2015 Notice of Annual Meeting and Proxy Statement2018 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
BNY MELLON Invested
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
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THE BANK OF NEW YORK MELLON CORPORATION
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2015 Notice of Annual Meeting and Proxy Statement2018 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
BNY MELLON Invested
On behalf of the Board of Directors, we are pleased to invite you to our 2015 Annual Meeting of Stockholders to be held on Tuesday, April 14, 2015 at 9 a.m., Eastern time, at 101 Barclay Street, New York, New York 10286.
At this year’s Annual Meeting, you will be asked to vote on several items, including the election of directors and our 2014 executive compensation. Detailed information about the director nominees, including their specific experience and qualifications, begins on page 6. Our Compensation Discussion and Analysis, which explains our continued commitment to pay for performance, alignment with stockholders’ interests and appropriate risk-taking in the context of our 2014 compensation decisions, begins on page 29. We appreciate the opportunity to provide you with these details of your Board’s actions in 2014 and recommendations for 2015. As you will see, we have made substantial changes to the format of our proxy statement this year. We hope you will find the presentation helpful and encourage you to read the proxy statement carefully for more information.
Your vote is important to usContents, and we hope that you will participate in the Annual Meeting, either by attending and voting in person or by voting through any of the acceptable means described in this proxy statement, as promptly as possible. Instructions on how to vote begin on page 70. You may also access the meeting at https://www.bnymellon.com/us/en/investor-relations/index.jsp.
Thank you for your continued support of BNY Mellon, and we look forward to seeing you at the Annual Meeting.
March 13, 2015
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| LETTER FROM THE CEO | ||
On behalf of the Board of Directors, we cordially invite you to our 2018 Annual Meeting of Stockholders to be held on Tuesday, April 10, 2018 at 9 a.m., Eastern time, at 101 Barclay Street, New York, New York 10286. At this year’s Annual Meeting, you will be asked to vote on several items, including the election of directors, our 2017 executive compensation program (the Your vote is important to us, and we hope that you will participate in the Annual Meeting, either by attending and voting in person or by voting as promptly as possible through any of the acceptable means described in this proxy statement. Instructions on how to vote begin on page 82. You may also listen to the meeting at https://www.bnymellon.com/us/en/investor-relations/index.jsp. Thank you for your continued support of BNY Mellon, and we look forward to seeing you at the Annual Meeting. Sincerely,
CHARLES W. SCHARF Chairman and CEO March 9, 2018 |
| BNY Mellon | 2018 Proxy Statement | 1 |
| NOTICE OF ANNUAL MEETING | ||
TUESDAY, APRIL 14, 201510, 2018
9:00 a.m., Eastern time
101 Barclay Street, New York, New York 10286
Record Date: February 13, 20159, 2018
| AGENDA | BOARD RECOMMENDATION |
1. To elect the | FOR each director nominee | |
2. To provide an advisory vote for approval of the | FOR | |
3. To ratify the appointment of KPMG LLP as our independent auditor for | FOR | |
4. To consider a stockholder proposal regarding written consent, if properly presented | AGAINST | |
5. To consider a stockholder proposal regarding a proxy voting review report, if properly presented | AGAINST | |
We will also act on any other business that is properly raised.
March 9, 2018
By Order of the Board of Directors, |
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CRAIG T. BEAZER
Corporate Secretary
IT IS IMPORTANT THAT YOU CAREFULLY READ YOUR PROXY STATEMENT AND VOTE.
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This introduction highlights certain information included in the proxy statement. You should read the entire proxy statement carefully before voting.
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BNY Mellon
2015 Proxy Statement 1
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Over the last 12 months, four directors have joined our Board, providing different perspectives, additional experience and diversity to the existing strengths and institutional knowledge of our Board.
| VIA THE INTERNET Visit the website listed on your proxy card |
| BY TELEPHONE
number listed on your proxy card
|  | IN PERSON
(see page 82 for more information) |  | BY MAIL Mail in a completed proxy card | |||||||||||||
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on April 10, 2018: Our 2018 proxy statement and 2017 Annual Report to stockholders are available at https://www.bnymellon.com/proxy. |
| 2 | BNY Mellon | 2018 Proxy Statement |
| INTRODUCTION | ||
The following information is presented to provide context for the operation of our pay program which is discussed in more detail on page 6 of this introduction and throughout our Compensation Discussion and Analysis beginning on page 35 of this proxy statement.
2017 Performance Highlights
| Earnings Per Share (“EPS”) | Operating Earnings Per Share (“OEPS”)* | ||||
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| Strong Multi-Year Total Stockholder Return (“TSR”) | Returned Significant Value to Stockholders | ||||
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Awards and Recognition
Age 58, Director since 2015
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Global Investor/ISF,2017 Best Global Corporate Trust Service Provider Global Finance, 2017 Best Global Bank for Depositary Receipts Global Finance, 2017 Best Middle-Office Solution and BestBuy-Side Operations Solution FTF News, 2017 Best Managed Accounts Platform Hedgeweek, 2017 Best ETF Fund Accounting and Administration Provider ETF Innovation Awards, 2017 Treasury Services Best Bank for Financial Institutions Global Finance, 2017 Best Global Trade Correspondent Bank Global Trade Review Magazine, 2017 | Investment Management
| Professional Wealth Management/The Banker, 2017
Financial Times, 2017 Best Mutual Funds: International Bond —Standish Mellon Investor’s Business Daily, 2017 LDI Manager of the Year — Insight Investment Financial News, 2017 Fixed Income Manager of the Year — Insight Investment UK Pension Awards, 2017 | Technology
| Anita Borg Institute, 2017
NICSA, 2017 Best Enterprise Data Management Initiative WatersTechnology, 2017 Workplace Top 50 Employers for Women The Times, 2017 100% Corporate Equality Index Human Rights Campaign, 2018 Gender-Equality Index Bloomberg, 2018 Corporate Social Responsibility Dow Jones Sustainability World Index 2017 | ||||||||||||||||
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| For a reconciliation and explanation of thisnon-GAAP measure, see Annex A. |
BNY Mellon 2015 Proxy Statement 2
| BNY Mellon | 2018 Proxy Statement | 3 |
| INTRODUCTION | ||
DIRECTOR NOMINEES
Our directors contribute to the strength of our Board through the variety of their experience, diversity, differing perspectives and institutional knowledge.
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| Skills and Expertise | ||||||
 Finance |  Leadership | |||||||
 Technology |  Global |  Governance | ||||||
 Risk |  Financial |  Diversity | ||||||
| COMMITTEE MEMBERSHIPS | ||||||||||||||||||||
Name and Occupation(1)
| Director Since
| Independent | Audit | Corp. Gov. & Nom. | Corp. Social Resp. | Finance | Human Res. & Comp. | Risk | Technology | Other Current Public Company Boards | ||||||||||
Steven D. Black(2) Co-CEO of Bregal Investments
| N/A |  | 1 | |||||||||||||||||
Linda Z. Cook Managing Director of EIG Global Energy Partners and CEO of Harbour Energy, Ltd.
| 2016 | | | | 0 | |||||||||||||||
Joseph J. Echevarria Retired CEO of Deloitte LLP
| 2015 | (3) |  (4) | | | 3 | ||||||||||||||
Edward P. Garden Chief Investment Officer and Founding Partner of Trian Fund Management, L.P.
| 2014 | | | | | | 2 | |||||||||||||
Jeffrey A. Goldstein CEO, SpringHarbor Financial Group LLC and
| 2014 | | | | | 1 | ||||||||||||||
John M. Hinshaw Former EVP and Chief Customer Officer of Hewlett Packard Enterprise Company
| 2014 | | | | 0 | |||||||||||||||
Edmund F. “Ted” Kelly Retired Chairman of Liberty Mutual Group
| 2004 | | | | 0 | |||||||||||||||
Jennifer B. Morgan Executive Board member of SAP and President of SAP Americas and Asia Pacific Japan, Global Customer Operations
| 2016 | | | | 0 | |||||||||||||||
Mark A. Nordenberg Chancellor Emeritus, Chair of the Institute of Politics and Distinguished Service Professor of Law of the University of Pittsburgh
| 1998 | | | | | | 0 | |||||||||||||
Elizabeth E. Robinson Retired Global Treasurer of The Goldman Sachs Group, Inc.
| 2016 | | | | | 0 | ||||||||||||||
Charles W. Scharf(5) Chairman & CEO of The Bank of New York Mellon Corporation
| 2017 | 1 | ||||||||||||||||||
Samuel C. Scott III Retired Chairman, President & CEO of Ingredion Incorporated
| 2003 | | (4) | | | 2 | ||||||||||||||
| (1) | Gerald Hassell retired as our Chairman of the Board effective December 31, 2017. Nicholas M. Donofrio, a member of our Corporate Governance and |
| (2) | Steven D. Black is a nominee who does not currently serve on our Board of Directors. |
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| (3) | Lead Director. |
| (4) | Financial expert. |
| (5) | Mr. Scharf was appointed as a director of our company effective July 17, 2017 in connection with his appointment as CEO, and became Chairman of the Board effective January 1, 2018. |
| 4 | BNY Mellon | 2018 Proxy Statement |
| INTRODUCTION | ||
COMMITTEES
Audit | Finance | |||
Chair:Joseph J. Echevarria Members:John A. Luke, Jr., Jennifer B. Morgan, Mark A. Nordenberg, Samuel C. Scott III 2017 Meetings: 13 Key Responsibilities:Overseeing our registered independent public accountants, internal audit function, and internal controls over financial statements and reports. | Chair:Jeffrey A. Goldstein Members:Joseph J. Echevarria, Edward P. Garden, Elizabeth E. Robinson 2017 Meetings: 7 Key Responsibilities: Monitoring and overseeing our financial resources and strategies; and reviewing forecasts and budgets, net interest revenue plans, investment portfolio activities, capital structure, capital raising and capital distribution initiatives that exceed our Corporate Governance Guidelines thresholds. | |||
Corporate Governance and Nominating | Human Resources and Compensation | |||
Chair:Mark A. Nordenberg Members:Linda Z. Cook, Joseph J. Echevarria, Edward P. Garden, John A. Luke, Jr. 2017 Meetings: 6 Key Responsibilities: Identifying and reviewing potential directors, and reviewingnon-employee director compensation; maintaining our Corporate Governance Guidelines; overseeing annual Board and committee evaluations; and reviewing structure, responsibilities and membership of committees. | Chair: Edward P. Garden Members:Jeffrey A. Goldstein, Edmund F. “Ted” Kelly, Samuel C. Scott III 2017 Meetings: 10 Key Responsibilities: Overseeing employee compensation and benefits, management development and succession and diversity and inclusion programs; and administering our incentive compensation plans, including equity incentive compensation plans. | |||
Corporate Social Responsibility | Risk | |||
Chair:Samuel C. Scott III Members:John A. Luke, Jr., Mark A. Nordenberg, Elizabeth E. Robinson 2017 Meetings: 4 Key Responsibilities: Promoting culture of exemplary corporate citizenship; overseeing our philanthropy, community involvement, and advocacy; assessing the impact of our businesses, operations and programs from a social responsibility perspective reflecting varied stakeholders’ interests; and overseeing Community Reinvestment Act and Fair Lending compliance. | Chair:Edmund F. “Ted” Kelly Members:Linda Z. Cook, Edward P. Garden, Jeffrey A Goldstein, John M. Hinshaw, Elizabeth E. Robinson 2017 Meetings: 5 Key Responsibilities: Approving enterprise-wide risk management practices, our risk appetite statement and our global risk management framework; evaluating risk exposure and tolerance; and reviewing policies and practices regarding risk assessment and risk management. | |||
Technology | ||||
Chair:John M. Hinshaw Members:Jennifer B. Morgan, Mark A. Nordenberg 2017 Meetings: 5 Key Responsibilities: Approving our technology planning and strategy; reviewing significant technology investments; and monitoring technology trends relative to our business strategy. | ||||
| BNY Mellon | 2018 Proxy Statement | 5 |
| INTRODUCTION | ||
GOVERNANCE AND COMPENSATION
| Robust Stockholder Rights | Active, Independent Board | Our Culture | ||
• No staggered board
•Special meeting of independent directors may be called by our Lead Director • Special meeting rights for
•Proxy access allows stockholders, individually or in a group of up to 20, holding 3% of our outstanding stock for at least 3 years to nominate up to 20% of the Board • No plurality voting in uncontested director elections (each director must be elected by majority of votes cast)
• No supermajority voting:stockholder actions require only majority of votes cast (not majority of shares present and entitled to vote)
• No “poison pill” (stockholders’ rights plan) | •
• Independent board:
• Independent
•Board succession and refreshment: led by the Corporate Governance and Nominating Committee recruiting efforts, our Board has added seven independent directors since 2014 and recommended an independent nominee for election at our 2018 Annual Meeting • Lead Director and Committee Chairman rotationat five-year intervals • High rate of attendance: average • A substantial portion of director compensation is paid inequity all of which is required to be retained until retirement | • Risk-aware: we protect against excessive risk-taking through multiple lines of defense, including • Honest and accountable: our codes of conduct apply to all employees and directors, • Innovative and evolving: we encourage directors to participate in continuing education programs, and |
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Awarded 2017 Total Direct Compensation(1)
| Named Executive Officers (NEOs)(2) | Salary
| Annual Incentive | Long-Term Incentive | Total Incentive | Awarded Total
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| Cash | RSUs | % of Target | PSUs | % of Target | % of Target | |||||||||||
Gerald L. Hassell Chairman & CEO |
$1,000,000 |
$1,244,640 |
$4,978,560 |
74% |
$4,500,000 |
125% |
89% |
$11,723,200 | ||||||||
Thomas P. (Todd) Gibbons Vice Chairman & CFO |
$ 650,000 |
$1,808,471 |
$1,358,729 |
85% |
$2,006,250 |
125% |
97% |
$ 5,823,450 | ||||||||
Curtis Y. Arledge Vice Chairman & CEO of Investment Management |
$ 650,000 |
$3,647,534 |
$2,740,442 |
68% |
$5,006,250 |
125% |
85% |
$12,044,226 | ||||||||
Karen Peetz President |
$ 650,000 |
$1,716,826 |
$1,289,874 |
80% |
$2,006,250 |
125% |
94% |
$ 5,662,950 | ||||||||
| Named Executives (NEOs) | Salary | Incentive Compensation | Total Incentive as % of Target | Awarded Total Direct Compensation(1) | ||||||||
| Cash | PSUs(2) | RSUs(2) | ||||||||||
Charles W. Scharf(3) Chairman & CEO
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$572,917 |
$1,754,000 |
$7,625,000 |
$1,754,000 |
100%(5) |
$11,705,917(6) | ||||||
Gerald L. Hassell(4) Former Chairman & CEO
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$1,000,000 |
$3,500,000 |
$— |
$10,500,000 |
100% |
$15,000,000 | ||||||
Thomas P. (“Todd”) Gibbons Vice Chairman & CFO
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$650,000 |
$1,943,100 |
$2,914,650 |
$1,619,250 |
102% |
$7,127,000 | ||||||
Brian T. Shea Former Vice Chairman & CEO of Investment Services
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$650,000 |
$1,188,495 |
$— |
$2,773,155 |
98% |
$4,611,650 | ||||||
Mitchell E. Harris CEO of Investment Management
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$650,000 |
$2,626,155 |
$3,939,232 |
$2,188,463 |
119% |
$9,403,850 | ||||||
Bridget E. Engle Senior Executive Vice President & Chief Information Officer
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$339,611 |
$2,350,000 |
$1,175,000 |
$1,175,000 |
100% |
$5,039,611 | ||||||
| 1 | The amounts reported as Awarded Total Direct Compensation differ substantially from the amounts determined under SEC rules as reported for |
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| 3 | Mr. Scharf was appointed as Chief Executive Officer, effective July 17, 2017, and as Chairman of the Board, effective January 1, 2018. |
| 4 | Mr. Hassell stepped down as Chief Executive Officer effective July 17, 2017 and retired as Chairman of the Board effective December 31, 2017. |
| 5 | Mr. Scharf’s 2017 incentive compensation was earned at 100% of target, and the cash and RSU components werepro-rated to reflect the time period in 2017 that he was employed by us. |
| 6 | Does not include Mr. Scharf’s $7,625,000 award ofsign-on PSUs, which were aone-time award granted in connection with his commencement of employment on July 17, 2017. |
BNY Mellon 2015 Proxy Statement 3
| 6 | BNY Mellon | 2018 Proxy Statement |
| ITEM 1. ELECTION OF DIRECTORS |
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Proposal
We are asking stockholders to elect the 1412 nominees named in this proxy statement to serve on the Board of Directors of The Bank of New York Mellon Corporation (the “company,” “BNY Mellon,” “we” or “us”) until the 20162019 Annual Meeting of stockholders or until their successors have been duly elected and qualified.
