStock |
| (2) | The amounts in theStock |
As part of its compensation review, the Compensation Committee considered the dollar amount change in pension value for Mr. Strangfeld and the other NEOs. The change in the present value of Mr. Strangfeld’s pension for 2013 reflects a number of factors, including his 36 years of service, his age, his average earnings and the increase in historically low interest rates. Potential pension values may fluctuate significantly from year to year and it is expected that in 2014, even if the discount rate is unchanged, Mr. Strangfeld’s pension accrual will be substantially increased. Alternatively, if the discount rate were to rise further, it is possible that Mr. Strangfeld’s change in pension value in subsequent years could again be a negative amount. Given this inherent volatility, the Committee will continue to monitor future accruals for Mr. Strangfeld and the other NEOs. The Traditional Pension Formula that applies to Mr. Strangfeld was closed to employees hired on or after January 1, 2001.
The following table provides information on the defined benefit retirement plans in which the NEOs participate, including the present value of accumulated benefits as of December 31, 2013,2016, except as noted, payable for each of the NEOs under each of these plans determined using interest rate and mortality rate assumptions consistent with those used in our consolidated financial statements; namely, the RP 20002014 generational mortality table with white collar adjustments and an adjustment to reflect recent Prudential-specific experience and an interest discount rate of 4.95%4.15%. Cash Balance Formula and PSI Cash Balance Formula accounts are assumed to grow with interest at 4.25% and 5.00%, respectively, until commencement of pension benefits. No additional earnings or service after December 31, 20132016 are included in the calculation of the accumulated benefits.
20132016 Pension Benefits Table
| Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year | ||||||||||
| John R. Strangfeld | Merged Retirement Plan—Traditional Benefit Formula | 36 | 2,642,496 | — | ||||||||||
| Supplemental Retirement Plan—Traditional Pension Formula | 36 | 52,943,479 | — | |||||||||||
| Supplemental Retirement Plan—Cash Balance Formula | n/a | (1) | 31,189 | — | ||||||||||
| Robert M. Falzon | Merged Retirement Plan—Cash Balance Formula | 30 | 1,055,679 | — | ||||||||||
| Merged Retirement Plan—PSI Cash Balance Formula | n/a | (2) | 64,601 | — | ||||||||||
| Supplemental Retirement Plan—Cash Balance Formula | 30 | 136,392 | 485 | (3) | ||||||||||
| Richard J. Carbone | Merged Retirement Plan—Cash Balance Formula | 16 | 2,514,271 | — | ||||||||||
| Supplemental Retirement Plan—Cash Balance Formula | 16 | 431,128 | 19,017 | (4) | ||||||||||
| Mark B. Grier | Merged Retirement Plan—Cash Balance Formula | 18 | 2,020,105 | — | ||||||||||
| Supplemental Retirement Plan—Cash Balance Formula | 18 | 6,229,165 | 2,431 | (3) | ||||||||||
| Edward P. Baird | Merged Retirement Plan—Traditional Benefit Formula | 34 | 2,886,748 | — | ||||||||||
| Merged Retirement Plan—Cash Balance Formula | n/a | (1) | 3,840 | — | ||||||||||
| Supplemental Retirement Plan—Traditional Pension Formula | 34 | — | 21,426,564 | (5) | ||||||||||
| Supplemental Retirement Plan—Cash Balance Formula | n/a | (1) | — | 27,661 | (5) | |||||||||
| Charles F. Lowrey | Merged Retirement Plan—Cash Balance Formula | 12 | 1,496,442 | — | ||||||||||
| Supplemental Retirement Plan—Cash Balance Formula | 12 | 681,365 | 1,395 | (3) | ||||||||||
| Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||||
| John R. Strangfeld | Merged Retirement Plan—Traditional Benefit Formula | 39 | $ | 3,366,600 | — | |||||||||
| Supplemental Retirement Plan—Traditional Pension Formula | 39 | $ | 78,916,344 | — | ||||||||||
| Supplemental Retirement Plan—Cash Balance Formula | n/a | (1) | $ | 35,305 | — | |||||||||
| Robert M. Falzon | Merged Retirement Plan—Cash Balance Formula | 33 | (2) | $ | 1,416,208 | — | ||||||||
| Merged Retirement Plan—PSI Cash Balance Formula | n/a | (2) | $ | 79,995 | — | |||||||||
| Supplemental Retirement Plan—Cash Balance Formula | 33 | (2) | $ | 1,172,293 | $ | 10,643 | (3) | |||||||
| Mark B. Grier | Merged Retirement Plan—Cash Balance Formula | 21 | $ | 2,453,655 | — | |||||||||
| Supplemental Retirement Plan—Cash Balance Formula | 21 | $ | 10,360,074 | $ | 31,095 | (3) | ||||||||
| Charles F. Lowrey | Merged Retirement Plan—Cash Balance Formula | 15 | $ | 1,905,356 | — | |||||||||
| Supplemental Retirement Plan—Cash Balance Formula | 15 | $ | 2,593,622 | $ | 20,990 | (3) | ||||||||
| Stephen Pelletier | Merged Retirement Plan—Traditional Benefit Formula | 18 | $ | 1,262,686 | — | |||||||||
| Merged Retirement Plan—Cash Balance Formula | n/a | (1) | $ | 5,660 | — | |||||||||
| Merged Retirement Plan—PSI Cash Balance Formula | n/a | (4) | $ | 109,234 | — | |||||||||
| Supplemental Retirement Plan—Traditional Pension Formula | 18 | $ | 17,551,601 | — | ||||||||||
| PSI Supplemental Retirement Plan for Executives | n/a | (4) | $ | 400,733 | — | |||||||||
| (1) | This benefit is a result of an allocation of demutualization compensation distributed to all participants in the Merged Retirement Plan in 2002 (“Demutualization Credit”). Ongoing service is not a consideration in determining this benefit for the NEOs. |
| (2) | Mr. Falzon transferred to Prudential from Prudential Securities Incorporated in 1998 and began accruing pension benefits under the Traditional Pension Formula |
| (3) | This payment was a distribution from the Supplemental Retirement Plan Cash Balance Formula to pay for FICA taxes due and accrued in |
| (4) |
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The Merged Retirement Plan
Our indirect wholly owned subsidiary, The Prudential Insurance Company of America, sponsors ourtax-qualified defined benefit retirement plan, The Prudential Merged Retirement Plan (the “Merged Retirement Plan”), which is available to our executive officers, including the NEOs, and other salaried U.S. employees. The Merged Retirement Plan has two formulas under which
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participants may have their retirement benefits for ongoing service determined: the “Traditional Pension Formula” or the “Cash Balance Formula.” In addition, employees who previously worked for Prudential Securities Incorporated also have retirement benefits for their service with Prudential Securities Incorporated under a third component of the Merged Retirement Plan: the “PSI Cash Balance Formula.”
TRADITIONAL PENSION FORMULA
Under the Traditional Pension Formula, employees are fully vested in their accrued benefits. These benefits (which are subject to Internal Revenue Code limits) are determined using the following formula, which is based on Average Eligible Earnings (as defined) and years of Credited Service (as defined):
(1.35% x Average Eligible Earnings up to Covered Compensation + 2% x Average Eligible Earnings in excess of Covered Compensation) × Years of Credited Service up to 25 years + (0.75% x Average Eligible Earnings up to Covered Compensation +
× Years of Credited Service for the next 13 years + 1% x Average Eligible Earnings × Years of Credited Service in excess of 38 years |
For a separation from service in 2013,2016, Average Eligible Earnings are determined by taking the average of earnings (base salary plus annual incentive payment) over the period beginning January 1, 2005,2009, and ending on the date of separation after dropping the lowest two years of earnings in that period. Under the Traditional Pension Formula, the starting point for the averaging period is moved forward two years on January 1 of every even calendar year. “Covered Compensation” for a year is the average of the Social Security wage bases for the 35 years ending in the year the participant will reach Social Security normal retirement age. Benefits are payable as early as age 55 (with a reduction in benefits) as a
single life annuity if not married or an actuarially equivalent 50% joint and survivor annuity if married.
Generally, a participant’s benefit will be determined as the greater of:
the benefit as determined above calculated at the time of separation from service;
the benefit as determined above calculated as of January 1, 2002, plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2002; and
If the Supplemental Retirement Plan benefit is to be paid in the form of an annuity, the benefit as determined above calculated as of January 1, 2012 (including any adjustment in the benefit on January 1, 2002 as described in the previous bullet), plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2012. (Messrs. Strangfeld and BairdPelletier each elected to receive their Supplemental Retirement Plan benefit in the form of a lump sum; consequently, this provision does not apply to them.)
Additional benefits are provided to participants who are eligible to retire upon separation from service. A participant is eligible to retire if he or she separates from service either: (a) after attainment of age 55 (with 10 years of vesting service) or age 65 or (b) due to an involuntary termination (other than for cause or exhausting short-term disability benefits) after attainment of age 50 (with 20 years of continuous service).
If a participant is eligible to retire, he or she is eligible for survivor benefits (with no actuarial reduction), a lesser (or no) reduction in benefit for benefit commencement before age 65, and an additional benefit paid to age 65.
The benefits reported in the Pension Benefits Table above are assumed to commence in the form of a 50% joint and survivor annuity on the later of January 1, 20142017 and the date the participant is eligible for an unreduced benefit, i.e., the earlier of (i) the first of the month on or following the later of attainment of age 60 and 30 years of service and (ii) the first of the month on or following attainment of age 65 (“Normal Retirement Date”).
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CASH BALANCE FORMULA
The Cash Balance Formula was added to the Merged Retirement Plan in 2001 for employees hired on or after January 1, 2001, except employees of Prudential Securities Incorporated. At that time, we offered aone-time conversion election for the current Merged Retirement Plan participants with benefits under the Traditional Pension Formula to opt to have their individual retirement benefits determined under the Cash Balance Formula. Participants who made this election to use the Cash Balance Formula are fully vested in their Cash Balance Formula benefit. Otherwise, participants are generally vested in their Cash Balance Formula benefit after three years of service.
Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account whichthat is allocated basic credits equal to 2% to 14% (depending on age and service) of base salary and annual incentive payments. Interest credits are made to the hypothetical account each month using an interest rate set each year based on the average yield on30-year U.S. Treasury securities (constant maturities) for October of the prior year, with a minimum rate of 4.25%. The rate in effect for 20132016 was 4.25%.
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Active participants on June 30, 2003 received an additional credit equal to his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of January 1, 2002, if any. Active participants on June 30, 2012 received an additional credit of no more than his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of April 1, 2012, if any.
Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity,annuity; 50%, 75%, or 100% joint and survivor annuityannuity; or 50% contingent annuity. Employees who made theone-time conversion election to use the Cash Balance Formula (specifically, Messrs. Carbone, Falzon and Grier) have a frozen “Grandfathered Benefit” determined as the accrued benefit under the Traditional Pension Formula as of January 1, 2002. The value of the Grandfathered Benefit, and early retirement subsidies on this benefit, if applicable, are included in determining the payable benefit.
As reported in the Pension Benefits Table, cash balance accounts are assumed to grow with interest until, (other than for Mr. Carbone) and benefits will commence on:
for Messrs. Strangfeld and BairdPelletier (whose Cash Balance Formula benefits are due only to the Demutualization Credit), the same date benefits are assumed to commence under the Traditional Pension Formula;
for Messrs. Falzon, Grier, and Lowrey, the participant’s Normal Retirement Date; and
for Mr. Carbone, January 1, 2014.