Background
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• The Board and the Corporate Governance and Nominating Committee (“CG&N Committee”) have concluded that each of our nominees should be recommended for nomination orre-nomination as a director as described on page 16 after considering, among other things, the
• The nominees have skills and expertise in a wide range of areas, including technology, accounting, private equity, financial regulation, financial services, global management, insurance, risk management and legal matters. • The nominees are able to devote the necessary time and effort to BNY Mellon matters. | ||||
The Board of Directors recommends that you vote “FOR” each of the nominees described below.
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Voting
We do not know of any reason why any nominee named in this proxy statement would be unable to serve as a director if elected. If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such other person as may be nominated in accordance with ourby-laws, as described on page 14.17. Proxies cannot be voted for a greater number of persons than the number of nominees named in this proxy statement.
Each director will be elected if more votes are cast “for” the director’s election than are cast “against” the director’s election, with abstentions and brokernon-votes not being counted as a vote cast either “for” or “against” the director’s election. Pursuant to our Corporate Governance Guidelines, if any incumbent director fails to receive a majority of the votes cast, the director will be required to tender his or her resignation promptly after the certification of the stockholder vote. Our CG&N Committee will promptly consider the tendered resignation and recommend to the Board whether to accept or reject it, or whether other actions should be taken. More information on our voting standard and the CG&N Committee’s consideration of tendered resignations is provided on page 1417 below.
BNY Mellon 2015 Proxy Statement 5
| 8 | BNY Mellon | 2018 Proxy Statement |
| ITEM 1. ELECTION OF DIRECTORS | > Nominees | |
| Steven D. Black
Age 65 Independent Nominee Bregal InvestmentsCo-Chief Executive Officer Committees:None Other Current Public Company Board Service: Nasdaq, Inc. |
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Age 59 Independent Director since 2016 Managing Director of EIG Global Energy Partners and CEO of Harbour Energy, Ltd. Retired Executive Committee Member and Director of Royal Dutch Shell plc Committees: Corporate Governance and Nominating, Risk Other Current Public Company Board Service: None |
Mr. Black has beenCo-CEO of Bregal Investments, a private equity firm, since September 2012. He was the Vice Chairman of JP Morgan Chase & Co. from March 2010 – February 2011 and a member of the firm’s Operating and Executive Committees. Prior to that position, Mr. Black was the Executive Chairman of JP Morgan Investment Bank from October 2009 – March 2010. Mr. Black served asCo-CEO of JP Morgan Investment Bank from 2004 – 2009. Mr. Black was the DeputyCo-CEO of JP Morgan Investment Bank since 2003. He also served as head of JP Morgan Investment Bank’s Global Equities business since 2000 following a career at Citigroup and its predecessor firms.
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Skills and Expertise: |
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Ms. Cook is a Managing Director and member of the Executive Committee of EIG Global Energy Partners, an investment firm focused on the global energy industry, and CEO of Harbour Energy, Ltd., an energy investment vehicle. Ms. Cook joined EIG in 2014, after spending over 29 years with Royal Dutch Shell at various companies in the U.S., the Netherlands, the United Kingdom and Canada. At her retirement from Royal Dutch Shell, Ms. Cook was a member of the Executive Committee in the Netherlands headquarters and a member of the Board of Directors. Her primary executive responsibility was Shell’s global upstream Natural Gas business in addition to oversight for Shell’s global trading business, Shell Renewable Energy, and Shell’s Downstream R&D and Major Projects organizations. Ms. Cook previously was CEO of Shell Canada Limited, CEO of Shell Gas & Power and Executive VP of Finance, Strategy and HR for Shell’s global Exploration and Production business. Ms. Cook has served as a director of the company since 2016.
Ms. Cook chairs the Board of Directors of Chrysaor Holdings Limited. Ms. Cook has previously served on the Boards of Directors of KBR, Inc., The Boeing Company, Marathon Oil Corporation, Cargill Inc., Royal Dutch Shell plc, Royal Dutch Shell Petroleum Co. NV and Shell Canada Limited. Ms. Cook is also a member of the National Petroleum Council, an advisory committee to the U.S. Secretary of Energy, and the Society of Petroleum Engineers and is a Trustee of the University of Kansas Endowment Association. Ms. Cook earned a Bachelor of Science degree in Petroleum Engineering from the University of Kansas.
| Skills and Expertise: |
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| Leadership | Technology | Global | Governance | Risk | Financial Services Experience | Diversity |
| BNY Mellon | 2018 Proxy Statement | 9 |
| ITEM 1. ELECTION OF DIRECTORS > Nominees |
| Joseph J. Echevarria
Independent Director since 2015; Lead Director since 2016
Retired CEO of Deloitte LLP
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Age 56 Independent Director since 2014 Chief Committees: Corporate Governance and Nominating, Finance, Human Resources and Compensation (Chair), Risk Other Current Public Company Board |
Mr. Echevarria served as Chief Executive Officer of Deloitte LLP, a global provider of professional services, from 2011 until his retirement in 2014. Mr. Echevarria previously served in increasingly senior leadership positions during his36-year career at the firm, including U.S. Managing Partner for Operations, prior to being named Chief Executive Officer. In addition to the public company board service noted above, Mr. Echevarria currently serves as a Trustee of the University of Miami. Mr. Echevarria previously served as Chairman of President Obama’s My Brother’s Keeper Alliance and as a Member of the Private Export Council, the principal national advisory committee on international trade. Mr. Echevarria has served as a director of the company since 2015. Mr. Echevarria earned his bachelor’s degree in business administration from the University of Miami.
Skills and Expertise:
• Leadership of a large, global company
• Expertise in accounting issues
• Senior level policy-making experience in the field of professional services
Other Public Company Board Service: None
BNY Mellon 2015 Proxy Statement 6
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Mr. Garden has been Chief Investment Officer and Founding Partner of Trian Fund Management, L.P. (“Trian”), a multi-billion dollar asset management firm specializing in helping companies to optimize operational performance, since 2005. He has served as a director of the company since 2014.
Mr. Garden served as a director of Family Dollar Stores, Inc., a discount retailer, from September 2011 until its acquisition by Dollar Tree, Inc. in July 2015, and as a director of The Wendy’s Company from December 2004 to December 2015. Previously he served as Vice Chairman and a director of Triarc Companies, Inc. from December 2004 through June 2007 and Executive Vice President from August 2003 until December 2004. From 1999 to 2003, Mr. Garden was a managing director of Credit Suisse First Boston, where he served as a senior investment banker in the Financial Sponsors Group. From 1994 to 1999, he was a managing director at BT Alex Brown, where he was a senior member of the Financial Sponsors Group and, prior to that,co-head of Equity Capital Markets. Mr. Garden graduated from Harvard College with a B.A. in Economics.
| Skills and Expertise: |
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| Leadership | Technology | Global | Governance | Risk | Financial Services Experience | Diversity |
| 10 | BNY Mellon | 2018 Proxy Statement |
| ITEM 1. ELECTION OF DIRECTORS > Nominees |
| Jeffrey A. Goldstein
Independent Director since 2014
Chief Executive Officer, SpringHarbor Financial Group LLC, Senior Advisor, Hellman & Friedman LLC and Former Under Secretary of the Treasury for Domestic Finance
Committees:Finance (Chair), Human Resources and Compensation, Risk Other Current Public Company Board Service: Westfield Corporation |
| John M. Hinshaw Age 47
Independent Director since 2014
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Mr. Goldstein is the Chief Executive Officer of SpringHarbor Financial Group LLC, a financial services adviser and investor, and a Senior Advisor at Hellman & Friedman LLC, a private equity firm. He was a Managing Director at Hellman & Friedman from 2011 to 2016 and was previously at the firm from 2004 to 2009. He was Under Secretary of the Treasury for Domestic Finance and Counselor to the Secretary of the Treasury from 2009 to 2011. Mr. Goldstein has served as a director of the company since 2014.
Mr. Goldstein worked at James D. Wolfensohn Inc. and successor firms for 15 years. When Wolfensohn & Co. was purchased by Bankers Trust in 1996, he served asco-chairman of BT Wolfensohn and as a member of Bankers Trust’s management committee. In 1999, Mr. Goldstein became a managing director of the World Bank. He also served as its Chief Financial Officer beginning in 2003. In July of 2009, President Barack Obama nominated Mr. Goldstein to be Under Secretary of the Treasury for Domestic Finance. In July 2011, Secretary of the Treasury Timothy F. Geithner awarded Mr. Goldstein with the Alexander Hamilton award, the highest honor for a presidential appointee. Earlier in his career Mr. Goldstein taught economics at Princeton University and worked at the Brookings Institution. In addition to the public company board service noted above, Mr. Goldstein is a member of the Board of Directors of Edelman Financial Services, LLC and on the Advisory Board of Promontory Financial Group, LLC. He also serves on the Board of Trustees of Vassar College. Mr. Goldstein earned a Bachelor of Arts degree from Vassar College and a Master of Arts, Master of Philosophy and a Ph.D. in economics from Yale University.
Skills and Expertise:
• Experience in private equity
• Expertise in the operations of large financial institutions
• Experience in financial regulation and banking
Other Public Company Board Service:None
BNY Mellon 2015 Proxy Statement 7
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Skills and Expertise: |
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Mr. Hinshaw served as Executive Vice President of Hewlett Packard and Hewlett Packard Enterprise from 2011 to 2016, running Technology and Operations and serving as Chief Customer Officer. Mr. Hinshaw has served as a director of the company since 2014. Prior to joining Hewlett-Packard Company, Mr. Hinshaw served as Vice President and General Manager for Boeing Information Solutions at The Boeing Company. Before that, he served as Boeing’s Chief Information Officer and led their companywide corporate initiative on information management and information security. Mr. Hinshaw also spent 14 years at Verizon Communications where, among several senior roles, he was Senior Vice President and Chief Information Officer of Verizon Wireless, overseeing the IT function of the wireless carrier. Mr. Hinshaw is also a board member of DocuSign, Inc., a provider of electronic signature transaction management, and a member of the Board of Advisors of Saama Technologies, Inc., a big data and advanced analytics solutions company. He also is a member of the Board of Directors, and chairs the STEM Committee, for NAF, an educationalnon-profit |
Technology and management expertise Experience in the operations of large, complex companies Leadership roles in several different industries
Mr. Kelly served as Chairman (from 2000 to 2013), President (from 1992 to 2010) and Chief Executive Officer (from 1998 to 2011) of Liberty Mutual Group, a multi-line insurance company. Mr. Kelly served as a director of Mellon from 2004 to 2007 and has served as a director of the company since 2007. Mr. Kelly’s experience also includes senior-level management positions at Aetna Life & Casualty Company. Mr. Kelly was a director of Citizens Financial Group Inc., where he served as Chair of the Audit Committee and Chair of the Joint Risk Assessment Committee. Mr. Kelly is also a member of the Board of Trustees of the Boston Symphony Orchestra; a member of the Senior Advisory Council of the New England College of Business and Finance; a member of the Bretton Woods Committee; a past member of the Board of Trustees for Boston College and former President of the Boston Minuteman Council of the Boy Scouts of America. Mr. Kelly received a Bachelor of Arts degree from Queen’s University in Belfast and a Ph.D. from the Massachusetts Institute of Technology.
Leadership of a major global company in a highly regulated industry Experience in risk management Senior level policy-making experience in the insurance industry Ms. Morgan has served as a member of the Executive Board of SAP and President of SAP Americas and Asia Pacific Japan, Global Customer Operations, since 2017. Previously, she was President of SAP North America since 2014. At SAP, Ms. Morgan is responsible for the company’s strategy, revenue and customer success in the Americas and Asia Pacific Japan. Since being named President, she has led SAP’s rapid shift to the cloud in North America while helping customers achieve growth in the digital economy. Ms. Morgan served in a number of leadership roles for SAP since joining the company in 2004, including as head of SAP North America’s public sector organization and president of its Regulated Industries business unit. In these roles, Ms. Morgan was a recognized thought-leader on government and public sector technology innovation, represented SAP to the U.S. Government and testified before Congress on technology and acquisition issues. Earlier in her career, Ms. Morgan served in various management roles at Siebel Systems and Accenture. She has served as a director of the company since 2016. Ms. Morgan is an executive advisory board member of James Madison University College of Business and a board member of NAF, an educationalnon-profit organization bringing education, business and community leaders together to transform the high school experience. Ms. Morgan earned a Bachelor of Business Administration degree from James Madison University.
Leadership and client experience with technology as a business driver Experience in the operations at large, complex global companies
Mr. Nordenberg served as Chancellor and Chief Executive Officer of the University of Pittsburgh, a major public research university, from 1996 to August 2014. He currently serves as Chancellor Emeritus, Chair of the Institute of Politics and Distinguished Service Professor of Law at the University. Mr. Nordenberg served as a director of Mellon from 1998 to 2007 and has served as a director of the company since 2007. Mr. Nordenberg joined the University of Pittsburgh’s law faculty in 1977 and served as Dean of the School of Law from 1985 until 1993. Mr. Nordenberg was the interim Provost and Senior Vice Chancellor for Academic Affairs from 1993 to 1994, and interim Chancellor from 1995 to 1996. A specialist in legal process and procedure, including civil litigation, he has published books, articles and reports on this topic, and has served as a member of both the U.S. Advisory Committee on Civil Rules and the Pennsylvania Supreme Court’s Civil Procedural Rules Committee. He is a former director and executive committee member of the Association of American Universities and has served on the boards of national and regional organizations promoting innovation and economic progress. Mr. Nordenberg received his Bachelor of Arts degree from Thiel College and his Juris Doctorate degree from the University of Wisconsin School of Law.
Legal expertise Leadership of a major research university Experience in the operations and management of a large institution Ms. Robinson served as Global Treasurer, Partner and Managing Director of The Goldman Sachs Group, Inc., the global financial services company, from 2005 to 2015. Prior to that, Ms. Robinson served in the Financial Institutions Group within the Investment Banking Division of Goldman Sachs. She has served as a director of the company since 2016. Ms. Robinson serves on the Board of Directors of Russell Reynolds Associates and is thenon-executive Chairman of the Board of Directors of BNY Mellon Government Securities Services Corp. Ms. Robinson is a trustee of Williams College, MASS MoCA and Every Mother Counts and was, until August 2016, a director of Goldman Sachs Bank USA. Ms. Robinson received a Bachelor of Arts degree from Williams College and an M.B.A. from Columbia University.
Experience in finance and risk management Experience in financial regulation and banking Leadership in the operations of a large global financial institution
Mr. Scharf has served as our Chief Executive Officer since July 2017. Mr. Scharf served as the Chief Executive Officer of Visa Inc. from 2012 to 2016. Prior to that, Mr. Scharf served in several senior positions at JPMorgan Chase & Co. (from 2004 to 2011), Bank One Corporation (from 2000 to 2004), and Citigroup Inc. and its predecessors (from 1987 to 2000). Mr. Scharf is a trustee of Johns Hopkins University and is Chairman of the New York City Ballet. Mr. Scharf received a Bachelor of Arts degree from Johns Hopkins University and an M.B.A. from New York University.
Knowledge of the company’s businesses and operations Experience in banking, risk management and financial regulation Leadership of a large global financial institution Prior to his retirement in 2009, Mr. Scott served as Chairman (since 2001), Chief Executive Officer (since 2001) and President and Chief Operating Officer (since 1997) of Corn Products International, Inc., a leading global ingredients solutions provider now known as Ingredion Incorporated. Mr. Scott previously served as President of CPC International’s Corn Refining division from 1995 to 1997 and President of American Corn Refining from 1989 to 1997. In addition to the public company board service noted above, Mr. Scott also serves on the boards of, among others, Chicago Sister Cities, Northwestern Medical Group, the Chicago Urban League, The Chicago Council on Global Affairs and Get IN Chicago. Mr. Scott received both a Bachelor of Science degree and a Master in Business Administration degree from Fairleigh Dickinson University. Mr. Scott served as a director of The Bank of New York from 2003 to 2007 and has served as a director of the company since 2007.
Senior level policy-making experience in the food industry Leadership of international company Financial expert with experience in the operations and management of a large public company
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| Steven D. Black* | Linda Z. Cook | Joseph J. Echevarria | Edward P. Garden | Jeffrey A. Goldstein | John M. Hinshaw | Edmund F. “Ted” Kelly | Jennifer B. Morgan | Mark A. Nordenberg | Elizabeth E. Robinson | Charles W. Scharf | Samuel C. Scott III | |||||||||||||||||||||||||||||||||||||
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Financial Services Experience |
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| * | Mr. Black is a nominee who does not currently serve on our Board of Directors. |
| BNY Mellon | 2018 Proxy Statement | 15 |
| ITEM 1. ELECTION OF DIRECTORS > Nominees |
The CG&N Committee assists the Board in reviewing and identifying individuals qualified to become Board members. The CG&N Committee utilizes Board-approved criteria, set forth in our Corporate Governance Guidelines (see “Helpful Resources” on page 88), in recommending nominees for directors at Annual Meetings and to fill vacancies on the Board. Directors chosen to fill vacancies will hold office for a term expiring at the end of the next Annual Meeting.
In selecting nominees for election as directors, our CG&N Committee’s charter provides, among other things, thatCommittee considers the CG&N Committee must consider (but is not limitedfollowing with respect to consideration of)Board composition:
The CG&N Committee seeks personsindividuals with leadership experience in a variety of contexts and, amongfrom public company leaders, across a variety of industries. The CG&N Committee will evaluate a candidateall candidates suggested by other directors or third-party search firms (which the company retains from time to time, including over the past year, to help identify potential candidates) or recommended by a stockholder for nomination as a director in the same manner that it evaluates any other nominee.manner. For information on recommending a candidate for nomination as a director see “Contacting the Board” on page 24 below.30.
The Board and the CG&N Committee have concluded that each of our current Board members standing for election should be recommended forre-nomination as a director. As partIn considering whether to recommendre-nomination of this determination,a director for election at our Annual Meeting, the Board and the CG&N Committee considered:considered, among other factors:
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Each of the nominees for election as director, other than Messrs. Echevarria, GardenMr. Scharf and Hinshaw,Mr. Black, was elected as a director at our 20142017 Annual Meeting. Mr. HinshawScharf was appointed a director effective September 8, 2014 and was recommended to the CG&N Committee for considerationJuly 17, 2017 in connection with his appointment as CEO. Mr. Black is a candidate by a third-party search firm, Egon Zehnder; Mr. Garden was appointed a director effective December 2, 2014 and was recommended to the CG&N Committee for consideration as a candidate by a security holder; and Mr. Echevarria was appointed a director effective January 30, 2015 andnominee who does not currently serve on our Board. He was recommended to the CG&N Committee for consideration as a candidate by our non-management directors and by our chief executive officer.CEO. Our Board believes that each of the nominees meet the criteria described above with diversity, depth and depthbreadth of experience that enable them to effectively oversee management of the company.company as an effective and engaged Board. No director or nominee has a family relationship to any other director, nominee for director or executive officer.
As previously disclosed, Mr. Kowalski,Gerald L. Hassell, who was elected as a director at our 20142017 Annual Meeting, retired from the Board effective December 31, 2017. Mr. Hassell’s retirement comes after a44-year career with the company, including the last 6 years as CEO and Chairman of the Board. The Board is grateful to Mr. Hassell for his innumerable and extensive contributions to the company over the course of his career.
| 16 | BNY Mellon | 2018 Proxy Statement |
| ITEM 1. ELECTION OF DIRECTORS > Nominees |
Nicholas M. Donofrio, who was elected as a director at our 2017 Annual Meeting, retired from the Board effective September 30, 2017, and John A. Luke, Jr., who was elected as a director at our 2017 Annual Meeting, will not be standing for reelection. The Board
is grateful to Mr. KowalskiMessrs. Donofrio and Luke for histheir dedication and invaluable contributions as a directordirectors during his 12their more than 18 years and 22 years, respectively, of service to the company and theThe Bank of New York.
We also note with sadness that Ruth E. Bruch, who was elected as a director at our 2014 Annual Meeting, resigned due to personal health reasons in August 2014 and subsequently passed away. The Board is grateful to Ms. Bruch for her invaluable contributions as a director during more than a decade of service to the Companywill miss their camaraderie, commitment, insight and Mellon.perspective.
BNY Mellon 2015 Proxy Statement 13
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Under ourby-laws, in any uncontested election of directors, each director will be elected if more votes are cast “for” the director’s election than are cast “against” the director’s election, with abstentions and brokernon-votes not being counted as a vote cast either “for” or “against” the director’s election. A plurality standard will apply in any contested election of directors, which is an election in which the number of nominees for director exceeds the number of directors to be elected. Pursuant to our Corporate Governance Guidelines, (see “Helpful Resources” on page 75), if any incumbent director fails to receive a majority of the votes cast in any uncontested election, the director will be required to tender his or her resignation to the Lead Director (or such other director designated by the Board if the director failing to receive the majority of votes cast is the Lead Director) promptly after the certification of the stockholder vote.
Our CG&N Committee will promptly consider the tendered resignation and recommend to the Board whether to accept or reject it, or whether other actions should be taken. In considering whether to accept or reject the tendered resignation, the CG&N Committee will consider whatever factors its members deem relevant, including any stated reasons for the “against” votes, the length of service and qualifications of the director whose resignation has been tendered, the director’s contributions to the company, and the mix of skills and backgrounds of the Board members. The
Board will act on the CG&N Committee’s recommendation no later than 90 days following the certification of the election in question. In considering the recommendation of the CG&N Committee, the Board will consider the factors considered by the CG&N Committee and such additional information and factors as it deems relevant.
Following the Board’s decision, the company will publicly disclose the Board’s decision in a Current Report on Form8-K filed with the Securities and Exchange Commission (“SEC”). If the Board does not accept the director’s resignation, it may elect to address the underlying stockholder concerns or to take such other actions as it deems appropriate and in the best interests of the company and its stockholders. A director who tenders his or her resignation pursuant to this provision will not vote on the issue of whether his or her tendered resignation will be accepted or rejected. If the Board accepts an incumbent director’s resignation pursuant to this provision, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board may fill the resulting vacancy pursuant to ourby-laws. If the Board does not accept an incumbent director’s resignation pursuant to this provision, he or she will continue to serve on the Board until the election of his or her successor.
BNY Mellon 2015 Proxy Statement 14
| BNY Mellon | 2018 Proxy Statement | 17 |
| ITEM 1. ELECTION OF DIRECTORS | >Corporate Governance and Board Information | |
Our Corporate Governance Practices
We believe that the strength of BNY Mellon’s business is a direct reflection ofreflects the high standards set by our governance structure. It provides guidance in managing the company from the Board of Directors on down for the benefit of all our stakeholders including our investors, clients, employees and communities. Several of our key governance practices are:
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ENGAGEMENT
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IMPROVEMENTS
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ü Our Board and each of our standing committees conduct annualself-evaluations that have resulted in enhancements to Board functioning (see “Evaluation of Board and Committee Effectiveness” on page 19), and in 2017 we added individual interviews to the self-evaluation process. Following engagement with stockholders, in 2017 we continued to enhance our Board and committee self-evaluation process and expand our related disclosure. ü Ourby-laws permit holders in the aggregate of 20% of our outstanding common stock tocall a special stockholdermeeting. ü Weredesigned our committee structure, for implementation following the Annual Meeting, to refine the allocation of committee responsibilities and to utilize our directors’ time more efficiently. ü Our Board participates ininformation sessions during regularly scheduled and special meetings, receiving business, regulatory and other updates from senior management, including risk executives and our General Counsel. |
| 18 | BNY Mellon | 2018 Proxy Statement |
| ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information |
ROBUST PROGRAMS | ü A significant portion of director compensation is paid indeferred stock units, which must be held as long as the director serves on the Board.
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DON’T DO
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Corporate Governance Developments
Based on stockholder engagement, over the last few years our Board has focused on Board refreshment and succession efforts. Since August 2014, nine of our directors have retired or announced their retirement and over that same period our Board has added eight new directors and recommended one new nominee for election at our 2018 Annual Meeting. Each of these new directors has added experience and expertise to our Board, complementing and supplementing the experience and talents of our Board as a whole. Although the CG&N Committee is principally involved in Board succession and recruitment, our entire Board plays a role in recruiting, interviewing and assessing candidates. Our Board’s succession planning is ongoing and will continue to be robust as it seeks to further enhance the diversity of our Board.
Our Board, led by our CG&N Committee, continually seeks to improve our governance structures, and has recently made the following enhancements:
Responsibility Committee will be dissolved, and its responsibilities assumed by the CG&N Committee (to be renamed the Corporate Governance, Nominating and Social Responsibility Committee, reflecting our continued commitment to the principles of corporate social responsibility). In addition, the scope of the Finance Committee’s duties will be refined, as certain duties will revert to the Audit Committee. |
As previously disclosed, consistent with our Board’s succession planning, Mr. Scharf became our new CEO effective July 17, 2017 and our new Chairman effective January 1, 2018 in connection with Mr. Hassell’s retirement, and Mr. Echevarria was elected as our new Lead Director during 2016. In addition to Board refreshment and succession, the CG&N Committee also monitors committee leadership refreshment level with the goal of committee chairs serving in such capacity for no more than 5 consecutive years. Accordingly, our Board elected Mr. Hinshaw as our new Technology Committee chair in 2017. We anticipate the election of a new chair to the (newlyre-named) Corporate Governance, Nominating and Social Responsibility Committee in 2018.
BNY Mellon
Annually, the Board and each of our standing committees conducts a self-evaluation to continually enhance performance. The Board and management
| BNY Mellon | 2018 Proxy Statement | 19 |
| ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information |
then work together to enhance Board and committee effectiveness in light of the results of the self-evaluations.
The CG&N Committee, in consultation with the Lead Director, determines the process, scope and contents of the Board’s annual performance evaluation. Areas of consideration in the Board self-evaluations include director contribution and performance, Board structure and size, Board dynamics, the range of business, professional and other backgrounds of directors necessary to serve the company and the range and type of information provided to the Board by management.
Based on the CG&N Committee’s determination of the evaluation process and scope, each standing committee self-evaluation is conducted in an executive session led by the chairman of the committee. The results of the self-evaluation of each standing committee are reported to the full Board.
As a result of the most recent round of Board and committee self-evaluations, the Board determined to
redesign the committee structure, reallocate directors among committees, have committees meet simultaneously (where membership permits) and set aside additional time for strategy discussions.
Active Stockholder Engagement Program
We conduct extensive governance reviews and investor outreach throughout the year. Management reports regularly to the independent directors to keep them informed of stockholders’ perspectives on a variety of issues, including governance, strategy and performance, and enable them to consider and address
those matters effectively. Although the Board is recommending against Stockholder Proposal 4 for the reasons we describe on page 74, it is committed to understanding stockholder perspectives in this area. The Board will consider this topic in its stockholder engagement outreach following the annual meeting, taking into account the results of the proposal and other stakeholder viewpoints, and has included it as part of its 2018 corporate governance agenda.
| 20 | BNY Mellon | 2018 Proxy Statement |
| ITEM 1. ELECTION OF DIRECTORS | > Corporate Governance and Board Information |
Our Board has reviewed its current leadership structure — which consistsconsisting of a combined Chairman and Chief Executive Officer with an independent Lead Director (currently Mr. von Schack) — in light of the Board’s composition, the company’s size, the nature of the company’s business, the regulatory framework under which the company operates, the company’s stockholder base, the company’s peer group and other relevant factors. Our Board has determined that a combined Chairman and Chief Executive Officer position, with an independent Lead Director, continues to be the most appropriate Board leadership structure for the company.company because it promotes Board effectiveness, provides for continuity of expertise in both business and corporate governance and ensures that the company has a clear public “face”. As described under “Succession Planning” on page 30, to facilitate an orderly transition of duties following Mr. Scharf’s appointment as Chief Executive Officer, Mr. Hassell continued to serve as Chairman of the Board through his retirement, effective December 31, 2017. Mr. Scharf assumed responsibilities as Chairman as of January 1, 2018.
EFFECTIVE ACTION
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A combined Chairman/Chief Executive Officer:
• Is in thebest position to be aware of major issues facing the company on aday-to-day and long-term basis, and to identify and bring key risks and developments facing the company to the Board’s attention (in coordination with the Lead Director as part of the agenda-setting process), and
• Eliminates the potential for uncertainty as to who leads the company, providing the company witha single public “face” in dealing with stockholders, employees, regulators, analysts and other constituencies.
• A substantial majority of our peers also utilize a similar board structure with a combined Chairman and Chief Executive Officer, as well as a lead or presiding independent director.
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COUNTERBALANCES
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As set forth in our Corporate Governance Guidelines, our Lead Director: • • Has the authority to add items to the agenda for any Board meeting,
• Presides at executive sessions of independent directors, which are held at each regular Board and committee meeting,
• Serves as anon-exclusiveliaison between the other independent directors and the Chairman/Chief Executive Officer,
• Cancall special meetings of the independent directors in his discretion and chairs any meeting of the Board or stockholders at which the Chairman is absent,
• Is available tomeet with major stockholders and regulators under appropriate circumstances,
• Consults with the HRC Committee regarding itsconsideration of Chief Executive Officer compensation, • In conjunction with the chairman of the
• Consults with the HRC Committee on Chief Executive Officer succession planning, and • Consults with the Chairman of the CG&N Committee on the Board’s annual performance evaluation. In practice, our Lead Director is a member of the CG&N Committee, which we believe is a governance best practice. In addition, the powers of the Chairman under ourby-laws are limited
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| BNY Mellon | 2018 Proxy Statement | 21 |
| ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information |
Our Board has determined that 1311 of our 1412 director nominees are independent. Our independent director nominees are Nicholas M. Donofrio;Steven D. Black; Linda Z. Cook; Joseph J. Echevarria,Echevarria; Edward P. Garden; Jeffrey A. Goldstein; John M. Hinshaw; Edmund F. “Ted” Kelly; Richard J. Kogan; John A. Luke, Jr.;Jennifer B. Morgan; Mark A. Nordenberg; Catherine A. Rein; William C. Richardson;Elizabeth E. Robinson and Samuel C. Scott III and Wesley W. von Schack.III. As our Chairman and Chief Executive Officer, Gerald L. HassellCharles W. Scharf is not independent. The Board has also determined that each of Catherine A. Rein, who did not stand for reelection as a director last year, Mr. Kowalski,Donofrio, who retired effective September 30, 2017, and Mr. Luke, who is not standing for reelection is independent and that Ms. Bruchas a director this year, was independent priorduring the period in 2017 in which she or he served as a director. Mr. Hassell, who served as Chairman of the Board until his December 31, 2017 retirement, was not independent due to her resignation in August 2014.his role as our Chief Executive Officer through July 17, 2017.
BNY Mellon 2015 Proxy Statement 16
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Our Standards of Independence
For a director to be considered independent, our Board must determine that the director does not have any direct or indirect material relationship with us. Our Board has established standards (which are also included in our Corporate Governance Guidelines) based on the specified categories and types of transactions, which conform to, or are more exacting than, the independence requirements of the New York Stock Exchange, or NYSE.
Our Board will also determine that a director is not independent if it finds that the director has material business arrangements with us that would jeopardize that director’s judgment. In making this determination, our Board reviews business arrangements between the company and the director and between the company and any other company for which the director serves as an officer or general partner, or of which the director directly or indirectly owns 10% or more of the equity. Our Board has determined that these arrangements will not be considered material if:
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Our Board may also consider other factors as it may deem necessary to arrive at sound determinations as to the independence of each director, and such factors may override the conclusion of independence ornon-independence that would be reached simply by reference to the factors listed above.
In determining that Mr. Black and each of the directors, other than Mr.Messrs. Hassell and Scharf, is independent, our Board reviewed these standards, the corporate governance rules of the NYSE and the SEC, and the individual circumstances of each director.