Benefits are assumed to commence in a form that is based on a value comparison between a lump sum and a 50% joint and survivor annuity.
PSI CASH BALANCE FORMULA
The PSI Cash Balance Formula applies only to employees who previously worked for Prudential Securities Incorporated. At this time, all participants are fully vested in their PSI Cash Balance Formula benefit. Mr.Messrs. Falzon isand Pelletier are the only NEONEOs with a benefit under this formula.
PSI Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account. Prior to January 1, 2004, the hypothetical accounts were allocated basic credits equal to 1.7% to 7% (depending on age and service) of eligible earnings. Since then, interest credits only have been made to the hypothetical account each month using an interest rate set each year, with a minimum rate of 5.00%. The rate in effect for 20132016 was 5.00%.
Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity,annuity; 50%, 75%, or 100% joint and survivor annuity,annuity; 50% or 100% contingent annuity,annuity; or single life annuity with 5 or 10 years guaranteed.
As reported in the Pension Benefits Table, PSI Cash Balance accounts are assumed to grow with interest until, and benefits will commence on,on:
Benefits are assumed to commence with 90% of participants electing a lump sum and 10% electing a 50% joint and survivor annuity.
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The Supplemental Retirement Plan and SERPs
The Supplemental Retirement Plan is anon-qualified retirement plan designed to complement the Merged Retirement Plan by providing benefits to all participants of the Merged Retirement Plan, including the NEOs, who are prohibited from receiving additional benefits under the Merged Retirement Plan because of Internal Revenue Code limits. Benefits under the Supplemental Retirement Plan are generally payable at the earlier of six months after separation from service and age 65.
The Prudential Insurance Supplemental Executive Retirement Plan and the PFI Supplemental Executive Retirement Plan (collectively, the “Prudential SERPs”) provide “Early Retirement Benefits” to certain eligible executives, including the NEOs, subject to the approval of our Board and the Committee. Early Retirement Benefits are designed to recognize the service and contributions of eligible executives who are involuntarily terminated by exempting them from the reduction factor for early retirement between the ages of 55 and 65, a reduction of up to 50%, which would otherwise be applicable under the Traditional Pension Formula and the Grandfathered Benefit under the Cash Balance Formula of the Merged Retirement Plan and the Supplemental Retirement Plan. Benefits under the Supplemental Retirement Plan and the Prudential SERPs are generally payable at the earlier of six months after separation from service and age 65.
No NEO is currently eligible for benefits under the Early Retirement Benefits provision. Upon an involuntary termination of employment, Messrs. Strangfeld, Grier, and Baird areLowrey will not be eligible for benefits under the Early Retirement Benefits provision due to a variety of the Prudential SERPs because theyfactors; Messrs. Falzon and Pelletier are already eligible for an unreduced benefit under the Traditional Pension Formula. Mr. Lowrey is not eligible for Prudential SERPs benefits because he was hired in 2001 and does not have a Grandfathered Benefit under the Cash Balance Formula. Because Mr. Falzon would be eligible for retirement upon an involuntary termination, and otherwise would have a reduced benefit on the Grandfathered Benefit portion of his benefit under the Cash Balance Formula, he is potentially eligible for benefits under the Early Retirement Benefits provision. WereHowever, were Mr. Falzon to qualify for Early Retirement Benefits, only the Grandfathered Benefit portion of his benefits would not be subject to reduction upon an involuntary termination of employment.reduction.
In 2008, the NEOs (with the exception of Mr. Lowrey) were permitted to make an irrevocable election regarding the form of payment for their pension benefits and each NEO (with the exception of Mr. Falzon) elected to receive his Supplemental Retirement Plan and Prudential SERPs benefits, if any, in a lump sum. By doing so, Messrs. Carbone
The Prudential Securities Incorporated Supplemental Retirement Plan for Executives (“PSI SERP”) was designed to make it more attractive to certain key executives to remain employees of Prudential Securities Incorporated and Grier forfeited their eligibility forits subsidiaries. Mr. Pelletier is the only NEO that is accruing benefits under the PSI SERP. Mr. Pelletier’s PSI SERP benefit will be paid as an annuity upon separation from service, irrespective of age. The PSI SERP benefit is determined as a Prudential SERPstarget benefit, since these benefits are not provided to participants underless the benefit payable from the PSI Cash Balance Formula who receive theirand an estimated Social Security retirement benefit. The target benefit inis 60% of an employee’s average salary times a lump sum. ratio of service to 30 years. Mr. Pelletier stopped accruing service credit under this plan upon his transfer to Prudential from Prudential Securities Incorporated.
Notwithstanding the foregoing, benefits reported in the Pension Benefits Table are assumed to commence in the same form and at the same time as under the Merged Retirement Plan benefit to be consistent with assumptions used in the Company’s financial statements.
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Nonqualified Deferred Compensation
The following table provides information on the NEOs’ participation in the Prudential Supplemental Employee Savings Plan (the(The “SESP”) and the Deferred Compensation Plan:
20132016 Nonqualified Deferred Compensation Table
Name | Plan | | Executive Contributions in Last Fiscal Year | ($)(1) |
| Registrant Contributions in Last Fiscal Year | ($)(2) | | Aggregate Earnings in Last Fiscal Year | ($) |
| Aggregate Withdrawals/ Distributions ($ | )(3) |
| Aggregate Balance at Last Fiscal Year End ($ |
)(4) | Plan | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($)(2) | Aggregate Earnings in Last Fiscal Year ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance Year End ($)(4) | ||||||||||||||||||||||||||
| John R. Strangfeld | SESP | 45,800 | 45,800 | 32,329 | — | 1,011,180 | SESP | $ | 45,400 | $ | 45,400 | $ | 45,788 | $ | 1,407,990 | |||||||||||||||||||||||||||||||||
| Deferred Compensation | 0 | 0 | 2,097,746 | — | 7,652,630 | Deferred Compensation | $ | — | $ | — | $ | 1,474,976 | $ | — | $ | 9,762,441 | ||||||||||||||||||||||||||||||||
| Robert M. Falzon | SESP | 13,585 | 13,585 | 1,219 | — | 56,415 | SESP | $ | 19,769 | $ | 19,769 | $ | 4,909 | $ | 172,044 | |||||||||||||||||||||||||||||||||
| Deferred Compensation | 0 | 0 | 335,213 | — | 2,004,118 | Deferred Compensation | $ | — | $ | — | $ | 189,361 | $ | — | $ | 2,541,179 | ||||||||||||||||||||||||||||||||
| Richard J. Carbone | SESP | 17,800 | 17,800 | 11,319 | — | 359,377 | ||||||||||||||||||||||||||||||||||||||||||
| Deferred Compensation | 0 | 0 | 268,769 | (152,329 | ) | 4,027,398 | ||||||||||||||||||||||||||||||||||||||||||
| Mark B. Grier | SESP | 37,400 | 37,400 | 21,441 | — | 680,300 | SESP | $ | 37,000 | $ | 37,000 | $ | 31,869 | $ | 987,646 | |||||||||||||||||||||||||||||||||
| Deferred Compensation | 0 | 0 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Edward P. Baird | SESP | 20,600 | 20,600 | 10,031 | — | 324,513 | ||||||||||||||||||||||||||||||||||||||||||
| Deferred Compensation | 0 | 0 | — | — | — | Deferred Compensation | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||||
| Charles F. Lowrey | SESP | 20,600 | 20,600 | 8,517 | — | 279,761 | SESP | $ | 20,200 | $ | 20,200 | $ | 13,877 | $ | 437,522 | |||||||||||||||||||||||||||||||||
| Deferred Compensation | 0 | 0 | 667,595 | — | 10,161,494 | Deferred Compensation | $ | — | $ | — | $ | 632,849 | $ | — | $ | 12,492,842 | �� | |||||||||||||||||||||||||||||||
| Stephen Pelletier | SESP | $ | 20,200 | $ | 20,200 | $ | 10,659 | $ | 342,360 | |||||||||||||||||||||||||||||||||||||||
| Deferred Compensation | $ | — | $ | — | $ | 1,217,282 | $ | — | $ | 11,956,082 | ||||||||||||||||||||||||||||||||||||||
| (1) | The amounts reported in the Executive Contributions in Last Fiscal Year column represent elective contributions of a portion of their base salary to the SESP (which amounts are also included in the Salary |
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| (2) | The amounts reported in the Registrant Contributions in Last Fiscal Year column represent the Company’s contributions to each NEO’s SESP account (which amounts are also included in the All Other Compensation column of the Summary Compensation Table). |
| (3) | The amounts reported in the Aggregate |
| (4) | The amounts reported in the Aggregate Balance at Last FiscalYear-End column represent balances from the SESP and the Deferred Compensation Plan and |
THE SESP
The SESP is anon-qualified profit-sharing plan designed to provide benefits in excess of amounts permitted to be contributed under the PESP. It allows employees, including the NEOs, to elect to defer from 1% to 4% of their eligible earnings paid after the Code limit is exceeded in the year ($255,000265,000 in 2013)2016) to a hypothetical recordkeeping account on apre-tax basis through payroll deduction. We match 100% of an employee’s deferrals. Eligible earnings for the NEOs under the SESP are limited to base salary only. Interest is earned on a participant’s account at the same rate as the Fixed Rate Fund under the PESP. This rate is generally set quarterly within a calendar year, and the rate in effect for each quarter of 20132016 was 3.50%. A participant’s account is distributed to the employee six months after the participant’s separation from service.
THE DEFERRED COMPENSATION PLANDeferred Compensation Plan
The Deferred Compensation Plan is anon-qualified, unfunded plan that provides certain designated executives in the United States, including the NEOs, with the ability to defer taxation on up to 85% of their annual cash incentive awards. Deferrals may be invested in notional funds that generally mirror the PESP fund offerings, including shares of our Common Stock.
Post-Employment Compensation Arrangements
While we have not entered into employment agreements with our executive officers, including the NEOs, they are eligible to receive certain payments and benefits in the event of a termination of employment, including following a change in control of the Company, under the Severance Plan and Change in Control Program. Mr. Strangfeld does not participate in the Severance Plan.
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In the case of the NEOs, and in many cases subject to the approval of our Board, the various payments and benefits provided under the Severance Plan, the Change in Control Program, the Omnibus Plan and other Company programs, as applicable, are as follows:
| Severance |
| Stock Options | Performance Shares/ Performance Units | Book Value Units | SERP | Additional Retirement Accruals | Health/Life | |||||||||||||||||||
| Voluntary Termination; Early or Normal Retirement | — | Annual Incentive Program | Omnibus Plan* | Omnibus Plan* | Omnibus Plan* | — | Merged Retirement Plan and Supplemental Retirement Plan | — | ||||||||||||||||||
| Involuntary Termination Without Cause | Severance Plan | Annual Incentive Program | Omnibus Plan** | Omnibus Plan** | Omnibus Plan** | Prudential SERP | Merged Retirement Plan and Supplemental Retirement Plan | — | ||||||||||||||||||
| Separation | Change in Control Program | Change in Control Program and Annual Incentive Program | Change in Control Program and Omnibus Plan | Change in Control Program and Omnibus Plan | Change in Control Program and Omnibus Plan | Prudential SERP | Merged Retirement Plan and Supplemental Retirement Plan | Change in Control Program | ||||||||||||||||||
| Separation Due to Disability | — | Annual Incentive Program | Omnibus Plan | Omnibus Plan | Omnibus Plan | — | Merged Retirement Plan and Supplemental Retirement Plan | Prudential Welfare Benefits Plan | ||||||||||||||||||
| Separation Due to Death | — | Annual Incentive Program | Omnibus Plan | Omnibus Plan | Omnibus Plan | — | Merged Retirement Plan and Supplemental Retirement Plan | — |
See footnotes below.