The following categories or types of transactions, relationships and arrangements were considered by the Board in determining that a director is independent. None of these transactions, relationships and arrangements rose to the level that would require disclosure under our related party transactions policy described on page 72,85, and none of the transactions described below were in an amount that exceeded the greater of $1 million or 2% of the other entity’s consolidated gross revenues, which is one of our standards for director independence:
| • | Purchases of goods or services in the ordinary course of business. The company and its subsidiaries purchased goods and services from the following |
| • | Sales of goods or services in the ordinary course of business. The company and its subsidiaries provided various financial services — including asset management services, asset servicing, |
| 22 | BNY Mellon | 2018 Proxy Statement |
| ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information |
directors served as an executive officer |
| • | Customer relationships.We and our subsidiaries provide ordinary course services, including asset management services, banking services, broker services |
| • | Charitable contributions. We made (directly, through our subsidiaries or by the BNY Mellon Foundation or the BNY Mellon Foundation of Southwestern Pennsylvania) charitable contributions tonot-for-profit, charitable ortax-exempt organizations for which one of our current or former independent directors served as a director, executive officer or trustee during |
BNY Mellon 2015 Proxy Statement 17
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| • | Beneficial ownership or voting power. In the ordinary course of our investment management business, we beneficially own or have the power to vote (directly or through our subsidiaries or through funds advised by our subsidiaries) shares of companies for which one of our independent directors served as an executive officer in |
Our Board determined that none of the transactions, relationships and arrangements described above constituted a material relationship between the respective director and our company or its subsidiaries for the purpose of the corporate governance rules of the NYSE and SEC and our Corporate Governance Guidelines. As such, our Board determined that these transactions, relationships and arrangements did not affect the independence of such director and did not impair such director’s ability to act in the stockholders’ best interests.
| BNY Mellon | 2018 Proxy Statement | 23 |
| ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information |
Successful management of our company requires understanding, identification and management of risk. We oversee risk through multiple lines of defense:defense.
| Primary Responsibilities for Risk Management | ||
| Risk Committee, consisting entirely independent directors | • Review and approval of the enterprise-wide risk management practices of the company. • Review and approval of the company’s risk appetite statement on an annual basis, and approval of any material amendment to the statement. • Review of significant financial and other risk exposures and the steps management has taken to monitor, control and report such exposures. • Evaluation of risk exposure and tolerance, and approval of • Review and evaluation of the company’s policies and practices with respect to risk assessment and risk management. • Review, with respect to risk management and compliance, of (1) reports and significant findings of the company’s Risk Management and Compliance department (the “Risk department”) and the Internal Audit department (“Internal Audit”), (2) significant reports from regulatory agencies and management’s responses, and (3) the Risk department’s scope of work and its planned activities.
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| Audit Committee, consisting entirely independent directors | • Review and • Oversight responsibility with respect to the integrity of our company’s financial reporting and systems of internal controls regarding finance and accounting, as well as our financial statements. • Review of the Risk Committee’s annual report summarizing its review of the company’s methods for identifying and managing risks. • Review of the Risk Committee’s semi-annual reports regarding corporate-wide compliance with laws and regulations. • Review of any items escalated by the Risk Committee that have significant financial statement impact or require significant financial statement/regulatory disclosures.
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| Management | •Chief Risk •Internal •Senior Risk Management Committee:Provide a senior focal point within the company to monitor, evaluate and recommend comprehensive policies and solutions to deal with all aspects of risk and to assess the adequacy of any risk remediation plans in our company’s businesses.
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BNY Mellon 2015 Proxy Statement 18
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We also encourage robust interactions among the different parties responsible for our risk management. Since the financial crisis emerged in September 2008, the Risk and Audit Committees of our Board have held joint sessions at the beginning of each of their regular meetings to hear reports and discuss key risks affecting our company and our management of these risks.
All independent directors are typically present during joint sessions, because all independent directors are currently members of either our Risk or Audit Committee. In addition, the Risk Committee reviews the appointment, performance and replacement of our Chief Risk Officer, and the Senior Risk Management Committee’s activities, and any significant changes in its key responsibilities must be reported to the Risk Committee. Our company has also formed several risk managementsub-committees to identify, assess and manage risks. Each risk managementsub-committee reports its activities to the Senior Risk Management Committee and any significant changes in the key responsibilities of anysub-committee, or a change in chairmanship of anysub-committee, must be approved
by our Chief Risk Officer and subsequently reported to the Senior Risk Management Committee.
Our company also has a comprehensive internal risk framework, which facilitates risk oversight by our Risk Committee. Our risk management framework is designed to:
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Our primary risk exposures as well as our risk management framework and methodologies are discussed in further detail on pages 7165 through 7670 in our 20142017 Annual Report. See “How We Address Risk and Control” on page 4857 below for a discussion of risk assessment as it relates to our compensation program.
Board Meetings and Committee Information
Board Meetings
Our Corporate Governance Guidelines provide that our directors are expected to attend our Annual Meeting of stockholders and all regular and special meetings of our Board and committees on which they sit. All of our directors then in office attended our 20142017 Annual Meeting of stockholders.
Our Board held 2115 meetings in 2014.2017. Each incumbent director attended at least 75% of the aggregate number of meetings of our Board and of the committees on which he or she sat, and the average attendance rate was over 93%97%.
BNY Mellon 2015 Proxy Statement 19
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Committees and Committee Charters
Our Board has established several standing committees, and each committee makes recommendations to our Board as appropriate and reports periodically to the entire Board. Our committee charters are available on our website (see “Helpful Resources” on page 75)88).
| BNY Mellon | 2018 Proxy Statement | 25 |
| ITEM 1. ELECTION OF DIRECTORS > Corporate Governance and Board Information |
Audit Committee
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13 Meetings in 2017 | |||
| Joseph J. Echevarria (Chair), John A. Luke, Jr., Jennifer B. Morgan, Mark A. Nordenberg, Samuel C. Scott III Independent Registered Public Accountant. Our Audit Committee has direct responsibility for the appointment, compensation, annual evaluation, retention and oversight of the work of the registered independent
Overseeing Internal Audit Function. The Committee acts on behalf of our Board in monitoring and overseeing the performance of our internal audit function. The Committee reviews the organizational structure, qualifications, independence and performance of Internal Audit and the scope of its planned activities, at least annually. The Committee also approves the appointment of our internal Chief Auditor, who functionally reports directly to the Committee and administratively reports to the CEO, and annually reviews his or her performance and, as appropriate, replaces the Chief Auditor.
Internal Controls over Financial Statements and Reports. The Committee oversees the operation of a comprehensive system of internal controls covering the integrity of our financial statements and reports, compliance with laws, regulations and corporate policies. Quarterly, the Committee reviews a report from the company’s Disclosure Committee and reports concerning the status of our annual review of internal control over financial reporting, including
Members and Financial Expert. The Committee consists entirely of directors who meet the independence requirements of listing standards of the NYSE, Rule10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations of the Federal Deposit Insurance Corporation (“FDIC”). All members are financially literate, |
BNY Mellon 2015 Proxy Statement 20
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| ITEM 1. ELECTION OF DIRECTORS | > Corporate Governance and Board Information |
Corporate Governance and Nominating Committee |
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Independent
2017
| Mark A. Nordenberg (Chair), Linda Z. Cook, Joseph J. Echevarria, Edward P. Garden, John A. Luke, Jr. Corporate Governance
Oversight of Director Compensation and
Following our Annual Meeting, the Committee will assume the responsibilities currently overseen by our Corporate Social Responsibility Committee and will be renamed the Corporate Governance, Nominating and Social Responsibility Committee, reflecting our continued commitment to the principles of corporate social responsibility. | |||
Corporate Social Responsibility Committee
Independent 4 Meetings in 2017 |
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| Samuel C. Scott III (Chair), John A. Luke, Jr., Mark A. Nordenberg, Elizabeth E. Robinson Our Corporate Social Responsibility Committee’s purpose is to promote a culture that emphasizes and sets high standards for corporate citizenship and to review corporate performance against those standards. The Committee is responsible for providing oversight of the company’s programs regarding strategic philanthropy and employee community involvement, public policy and advocacy, including lobbying and political contributions, environmental management, corporate social responsibility of suppliers, corporate social responsibility governance and reporting and human rights. The Committee also provides oversight for the company’s compliance with the Community Reinvestment Act and Fair Lending laws and considers the impact of the company’s businesses, operations and programs from a social responsibility perspective, taking into account the interests of stockholders, clients, suppliers, employees, communities and regulators.
Following our Annual Meeting, the Committee will be dissolved, and its responsibilities assumed by the CG&N Committee (to be renamed the Corporate Governance, Nominating and Social Responsibility Committee, reflecting our continued commitment to the principles of corporate social responsibility). For additional information regarding the company’s commitment to corporate social responsibility and the Committee’s recent initiatives, see “Helpful Resources” on page | |||
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Finance Committee Independent 7 Meetings in 2017 | Jeffrey A. Goldstein (Chair), Joseph J. Echevarria, Edward P. Garden, | |||||
| The Finance Committee |
BNY Mellon 2015 Proxy Statement 21
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Human Independent | Edward P. Garden (Chair), Jeffrey A. Goldstein, Edmund F. “Ted” Kelly, | |||||
| Compensation and Benefits. The HRC Committee is generally responsible for overseeing our employee compensation and benefit policies and programs, our management development and succession programs, the development and oversight of a succession plan for the CEO position and our diversity and inclusion programs. The Committee also administers and makes equity and/or cash awards under plans adopted for the benefit of our employees to the extent required or permitted by the terms of these plans, establishes any related performance goals and determines whether and the extent to which these goals have been attained. The Committee also evaluates and approves the total compensation of the CEO and all other executive officers and makes recommendations concerning equity-based plans, which recommendations are subject to the approval of our entire Board. The Committee also oversees certain retirement plans that we sponsor to ensure
CEO Compensation.The Committee reviews and approves corporate goals and objectives relevant to the compensation of our CEO, his performance in light of those goals and objectives, and determines and approves his compensation on the basis of its evaluation. With respect to the performance evaluation and compensation decisions regarding our CEO, the Committee reports its preliminary conclusions to the other independent directors of our full Board in executive session and solicits their input prior to finalizing the Committee’s decisions.
Delegated Authority. The Committee has delegated to our CEO the responsibility for determining equity awards to certain employees, other than himself, who are eligible to receive grants under our Long-Term Incentive Plan (“LTIP”). This delegated authority is subject to certain limitations, including:
Management Involvement. Our management provides information and recommendations for the Committee’s decision-making process in connection with the amount and form of executive compensation, except that no member of management will participate in the decision-making process with respect to his or her own compensation. The “Compensation Discussion and Analysis” starting on page |
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Risk Committee Independent |
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| See “Oversight of Risk” on page |
BNY Mellon 2015 Proxy Statement 22
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Technology Committee |
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| Technology Planning and Strategy. The Technology Committee is responsible for reviewing and approving the company’s technology planning and strategy, reviewing significant technology investments and expenditures, and monitoring and evaluating existing and future trends in technology that may affect our strategic plans, including monitoring overall industry trends. The Committee receives reports from management concerning the company’s technology and approves related policies or recommends such policies to the Board for approval, as appropriate. The Committee also oversees risks associated with technology. |
Compensation Consultants to the HRC Committee
The HRC Committee has the sole authority to retain, terminate and approve the fees and other engagement terms of any compensation consultant directly assisting the Committee,committee, and may select or receive advice from any compensation consultant only after taking into consideration all factors relevant to the consultant’s independence from management, including the factors set forth in the NYSE’s rules.
The HRC Committee has engaged Compensation Advisory Partners LLC (“CAP”) has servedto serve as the Committee’sits independent compensation consultant since March 2014. Prior to that time, Aon Hewitt Consulting served as the Committee’s independent consultant, including with respect to 2013 compensation decisions. Due to the retirement of Aon Hewitt Consulting’s lead consultant, the Committee interviewed a number of potential advisers and determined to engage CAP beginning with respect to 2014 compensation decisions.
As discussed in greater detail in the “Compensation Discussion and Analysis” beginning on page 2935 below, beginning in March 2014,throughout the year, CAP assistedassists the Committeecommittee in its analysis and evaluation of 2014 compensation matters relating to our executive officers. CAP reportedreports directly to the Committee, attendedcommittee, attends thein-person and telephonic meetings of the Committee,committee, and metmeets with the Committeecommittee in executive session without management present. CAP also reviewedreviews and providedprovides input on Committeecommittee meeting materials and advisedadvises on other matters considered by the Committee.committee.
The HRC Committee annually reviews the independence of its compensation consultantconsultant. CAP works with management in executing its services to the committee, but does not provide services to management withoutpre-approval by the committee Chairman. In addition, CAP maintains, and alsohas provided to the committee, a written policy designed to avoid, and address potential, conflicts of interest.
In 2017, neither CAP nor its affiliates provided any services to the company other than serving as the HRC Committee’s independent compensation consultant. The committee considered CAP’s independence prior to its determination to engage CAP. The Committeethe Company’s relationship with CAP, assessed the independence of CAP pursuant to SEC and NYSE rules including considering its prior role as management’s advisor, and concluded that there are no conflicts of interest that would prevent CAP from independently representing the Committee. CAP works with management in executing its services to the Committee, but does not provide services to management without pre-approval by the Committee Chair. In addition, CAP maintains, and has provided to the Committee, a written policy designed to avoid, and address potential, conflicts of interest.committee.
In 2014, the company paid approximately $248,000 in fees to CAP for serving as the independent compensation consultant to the Committee. Between January and March 2014, the company paid $156,000 in fees to CAP for its service as management’s advisor. Neither CAP nor its affiliates currently provide any services to the company other than serving as the HRC Committee’s independent compensation consultant. The Committee has considered the company’s relationship with CAP and determined that a conflict of interest does not exist.
The company has historically used affiliates of Aon Hewitt Consulting for additional services, including insurance brokerage services, equity valuation services and compensation market survey data. The decisions to engage affiliates of Aon Hewitt Consulting for the additional services were made by management and were not approved by the Committee or the Board of Directors; however, the Committee and the Board of Directors were aware of other services being provided by affiliates of Aon Hewitt Consulting.
In 2014, the company paid approximately $19,000 in fees to Aon Hewitt Consulting for serving as the independent compensation consultant to the Committee prior to March 2014, and an aggregate of $5 million in fees to affiliates of Aon Corporation for additional services. In addition, in 2014, Aon Risk received $2.3 million in commissions from insurance providers in connection with Aon Risk’s services as an insurance broker for the company. The Committee has considered the company’s relationship with Aon Hewitt, including the provision of other services to the company by Aon Hewitt, and determined that a conflict of interest does not exist.
We have succession plans and succession processes in place for our Chairman and Chief Executive Officer, each of our Vice Chairmen, President, and for the team of approximately 180 senior leaders that make up our management Executive and Operating Committees. Our senior management succession planning process is an organization-wide practice designed to proactively identify, develop and retain the leadership talent that is critical for future business success.
BNY Mellon 2015 Proxy Statement 23
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Succession planning is a priority for the Board and our senior management, with the goal of ensuring a strong pipeline of leaders for the future. The HRC Committee, and ultimately the entire Board, reviews the succession plan for our Chairman and Chief Executive Officer is reviewed regularly by the HRC Committee and the other independent directors. Theon a regular basis. This plan identifies a “readiness” level and ranking for each internal candidatecandidates and also incorporates the flexibility to define an external hire as a succession option. In 2017 we executed on our established succession plan and transitioned to a new Chairman and Chief Executive Officer. To ensure an orderly transition, this succession was implemented in two phases, with Mr. Scharf assuming responsibilities as Chief Executive Officer and directormid-year and then assuming additional responsibilities as Chairman effective January 1, 2018 upon Mr. Hassell’s retirement. Formal succession planning for the restbalance of our senior leadersmanagement Executive Committee members is also a regular process, which also includes identifying a rank and readiness level for each potential internal candidatecandidates and also strategically planning for external hires for positions where, for example, capability gaps are identified. The HRC Committee and the Board review the succession plans for all management Executive Committee positions.
Interested parties may send communications to our Board or our independent directors or any Board Committeecommittee through our Lead Director in accordance with the procedures set forth on our website (see “Helpful Resources” on page 75)88).
Our Corporate Secretary is authorized to open and review any mail or other correspondence received that is addressed to the Board or any individual director unless the item is marked “Confidential” or “Personal.” If so marked and addressed to the Board, it will be delivered unopened to the Lead Director. If so marked and addressed to an individual director, it will be delivered to the addressee unopened. If, upon opening an envelope or package not so marked, the Corporate Secretary determines that it contains a magazine, solicitation or advertisement, the contents may be discarded. Any written communication regarding accounting matters to our Board of Directors are processed in accordance with procedures adopted by the Audit Committee with respect to the receipt, review and processing of, and any response to, such matters.
In addition, all directors are expected to attend each Annual Meeting of stockholders. While ourby-laws, consistent with Delaware law, permit stockholder meetings to occur by remote communication, we intend this to be used only in exigent circumstances. Our Board believes that anin-person Annual Meeting provides an important opportunity for stockholders to ask questions.
BNY Mellon 2015 Proxy Statement 24
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Our Corporate Governance Guidelines provide that compensation for our independent directors���directors’ services may include annual cash retainers; shares of our common stock; deferred stock units or options on such shares; meeting fees; fees for serving as a committee chair; and fees for serving as a director of one of our subsidiaries. We also reimburse directors for their reasonableout-of-pocket expenses in connection with attendance at Board meetings. In the case of airfare, directors are reimbursed for their travel expenses not exceeding the first-class commercial rate. In addition, corporate aircraft and charter aircraft may be used for directors in accordance with the company’s aircraft usage policy. Directors will also be reimbursed for reasonableout-of-pocket expenses (including tuition and registration fees) relating to attendance at seminars and training sessions relevant to their service on the Board and in connection with meetings or conferences which they attend at the company’s request.
Each year, the CG&N Committee is responsible for reviewing and making recommendations to the Board regarding independent director compensation. The CG&N Committee annually reviews independent director compensation to ensure that it is consistent with market practice and aligns our directors’ interests with those of long-term stockholders while not calling into question the directors’ objectivity. In undertaking its review, the CG&N Committee utilizes benchmarking data regarding independent director compensation of the company’s peer group based on public filings with the SEC, as well as survey information analyzing independent director compensation at U.S. public companies.
Based on its review, and as previously disclosed in theeach year since 2014, Proxy Statement, the CG&N Committee has recommended, and the Board has approved, for 2014 an annual equity award with a value of $130,000 for each independent director. The annual equity award is in the form of deferred stock units that vest on the earlier of one year after the date of the award or on the date of the next Annual Meeting of stockholders, and must be held for as long as the director serves on the Board. The units accrue dividends, which are reinvested in additional deferred stock units. For 2014,2017, this award of deferred stock units was granted shortly after the 20142017 Annual Meeting for directors elected orre-elected at such meeting and, similarly, for 2015,2018, this award will be granted shortly after the 20152018 Annual Meeting for directors elected orre-elected at such meeting. In the case of Mr. Garden, the CG&N Committee determined that holdings of our securities by Trian (other than hedged or pledged securities) shall be deemed to be beneficially owned by Mr. Garden, given his relationship with Trian and that he transfers his security holdings to Trian.
For 2014, as previously disclosed in the 2014 Proxy Statement,2017, our independent directors received an annual cash retainer of $110,000, payable in quarterly installments in advance. In addition, the chair of the HRC Committee received an annual cash retainer of $25,000, the chairs of the Audit Committee and the Risk Committee each received an annual cash retainer of $30,000, the chairs of all other committees each received an annual cash retainer of $20,000, each member of the Audit Committee and the Risk
Committee received an annual membership fee of $10,000, and our Lead Director received an annual cash retainer of $50,000.
In addition, under our Corporate Governance Guidelines, by the fifth anniversary of their service on the Board, directors are required to own a number of shares of our common stock with a market value of at least five times the annual cash retainer of $110,000. We believe that our independent director compensation is consistent with current market practice, recognizes the critical role that our directors play in effectively managing the company and responding to stockholders, regulators and other key stakeholders, and will assist us in attracting and retaining highly qualified candidates. In the case of Mr. Garden, the CG&N Committee determined that holdings of our securities by Trian shall be deemed to be beneficially owned by Mr. Garden for purposes of this stock ownership requirement, given his relationship with Trian and that he transfers to Trian, or holds for the benefit of Trian, his security holdings.
Our directors are not permitted to hedge, pledge or transfer any of their deferred stock units and are subject to a robust anti-hedging policy as described in further detail under “Compensation Discussion and Analysis — Anti-Hedging Policy” on page 53 below. With the exception of those securities deemed to be beneficially owned by Mr. Garden by virtue of his relationship with Trian, this policy prohibits our directors from engaging in certain transactions involving our securities and requires directors topre-clear any transaction in company stock or derivative securities with our legal department (including gifts, pledges and other similar transactions).
In the merger we assumed the Deferred Compensation Plan forNon-Employee Directors of theThe Bank of New York Company, Inc. (the “Bank of New York Directors Plan”) and the Mellon Elective Deferred Compensation Plan for Directors (the “Mellon Directors Plan”). Under the Bank of New York Directors Plan, participating legacy theThe Bank of New York directors continued to defer receipt of all or part of their annual retainer and committee fees earned through 2007. Under the Mellon Directors Plan, participating legacy Mellon directors continued to defer receipt of all or part of their annual retainer and fees earned through 2007. Both plans are nonqualified plans, and neither plan is funded.
Although the Bank of New York Directors Plan and the Mellon Directors Plan continue to exist, all new deferrals of director compensation by any of the independent directors have been made under the Director Deferred Compensation Plan, which was adopted effective as of January 1, 2008. Under this plan, an independent director can direct all or a portion of his or her annual retainer or other fees into either (i)(1) variable funds, credited with gains or losses that mirror market performance of market style funds or (ii)(2) the company’s phantom stock.
BNY Mellon 2015 Proxy Statement 25
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| ITEM 1. ELECTION OF DIRECTORS > Director Compensation |
Director Compensation
Director Compensation Table
The following table provides information concerning the compensation of each independent director who served in 2014. Mr.2017. Messrs. Scharf and Hassell did not receive any compensation for his servicetheir services as a director. Mr. Garden has advised us that, pursuant to his arrangement with Trian, he transfers to Trian, or holds for the benefit of Trian, all director compensation paid to him.
| Name | Fees Earned or Paid in Cash($) | Stock Awards($)(6) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(7) | All Other Compensation($)(8) | Total($) | |||||||||||||||
Ruth E. Bruch(1) | $ | 107,500 | $ | 129,975 | $ | — | $ | — | $ | 237,475 | ||||||||||
Nicholas M. Donofrio(2) | $ | 151,800 | $ | 129,975 | $ | — | $ | 896 | $ | 282,671 | ||||||||||
Edward P. Garden(3) | $ | 849 | $ | — | $ | — | $ | — | $ | 849 | ||||||||||
Jeffrey A. Goldstein(2) | $ | 90,000 | $ | 129,975 | $ | — | $ | — | $ | 219,975 | ||||||||||
John M. Hinshaw(4) | $ | 37,667 | $ | — | $ | — | $ | — | $ | 37,667 | ||||||||||
Edmund F. Kelly | $ | 141,800 | $ | 129,975 | $ | — | $ | — | $ | 271,775 | ||||||||||
Richard J. Kogan | $ | 120,000 | $ | 129,975 | $ | — | $ | — | $ | 249,975 | ||||||||||
Michael J. Kowalski(2)(5) | $ | 131,308 | $ | 129,975 | $ | — | $ | 491 | $ | 261,774 | ||||||||||
John A. Luke, Jr. | $ | 140,000 | $ | 129,975 | $ | — | $ | — | $ | 269,975 | ||||||||||
Mark A. Nordenberg | $ | 131,178 | $ | 129,975 | $ | 5,724 | $ | 3,119 | $ | 269,975 | ||||||||||
Catherine A. Rein | $ | 150,000 | $ | 129,975 | $ | 8,991 | $ | 1,930 | $ | 290,896 | ||||||||||
William C. Richardson | $ | 150,400 | $ | 129,975 | $ | — | $ | 897 | $ | 281,272 | ||||||||||
Samuel C. Scott III | $ | 146,800 | $ | 129,975 | $ | — | $ | 490 | $ | 277,265 | ||||||||||
Wesley W. von Schack(2) | $ | 195,200 | $ | 129,975 | $ | 70,554 | $ | 4,659 | $ | 400,388 | ||||||||||
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(4) | All Other Compensation ($)(5) | Total ($) | |||||
Linda Z. Cook | $130,321 | $129,965 | $0 | $0 | $260,286 | |||||
Nicholas M. Donofrio(1)(2) | $102,500 | $129,965 | $0 | $1,234 | $233,699 | |||||
Joseph J. Echevarria(2) | $200,000 | $129,965 | $0 | $0 | $329,965 | |||||
Edward P. Garden | $145,000 | $129,965 | $0 | $0 | $274,965 | |||||
Jeffrey A. Goldstein(2) | $140,000 | $129,965 | $0 | $0 | $269,965 | |||||
John M. Hinshaw(2) | $135,000 | $129,965 | $0 | $0 | $264,965 | |||||
Edmund F. “Ted” Kelly | $150,000 | $129,965 | $0 | $0 | $279,965 | |||||
John A. Luke, Jr. | $120,000 | $129,965 | $0 | $0 | $249,965 | |||||
Jennifer B. Morgan(2) | $131,373 | $129,965 | $0 | $0 | $261,338 | |||||
Mark A. Nordenberg | $167,200 | $129,965 | $5,985 | $3,381 | $306,531 | |||||
Catherine A. Rein(1) | $40,556 | $0 | $0 | $2,657 | $43,213 | |||||
Elizabeth E. Robinson | $120,000 | $129,965 | $0 | $125,000 | $374,965 | |||||
Samuel C. Scott III | $140,000 | $129,965 | $0 | $675 | $270,640 |
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Amount shown represents the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board’s Accounting Standards Codification (or “FASB ASC”) 718 Compensation-Stock Compensation for |
The |
The amounts disclosed for Messrs. Donofrio |
BNY Mellon 2015 Proxy Statement 26
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| ITEM 2. ADVISORY VOTE ON COMPENSATION | ||
Quick Reference Guide EXECUTIVE COMPENSATION TABLES Advisory Vote on CompensationPage 2834Page 2935Page 35 Page 37 Page 38 Page 50 Page 57 Page 57 | AND OTHER COMPENSATION DISCLOSUREPage 5058Page 58 Page 60 Page 61 Page 63 Page 63 Page 65 Page 66 Page 69 BNY Mellon 2015 Proxy Statement 27BNY Mellon 2018 Proxy Statement 33
| ITEM 2. ADVISORY VOTE ON COMPENSATION | ||
Proposal
We highly value dialogue and engagement with our stakeholders, including stockholders, employees, clients and the communities we serve, with respect to our executive compensation program. Consistent with that, and in accordance with SEC rules, we are asking our stockholders to approve the following resolution:
RESOLVED, that the stockholders approve the 20142017 compensation of the named executive officers, as disclosed in this proxy statement pursuant to Item 402 of RegulationS-K of the Securities and Exchange Commission (including the Compensation Discussion and Analysis, the compensation tables and other narrative executive compensation disclosures).
Background
• Since
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• Our approach to compensation |  | |
The Board of Directors recommends that you vote “FOR” the approval of the 2017 compensation of our named executive officers.
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Voting
Your vote on this resolution is an advisory vote. Whileadvisory. Although the Board is not required to take any action in response, to the stockholder vote, the Board values our stockholders’ opinions. As in prior years, the Board intends to evaluate the results of the 20152018 vote carefully when making future decisions regarding the compensation of our named executive officers.
At our 2011last year’s Annual Meeting, we provided stockholders with an advisory vote with respectas to how often the company should hold asay-on-pay vote, and 86%91% of the votes cast voted in favor of holding such vote annually. Consistent with the voting results,an annual vote. Accordingly, we intend to continue to hold an advisory vote each year on our executive compensation program until the next stockholder advisory vote on its frequency, which we expect will occur at our 20172022 Annual Meeting.
BNY Mellon 2015 Proxy Statement 28
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| ITEM 2. ADVISORY VOTE ON COMPENSATION | >Compensation Discussion | |
Chairman and CEO Transition and Compensation
Mr. Scharf was appointed CEO of the company effective July 17, 2017 and Chairman effective January 1, 2018. He succeeds Mr. Hassell, who retired as our Chairman effective December 31, 2017 after 44 years of dedicated service to BNY Mellon, including 6 years as CEO and Chairman.
The compensation package for Mr. Scharf was designed to create alignment with our stockholders’ interests, directly link pay to performance and promote long-term stock ownership. His annual target total direct compensation was set by the HRC Committee at $16.5 million for 2017, which considered the competitive market for top tier talent, including peer CEO compensation and our historical CEO compensation. His target incentive opportunity of $15,250,000 was structured in a manner consistent with how we have historically awarded incentive compensation for our CEO (25% in cash, 50% in PSUs and 25% in RSUs).
Recognizing that 2017 was Mr. Scharf’s first year with BNY Mellon, the HRC Committee structured this package to give Mr. Scharf significant stake in the company from day one. Accordingly, Mr. Scharf’s 2017 compensation was delivered in two phases: first, a grant of PSUs and RSUs upon commencement of employment, providing immediate alignment with our stockholders and the management team; and second, payment of the balance of Mr. Scharf’s 2017 incentive award in the ordinary course in February 2018. In addition, subsequent to his appointment as CEO, Mr. Scharf purchased approximately $10 million of shares of our common stock to enhance alignment with our stockholders.
The PSUs granted to Mr. Scharf upon his commencement of employment consisted of two awards, both subject to the same performance metrics as those granted in February 2017 to other executives: a specialone-timesign-on award of PSUs, and apre-grant of 50% of the PSU component of his target incentive compensation. The RSUs awarded to Mr. Scharf upon his commencement of employment were apre-grant of the RSU component of his target incentive compensation andpro-rated to reflect the time period in 2017 that he was employed by us.
Mr. Scharf received the balance of his 2017 incentive award in February 2018. This consisted of the remaining half of Mr. Scharf’s incentive PSUs (calculated as 50% of the PSU component of his target incentive compensation), earned based on 2018 — 2020 performance, and the entire cash component of his incentive compensation (calculated based on actual 2017 performance andpro-rated to reflect the time period in 2017 he was employed by us).
Mr. Scharf’s 2018 annual target direct compensation was set at $16.5 million, unchanged from 2017, and actual compensation for 2018 will be determined in early 2019 based on established performance criteria.
The following chart shows Mr. Scharf’s actual 2017 total direct compensation. For more information regarding Mr. Scharf’s target direct compensation structure, including target incentive compensation elements, see page 39.
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BNY Mellon 2015 Proxy Statement 29
ITEM 2. ADVISORY VOTE ON COMPENSATION | > Compensation Discussion |
BNY Mellon
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| Objectives | Enhancement | |
| Focus on growth driven by earnings and revenue | • Eliminated the operating leverage metric, making OEPS the sole performance metric for the corporate component of the 2017 balanced scorecard | |
| Strengthen tie between pay and performance | • By eliminating the operating leverage metric (previously earned at 100% or 0%), subjected an incremental 25% of the corporate component earnout to 3:1 upside leverage and 4:1 downside leverage • Maintained HRC Committee discretion to consider other factors in assessing the strength of the company’s OEPS results, including various relative performance measures |
2017 Incentive Award Outcome
| Considerations | ||
| Objective Metric | • OEPS: OEPS was 2.6% above budget. | |
| Discretionary Factors | • Relative Performance: Multi-year TSR performance and 1-year EPS growth were generally at median relative to the S&P Financials Index and peers. • Earnings Drivers: OEPS results above budget driven by higher equity market performance and a lower effective tax rate. |
| Corporate Component Payout |
2017 Executive Pay Practice Highlights
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BNY Mellon 2015 Proxy Statement 31
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GAAP EPS (earnings per diluted common share) increased by 24% from $1.73 to $2.15. As contemplated by our annual incentive program, the HRC Committee adjusted EPS* for certain significant unusual items, such as litigation charges in excess of plan, sale of businesses or assets or other items. As adjusted for compensation purposes, EPS was $2.39, which is consistent with our operating income per share of $2.39.**
The low global interest rate environment and increased regulatory compliance requirements combined with non-U.S. economic and geopolitical uncertainties contributed to a challenging revenue environment for us, resulting in 2014 revenue, as adjusted for compensation purposes, below our operating plan. Our revenue performance was largely offset by strong operating expense control. Assets under custody and/or administration grew 3% (to $28.5 trillion) and assets under management increased 8% (to $1.71 trillion).