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Voluntary Termination; Early or
Normal Retirement
SEVERANCE
—
Annual IncentivesANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on the current year’s business and individual performance, payable following the completion of the performance year.
STOCK OPTIONS
Omnibus Plan*: (i) except for stock options granted on January 18, 2008, vested stock options remain exercisable for a period of up to five years after termination; and unvested stock options continue to vest according to the original vesting schedule; and (ii) for stock options granted on January 18, 2008, (x) upon a voluntary termination of employment before January 18, 2012, (January 18, 2011, in the case of Mr. Carbone), unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination, and (y) upon a voluntary termination of employment on or after January 18, 2012, (January 18, 2011, in the case of Mr. Carbone), unexercised stock options remain exercisable for a period of up to five years after termination.
PERFORMANCE SHARES/PERFORMANCE UNITS
Omnibus Plan*: each grant of performance shares and performance units will be paid out at the end of its respective performance period based on the actual number of shares and performance units earned as determined by the Committee.
Performance shares are paid in shares of Common Stock and performance units are paid in cash.
BOOK VALUE UNITS
Omnibus Plan*: each grant of book value units vestsone-third each year and is paid out annually in cash based on the Company’s book value per share at the end of the fiscal quarter prior to payment.
| * | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment (i) for stock options granted in 2005 or later, unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination |
SERP
—
Additional Retirement AccrualsADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.
HEALTH/LIFE
—
Involuntary Termination Without Cause
SEVERANCE
Severance Plan: assuming all eligibility conditions are satisfied, severance payments of up to 18 months of salary and annual incentive.
ANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on the current year’s business and individual performance, payable following the completion of the performance year.
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STOCK OPTIONS
Omnibus Plan**: (i) except for stock options granted on January 18, 2008, vested stock options remain exercisable for a period of up to five years after termination date and unvested stock options continue to vest according to the original vesting schedule; and (ii) for stock options granted on January 18, 2008, unvested stock options arepro-rated and are exercisable for up to 90 days after termination.
PERFORMANCE SHARES/PERFORMANCE UNITS
Omnibus Plan**: each grant of performance shares and performance units will be paid out at the end of its respective performance period based on the actual number of shares and performance units earned as determined by the Committee. Performance shares are paid in shares of Common Stock and performance units are paid in cash.
BOOK VALUE UNITS
Omnibus Plan**: each grant of book value units vestsone-third each year and is paid out annually in cash based on the Company’s book value per share at the end of the fiscal quarter prior to payment.
| ** | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment (i) unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination, (ii) for stock options granted on January 18, 2008, unvested stock options arepro-rated and are exercisable for up to 90 days after termination, and (iii) generally apro-rata portion of restricted stock units, performance shares, performance units and book value units will vest. |
SERP
Prudential SERP: Mr.Messrs. Falzon would be retirementand Pelletier are retirement- eligible and may receive an Early Retirement Benefit.
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.
Merged Retirement Plan (Traditional Pension Formula) and Supplemental Retirement Plan (Traditional Pension Formula): additional benefit to Mr. BairdPelletier based on the amount of severance paid and the period of time over which the severance is based (e.g., 78 weeks).
Merged Retirement Plan (Cash Balance Formula) and Supplemental Retirement Plan (Cash Balance Formula): additional benefit to Messrs. Carbone, Falzon, Grier, and Lowrey based on the amount of severance.
HEALTH/LIFE
—
Separation in Connection with Change in
Separation Due to Change in Control1
SEVERANCE
Change in Control Program: (i) alump-sum payment equal to the sum of two times annual base salary and bonus (based on the average of the annual incentive payments for the previous three calendar years); and (ii) a payment equal to the present value of the retirement benefits that would have accrued during the period of time on which thelump-sum payment in (i) is based.
| (1) | Pursuant to the Change in Control Program, before payments may be made, a change in control must have occurred and the designated executive officer’s employment must, within two years following the change in control, either have terminated involuntarily without “cause” or by the eligible executive officer for “good reason”. An eligible executive officer would have good reason to terminate his or her employment in the event of a material reduction in his or her compensation or the terms and conditions of his or her employment were to adversely change (for example, a reduction in job responsibilities, title, or forced relocation). |
ANNUAL INCENTIVES
Change in Control Program and Annual Incentive Program: an annual incentive payment based on the target annual incentive award opportunity in the year termination occurs.
| 74 | | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | |
| Executive Compensation |
STOCK OPTIONS
Change in Control Program and Omnibus Plan: accelerated vesting of stock options, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.
PERFORMANCE SHARES/PERFORMANCE UNITS
Change in Control Program and Omnibus Plan: payment of outstanding performance shares and performance units at target in cash or shares within 30 days of a change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.
BOOK VALUE UNITS
Change in Control Program and Omnibus Plan: payment of outstanding book value units in cash based on the Company book value per share at the end of the fiscal quarter ended on or immediately prior to the change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.
SERP
Prudential SERP: Mr.Messrs. Falzon would be retirement eligibleand Pelletier are retirement-eligible and may receive an Early Retirement Benefit.
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.
HEALTH/LIFE
Change in Control Program: continued health benefits at active employee contribution levels for a period of 18 months, plus a “gross up” for any expected tax consequences associated with providing these health benefits.
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Separation Due to Disability
SEVERANCE
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ANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards.
STOCK OPTIONS
Omnibus Plan: stock option vesting accelerates with up to three years to exercise.
PERFORMANCE SHARES/PERFORMANCE UNITS
Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock and cash, respectively.
BOOK VALUE UNITS
Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company book value per share at the end of the fiscal quarter prior to payment.
SERP
—
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.
Merged Retirement Plan (Cash Balance Formula) and Supplemental Retirement Plan (Cash Balance Formula): Messrs. Falzon, Grier, and Lowrey would receive additional credits until pension commencement (assumed to be Normal Retirement Date).
HEALTH/LIFE
Prudential Welfare Benefits Plan: monthly disability payment based on salary plus the greater of the most recently paid annual incentive award or the average of the last three most recently paid annual incentive awards.
Separation Due to Death
SEVERANCE
—
ANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards.
STOCK OPTIONS
Omnibus Plan: stock option vesting accelerates with a minimum of one and up to three years to exercise outstanding options.
PERFORMANCE SHARES/PERFORMANCE UNITS
Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock and cash, respectively.
BOOK VALUE UNITS
Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company book value per share at the end of the fiscal quarter prior to payment.
SERP
—
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit payable to the spouse based on the annual incentive.
HEALTH/LIFE
—
Potential Payments Upon
Termination or Change in Control
The following table presents, for each of the NEOs, the estimated payments and benefits that would have been payable as of the end of 20132016 in the event of:
voluntary termination of employment;
involuntary termination of employment without cause;
separation due to a change in control of the Company;
separation due to disability; and
separation due to death.
Consistent with SEC requirements, these estimated amounts have been calculated as if the NEO’s employment had been terminated as of December 31, 2013,30, 2016, the last business day of 2013,2016, and using the closing market price of our Common Stock on December 31, 201330, 2016 ($92.22104.06 per share).
Retirement eligibility differs according to the employment separation event. The following table assumes that benefits are paid in an annuity form and commence on January 1, 2014,2017, unless stated otherwise. The table also assumes Board approval of various payments and Prudential SERP Early Retirement Benefits, as applicable, for all NEOs.
| Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | | 75 | |||
| Executive Compensation |
The following items have been excluded from the table:
The benefits the NEOs would be entitled to receive under the SESP and the Deferred Compensation Plan (these benefits are disclosed in the Nonqualified Deferred Compensation Table contained in this Proxy Statement).
Additional payments to the NEOs under the PESP, and The Prudential Welfare Benefits Plan (a planand The Prudential Retiree Welfare Benefits Plan (plans providing, among other things, life insurance, disability insurance, medical insurance andand/or dental insurance), which do not discriminate in scope, terms, or operation in favor of the NEOs and are generally available to all salaried employees.
The amounts reported in the following table are hypothetical amounts based on the disclosure of compensation information about the NEOs. Actual payments and benefits will depend on the circumstances and timing of any termination of employment or other triggering event.