In 2014 and over the past three years, BNY Mellon achieved a TSR of 18% and 117%, respectively, outperforming the median of our peer group and the S&P Financials Index as a whole. Our 2014 TSR was at the 74th percentile compared to our peer group and the 61st percentile compared to the S&P Financials Index.
In 2014, we also repurchased 46.2 million common shares for approximately $1.7 billion and increased our quarterly dividend by 13% to $0.17 per share, returning significant value to our stockholders.
We also continued to maintain our strong capital position and further strengthened our balance sheet, remaining a safe and trusted business partner to our clients. Our estimated Basel III common equity Tier 1 ratio** calculated under the Advanced Approach on a fully phased-in basis was 9.8% at December 31, 2014, exceeding our minimum expected threshold ratio of 8%, including a G-SIB buffer of at least 1%.
| 36 | BNY Mellon | 2018 Proxy Statement |
$7.63 PSUs $7.63 Sign-on PSUs $1.75 Cash $1.75 RSUs BASE SALARY $0.57 DEFERRED EQUITY About 88% of actual 2017 total direct compensation was equity-linked and will be realized on a deferred basis 100% of sign-on compensation was granted in the form of PSUs, establishing alignment with stockholders and management and linking all sign-on compensation to performance Sign-on PSUs and pre-granted incentive PSUs will be earned based on 2017 – 2019 performance to establish alignment with stockholders and management Incentive PSUs granted on the standard schedule will be earned based on 2018 – 2020 performance Incentive RSUs vest on the generally applicable schedule despite being pre-granted INCENTIVE COMPENSATION Cash incentive was pro-rated and 100% subject to performance Incentive RSUs were pro-rated and 100% pre-granted upon commencement of employment to establish alignment with stockholders 50% of incentive PSUs were pre-granted upon commencement of employment to establish alignment with stockholders 100% of incentive compensation (and sign-on PSUs) is subject to clawback
| ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis |
The following information summarizes key highlights of our 2017 performance, including year-over-year growth. For a more detailed discussion of our 2017 performance, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2017 Annual Report to stockholders.
| 2017 | 2016 | Change (%) | ||||
EPS | $3.72 | $3.15 | 18% | |||
OEPS | $3.57 | $3.17 | 13% |
| EPS | OEPS | |
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| Strong Multi-Year TSR | Returned Significant Value to | |
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 |  |  | 37 |
OEPS above budget, resulting in above-target earnout calculation of 107.8% Median multi-year TSR performance and EPS growth relative to S&P Financials Index and peers Corporate component payout reduced by 7.8 percentage points to reflect that equity market performance and lower effective tax rate drove OEPS results 110% 100% 107.8% 107.8% 100% 90%
| ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis |
Compensation of Named Executives
2017 Target Direct Compensation Structure
2017 Target Incentive Compensation Elements
| * |
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BNY Mellon 2015 Proxy Statement 32
| 38 | BNY Mellon | 2018 Proxy Statement |
PSUs Cash RSUs BASE SALARY About 8% of target total direct compensation Sole fixed source of cash compensation DEFERRED EQUITY Deferred equity is subject to forfeiture based on annual risk assessments Dividend equivalents are paid only at vesting INCENTIVE COMPENSATION About 92% of target total direct compensation Determined at between 0% - 150% of target using a “balanced scorecard” As a condition of funding, subject to a threshold common equity Tier 1 ratio of at least 8.5% 100% of incentive compensation is subject to reduction and clawback CEO* Other NEOs** Cash 25% 30% PSUs 50% 45% RSUs 25% 25%
PSUs are earned between 0% – 150% based on the achievement of performance metrics over a 3-year performance period. RSUs generally vest in equal installments over three years.
| ITEM 2. ADVISORY VOTE ON COMPENSATION | > Compensation Discussion |
Compensation of Our Named Executives
2014 Target Total Direct Compensation Structure
2014 Incentive Compensation Awarded1, 2
After determining the calculated annual and long-term incentives, the HRC Committee shifted more of 2014 incentive pay from annual awards to at-risk long-term incentive awards in the form of PSUs, as described below on page 41, resulting in the following awards.
Annual Incentive
| Long-Term Incentive
| Total
| Deferred
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| Cash | RSUs | Awards as % of Target | PSUs | Award as % of Target | Award as % of Target | as % of | ||||||||||||||||||||||
Gerald L. Hassell (Chairman & CEO) | $ | 1,244,640 | $ | 4,978,560 | 74 | % | $ | 4,500,000 | 125 | % | 89 | % | 88 | % | ||||||||||||||
Thomas P. (Todd) Gibbons (Vice Chairman & CFO) | $ | 1,808,471 | $ | 1,358,729 | 85 | % | $ | 2,006,250 | 125 | % | 97 | % | 65 | % | ||||||||||||||
Curtis Y. Arledge (Vice Chairman & CEO of Investment Management) | $ | 3,647,534 | $ | 2,740,442 | 68 | % | $ | 5,006,250 | 125 | % | 85 | % | 68 | % | ||||||||||||||
Karen Peetz (President) | $ | 1,716,826 | $ | 1,289,874 | 80 | % | $ | 2,006,250 | 125 | % | 94 | % | 66 | % | ||||||||||||||
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BNY Mellon 2015 Proxy Statement 33
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2017 Annual Target Direct Compensation
For 2014, the HRC Committee did not change the target total direct compensation for any of our named executives.
In the first quarter of each year, the HRC Committee considers competitive data, executive position and level of responsibility and, for executives other than our CEO, our CEO’s recommendation, and establishes annual target total direct compensation for each executive. Targets are reviewed annually but only adjusted if determined appropriate by the HRC Committee.
For Messrs. Hassell, Gibbons and Harris, target total direct compensation for 2017 remained unchanged compared to the prior year. For Ms. Engle, target total direct compensation was determined in connection with her commencement of employment. For Mr. Shea, target total direct compensation was increased by $1 million to reflect increased responsibilities.
| Name1 | Salary | Annual Incentive | Long-Term Incentive | Total Target Direct Compensation | % Change from 2013 | |||||||||||||||
Hassell | $ | 1,000,000 | $ | 8,400,000 | $ | 3,600,000 | $ | 13,000,000 | 0 | % | ||||||||||
Gibbons | $ | 650,000 | $ | 3,745,000 | $ | 1,605,000 | $ | 6,000,000 | 0 | % | ||||||||||
Arledge | $ | 650,000 | $ | 9,345,000 | $ | 4,005,000 | $ | 14,000,000 | 0 | % | ||||||||||
Peetz | $ | 650,000 | $ | 3,745,000 | $ | 1,605,000 | $ | 6,000,000 | 0 | % | ||||||||||
Name
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| Annual Target Total Direct Compensation
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Hassell
| $1,000,000
| $14,000,000
| $15,000,000
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Gibbons
| $650,000
| $6,350,000
| $7,000,000
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Shea
| $650,000
| $7,350,000
| $8,000,000
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Harris
| $650,000
| $7,350,000
| $8,000,000
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Engle
| $600,000
| $4,700,000
| $5,300,000
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In the third quarter of 2017, the HRC Committee determined Mr. Scharf’s target total direct compensation for 2017 in connection with his appointment as our CEO effective July 17, 2017. In determining Mr. Scharf’s compensation, the HRC Committee sought input and advice from its independent compensation consultant, Compensation Advisory Partners LLC, on competitive levels of pay for top tier talent, including with respect to our historical CEO compensation and CEO compensation in our peer group, and designed an overall compensation package intended to create alignment with our stockholders, directly link pay to performance and promote long-term stock ownership. Mr. Scharf’s target compensation consists of an annual base salary of $1,250,000 and a target incentive opportunity of $15,250,000, structured in a manner consistent with how we have historically awarded incentive compensation to our CEO (25% in cash, 50% in PSUs and 25% in RSUs). For more information regarding Mr. Scharf’s actual 2017 direct compensation, including the timing of payments,pro-ration of certain incentive compensation components and the grant ofsign-on PSUs, see “Chairman and CEO Transition and Compensation” on page 35.
Name
| Salary
| Target Incentive
| Annual Target Total Direct Compensation(1)
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Cash
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PSUs
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RSUs
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Scharf
| $1,250,000
| $3,812,500
| $7,625,000
| $3,812,500
| $16,500,000
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20142017 Incentive CompensationAwards
EmphasisUnder our “one decision” incentive structure, total incentive compensation is based on Long-Term Sustainable Performance
As contemplated by our annuala single incentive programaward decision based on the balanced scorecard results and discussed under “Annual Incentive Calculation – Corporate Component,” the HRC Committee adjusted our GAAP EPS of $2.15 to $2.39 for compensation purposes, reflecting certain significant unusual items, such as litigation charges in excess of plan, sale of businesses or assets or other items. In determining the annual incentives for named executives, the HRC Committee further adjusted EPS downward by $0.11 to reflect the impact of certain 2014 litigation charges. This resulted in an adjusted EPS measure of $2.28.
Further, to emphasize our commitment to future long-term growth the HRC Committee shifted more of 2014 incentive pay from annual awards to at-risk long-term incentive awardsthen delivered in the form of PSUs. After calculatingcash, PSUs and RSUs. One hundred percent of the annual incentive and long-term incentive as described below, the HRC Committee exercised its discretion to reduce the calculated annual incentive. The reduction was then offset by a corresponding increase in the long-term incentive in the form of PSUs. As a result, a greater portion of total incentive for 2014 (i.e., annual incentive awarded plus long-term incentive awarded) was deferredaward is conditional upon meeting a minimum funding requirement and weighted towards multi-year awards and goals. These long-term awards will be earned onlysubject to reduction or elimination based on a risk assessment.
Minimum Funding Requirement
A common equity Tier 1 ratio of at least 8.5% was established as a minimum funding requirement for our incentive compensation. Payment of incentive compensation is conditioned upon our meeting this goal.This threshold funding goal was met, with an estimated common equity Tier 1 ratio of 11.5%* at December 31, 2017, calculated under the achievement of future three-year performance goals.Standardized Approach.
The HRC Committee determined to apply the heightened emphasis on long-term growth to our continuing named executive officers and other members of senior management, not including our Chief Risk and Legal Officers. The shift did not apply to Messrs. Keaney and Rogan, whose employment with us terminated in 2014.
| * | For a reconciliation and explanation of thisnon-GAAP measure see Annex A. |
The remainder of this 2014 Incentive Compensation discussion describes (1) the annual incentive calculation before the shift, (2) the long-term incentive calculation before the shift, (3) the effect of the shift and (4) the enhanced long-term performance metrics the HRC Committee has implemented beginning with the award for 2014.
| BNY Mellon | 2018 Proxy Statement | 39 |
Annual Incentive Calculation
| ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis |
Balanced Scorecard
We have useduse a “balanced scorecard” approach for our annual incentive since 2009.compensation determinations. Our approach is designed to be a comprehensive analysis of corporate and individual performance determined based on quantitative metrics as appropriate, but with considerable discretion by the HRC Committee. Our balanced scorecard provides for the following:
The HRC Committee determines the discretion ofcorporate component payout and the business unit payout, then applies the individual modifier to increase or decrease the total incentive award by up to ±25%. Finally, the HRC Committee and measures both (1)has the discretion to reduce an individual’s corporate financial performance and capital management,component, individual component and/or total incentive award based on an assessment of the individual’s risk profile, as well as risk assessment results, which we referdescribed on page 46. Incentive awards, including the effect of the individual modifier, can range from 0% up to as150% of the “corporate component,” and (2) each executive’s business/functional, strategic and operational results, including expense management and risk assessment results, which we refer to as the “individual component.” Earnedindividual’s target award.
As illustrated below, incentive awards are paid out in a combination of cash, PSUs (earned between 0% – 150% based on the achievement of performance metrics over a three-year performance period) and RSUs deferred over three years. Percentages in the graphic below reflect Mr. Hassell’s and Mr. Scharf’s target incentive awards. For our other named executives, incentive awards are generally paid 30% in cash, 45% in PSUs and 25% in RSUs. Mr. Hassell’s incentive award was paid 25% in cash and 75% in RSUs in light of his retirement effective December 31, 2017. This treatment is consistent with past practice for other retiring executives, who receive RSUs in lieu of their PSU component. As described below on page 55, in connection with his termination of employment effective December 31, 2017, Mr. Shea’s target incentive award was reduced by 45% and his actual incentive award was paid 30% in cash and 70% in RSUs. Ms. Engle’s incentive award was paid 50% in cash, 25% in PSUs and 25% in RSUs, as determined in connection with her commencement of employment.
BNY Mellon 2015 Proxy Statement 34
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Weighting
| * | In calculating the number of PSUs and RSUs to grant, the HRC Committee divided the value of PSUs and RSUs awarded by $57.23, the average closing price of our common stock on the NYSE for the 15 trading days from January 12, 2018 through February 2, 2018, to mitigate the impact of short-term volatility in our stock price (with the exception of Mr. Scharf’ssign-on PSUs,pre-granted PSUs andpre-granted RSUs, the number of which was determined by dividing the value of PSUs and RSUs awarded by $47.74, the average closing price of our common stock on the NYSE for the 25 trading days from May 12, 2017 through June 16, 2017). |
The weightings of the corporateFor Messrs. Scharf, Hassell and individual components are reviewed annually. For 2014,Gibbons and Ms. Engle, the corporate component weighting was raised to 50% for any named executive whose corporate component was previously below that level. The corporate component weight for Mr. Hassell continued to be 65% due to his role.
Corporate Component
The same corporate component goals apply to each named executive officer.100%. For 2014, the HRC Committee retained EPS (earnings per share) as the guideline measure forMessrs. Shea and Harris, the corporate component and identified expense control and operating leverage, total shareholder return (TSR) relative to peers, return on equity, EPS growth relative to peers, and impact of market conditions as other financial factors to evaluate. The HRC Committee established the target corporate components of the balanced scorecard in February 2014. The HRC Committee and management view EPS as an indicator of operational success and an important factor that drives stock price performance and stockholder value creation. The other identified factors can impact the EPS guideline payout result, based on a retrospective assessment of the strength of that result. The assessment also considers market reaction to company performance, relative performance, risk-based results and other important factors that could not have been known when the EPS goalsbusiness unit were established.weighted equally (50% each).
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The guidelines below provide a range of incentive payouts that correspond to each of five different levels of EPS and were enhanced for our 2014 program so that results below what we earned in 2013, as adjusted for compensation purposes, would produce a maximum guideline of 75% and results below a threshold of 83% of budget would result in a zero component payout:
| BNY Mellon | 2018 Proxy Statement |
Individual Target Award Corporate Component Payout Percentage Weighting Business Unit Payout Percentage (if applicable) Weighting Individual Modifier Incentive Award Risk Assessment Cash 25% PSUs 50%* RSUs 25%*
| ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis |
Corporate Component
The corporate component metrics are reviewed annually by the HRC Committee to select a measure or set of measures that align with our strategy and are appropriate for measuring annual performance. The same corporate component metrics and goals apply to each named executive officer. In February 2017, the HRC Committee determined to focus management on OEPS to reinforce our focus on driving quality earnings growth, which we believe is the key to ensure both revenue and costs are optimized. As a result, the HRC Committee established OEPS as the sole corporate component metric, weighted 100%, and eliminated adjusted operating leverage (previously weighted 25%) as a corporate component metric. The HRC Committee retains discretion to consider other factors (including, for example, our performance relative to our peers, market conditions and interest rate environment) in determining the earnout within the OEPS earnout range and also in determining the overall corporate component payout.
OEPS. OEPS is defined as reported earnings per share excluding merger and integration, restructuring, litigation expense and other significant, unusual items considered by the HRC Committee in its discretion. Our 2017 OEPS budget was set at $3.48 and, in February 2017, the HRC Committee established the guidelines below for a range of incentive payouts. These guidelines include the intended upside and downside leverage, which is the amount by which each percentage point difference between our budgeted and actual OEPS is magnified to determine the OEPS earnout portion of the corporate component.
OEPS | Percent of Budget ($ | Percent of Target | Intended Leverage | |||
> $4.18 | > 120% | 150% | ||||
$3.48 – $4.18 | 100% – 120% | 100% – 150% | 3:1 | |||
$2.96 – $3.48 | 85% – 100% | 40% – 110% | 4:1 | |||
< | < | 0% | ||||
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HRC Committee Determinations. Our actual 2017 OEPS was $3.57 and 2.6% above our operating budget, resulting in an earnout range of 100% to 150% per the guidelines shown above. The EPS guidelines provideHRC Committee calculated an earnout of 107.8%, which reflected an earnout of 3 percentage points above target for each percentage point by which actual 2017 OEPS exceeded our operating budget (consistent with our intended leverage shown above).
After determining that thepre-established objective performance metric yielded a corporate component earnout of 107.8%, the HRC Committee with discretion within the corporate component payout range. They also provide for adjustments for certain significant unusual items, such as litigation charges in excess of plan, sale of businesses or assets or other items, as determined in the exercise of the HRC Committee’s discretion.
Our GAAP 2014 EPS was $2.15. The HRC Committee adjusted GAAP EPS for compensation purposes to exclude the following items: the gain on the sale of our investment in Wing Hang Bank Ltd., the gain in excess of plan on the sale of our One Wall Street office building in lower Manhattan, litigation charges in excess of plan, certain restructuring charges, a charge related to an administrative error in connection with certain investment management funds net of incentives, and the benefit of a tax carryback claim. These adjustments, which we refer to as the “2014 Adjustments,” resulted in an adjusted EPS of $2.39.
The company incurred significant litigation charges during 2014. For the named executives, the HRC Committee determined inthen exercised its discretion to further adjustreview the impact of the litigation charges in its calculation of EPS, as adjusted for compensation purposes,following factors with respect to reflect their leadership positions. This resulted in a further adjusted EPS of $2.28 as shown on the next page.
BNY Mellon 2015 Proxy Statement 35
| • | TSR results relative to the S&P Financials Index over a 1, 3 and5-year period were at the 49th, 53rd and 62nd percentiles, respectively, and TSR results relative to peers over a 1, 3 and5-year period were at the 41st, 41st and 41st percentiles, respectively. |
| • | EPS growth results relative to the S&P Financials Index and peers over a 1-year period were at the 62nd and 75th percentiles, respectively, at the time the HRC Committee made its determination (and based on final results with all companies reporting, were at the 56th and 65th percentiles, respectively). |
| BNY Mellon | 2018 Proxy Statement | 41 |
| ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis |
Notwithstanding actual 2017 OEPS results that yielded a corporate component of 107.8% based solely on objective performance metrics, the HRC Committee determined to limit the corporate component payout to 100% to reflect that 2017 earnings were driven by higher equity market performance and a lower effective tax rate.
Objective Performance Metric | ||||||||||
Earnout Based on Objective Performance Metric: |
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EPS as Adjusted for Compensation Purposes | $ | 2.39 | ||
• Further adjust EPS, as adjusted for compensation purposes, to include certain litigation charges incurred in the fourth quarter of 2014 | (0.11 | ) | ||
Further Adjusted EPS for Named Executive Officers | $ | 2.28 |
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• 1-year EPS growth relative to the S&P |
Actual Corporate Component Payout: |
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The further adjusted EPS of $2.28 was 94% of our budgeted 2014 EPSIndividual Component (Business Unit Payout and resulted in a guideline corporate component payout range of 75% to 120%. Taking in account an evaluation of the factors outlined above, none of which had any specific weighting, and its discussions with other independent directors, the HRC Committee established 82% as the payout percentage, at the lower end of the guideline 75% to 120% payout range. In reaching its decision, the HRC Committee viewed our performance results from the perspective of limited EPS growth and revenue, as adjusted for compensation purposes, below our operating plan, while recognizing the company’s strong TSR and improved expense control.
Individual ComponentModifier)
In February 2014,2017, the HRC Committee approved thepre-tax income goal for each business unit and determined to apply the same payout range guidelines and the same intended leverage ratios as those applicable to the corporate component, as set forth above. The HRC Committee approved and recommended to the Board individual modifier strategic and leadership objectives for our CEO, after discussion with the other independent directors,Mr. Hassell in February 2017 and for Mr. Scharf in August 2017, and approved individual modifier strategic and leadership objectives for Ms. Engle in August 2017. For our other named executive officers, the HRC Committee approved individual modifier strategic and leadership objectives, which were set by our CEOMr. Hassell after discussion with the HRC Committee. In May 2014, the HRC Committee, approved changes to these objectives to reflect the inclusion of additional operating leverage or expense reduction targets, where applicable.in February 2017. None of the individual strategic and leadership objectives had any specific weighting andweighting; the objectives are intended to be used, together with other information the HRC Committee determines relevant, to develop a holistic evaluation of individual performance.
In December 2017, the HRC Committee reviewed and considered each named executive officer’s performance, including considering recommendations and performance summaries from both Mr. Scharf and Mr. Hassell for each of the other named executive officers. In the first quarter of 2015,2018, the HRC Committee evaluated 20142017 business unit performance forand determined each named executive against, among other factors, the approvedofficer’s individual objectives.modifier. For each of Mr. Scharf and Mr. Hassell, the HRC Committee reviewed his performance self-assessment, obtained feedback from each independent director, and finalized its decision after reporting its preliminary evaluation to the other independent directors and soliciting their input. For each of the other named executive officers, (other than Messrs. Keaney and Rogan), the HRC Committee reviewed his or her performance self-assessment, considered the December 2017 feedback from Mr. Hassell’s recommendationScharf and summary of performance,Mr. Hassell, and finalized its decision after soliciting input from the other independent directors. See “Separation Benefits for Messrs. Keaney and Rogan” on page 47 for information on the determination of their 2014 annual incentive.
BNY Mellon 2015 Proxy Statement 36
| 42 | BNY Mellon | 2018 Proxy Statement |
2017 OEPS Budget Threshold $2.96 Target $3.48 Maximum $4.18 Potential Earnout (as % of target) 100%–150% Intended Leverage 3:1 2017 OEPS Performance $3.57
| ITEM 2. ADVISORY VOTE ON COMPENSATION | > Compensation Discussion |
In determining the individual component for Mr. Scharf, the HRC Committee considered the following key results:
Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 100% for Mr. Scharf.
The HRC Committee then granted Mr. Scharf 25% of his total target incentive award,pro-rated to reflect the time period in 2017 that he was employed by us, in the form of cash. The HRC Committee also granted Mr. Scharf 50% of the PSU component of his target incentive compensation (based on target performance). The remaining 50% of the PSU component of his target incentive award and the entire RSU component of his target incentive award werepre-granted upon his commencement of employment, as described on page 35.
In determining the individual component for Mr. Hassell, the HRC Committee considered the following key results:
Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 100% for Mr. Hassell.
The HRC Committee then granted Mr. Hassell 25% of his total incentive award in the form of cash and, in light of his retirement effective December 31, 2017, 75% in the form of RSUs.
BNY Mellon | 43
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[100% corporate component payout × 100% weighting] × 100% individual modifier = 100% of target earned [100% corporate component payout × 100% weighting] × 100% individual modifier = 100% of target earned
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In determining the individual component for Mr. Gibbons, the HRC Committee considered the following key results:
Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 102% for Mr. Gibbons.
The HRC Committee then granted Mr. Gibbons 30% of his total incentive award in the form of cash, 45% in the form of PSUs and 25% in the form of RSUs.
In determining the individual component for Mr. Shea, the HRC Committee considered the following key results:
($4.240 billion) | Payout Range
Target | |
> 120% | 150% | |
100% – 120% | 100% – 150% | |
85% – 100% | 40% – 110% | |
< 85% | 0% |
Our actual achievement was $4.207 billion, representing 99% of budget, resulting in a payout range of 40% to 110%. The HRC Committee determined that a business unit payout percentage of 96% was appropriate.
Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 100% for Mr. Shea.
BNY Mellon 2015 Proxy Statement 37
The HRC Committee reduced Mr. Shea’s total target incentive award by 45% and then granted him his actual incentive award 30% in the form of cash and 70% in the form of RSUs, as described below on page 55.
| 44 | BNY Mellon | 2018 Proxy Statement |
[100% corporate component payout × 50% weighting + 96% business unit payout × 50% weighting] × 100% individual modifier = 98% of target earned
| ITEM 2. ADVISORY VOTE ON COMPENSATION | > Compensation Discussion |
In determining the individual component for Mr. Harris, the HRC Committee considered the following key results:
| Payout Range as a | |
> 120% | ||
| 150% | ||
100% – | 100% –
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| 150% | ||
85% – | 40% – |
| 110% |
< 85% |
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Our actual achievement was $1.236 billion, representing 112% of budget, resulting in a payout range of 100% to 150%. The HRC Committee determined that a business unit payout percentage of 116.5% was appropriate.
Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 110% for Mr. Harris.
The HRC Committee then granted Mr. Harris 30% of his total incentive award in the form of cash, 45% in the form of PSUs and 25% in the form of RSUs.
BNY Mellon
Based on the above strategic and leadership results, the HRC Committee approved an individual modifier of 100% for Ms. Engle.
The HRC Committee then granted Ms. Engle 50% of her total incentive award in the form of cash, 25% in the form of PSUs and 25% in the form of RSUs.
| BNY Mellon | 2018 Proxy Statement | 45 |
[100% corporate component payout × 50% weighting + 116.5% business unit pwayout × 50% weighting] × 110% individual modifier = 119% of target earned
[100% corporate component payout × 100% weighting] × 100% individual modifier = 100% of target earned
| ITEM 2. ADVISORY VOTE ON COMPENSATION | > Compensation Discussion |
2017 Incentive Award Payouts
Based on the corporate component and individual component determinations described above, the actual value of incentive compensation awarded to each of our named executives in respect of 2017 was as follows:
Incentive Compensation
| Total Incentive Compensation | Total Incentive as % of Target | ||||||||
| Cash | PSUs | RSUs | ||||||||
Scharf | $1,754,000 | $7,625,000 | $1,754,000 | $11,133,000(1) | 100%(2) | |||||
Hassell | $3,500,000 | $—(3) | $10,500,000 | $14,000,000 | 100% | |||||
Gibbons | $1,943,100 | $2,914,650 | $1,619,250 | $6,477,000 | 102% | |||||
Shea | $1,188,495 | $—(4) | $2,773,155 | $3,961,650 | 98% | |||||
Harris | $2,626,155 | $3,939,232 | $2,188,463 | $8,753,850 | 119% | |||||
Engle | $2,350,000 | $1,175,000 | $1,175,000 | $4,700,000 | 100% | |||||
| (1) | Does not include Mr. Scharf’s $7,625,000 award ofsign-on PSUs, which were aone-time award granted in connection with his commencement of employment on July 17, 2017. |
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| (3) | In connection with his retirement effective December 31, 2017, Mr. Hassell’s incentive award was paid 25% in cash and 75% in RSUs. |
| (4) | In connection with his termination of employment effective December 31, 2017, Mr. Shea’s target award was reduced by 45% and his total incentive award was paid 30% in cash and 70% in RSUs, as described below on page 55. |
Risk Assessment
We adopted the use of a risk scorecard in 2011 to formally connect compensation and appropriate risk-taking. The risk scorecard takes into account liquidity, operational, reputational, market, credit and technology risk categories by measuring:
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The HRC Committee’s review of the risk scorecard results for each named executive was taken into account by the HRC Committee in determining each of the corporate and individual components of the balanced scorecard. The HRC Committee has the ability to reduce or fully eliminate the incentive award if the risk scorecard as described above.result is significantly below expectation. No downward adjustments were made for 2014.2017.
Minimum Funding Requirement
A Basel III common equity Tier 1 ratio of at least 8.5% on a fully phased-in basis was established as a minimum funding requirement for our annual incentive, with such percentage being above the minimum regulatory threshold ratio to which we expect to be held. This threshold funding goal was met, with an estimated Basel III common equity Tier 1 ratio of 9.8% at December 31, 2014, calculated under the advanced approach on a fully phased-in basis.
BNY Mellon 2015 Proxy Statement 39
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Long-Term Incentive Calculation
In February 2015, in calculating the 2014 long-term incentive, our HRC Committee applied the following adjustment process to the target amounts previously set and communicated to our named executives in February 2014. The adjustment process can result in a PSU grant between 0% and 125% of the target amount.
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The initial target award for Mr. Gibbons was adjusted upward by 10% in recognition of his 2014 contributions in developing a three-year plan for the company as presented at our 2014 Investor Day and in delivering significant benefits related to a tax carryback claim. The initial target award for Mr. Arledge was adjusted downward by 15% in light of 2014 operating performance below plan and peers. As a result of these adjustments, the calculated long-term incentive awards were as follows: $3,600,000 for Mr. Hassell, $1,765,500 for Mr. Gibbons, $3,404,250 for Mr. Arledge and $1,605,000 for Ms. Peetz. Messrs. Keaney and Rogan did not receive a PSU grant in February 2015 since their employment with us terminated in 2014.
Strategic Shift to Long-Term Incentive
After determining the calculated annual and long-term incentives as described above, the HRC Committee shifted the 2014 pay mix for Executive Committee members to long-term incentives that are at-risk based on 2015-2017 performance by:
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As a result, 2014 incentives were significantly weighted more towards long term awards that will only be earned based on future performance and 88% of the total incentive was delivered in the form of deferred equity (i.e., RSUs and PSUs) for Mr. Hassell (between 65% and 68% for the other applicable named executives).
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BNY Mellon 2015 Proxy Statement 40
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Enhanced Long-Term Incentive Performance Metrics
To further emphasize future growth, the HRC Committee also revised the performance metrics for the long-term incentive (PSUs) to focus on three-year OEPS growth during 2015-2017, with targets consistent with the goals we presented to shareholders on our 2014 Investor Day. The PSUs will include a risk modifier based on appropriate growth in risk-weighted assets (RWA), which can result in downward adjustment only. Previously, PSUs were earned in separate tranches over each year of the performance period and earned based on RRWA.
Operating earnings per share (OEPS) is defined as reported earnings per share excluding merger and integration, restructuring, litigation expense and other significant, unusual items added or subtracted at the HRC Committee’s discretion. RWA is defined as, for each fiscal year, the simple average of the preceding four quarter-end risk-weighted assets (estimated on a fully phased-in basis in Basel III using the advanced approach) based on existing assumptions at the commencement of the performance period and as reported in the company’s SEC filings.
HRC Committee Award Determinations vs. Summary Compensation Table
The Summary Compensation Table on page 50 does not reflect the manner in which our HRC Committee thinks about and determines compensation. In particular, the SEC rules require that we report equity-based awards for the year that they are granted, even though they were awarded for services performed the prior year (such as through our annual incentive) or are awarded after adjustment for performance during the prior year (such as through our long-term incentive).
We have made a number of enhancements to our compensation program over the last few years, including (1) substantially increasing the deferred equity portion of our annual incentive to promote long-term equity ownership and (2) increasing the portion of pay that varies directly with yearly performance. These enhancements have had a particular effect on the ability to compare year-over-year reported pay.
The manner in which our HRC Committee approaches compensation and a comparison to SEC reporting requirements is set forth in the following table and is illustrated on this page 41.
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The difference between our HRC Committee’s approach and the Summary Compensation Table becomes more pronounced when change in pension value is included. Since 2011, we have not changed the formula for calculating benefits under our pension plans. However, SEC rules require that we report the change in actuarial present value of each named executive’s accumulated pension benefit from year to year. Because the assumptions used for calculating actuarial present value (such as the relevant discount rate) may change from year to year, the figure reported as change in pension value in the Summary Compensation Table does not reflect any changes made to our retirement plans but instead reflects changes in the underlying assumptions used for calculating the actuarial present value.
Outstanding Long-Term Equity Incentives
In 2013, we reintroduced PSUs as our long-term performance vehicle. The PSUs are granted each year and any earned PSUs cliff vest after the end of three-year performance periods based on continued service (with certain exceptions for retirement-eligible executives). The PSUs are earned between 0-125% based on the achievement of performance metrics. Granting awards annually with overlapping, multi-year performance periods allows the HRC Committee to annually review and update, as appropriate, the structure and performance metrics that we use in our PSUs program.