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Estimated Post-Employment Payments and Benefits
| Name | Type of Payment or Benefit | Voluntary Normal Retirement | Involuntary Termination Without Cause ($) | Separation Due to Change In Control ($) | Separation Due to Disability ($) | Separation ($) | ||||||||||||||||||
| John R. Strangfeld | Severance Payment | 19,014,479 | (1) | |||||||||||||||||||||
| Annual Incentive | 7,800,000 | (2) | 7,800,000 | (2) | 5,600,000 | 6,010,000 | 6,010,000 | |||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||
| Performance Shares | 7,974,909 | (4) | 7,974,909 | (4) | 7,974,909 | (4) | ||||||||||||||||||
| Performance Units | 7,974,909 | (5) | 7,974,909 | (5) | 7,974,909 | (5) | ||||||||||||||||||
| Book Value Performance | Book Value Units | 6,391,815 | (6) | 6,391,815 | (6) | 6,391,815 | (6) | |||||||||||||||||
| Benefits: | SERP | |||||||||||||||||||||||
| Health/Life | 26,966 | (7) | 1,723,969 | |||||||||||||||||||||
| Addtl. Retire Accruals | 4,945,997 | 4,945,997 | 2,047,413 | 2,587,604 | 1,290,486 | |||||||||||||||||||
| Total | 12,745,997 | 12,745,997 | 49,030,491 | 32,663,206 | 29,642,119 | |||||||||||||||||||
| Robert M. Falzon | Severance Payment | 2,367,600 | 3,814,907 | (1) | ||||||||||||||||||||
| Annual Incentive | 1,990,000 | (2) | 1,450,000 | 928,400 | 928,400 | |||||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||
| Performance Shares | 959,272 | (4) | 959,272 | (4) | 959,272 | (4) | ||||||||||||||||||
| Performance Units | 959,272 | (5) | 959,272 | (5) | 959,272 | (5) | ||||||||||||||||||
| Book Value Performance | Book Value Units | 717,360 | (6) | 717,360 | (6) | 717,360 | (6) | |||||||||||||||||
| Benefits: | SERP | 233,906 | 233,906 | |||||||||||||||||||||
| Health/Life | 35,216 | (7) | 4,654,539 | |||||||||||||||||||||
| Addtl. Retire Accruals | 413,225 | 137,502 | 1,421,339 | 89,126 | ||||||||||||||||||||
| Total | 0 | (8) | 5,004,731 | 8,307,435 | 9,640,182 | 3,653,430 | ||||||||||||||||||
| Richard J. Carbone | Severance Payment | 4,937,600 | 8,278,536 | (1) | ||||||||||||||||||||
| Annual Incentive | 2,500,000 | (2) | 2,500,000 | (2) | 1,750,000 | 2,591,700 | 2,591,700 | |||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||
| Performance Shares | 1,731,154 | (4) | 1,731,154 | (4) | 1,731,154 | (4) | ||||||||||||||||||
| Performance Units | 1,731,154 | (5) | 1,731,154 | (5) | 1,731,154 | (5) | ||||||||||||||||||
| Book Value Performance | Book Value Units | 2,040,980 | (6) | 2,040,980 | (6) | 2,040,980 | (6) | |||||||||||||||||
| Benefits: | SERP | |||||||||||||||||||||||
| Health/Life | 25,403 | (7) | 2,203,312 | |||||||||||||||||||||
| Addtl. Retire Accruals | 346,718 | 1,031,499 | 242,703 | 359,435 | 362,838 | |||||||||||||||||||
| Total | 2,846,718 | 8,469,099 | 15,799,930 | 10,657,735 | 8,457,826 | |||||||||||||||||||
| Mark B. Grier | Severance Payment | 9,472,500 | 15,669,888 | (1) | ||||||||||||||||||||
| Annual Incentive | 6,500,000 | (2) | 6,500,000 | (2) | 4,800,000 | 5,125,000 | 5,125,000 | |||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||
| Performance Shares | 6,317,070 | (4) | 6,317,070 | (4) | 6,317,070 | (4) | ||||||||||||||||||
| Performance Units | 6,317,070 | (5) | 6,317,070 | (5) | 6,317,070 | (5) | ||||||||||||||||||
| Book Value Performance | Book Value Units | 5,266,402 | (6) | 5,266,402 | (6) | 5,266,402 | (6) | |||||||||||||||||
| Benefits: | SERP | |||||||||||||||||||||||
| Health/Life | 24,334 | (7) | 13,114,799 | |||||||||||||||||||||
| Addtl. Retire Accruals | 778,228 | 1,912,346 | 574,692 | 3,162,540 | 620,125 | |||||||||||||||||||
| Total | 7,278,228 | 17,884,846 | 38,969,456 | 39,302,881 | 23,645,667 | |||||||||||||||||||
| Edward P. Baird | Severance Payment | 5,705,100 | 12,632,538 | (1) | ||||||||||||||||||||
| Annual Incentive | 4,050,000 | (2) | 4,050,000 | (2) | 3,000,000 | 3,033,400 | 3,033,400 | |||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||
| Performance Shares | 3,195,239 | (4) | 3,195,239 | (4) | 3,195,239 | (4) | ||||||||||||||||||
| Performance Units | 3,195,239 | (5) | 3,195,239 | (5) | 3,195,239 | (5) | ||||||||||||||||||
| Book Value Performance | Book Value Units | 3,000,400 | (6) | 3,000,400 | (6) | 3,000,400 | (6) | |||||||||||||||||
| Benefits: | SERP | |||||||||||||||||||||||
| Health/Life | 26,966 | (7) | 2,715,967 | |||||||||||||||||||||
| Addtl. Retire Accruals | 1,207,336 | 2,970,962 | 9,691 | 47,788 | 808,959 | |||||||||||||||||||
| Total | 5,257,336 | 12,726,062 | 25,060,073 | 15,188,033 | 13,233,237 | |||||||||||||||||||
| Charles F. Lowrey | Severance Payment | 7,430,100 | 11,263,892 | (1) | ||||||||||||||||||||
| Annual Incentive | 5,600,000 | (2) | 5,600,000 | (2) | 4,000,000 | 4,183,400 | 4,183,400 | |||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||
| Performance Shares | 3,833,585 | (4) | 3,833,585 | (4) | 3,833,585 | (4) | ||||||||||||||||||
| Performance Units | 3,833,585 | (5) | 3,833,585 | (5) | 3,833,585 | (5) | ||||||||||||||||||
| Book Value Performance | Book Value Units | 3,779,850 | (6) | 3,779,850 | (6) | 3,779,850 | (6) | |||||||||||||||||
| Benefits: | SERP | |||||||||||||||||||||||
| Health/Life | 31,863 | (7) | 13,502,129 | |||||||||||||||||||||
| Addtl. Retire Accruals | 509,102 | 1,184,579 | 363,644 | 4,203,034 | 384,873 | |||||||||||||||||||
| Total | 6,109,102 | 14,214,679 | 27,106,419 | 33,335,583 | 16,015,293 | |||||||||||||||||||
| Name | Type of Payment or Benefit | Voluntary Termination/Early or Normal Retirement ($) | Involuntary Termination Without Cause ($) | Separation Due to Change in Control ($) | Separation Due to Disability ($) | Separation Due to Death ($) | ||||||||||||||||||||||
| John R. Strangfeld | Severance Payment | 21,462,445 | (1) | |||||||||||||||||||||||||
| Annual Incentive | 5,976,000 | (2) | 5,976,000 | (2) | 6,000,000 | 7,171,700 | 7,171,700 | |||||||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||||||
| RSUs | ||||||||||||||||||||||||||||
| Performance Shares(4) | 10,556,159 | (4) | 10,556,159 | (4) | 10,556,159 | (4) | ||||||||||||||||||||||
| Performance Units(5) | 10,556,159 | (5) | 10,556,159 | (5) | 10,556,159 | (5) | ||||||||||||||||||||||
| Book Value Performance | Book Value Units(6) | 9,106,014 | (6) | 9,106,014 | (6) | 9,106,014 | (6) | |||||||||||||||||||||
| Benefits: | SERP | |||||||||||||||||||||||||||
| Health/Life | 27,369 | (7) | ||||||||||||||||||||||||||
| Addtl. Retire Accurals | 47,904 | 47,904 | 89,340 | 2,112,300 | 1,056,660 | |||||||||||||||||||||||
| Total | 6,023,904 | 6,023,904 | 57,797,486 | 39,502,332 | 38,446,692 | |||||||||||||||||||||||
| Robert M. Falzon | Severance Payment | 5,100,000 | 7,850,324 | (1) | ||||||||||||||||||||||||
| Annual Incentive | 2,990,000 | (2) | 2,990,000 | (2) | 3,000,000 | 2,630,000 | 2,630,000 | |||||||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||||||
| RSUs | ||||||||||||||||||||||||||||
| Performance Shares(4) | 3,787,888 | (4) | 3,787,888 | (4) | 3,787,888 | (4) | ||||||||||||||||||||||
| Performance Units(5) | 3,787,888 | (5) | 3,787,888 | (5) | 3,787,888 | (5) | ||||||||||||||||||||||
| Book Value Performance | Book Value Units(6) | 3,477,905 | (6) | 3,477,905 | (6) | 3,477,905 | (6) | |||||||||||||||||||||
| Benefits: | SERP | 118,620 | 118,620 | |||||||||||||||||||||||||
| Health/Life | 27,369 | (7) | ||||||||||||||||||||||||||
| Addtl. Retire Accurals | 320,068 | 866,004 | 321,139 | 2,962,251 | 284,040 | |||||||||||||||||||||||
| Total | 3,310,068 | 9,074,624 | 22,371,134 | 16,645,933 | 13,967,722 | |||||||||||||||||||||||
| Mark B. Grier | Severance Payment | 10,835,100 | 18,376,355 | (1) | ||||||||||||||||||||||||
| Annual Incentive | 5,080,000 | (2) | 5,080,000 | (2) | 5,100,000 | 6,033,400 | 6,033,400 | |||||||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||||||
| RSUs | ||||||||||||||||||||||||||||
| Performance Shares(4) | 8,591,610 | (4) | 8,591,610 | (4) | 8,591,610 | (4) | ||||||||||||||||||||||
| Performance Units(5) | 8,591,610 | (5) | 8,591,610 | (5) | 8,591,610 | (5) | ||||||||||||||||||||||
| Book Value Performance | Book Value Units(6) | 7,551,015 | (6) | 7,551,015 | (6) | 7,551,015 | (6) | |||||||||||||||||||||
| Benefits: | SERP | |||||||||||||||||||||||||||
| Health/Life | 33,072 | (7) | 394,678 | |||||||||||||||||||||||||
| Addtl. Retire Accurals | 697,097 | 2,183,928 | 699,841 | 1,554,473 | 832,609 | |||||||||||||||||||||||
| Total | 5,777,097 | 18,099,028 | 48,943,503 | 32,716,786 | 31,600,244 | |||||||||||||||||||||||
| Charles F. Lowrey | Severance Payment | 8,780,100 | 13,512,271 | (1) | ||||||||||||||||||||||||
| Annual Incentive | 3,985,000 | (2) | 3,985,000 | (2) | 4,000,000 | 5,083,400 | 5,083,400 | |||||||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||||||
| RSUs | ||||||||||||||||||||||||||||
| Performance Shares(4) | 5,353,367 | (4) | 5,353,367 | (4) | 5,353,367 | (4) | ||||||||||||||||||||||
| Performance Units(5) | 5,353,367 | (5) | 5,353,367 | (5) | 5,353,367 | (5) | ||||||||||||||||||||||
| Book Value Performance | Book Value Units(6) | 5,567,475 | (6) | 5,567,475 | (6) | 5,567,475 | (6) | |||||||||||||||||||||
| Benefits: | SERP | |||||||||||||||||||||||||||
| Health/Life | 33,207 | (7) | ||||||||||||||||||||||||||
| Addtl. Retire Accurals | 418,930 | 1,341,953 | 420,508 | 4,453,070 | 538,840 | |||||||||||||||||||||||
| Total | 4,403,930 | 14,107,053 | 34,240,195 | 25,810,679 | 21,896,449 | |||||||||||||||||||||||
| Stephen Pelletier | Severance Payment | 6,280,050 | 12,201,885 | (1) | ||||||||||||||||||||||||
| Annual Incentive | 3,985,000 | (2) | 3,985,000 | (2) | 4,000,000 | 3,416,700 | 3,416,700 | |||||||||||||||||||||
| Long-term Incentive: | Stock Options(3) | |||||||||||||||||||||||||||
| RSUs | ||||||||||||||||||||||||||||
| Performance Shares(4) | 4,540,866 | (4) | 4,540,866 | (4) | 4,540,866 | (4) | ||||||||||||||||||||||
| Performance Units(5) | 4,540,866 | (5) | 4,540,866 | (5) | 4,540,866 | (5) | ||||||||||||||||||||||
| Book Value Performance | Book Value Units(6) | 4,018,476 | (6) | 4,018,476 | (6) | 4,018,476 | (6) | |||||||||||||||||||||
| Benefits: | SERP | 274,380 | 1,446,516 | |||||||||||||||||||||||||
| Health/Life | 31,729 | (7) | ||||||||||||||||||||||||||
| Addtl. Retire Accurals | 1,990,500 | 5,500,164 | 2,010,048 | 1,457,004 | 802,104 | |||||||||||||||||||||||
| Total | 5,975,500 | 16,039,594 | 32,790,386 | 17,973,912 | 17,319,012 | |||||||||||||||||||||||
| Includes severance payments equal to two times annual cash compensation (subject to execution of a non-competition agreement), and a cash payment for the pension impact of additional two years of credited service. |
| Includes annual incentive award amount for |
| For disability and death, accelerated vesting of all stock options with up to three years to exercise. |
| Includes the value of |
| Includes the value of |
| Includes the value of |
| Reflects the expected contribution subsidy for 18 months and the associated tax gross-up. For this purpose, we have assumed the |
| | Notice of Annual Meeting of Shareholders and | ||
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VOTING INSTRUCTIONS AND INFORMATIONGeneral Information About The Meeting
Voting Instructions and Information
Who Can Vote
You are entitled to vote your Common or Class B Stock if our records show that you held your shares as of the record date of March 14, 2014.10, 2017. At the close of business on that date, a total of 460,979,359430,370,040 shares of Common Stock and 2,000,000 shares of Class B Stock were outstanding and entitled to vote. Each share of Common Stock and Class B Stock is entitled to one vote, and vote together as a single class on the matters submitted for a vote at this Annual Meeting. Your voting instructions are confidential and will not be disclosed to persons other than those recording the vote, except if a shareholder makes a written comment on the proxy card, otherwise communicates his or her vote to management, as may be required in accordance with the appropriate legal process, or as authorized by you.
Voting Your Proxy
If your Common Stock is held through a broker, bank or other nominee (held in street name), you will receive instructions from such entity that you must follow in order to have your shares voted. If you want to vote in person, you must obtain a legal proxy from your broker, bank or other nominee and bring it to the meeting, and submit it with your vote.
If you hold your shares in your own name as a holder of record with our transfer agent, Computershare, you may instruct the proxies how to vote by following the instructions listed on the Notice of Internet Availability or the proxy card to vote online, or by signing, dating and mailing the proxy card in the postage-paid envelope. Of course, you can always come to the meeting and vote your shares in person.
Whichever method you select to transmit your instructions, the proxies will vote your shares in accordance with those instructions. IfExcept as discussed below with respect to shares held in certain company plans, if you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board of Directors: forFOR each director nominee, forFOR ratification of the appointment of the independent registered public accounting firm, forFOR the advisory vote to approve named executive officer compensation, for “EVERY YEAR” on the advisory vote on the frequency of future advisory votes to approve named executive officer compensation, and againstAGAINST the shareholder proposal regarding executive stock ownership.an independent Board Chairman.
Special Voting Instructions for Plan Shares
If you are a participant in The Prudential Employee Savings Plan (“PESP”) and your account is invested in the Common Stock Fund, you may instruct the PESP Trustee how to vote the shares of Common Stock credited to your PESP account and held in the Fund on March 7, 2017. The PESP Trustee, the shareholder of record, will vote these shares in accordance with your instructions or, if you do not provide voting instructions, in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions subject to the terms of the PESP plan document, its trust agreement and applicable law. If you hold shares of Common Stock through your participation in the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan (collectively, “the Plan”), on those shares will be voted by the Plan administrator in accordance with your instructions or, if you do not provide voting instructions, in accordance with the Board of Directors’ recommendation subject to the terms of the Plan and applicable law.
Matters to Be Presented
We are not aware of any matters to be presented at the Annual Meeting other than those described in this proxy statement.Proxy Statement. If any matters not described in this Proxy Statement are properly presented at the meeting, the proxies will use their own judgment to determine how to vote your shares. If the meeting is adjourned or postponed, the proxies can vote your shares at the adjournment or postponement as well.
Revoking Your Proxy
If you hold your shares in street name, you must follow the instructions of your broker, bank or other nominee to revoke your voting instructions. If you are a holder of record and wish to revoke your proxy instructions, you must deliver later-dated proxy instructions, advise the Chief Governance Officer and Corporate Secretary in writing before the proxies vote your shares at the meeting, or attend the meeting and vote your shares in person.
| Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | | 77 | |||
| General Information About The Meeting |
How Votes Are CountedQuorum
A quorum is required to transact business at our Annual Meeting. Shareholders of record holding shares of stock constituting 50% of the shares entitled to be cast shall constitute a quorum. If you have returned valid proxy instructions or attend the meeting in person, your shares will be counted for the purpose of determining whether there is a quorum, even if you abstain from voting on some or all matters introduced at the meeting. In addition, brokernon-votes will be treated as present for purposes of determining whether a quorum is present.
Voting Requirements
You may either vote for, against or abstain on each of the proposals.proposals, with the exception of Item 4 where you may vote for one year, two years, three years or abstain. The affirmative vote of a majority of the votes cast is required to approve each proposal. Brokernon-votes and abstentions will have no impact, as they are not counted as votes cast.
Although the advisory votevotes in ItemItems 3 isand 4 arenon-binding, as provided by law, our Board will review the results of the votevotes and, consistent with our commitment to shareholder engagement, will take itthem into account in making a determination concerning our named executive officer compensation and the frequency of future advisory votes to approve named executive officer compensation. If you hold your shares in street name, and you do not submit voting instructions to your broker, bank or other nominee, your broker, bank or other nominee will not be permitted to vote your shares in their discretion on the election of directors, the advisory vote to approve executive compensation, andthe advisory vote on the frequency of future advisory votes to approve named executive officer compensation, or the shareholder proposal regarding executive stock ownership,an independent Board Chairman, but may still be permitted to vote your shares in their discretion on the ratification of the independent registered public accounting firm.
Election of Directors
At the meeting, each nominee must receive the affirmative vote of a majority of the votes cast with respect to his or her election in order to be elected. If an incumbent nominee is not elected by the requisite vote, he or she must tender his or her resignation, and the Board, through a process managed by the Corporate Governance and Business Ethics Committee, will decide whether to accept the resignation.
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Board RecommendationsBOARD RECOMMENDATIONS
The boardBoard of Directors recommends that you voteFOR“FOR” each of the Director Nominees,FOR“FOR” the
Ratificationratification of the Appointmentappointment of the Independent Registered Public Accounting Firm,
FOR“FOR” the Advisory Voteadvisory vote to approve named Executive Officer Compensation,executive officer compensation, for“EVERY YEAR” on the advisory vote on the frequency of future advisory votes to approve named executive officer compensation and
AGAINST“AGAINST” the Shareholder Proposal on Executive Stock Ownership.shareholder proposal regarding an independent Board Chairman.
Cost of Proxy Solicitation
We are providing these proxy materials in connection with the solicitation by the Company’s Board of Directors of proxies to be voted at our Annual Meeting. We will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, we expect that a number of our employees will solicit shareholders personally, electronically and by telephone. None of these employees will receive any additional compensation for doing this. We have retained Georgeson, Inc. to assist in the solicitation of proxies for a fee of $25,000 plus reimbursement of expenses. We will, on request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.
If you attend the Annual Meeting, you will be asked to present valid, government-issued photo identification, such as a driver’s license. If you are a holder of record, the top half of your proxy card or your Notice of Internet Availability is your admission ticket. If you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from your bank or broker are examples of proof of ownership. If you want to vote your shares held in street name in person, you must get a legal proxy in your name from the broker, bank or other nominee that holds your shares, and submit it with your vote.
You
| 78 | | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | |
| General Information About The Meeting |
Attendance at the Annual Meeting is limited to shareholders of Prudential as of the record date. Each shareholder may listenappoint only one proxy holder or representative to attend the Annual Meeting on the Internet by visiting www.investor.prudential.com. Please log in a few minutes earlyhis or her behalf.
Submission of Shareholder Proposals and Director Nominations
Proposals and Director Nominations for Inclusion in the event you need to download any required software.
SUBMISSION OF SHAREHOLDER PROPOSALSProxy Statement for the 2018 Annual Meeting
In order to submit shareholder proposals for the 20152018 Annual Meeting of Shareholders for inclusion in the Company’sour Proxy Statement pursuant to SEC Rule14a-8, materials must be received by the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark, New Jersey, no later than the close of business on November 25, 2014.21, 2017.
Proposals must comply with allWe have adopted proxy access, which permits a shareholder, or a group of up to 20 shareholders, owning 3% or more of the requirements of SEC Rule 14a-8. Proposals should be addressed to: Margaret M. Foran, Chief Governance Officer and Corporate Secretary, Prudential Financial, Inc., 751 Broad Street,
Newark, NJ 07102. As the rulesCompany’s outstanding capital stock for at least three years, to submit director nominees for up to 20% of the SEC make clear, simply submitting a proposal does not guarantee its inclusion.
The Company’s By-laws also establish an advance notice procedure with regard to director nominations and shareholder proposals that are not submittedBoard for inclusion in theour Proxy Statement but that a shareholder instead wishes to present directly at an Annual Meeting. To be properly brought beforeif the 2015 Annual Meeting, a noticeshareholder(s) and the nominee(s) meet the requirements in ourBy-laws. Notice of the nomination or the matter the shareholder wishes to present at the meeting must be delivered to the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark (see above), not less than 120 or more than 150 days prior to the first anniversary of the date of this year’s Annual Meeting. As a result, any notice given by or on behalf of a shareholder pursuant todirector nominations submitted under these proxy accessBy-lawprovisions of the Company’s By-laws (and not pursuant to SEC Rule 14a-8) must be received no earlier than December 14, 2014,10, 2017 and no later than January 13, 2015.9, 2018. However, if the 20152018 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 2017 Annual Meeting was mailed or public disclosure of the meeting date was made.
Proposals submitted for inclusion in our Proxy Statement must comply with all of the requirements of SEC Rule14a-8, and director nominations submitted pursuant to the proxy access provisions of ourBy-laws must comply with all of the requirements of ourBy-laws. As the rules of the SEC and ourBy-laws make clear, simply submitting a proposal or nomination does not guarantee its inclusion.
Other Proposals or Director Nominations for Presentation at the 2018 Annual Meeting
OurBy-laws also establish an advance notice procedure with regard to director nominations and shareholder proposals that are not submitted for inclusion in the Proxy Statement, but that a shareholder instead wishes to present directly at an Annual Meeting. To be properly brought before the 2018 Annual Meeting, a notice of the nomination or the matter the shareholder wishes to present at the meeting must be delivered to the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark (see below) not less than 120 or more than 150 days prior to the first anniversary of the date of this year’s Annual Meeting. As a result, any notice given by or on behalf of a shareholder pursuant to these provisions of the Company’sBy-laws (and not pursuant to SEC Rule14a-8) must be received no earlier than December 10, 2017 and no later than January 9, 2018. However, if the 2018 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 2018 Annual Meeting was mailed or public disclosure of the meeting date was made. All director nominations and shareholder proposals must comply with the requirements of the Company’sBy-laws, a copy of which may be obtained at no cost from the Chief Governance Officer and Corporate Secretary. The Chairman may refuse to acknowledge or introduce any such matter at the Annual Meeting if notice of the matter is not received within the applicable deadlines or does not comply with the Company’sBy-laws. If a shareholder does not meet these deadlines, or does not satisfy the requirements of Rule14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the Annual Meeting.
ELIMINATING DUPLICATIVE PROXY MATERIALSAll proposals and director nominations should be addressed to: Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, Prudential Financial, Inc., 751 Broad Street, Newark, NJ 07102.
Eliminating Duplicative Proxy Materials
A single Proxy Statement and Annual Report, along with individual proxy cards, or individual Notices of Internet Availability, will be delivered in one envelope to multiple shareholders having the same last name and address and to individuals with more than one account registered at Computershare with the same address unless contrary instructions have been received from an affected shareholder.
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If you would like to enroll in this service or receive individual copies of all documents, now or in the future, please contact Computershare by calling1-800-305-9404 or writing Computershare, P.O. Box 43033, Providence, RI 02940-3033. We will
| Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | | 79 | |||
| General Information About The Meeting |
deliver a separate copy of all documents to a shareholder at a shared address to which a single copy of the documents was delivered promptly upon request to the address or telephone number provided above.
DELIVERY OF PROXY MATERIALSDelivery of Proxy Materials
We want to communicate with you in the way that is most convenient for you. You may choose to receive either a full set of printed materials – materials—which will include an Annual Report, Proxy Statement, and proxy card – card—or an email with instructions for how to view the materials and vote online. To select a method of delivery during the voting season, registered shareholders may follow the instructions when voting online at www.investorvote.com/prudential. Following the 20142017 Annual Meeting, you may continue to choose your method of delivery of future documents by visiting www.computershare.com/investor. If you own shares indirectly through a broker, bank, or other nominee, please contact your financial institution for additional information regarding delivery options.
If you do not choose a method of delivery as outlined above, you may receive aone-page Notice of Internet Availability instructing you how to access the materials and vote in lieu of printed or electronic materials. As a publicly traded company, Prudential is legally required to make these materials available to all shareholders and it is not possible to opt out of the mailing.
Important Notice Regarding the Availability of Proxy Materials for the 20142017 Annual Meeting of Shareholders to Be Held on May 13, 2014:9, 2017: Our 20142017 Proxy Statement and Annual Report for the year ended December 31, 2013,2016, are available free of charge on our website at www.prudential.com/governance.
Annual Report on FormANNUAL REPORT ON FORM 10-K
The Company will provide by mail, without charge, a copy of its Annual Report on Form10-K, at your request. Please direct all inquiries to the Company’s Corporate Information Service at1-877-998-ROCK (7625) or 751 Broad Street, Newark, NJ 07102.
INCORPORATION BY REFERENCEIncorporation By Reference
To the extent that this Proxy Statement has been or will be specifically incorporated by reference into any other filing of Prudential Financial under the Securities Act of 1933 or the Exchange Act, the sections of this Proxy Statement entitled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC) and “Compensation Committee Report” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing.
SHAREHOLDER LISTShareholder List
A list of shareholders entitled to vote at the Annual Meeting will be available for examination by shareholders at the Annual Meeting.
| 80 | | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | |
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Appendix A - Non-GAAP Measures
Adjusted operating income (“AOI”) and operating return on average equity are non-GAAP measures of financial performance. Adjusted book value is a non-GAAP measure of financial position. We use earnings per share based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. Also, we believe that our use of these non-GAAP measures helps investors understand and evaluate the Company’s results of operations and financial position, by providing measures that are primarily attributable to our business operations separate from the portion attributable to external and potentially volatile capital and currency market conditions.
Adjusted Operating Income
Adjusted operating income excludes “Realized investment gains (losses), net,” as adjusted, and related charges and adjustments. A significant element of realized investment gains and losses are impairments and credit-related and interest rate-related gains and losses. Impairments and losses from sales of credit-impaired securities, the timing of which depends largely on market credit cycles, can vary considerably across periods. The timing of other sales that would result in gains or losses, such as interest rate-related gains or losses, is largely subject to our discretion and influenced by market opportunities as well as our tax and capital profile.
Realized investment gains (losses) within certain of our businesses for which such gains (losses) are a principal source of earnings, and those associated with terminating hedges of foreign currency earnings and current period yield adjustments are included in adjusted operating income. Adjusted operating income generally excludes realized investment gains and losses from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset-liability management program related to the risk of those products. However, the effectiveness of our hedging program will ultimately be reflected in adjusted operating income over time. Adjusted operating income also excludes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that have been economically hedged or considered part of our capital funding strategies for our international subsidiaries, as well as gains and losses on certain investments that are classified as other trading account assets.
Adjusted operating income also excludes investment gains and losses on trading account assets supporting insurance liabilities and changes in experience-rated contractholder liabilities due to asset value changes, because these recorded changes in asset and liability values are expected to ultimately accrue to contractholders. In addition, adjusted operating income excludes the results of divested businesses, which are not relevant to our ongoing operations. Discontinued operations and earnings attributable to noncontrolling interests, each of which is presented as a separate component of net income under GAAP, are also excluded from adjusted operating income. The tax effect associated with pre-tax adjusted operating income is based on applicable IRS and foreign tax regulations inclusive of pertinent adjustments.
| Notice of Annual Meeting of Shareholders and | | |||
Value Creation Model
PRUDENTIAL’S MISSION: PRUDENTIAL’S VISION:
To help our customers achieve financial To distinguish Prudential as an admired prosperity and peace of mind. multinational financial services leader, trusted partner, and provider of innovative solutions for growing and protecting wealth.
As a member of the International Integrated Reporting activities that affect the ability of Prudential to keep its promises Council Pilot Program, Prudential has been participating in to our investors and customers now and well into the future. the development of a framework that helps investors better Detailed data on financial results and other outputs of the model understand the process that underlies a company’s short-, are available at www.prudential.com or in Prudential’s Annual medium- and long-term value creation.
Report and the company’s Sustainability Report. Additional This infographic portrays a model of Prudential’s process at the information about integrated reporting is offered at www.theiirc.org. conceptual level, tying together the direct business and corporate
Financial Intellectual Human Social
Global economic and Impaired trust in industry Attracting and retaining Underserved communities social volatility Financial and regulatory crucial talent Effects of climate change
The level and volatility of environment SKS interest rates and equity RI markets
Complex insurance and ?nancial products
Strong investment, actuarial Improving understanding Reputation as employer of Functioning local economies E S and risk management skills of business may choice supports recruitment, can strengthen pipelines for
IT I
N may attract customers and strengthen trust retention and loyalty talent and customers U enhance ?nancial results Good public policy supports
Financial strength and value creation OPPORT capacity enhances ?exibility and competitiveness
Prudential’s Assets Thought leadership in Diverse, talented employees Strong corporate social
Client Assets retirement and Collaborative mindset responsibility program RCES Under Management financial services inclusive of grants, volunteer U O Seasoned management services and social
Overall financial strength Ethical culture team with strong succession
R ES investments
Global platform History of product innovation planning
Capital & diversi?cation Environmental commitment
Previous performance
BUSINESS ACTIVITIES
Individual and group Investments Retirement solutions Corporate activities insurance
STRATEGY
High value-added products Integrity in a diverse and Growing financial strength Creating shared value through meeting long-term, inclusive culture corporate social responsibility sophisticated client needs
Complementary high-quality businesses
Increased book value, New longevity risk Engaged employees resulting Resilient communities shareholder distributions management products in a competitive advantage Strong brand and share price
Studies outlining needs of Tradition of service
Benefits for and payments underserved markets S UT to customers, shareholders Research on P ROI, ROE, AOI retirement issues
UT
O Taxes
Ful?lling promises to customers, employees, vendors and investors
PAPERS PRODUCED UNDER A
PRINTED ON REYCLED SUSTAINABLE FOREST MANAGEMENT PAPER WITH 10% PROGRAM. PRINTED WITH VEGETABLE-POST-CONSUMER WASTE BASED INKS AND RENEWABLE ENERGY.
| Appendix A |
Reconciliations of GAAP Net Income to After-Tax Adjusted Operating Income
(in billions)
| Year Ended December 31 | ||||||||
| 2016 | 2015 | |||||||
| Net income attributable to Prudential Financial, Inc. | $ | 4.37 | $ | 5.64 | ||||
| Income attributable to noncontrolling interests | $ | 0.05 | $ | 0.07 | ||||
| Net income | $ | 4.42 | $ | 5.71 | ||||
| Less: Income from discontinued operations, net of taxes | $ | — | $ | — | ||||
| Income from continuing operations (after-tax) | $ | 4.42 | $ | 5.71 | ||||
| Less: Earnings attributable to noncontrolling interests | $ | 0.05 | $ | 0.07 | ||||
| Income from continuing operations attributable to Prudential Financial, Inc. | $ | 4.37 | $ | 5.64 | ||||
| Less: Equity in earnings of operating joint ventures, net of taxes and earnings attributable to noncontrolling interests | $ | (0.00 | ) | $ | (0.06 | ) | ||
| Income from continuing operations (after-tax) before equity in earnings ofoperating joint ventures | $ | 4.37 | $ | 5.70 | ||||
Less: Reconciling Items: | ||||||||
Realized investment gains (losses), net, and related charges and adjustments | $ | 0.52 | $ | 1.58 | ||||
Investment losses on trading account assets supporting insurance liabilities, net | $ | (0.02 | ) | $ | (0.52 | ) | ||
Change in experience-rated contractholder liabilities due to asset value changes | $ | 0.02 | $ | 0.43 | ||||
Divested businesses: | ||||||||
Closed Block division | $ | (0.13 | ) | $ | 0.06 | |||
Other divested businesses | $ | (0.08 | ) | $ | (0.07 | ) | ||
Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests | $ | (0.01 | ) | $ | 0.06 | |||
Total reconciling items, before income taxes | $ | 0.31 | $ | 1.54 | ||||
Less: Income taxes, not applicable to adjusted operating income | $ | 0.04 | $ | 0.49 | ||||
Total reconciling items, after income taxes | $ | 0.26 | $ | 1.05 | ||||
| After-tax adjusted operating income | $ | 4.11 | $ | 4.65 | ||||
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| Appendix A |
Reconciliations of GAAP Earnings per Share to After-Tax Adjusted Operating Income Earnings per Share
(shares in millions)
Year Ended December 31 | ||||||||
| 2016 | 2015 | |||||||
| Net income attributable to Prudential Financial, Inc. | $ | 9.71 | $ | 12.17 | ||||
Less: Income from discontinued operations, net of taxes | — | — | ||||||
| Income from continuing operations (after-tax) attributable to Prudential Financial, Inc. | 9.71 | 12.17 | ||||||
Less: Reconciling Items: | ||||||||
Realized investment gains (losses), net, and related charges and adjustments | 1.17 | 3.43 | ||||||
Investment gains (losses) on trading account assets supporting insurance liabilities, net | (0.04 | ) | (1.14 | ) | ||||
Change in experience-rated contractholder liabilities due to asset value changes | 0.05 | 0.94 | ||||||
Divested businesses: | ||||||||
Closed Block division | (0.30 | ) | 0.13 | |||||
Other divested businesses | (0.19 | ) | (0.14 | ) | ||||
Difference in earnings allocated to participating unvested share-based payment awards | — | (0.02 | ) | |||||
Total reconciling items, before income taxes | 0.69 | 3.20 | ||||||
Less: Income taxes, not applicable to adjusted operating income | 0.11 | 1.07 | ||||||
Total reconciling items, after income taxes | 0.58 | 2.13 | ||||||
| After-tax adjusted operating income | $ | 9.13 | $ | 10.04 | ||||
Weighted average number of outstanding Common shares (diluted) | 446.6 | 460.4 | ||||||
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Adjusted Book Value
Reconciliations of GAAP Book Value to Adjusted Book Value
(in millions, except for per share data)
Year Ended December 31 | ||||||||
| 2016 | 2015 | |||||||
| GAAP book value (total PFI equity) at end of period | $ | 45,863 | $ | 41,890 | ||||
| Less: Accumulated other comprehensive income (AOCI) | $ | 14,621 | $ | 12,285 | ||||
| GAAP book value excluding AOCI | $ | 31,242 | $ | 29,605 | ||||
| Less: Cumulative effect of foreign exchange remeasurement and currency | ||||||||
| translation adjustments corresponding to realized gains/losses | $ | (3,199 | ) | $ | (3,747 | ) | ||
| Adjusted book value | $ | 34,441 | $ | 33,352 | ||||
| Number of diluted shares at end of period | 436.2 | 453.2 | ||||||
| GAAP book value per common share - diluted(1) | 104.91 | 92.39 | ||||||
| Adjusted book value per common share - diluted | 78.95 | 73.59 | ||||||
| (1) |
Operating Return on Average Equity
Operating Return on Average Equity represents adjusted operating income after-tax divided by average adjusted book value. The comparable GAAP measure is return on average equity (based on income from continuing operations). Return on average equity (based on income from continuing operations) represents income from continuing operations after-tax, attributable to consolidated Prudential Financial, Inc., as determined in accordance with GAAP, divided by average total Prudential Financial, Inc. equity. Return on average equity (based on income from continuing operations) was 8.8% for the year ended December 31, 2016.
| 84 | | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | |
GENDER PAY POLICY
Prudential’s Total Rewards is integral to our employee value proposition. This package includes compensation, as well as programs and resources available to our employees.
All roles in our U.S. organization are reviewed and assigned a value and market reference range based on market and benchmarking data. These ranges enable us to recruit and promote talent within the context of an individual’s background, experience and performance.
ANNUAL COMPENSATION REVIEW OF ALL U.S. EMPLOYEES
Process
Human Resources and Legal team assesses compensation structure for potential pay disparities by gender and race/ethnicity.
Independent third party reviews Human Resources and Legal team’s evaluation.
If disparities are found, corrective action is taken.
Employee Input
Internal survey contains pay-related questions enabling employees to address compensation issues.
Employees can raise issues regarding pay equity with the Ethics Office, Human Resources or their manager.
Pay discrimination is investigated by trained professionals dedicated to reviewing unlawful discrimination claims.
This integrated approach ensures that we proactively manage pay equity on an ongoing basis for both women and people of color, and that we satisfy our heightened obligations as a federal contractor.
After completion of our annual review, Prudential is confident that, controlling for relevant factors, there are no significant gender or race wage differentials in the U.S. for employees performing substantially similar work.
Our Board receives a review of our pay equity assessment each year as part of our annual human resources strategy update.
THE ENVIRONMENT:
RISKS, OPPORTUNITIES AND ENGAGEMENT
Prudential has long recognized the connection between climate risk and the company’s long-term vitality.
The company has managed its own impact on the environment by decreasing energy use and installing solar arrays in major employee centers. Other efforts decrease water and paper use and increase recycling.
Prudential also invests in initiatives that contribute to a healthier environment. Our holdings, as of December 31, 2016, include:
Renewable energy investments valued at more than $3.8 billion
27.2 million square feet of LEED Green U.S. real estate totaling $13.7 billion
“Green” bonds totaling over $380 million
Our developing understanding of risks and opportunities comes from engagement with stakeholders, including our investors, customers and employees.
Active involvement in environmental issues is one part of Prudential’s long-term value creation. For more information, go to www.prudential.com/sustainability
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PAPERS PRODUCED UNDER A SUSTAINABLE FOREST MANAGEMENT PROGRAM. PRINTED USING VEGETABLE-BASED INKS AND RENEWABLE ENERGY.
| IMPORTANT ANNUAL MEETING INFORMATION |
| Admission Ticket | |||||||||
| Electronic Voting Instructions | |||||||||
You can vote by Internet or telephone | |||||||||
Instead of mailing your proxy, you may choose to vote online or by telephone. | |||||||||
Proxies submitted by the Internet or telephone must be received by 11:59 p.m.
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| Vote by Internet | ||||||||
• Go towww.investorvote.com/ | |||||||||
• Follow the steps outlined on the secured website. | |||||||||
|  | Vote by telephone | |||||||
• Call toll free1-800-652-VOTE (8683)within the USA, | |||||||||
• Follow the instructions provided by the recorded message. | |||||||||
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
| A | Proposals |
1. Election of Directors: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | + | ||||||||||||||||||||||||||||||||||||||||
| 01 - Thomas J. Baltimore, Jr. | ☐ | ☐ | ☐ | 05 - Karl J. Krapek | ☐ | ☐ | ☐ | 09 - Christine A. Poon | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||||||||
| ☐ | ☐ | 06 - Peter R. Lighte | ☐ | ☐ | ☐ | 10 - Douglas A. Scovanner | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||||||||||
| 03 - Mark B. Grier | 07 - George Paz | 11 - John R. Strangfeld |
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2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for | ☐ | The Board of Directors recommends a voteAGAINST Proposal 5. | ||||||||||||||||||||||||||
| For | Against | Abstain | ||||||||||||||||||||||||||
3. Advisory vote to approve named executive officer compensation. | ☐ | ☐ | ☐ |
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4. Advisory Vote on frequency. | ||||||||||||||||||||||||||||
| B | Non-Voting Proposal – |
| I would like a free tote bag from Prudential. ☐ I prefer Prudential contribute to a tree planting campaign. ☐ |
| Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | ||||||||||||||||||
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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1 U P X | + | |||
02IB6E |
| ANNUAL MEETING OF SHAREHOLDERS |  | ||
| May
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| 751 Broad Street, Newark, New Jersey 07102 | ||||
You may vote via the telephone number or website on the front of this card. When voting on the Internet, you can also register to receive electronic delivery of future proxy materials. Votes must be received by 11:59 p.m. EDT, May 12, 2014, if submitted via the phone or Internet. Votes submitted by returning this proxy card in the mail must be received by 10:00 a.m. EDT, May 13, 2014.
If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits a shareholder and one guest.the shareholder. All meeting attendees must present valid government-issued photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will
This card covers the total number of shares of Prudential Financial, Inc. Common Stock (“Common Stock”) registered in your name (“Registered Shares”) at Prudential’s transfer agent, Computershare, as of March 10, 2017, and may also cover the total number of shares of Prudential Financial, Inc. Common Stock held in The Prudential Employee Savings Plan (“PESP”) on March 7, 2017. Or, this card may cover the total number of shares of Prudential Financial, Inc. Common Stock for the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) registered in your name with Computershare as of the close of business on the record date of March 10, 2017.
You only need to vote once. This card enables you to submit your vote on your Registered Shares; to provide voting instructions to the PESP Trustee for your PESP shares; or to submit voting instructions for your International portion of the Prudential Stock Purchase Plan shares.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 9, 2017. The Proxy Statement and Annual Report to Shareholders are available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.www.investorvote.com/prudential
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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Proxy/Voting Instruction Form
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This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:0030 p.m. EDT on May 13, 2014.9, 2017.
The undersigned, having received the Notice of Meeting and Proxy Statement dated March 25, 2014,21, 2017, appoints Susan L. Blount, Margaret M. Foran, Timothy P. Harris and John R. Strangfeld, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc. held of record on March 14, 2014,, at the Annual Meeting of Shareholders to be held at 2:0030 p.m. EDT,, May 13, 2014,9, 2017, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.
If no directions are given, the proxies will vote in accordance with the Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.
Important Notice RegardingSpecial Voting Instructions for Plan Shares: If you are a participant in The Prudential Employee Savings Plan (“PESP”), or the Availabilityinternational portion of Proxy Materialsthe Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan, your shares will be voted by the applicable trustee or administrator in accordance with the instructions indicated on the reverse side or received by internet or telephone. If no instructions are specified, your PESP shares will be voted in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions, and all other shares will be voted by the Shareholder Meetingplan administrator in accordance with the Board of Directors’ recommendations, in each case, subject to be Held on May 13, 2014.
The Proxy Statementthe terms of the applicable plan documents and Annual Report to Shareholders are available at www.investorvote.com/prudential.
applicable law.
Comments — We value your feedback. Please provide any comments you have in the space below.
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IMPORTANT SHAREHOLDER INFORMATION
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. qYOUR VOTE COUNTS!
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VOTING INSTRUCTIONS ARE LOCATED BELOW
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| Shareholder Meeting Notice & Admission Ticket |  |
Important Notice Regarding the Availability of Proxy Materials for the
Prudential Financial, Inc. Shareholder Meeting to be Held on May 09, 2017
The proxy materials for the annual meeting are available online. The items to be voted on are listed below. Follow the instructions to view the materials and vote online. Your vote is important! To obtain a paper or e-mail copy of the proxy materials follow the instructions on the reverse side.
Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations.
The Board of Directors recommends that you voteFOR Proposals 1 – 3 and 1 year for Proposal 4.
| 1. | Election of Directors: Thomas J. Baltimore, Jr., Gilbert F. Casellas, Mark B. Grier, Martina Hund-Mejean, Karl J. Krapek, Peter R. Lighte, George Paz, Sandra Pianalto, Christine A. Poon, Douglas A. Scovanner, John R. Strangfeld and Michael A. Todman. |
| 2. | Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for |
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| 3. | Advisory vote to approve named executive officer compensation. |
| Advisory vote on frequency. |
The Board of Directors recommends that you voteAGAINST Proposal 5:
| Shareholder proposal regarding an independent Board Chairman. |
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet.
We encourage you to access and review all of the important information contained in the proxy materials before voting.
The proxy statement and annual report to shareholders are available at www.investorvote.com/prudential.
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Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
If you have access to the Internet, you can complete the process in a few easy steps: | ||||||||
Step 1: Go towww.investorvote.com/prudential | ||||||||
Step 2: Click theView buttons to see the proxy statement, which contains details of the proposals to be voted on, and the annual report. | ||||||||
Step 3: Follow the instructions on the screen to log in. | ||||||||
Step 4: Make your selection as instructed on each screen to select delivery preferences. | ||||||||
| Step 5: Make your voting selections as instructed on the screen and click the vote button to submit your vote. |
PLEASE NOTE — YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares, you must vote online or request a paper copy of the proxy materials to receive a proxy card.
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02IB8C
Shareholder Meeting Notice & Admission Ticket
| Obtaining a Copy of the Proxy Materials – If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed below on or before April 28, 2017, to facilitate timely delivery. | |||
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Here’s how to order a copy of the proxy materials and select future delivery preference:
Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or e-mail options below.
E-mail copies: Current and future e-mail delivery requests must be submitted via the Internet or e-mail following the instructions below. If you request an e-mail copy of the materials, you will receive an e-mail with a link to view the materials on the Internet.
PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials.
May 13, 2014, 2:00 p.m. EDT at
Prudential’s Corporate Headquarters,
751 Broad Street, Newark, New Jersey 07102
| g | Internet– Go to www.investorvote.com/prudential. Follow the instructions to log in and order a paper or e-mail copy of the current meeting materials and submit your preference for e-mail or paper delivery of future meeting materials. |
| g | Telephone– Call us free of charge at 1-866-641-4276 using a touch-tone phone and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings. |
You may
| g | E-mail– Send an e-mail to investorvote@computershare.com with “Proxy Materials Prudential” in the subject line. In the e-mail, include your full name and address, plus the number located in the shaded bar on the reverse side of this document. State in the e-mail whether you want a paper or e-mail copy of the current meeting materials. You can also state your preference for an e-mail or paper copy for future meetings. |
If you wish to attend and vote viaat the telephone number or websitemeeting, please bring this notice and identification with you.
Prudential Financial, Inc.’s Annual Meeting of Shareholders will be held on the front of this card. When voting on the Internet, you can also register to receive electronic delivery of future proxy materials. Votes must be received by 11:59May 09, 2017, at 751 Broad Street, Newark, New Jersey 07102, at 2:30 p.m. EDT, May 12, 2014, if submitted via the phone or Internet. Votes submitted by returning this proxy card in the mail must be received by 10:00 a.m. EDT, May 13, 2014.
If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits a shareholder and one guest.the shareholder. All meeting attendees must present valid government-issued photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT on May 13, 2014.
The undersigned, having received the Notice of Meeting and Proxy Statement dated March 25, 2014, appoints Susan L. Blount, Margaret M. Foran, and John R. Strangfeld, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Class B Stock of Prudential Financial, Inc. held of record on March 14, 2014, at the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT, May 13, 2014, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.02IB8C
If no directions are given, the proxies will vote in accordance with the Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 13, 2014.
The Proxy Statement and Annual Report to Shareholders are available at www.investorvote.com/prudential.
Comments— We value your feedback. Please provide any comments you have in the space below.
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Important Notice Regarding the Availability of Proxy Materials for the
Prudential Financial, Inc. Shareholder Meeting to be Held on May 13, 2014
The proxy materials for the annual meeting are available online. The items to be voted on are listed below. Follow the instructions to view the materials and vote online. Your vote is important! To obtain a paper ore-mail copy of the proxy materials follow the instructions on the reverse side.
Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations.
The Board of Directors recommends that you voteFOR Proposals1-3 andAGAINST Proposal 4:
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet.
We encourage you to access and review all of the important information contained in the proxy materials before voting.
The proxy statement and annual report to shareholders are available at www.investorvote.com/prudential.
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PLEASE NOTE — YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares, you must vote online or request a paper copy of the proxy materials to receive a proxy card.
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Shareholder Meeting Notice & Admission Ticket
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Here’s how to order a copy of the proxy materials and select future delivery preference:
Paper copies:Current and future paper delivery requests can be submitted via the telephone, Internet ore-mail options below.
E-mail copies:Current and futuree-mail delivery requests must be submitted via the Internet ore-mail following the instructions below. If you request ane-mail copy of the materials, you will receive ane-mail with a link to view the materials on the Internet.
PLEASE NOTE:You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials.
If you wish to attend and vote at the meeting, please bring this notice and identification with you.
Prudential Financial, Inc.’s Annual Meeting of Shareholders will be held on May 13, 2014, at Prudential’s Corporate Headquarters, 751 Broad Street, Newark, New Jersey 07102, at 2:00 p.m. EDT.
If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits a shareholder and one guest. All meeting attendees must present valid photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.
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Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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This card covers the total number of shares of Prudential Financial, Inc. Common Stock (“Common Stock”) held in The Prudential Financial, Inc. Common Stock Fund (the “Fund”) and deemed to be credited to your account in The Prudential Employee Savings Plan (“PESP”) on March 11, 2014, as well as your shares of Common Stock registered in your name (“Registered Shares”) at Prudential’s transfer agent, Computershare, as of March 14, 2014.
You only need to vote once. This card enables you to provide voting instructions to the PESP shares and submit your vote directly on your Registered Shares. Your vote will remain confidential. Please review the enclosed letter from the PESP Trustee dated March 31, 2014, for more information on voting your PESP shares.
You may vote via the telephone number or website on the front of this card. Your vote must be received by 11:59 p.m. EDT, May 7, 2014, in order for your instructions to apply to your PESP shares and by 11:59 p.m. EDT, May 12, 2014, for your Registered Shares. Should you choose to vote by mailing back this card, it must be received by 11:59 p.m. EDT, May 7, 2014, for your PESP shares and by 10:00 a.m. EDT, May 13, 2014, for your Registered Shares.
If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits a shareholder and one guest. All meeting attendees must present valid photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT on May 13, 2014.
The undersigned, having received the Notice of Meeting and Proxy Statement dated March 25, 2014, appoints Susan L. Blount, Margaret M. Foran and John R. Strangfeld, and each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc. held of record on March 14, 2014, at the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT, May 13, 2014, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.
If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.
Your voting instructions will also direct the PESP Trustee to vote (in person or by proxy) as indicated on the reverse side of this card. The Trustee’s representative will tally all the timely votes for the Trustee to present in person or by proxy at the Annual Meeting of Shareholders on May 13, 2014.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 13, 2014. The Proxy Statement and Annual Report to Shareholders are available at www.investorvote.com/prudential.
Comments — If there are any comments that you would like to provide, please write them below.
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Dear Shareholder:
This package includes your proxy and voting materials. We care about what you think and voting is an important way for you to let us know how we’re doing.
To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or having a tree planted in your honor. Since its inception, this program has resulted in over 500,000 trees being planted and provided 375,000 tote bags to our shareholders. This years’s tree planting will continue our work in Osceola National Forest, but will also include funding for the City of Newark’s “Greenstreets” urban reforesting project.
When you vote on the Internet, via phone, or through the mail, you can indicate your choice of either the bag or a tree planted in your honor. If you elect to receive a bag, you can expect to receive your free gift around the end of June.
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Dear Shareholder:
As a shareholder, you have the right to vote on important matters that affect Prudential Financial. We take the opinions of Prudential’s shareholders very seriously and we hope you will provide your input by casting your vote on the items in the 2014 proxy statement.2017 Proxy Statement.
Enclosed you will find a Notice of Internet Availability (Notice), which provides information on how to view the materials and cast your vote online. If you would prefer to vote by mail, you may request a paper copy of the proxy materials by visiting www.investorvote.com/prudential, calling 1-866-641-4276, or by sending an email to investorvote@computershare.com.
Additional information regarding the Notice is located on the reverse side of this letter. The SEC has also created an educational website where you can learn more about proxy voting—voting —www.sec.gov/spotlight/proxymatters.shtml.
To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or havingcontributing to a tree planted in your honor.tree-planting campaign. Since thethis program’s inception, of this program, we have planted more than 5000,000730,000 trees through our partnership with American Forests and have provided 375,000nearly 525,000 bags to our shareholders.
This year’s plantingtree-planting initiative will continue to support our work with American forestsForests in Osceolaour National Forest in Florida, but will also include funding for the City of Newak’s “Greenstreets” urban reforesting project.Parks.
As always, we thank you for your investment in Prudential.
Sincerely,
Margaret M. Foran
Chief Governance Officer,
Vice President, and Corporate Secretary
Prudential Financial, Inc.
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| Margaret M. Foran |
| Chief Governance Officer, |
| Senior Vice President and Corporate Secretary |
| Prudential Financial, Inc. |
© 20142017 Prudential Financial, Inc., and its related entities. All rights reserved.
FAQ – Internet Availability of Proxy Materials
The Securities and Exchange Commission (SEC) has issued rules requiring public companies to:
These rules allow companies to give shareholders more options for reviewing important proxy materials. Information can be made available to shareholders more quickly and conveniently—online documents are easily searchable, enabling shareholders to quickly find the information they need to make informed voting decisions.
The SEC also allows companies to send a one-page Notice to holders with instructions on how to access the materials online, rather than sending a full set of materials. Our reasons for choosing the notice-only option are to:
Please refer to the information below to learn more and to find out what your options are as a shareholder to view materials and vote.
What is on the one-page Notice?
The Notice contains simple instructions on how to: Access and view the proxy materials online Vote your shares online Request a free set of printed materials Change delivery preferences for future proxy mailings DO retain the Notice for future reference DO NOTmark your vote on the Notice and return it; the Notice is not a proxy card or ballot If I received only a one-page Notice, how do I vote my shares? To vote your shares, follow the instructions on the Notice to vote online. If you request a paper copy of the proxy materials, you’ll receive a proxy card with voting instructions. You may also vote your shares in person by bringing the Notice with you and attending the meeting. If I received only a one-page Notice, how do I request a full set of printed materials for this meeting or future proxy mailings? To request a free set of printed materials for this meeting or for future mailings, refer to the Notice for detailed instructions on how to request a copy via Internet, telephone or email. If I received a full set of materials, may I request only a one-page Notice for future proxy mailings? Our company will make a decision for each meeting whether or not to use the notice-only option, and send notice-only mailings at our discretion. Can I elect to receive my proxy materials electronically? You may elect to receive materials via email for future mailings. You will receive the materials electronically if our company chooses to offer email delivery in the future. To change your delivery preferences, follow the instructions on the Notice. | ||
One of your key privileges as an investor is the right to vote on important matters that affect the company you own shares in.
Please vote. Your vote is important to us and our business. |
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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This package includes your proxy and voting materials. We care about what you think and voting is an important way for you to let us know how we’re doing. | ||||
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You may vote via the telephone number or website on the front of this card. Your vote must be received by 11:59 p.m. EDT, May 7, 2014.
If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits a shareholder and one guest. All meeting attendees must present valid photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
Your vote is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT on May 13, 2014.
The administrator and/or custodian, Computershare Shareholder Services, Inc., for the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, and the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan (collectively “the Plan”), will be recording and tabulating votes associated with the Plan. You are eligible to vote if you own at least one share of Prudential Financial, Inc. Common Stock under the terms of the Plan, registered in your name with the Administrator as of the close of business on the record date of March 14, 2014. Shares voted will be counted at the Annual Meeting of Shareholders to be held on May 13, 2014, or at any adjournment or postponement thereof. Items to be voted upon are listed on the reverse side of this Voting Instruction Form and are more fully set forth in the proxy statement.
Your vote will be tabulated as directed on the reverse side of this form, if properly completed and signed. If no choice is made, your shares will be voted in accordance with the recommendation of the Board of Directors. Your vote must be received by 11:59 p.m. EDT on May 7, 2014, in order to be counted at the Annual Meeting of Shareholders.
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To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or contributing to a tree-planting campaign. Since its inception, this program has resulted in over 730,000 trees being planted and provided nearly 525,000 tote bags to our shareholders. This year’s tree-planting will continue our work with American Forests in our National Parks. | |||||||
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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4. Shareholder proposal regarding executive stock ownership.
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Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
Voting Instruction Form
Confidential Voting Instructions to Prudential Trust Company, Trustee of the Master Trust for
The Prudential Financial, Inc. Common Stock Fund of The Prudential Employee Savings Plan (“PESP”)
By signing on the reverse side or by voting on the Internet or by telephone, the PESP participant directs the Trustee to vote (in person or by proxy) as indicated on the other side of this form. This vote will apply to the number of shares of Prudential Financial, Inc. (Prudential) Common Stock deemed to be credited to the participant’s PESP account and held in the PFI Common Stock Fund (the “Fund”) on March 11, 2014, as described in the PESP Trustee’s letter dated March 31, 2014. If the voting instructions do not include a vote on a particular matter, please mark it to abstain or the shares deemed to be credited to this PESP account in the Fund will be voted as recommended by the Board of Directors. The Trustee’s representative will tally all the timely votes for the Trustee to present in person or by proxy at the Prudential Financial, Inc. Annual Meeting of Shareholders on May 13, 2014. Your vote will remain confidential.
Also, unless the Named Fiduciary of the PESP plan (or its delegate) directs otherwise in accordance with plan provisions, the Trustee will apply this voting instruction pro rata (along with the votes of all other eligible individuals in PESP) to all shares of PFI Common Stock held in the Fund for which the Trustee receives no voting instructions. For more information, please see the March 31, 2014, letter from the Trustee.
Your vote must be received no later than 11:59 p.m. EDT on May 7, 2014.
Only the Trustee’s authorized representatives will see these confidential voting instructions.
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