BNY Mellon 2015 Proxy Statement 41
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Our outstanding long-term incentive PSU awards are illustrated below.
February 2014 PSU Award
As discussed in last year’s proxy statement, in February 2014, the HRC Committee granted PSUs to each of our named executives based on target values, as adjusted based on prior-year 2013 performance. The PSUs are earned based on RRWA over each year of the 2013-2015 performance period.
Consistent with our focus on pay for performance, the HRC Committee pre-established an RRWA target of 2.0% for the February 2014 PSU awards (25% higher than the target for the PSUs granted in the prior year). Our RRWA in 2014 was 1.57%, resulting in an earnout percentage of 67% for the first tranche of the February 2014 PSU awards (and 98% for the second tranche of the February 2013 PSU awards).
Return on risk-weighted assets (RRWA) is defined as net income available to common stockholders, adjusted for capital charges on acquisitions as incurred, divided by the simple average of quarter-end risk-weighted assets (estimated per a fully phased-in Basel III, based on existing assumptions and approaches at the end of the commencement of the performance period, and as reported in our reports on Forms 10-Q and 10-K).
Reduction or Forfeiture in Certain Circumstances
The company may cancel all or any portion of the RSUs and PSUs (as well as the RSUs that constitute a portion of our named executives’ annual incentive award),award if, directly or indirectly, the named executive (1) engages, or is discovered to have engaged, in conduct that is materially adverse to the company’s interests during his or her employment, (2) violates certainnon-solicitation ornon-competition restrictions during his or her employment and for a certain period thereafter, (3) violates any post-termination obligation or duties owed to the company or (4) has received, or may receive, compensation that is required to be forfeited and/or repaid to the company pursuant to applicable regulatory requirements. In addition, in the event that the named executive’s risk scorecard rating is lower than acceptable risk tolerance, any unvested RSUs and PSUs (as well as unvested RSUs) will be subject to review and potential forfeiture, as determined by our HRC Committee.
| 46 | BNY Mellon | 2018 Proxy Statement |
| ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis |
Outstanding PSUs
As part of our incentive compensation program, we grant PSUs each year based on prior-year performance. We consider PSUs granted during a given year to be part of the prior year’s compensation; for example, we consider the February 2017 PSU grant to be part of 2016 earned compensation. Any earned PSUs cliff vest after the end ofthree-year performance periods based on continued service with certain exceptions. The PSUs granted in 2015 were earned at 114%, as described below. The PSUs granted in 2016 and 2017 are earned between 0% – 150%, in each case based on the achievement of performance metrics over the applicable three-year performance period. Granting awards annually with overlapping, multi-year performance periods allows the HRC Committee to annually review and update, as appropriate, the structure and performance metrics that we use in our PSU program.
February 2017 PSUs,Sign-On PSUs andPre-Granted Incentive PSUs
PSUs granted in February 2017, the amounts of which were determined based on 2016 performance as discussed in last year’s proxy statement, are earned based on 2019 OEPS, with the potential of a negative risk modifier should risk-weighted assets (“RWA”) grow at an unacceptable rate. In July 2017, in connection with Mr. Scharf’s appointment as CEO, the HRC Committee granted him asign-on award of PSUs and 50% of the PSU component of his 2017 incentive compensation as described above in “Chairman and CEO Transition and Compensation” on page 35. Thesesign-on PSUs andpre-granted incentive PSUs are earned based on the same performance metrics and were granted with generally the same terms as the February 2017 PSUs.
To emphasize our focus on paying for performance, the HRC Committeepre-established two sets of 2019 OEPS targets (one set for a “normalizing” rate scenario, where the daily average Fed target rate is greater than or equal to 125 basis points in 2019, and one set for an alternative “flat” rate scenario):
2019 OEPS in a “Flat” Rate Scenario
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The actual percentage of PSUs that are earned will be determined in the HRC Committee’s discretion within the payout range set forth above. In addition, the percentage may be adjusted downward by a risk-based modifier should risk-weighted assets grow at an unacceptable rate during the three-year performance period as set forth below:
Compound Annual Growth Rate of RWA | Risk-Based Modifier | |
> 11% | 0% – 75% | |
11% – 9% | 75% – 100% | |
< 9% | 100% | |
For 2017, our OEPS was $3.57 and the three-year compound annual growth rate of our RWA was 2.24%.
| BNY Mellon | 2018 Proxy Statement | 47 |
| ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis |
Our outstanding PSU awards are illustrated below:
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | ||||||||
February 2015 PSU Award | Earned at 114% as described below | cliff vested in 2018 based on continued service | ||||||||||||
February 2016 PSU Award | OEPS, with the potential of a negative risk modifier should risk-weighted assets grow at an unacceptable rate | cliff vests in 2019 based on continued service | ||||||||||||
February 2017 PSU Award | OEPS, with the potential of a negative risk modifier should risk-weighted assets grow at an unacceptable rate | cliff vests in 2020 based on continued service | ||||||||||||
February 2018 PSU Award | Average revenue growth and average operating margin | cliff vests in 2021 based on continued service | ||||||||||||
RWA is generally defined as, for each fiscal year, the simple average of the preceding fourquarter-end risk-weighted assets (estimated on a fullyphased-in basis in Basel III using, for PSUs granted in 2015, the Advanced Approach, for PSUs granted in 2016, the higher of the Advanced or Standardized Approach, and for PSUs granted in 2017, the Standardized Approach) based on existing assumptions at the commencement of the performance period and as reported in the company’s SEC filings.
February 2015 PSUs
As previously disclosed in our 2016 proxy statement, the PSUs granted in February 2015 were to be earned between 0% – 125% based on 2017 OEPS, with the potential of a negative risk modifier should RWA grow at an unacceptable rate. Consistent with our Investor Day goals, two sets of 2017 OEPS targets werepre-established for these awards (one set for a “normalizing” rate scenario, where interest rates moved a minimum of 100 basis points during the three-year performance period, and an alternative set for a “flat” rate scenario). The HRC Committee applied targets under the “normalizing” rate scenario because interest rates rose 125 basis points during 2015 – 2017. Actual 2017 OEPS was $3.57, resulting in an earnout range of 75% to 125%. The terms of the 2015 PSUs provide that the percentage of the earned award will be determined in the HRC Committee’s discretion. Accordingly, the HRC Committee determined it was appropriate to use a linear interpolation between 75% and 125% (the minimum and maximum of the applicable earnout range) and calculated an earnout of 114%, without making any further discretionary adjustments. The HRC Committee then considered RWA, which for December 2014 – December 2017 had a compound annual growth rate of 2.24%, resulting in no risk modifier being applied based on RWA growth. Accordingly, the February 2015 PSUs were earned at 114%.
February 2018 PSUs
The HRC Committee determined that the 2018 PSUs will be earned based on average revenue growth (as adjusted) and average operating margin (as adjusted) over a three-year period. In connection with establishing the performance metrics for the 2018 PSUs, the HRC Committee considered the fact that OEPS had been used as the primary performance metric for the corporate component of the 2017 balanced scorecard and recognized that use of average revenue growth and average operating margin would introduce complimentary performance metrics that are consistent with the Company’s emphasis on organic growth over market-related factors.
Other Compensation and Benefits Elements
Retirement and Deferred Compensation Plans
After the Bank of New York and Mellon merger in 2007, we assumed certain existing arrangements affecting the provision of retirement benefits to certain of our named executives, maintaining qualified andnon-qualified defined benefit and defined contribution plans in which eligible employees, including our named executives, may participate. Our named executives are eligible to participate in deferred compensation plans, which enable eligible employees to defer the payment of taxes on a portion of their compensation until a later date. In December 2014,To limit pension accruals, we froze all accruals under the HRC Committee authorized an amendment to our Legacy BNY SERP to freeze all accruals as of December 31, 2014 and in January 2015, the HRC Committee authorized an amendment tounder our other U.S. defined benefit pension plans (including the BNY Mellon
| 48 | BNY Mellon | 2018 Proxy Statement |
| ITEM 2. ADVISORY VOTE ON COMPENSATION > Compensation Discussion & Analysis |
Tax-Qualified Retirement Plan and the Legacy BNY Excess Plan) to freeze all accruals as of June 30, 2015. For a description of these plans and our named executive officers’ participation therein, see “Pension Benefits” and “Nonqualified Deferred Compensation” below.
BNY Mellon 2015 Proxy Statement 42
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Perquisites
Our named executives are eligible to participate in company-wide benefit plans. In addition, we provide certain benefits, consistent with market practices, that are reportable under SEC rules as perquisites.perquisites (see footnotes to the Summary Compensation Table below).
Our policy regarding corporate aircraft usage provides that the CEO should make reasonable use of the company aircraft for security purposes and to make the most efficient use of his time. The following perquisitesHRC Committee receives and reviews an aircraft usage report on a semi-annual basis.
Certain named executives have historically had access to a pool of company cars and drivers for security purposes and to allow for more effective use of travel time. This car and driver perquisite was available during 2017, but has been discontinued for 2018.
Additionally, under our charitable gifts matching program, in 2017 our named executive officers were providedeligible for an additional match of up to $30,000 above the level of charitable gift matching to which all of our employees are entitled. As of January 1, 2018, our named executive officers are no longer eligible for a charitable gift match.
Lastly, Messrs. Hassell and Gibbons are covered by legacy life insurance plans assumed in 2014 and are substantially unchanged from 2013:the merger.
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Stakeholder Engagement
Key Compensation Practices
98% of stockholders approved our 2017 say-on-pay proposal
HRC Committee Role and Process In 2017, the HRC Committee led the search for, and recruitment of, Mr. Scharf as the successor to Mr. Hassell. In addition to overseeing our succession program, the HRC Committee also oversaw our executive compensation program. In the first quarter of In setting In the third quarter of 2017, in connection with the appointment of Mr. Scharf as CEO, the HRC Committee approved his base salary; established his 2017 target total direct compensation; and granted certain of his equity awards (consisting of thesign-on PSUs,pre-granted incentive PSUs andpre-granted RSUs) to provide immediate alignment with our stockholders and the management team. During the year, the HRC Committee received regular updates on performance forecasts versus performance goals, regulatory and legislative developments and other relevant matters. In the first quarter of
The HRC Committee also provided each continuing named executive With respect to Role of Compensation Consultants
Benchmarking
The 2017 peer group selected by the HRC Committee was unchanged from 2016. Compensation Benchmarking Compensation information is collected from the peer group proxy statements to provide data for the HRC Committee to assess the competitiveness of targeted and actual compensation. Peer group information is also used to analyze market trends and compensation program practices. For certain named executive officers, data relating to the peer group is supplemented with industry data from surveys conducted by national compensation consulting firms and other data to assess the compensation levels and practices in the businesses and markets in which we compete for executive talent. Financial Performance Benchmarking The peer group is also used to provide the HRC Committee with relative financial performance assessments. The metrics reviewed include revenue growth, EPS growth, operating leverage, return on equity, return on tangible common equity as well as TSR on aone- and three-year basis. This analysis provides additional context for the HRC Committee in their review of compensation outcomes as well as compensation program design. When making annual compensation determinations for prior year performance, the HRC Committee reviews additional relative performance metrics as part of their considerations, as discussed above on pages 41 to 42. Peer group data reviewed by the HRC Committee was considered holistically, and was used as an input, but not the sole input, of their compensation decisions.
Stock Ownership Guidelines Under our stock ownership guidelines, each named executive is required to own a number of shares of our common stock with a value equal to a multiple of base salary within five years of becoming a member of our Executive Committee. The officer cannot sell or transfer to a third party any shares until he or she achieves the ownership guideline.
Our CEO is subject to a6-times base salary, and our other named executives are subject to a4-times base salary, ownership guideline. All of our named executives In addition, named executives are subject to a retention requirement relating to shares received from the vesting of RSUs, PSUs, restricted stock and other long-term equity awards that were granted after their respective appointment to the Executive Committee and that were unvested as of, or granted after, August 2012. For the CEO, 50% of the netafter-tax shares from these awards must be held until age Anti-Hedging Our executive officers, including each named executive Our anti-hedging policy applies to all securities which our executive officers and directors beneficially own and, with the exception of Trian, any entity for which an executive officer or director is attributed ownership.
Clawback and Recoupment Policy In addition to forfeiture provisions based on risk outcomes during the vesting period, we have a comprehensive recoupment policy administered by the HRC Committee that applies to equity awards granted to our
the executive directly or indirectly engages in conduct, or it is discovered that the executive engaged in conduct, that is materially adverse to the interests of the company, including failure to comply with the company’s rules or regulations, fraud or conduct contributing to any financial restatements or irregularities;
during the course of employment, the executive engages in solicitation and/or diversion of customers or employees and/or competition with the company;
following termination of employment with the company for any reason, the executive violates any post-termination obligations or duties owed to the company or any agreement with the company; or
any compensation otherwise payable or paid to the executive is required to be forfeited and/or repaid to the company pursuant to applicable regulatory requirements.
The company continues to monitor regulatory requirements as may be applicable to its recoupment policies. Severance Benefits Stockholder Approval of Future Senior Officer Severance
Executive Severance
Executive Severance Plan participants are selected by the HRC Committee and include each of our named executives. To receive benefits under the plan, the participant must sign a release and waiver of claims in favor of the company and agree not to compete against the company, or solicit our customers and employees, for We do not provide any severance-related taxgross-ups. If any payment under the Retirement Benefits for Mr. Hassell Mr. Hassell retired as Chairman effective December 31, 2017 following a44-year career with the company, including 6 years as our CEO and Chairman. Pursuant to the standard retirement vesting provisions in our LTIP and the applicable award agreements, Mr. Hassell is eligible to vest in his unvested February 2015, February 2016 and February 2017 PSU and RSU awards. At December 31, 2017, and using the same assumptions as used for the Table of Other Potential Payments on page 68, the estimated value of such vesting was $41,445,373. Subsequent to his retirement, Mr. Hassell vested in his February 2015 RSU award and 114% of his February 2015 PSU award based on the company’s actual performance as described above. The number of shares under the February 2016 and February 2017 PSU awards in which Mr. Hassell will vest will be based on the company’s actual performance as determined by the HRC Committee at the end of the applicable performance periods. Mr. Hassell will also have the use of an office and administrative/IT support for 2 years following his retirement. Separation Benefits for
Tax Considerations The HRC Committee considers certain tax implications when designing our executive compensation programs and certain specific awards. The HRC Committee considered that Section 162(m) of the IRC generally imposes a $1 million limit on the amount that a public company may deduct for compensation paid to its CEO and the three other most highly compensated officers each year. However, the HRC Committee believes that stockholders’ interests may best be served by offering compensation that is not fully deductible, where appropriate, to attract, retain and motivate talented executives. Accordingly, the HRC Committee has discretion to authorize compensation that does not qualify for income tax deductibility.
Regular Review of Compensation Plans and Practices + Direct Link Between Pay and Risk-Taking + Comprehensive Recoupment Policy + Incentive Award Funding Condition
How We Address Risk and Control
On a regular basis, our Chief Risk Officer and our HRC Committee review the company’s risk appetite, practices and employee compensation plans, We identify employees who, individually or as a group, are responsible for activities that may expose us to material amounts of risk, using a risk-related performance evaluation program with adjustments determined by a senior management committee responsible for control functions, with such adjustments later reviewed by the HRC Committee. The incentive compensation of identified employees is directly linked to risk-taking either through a “risk scorecard” or through the inclusion of a standard risk goal as part of our performance management process. With respect to our named executive officers, a We are also subject to regulation by various U.S. and international governmental and regulatory agencies with respect to executive compensation matters and the consideration of risk in the context of compensation. Our programs have been designed to comply with these regulations, and the HRC Committee regularly monitors new and proposed regulations as they develop to determine if additional action is required. Based on the above, we believe that our compensation plans and practices are well-balanced and do not encourage imprudent risk-taking that threatens our company’s value or create risks that are reasonably likely to have a material adverse effect on the company.
The HRC Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. On the basis of such review and discussions, the HRC Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the company’s Annual Report on Form10-K and this proxy statement. By: The Human Resources and Compensation Committee
Outstanding Equity Awards at FiscalYear-End The market value of unvested or unearned awards is calculated based on
Option Exercises and Stock Vested
BNY Mellon Retirement Plans All of these plans are closed to new participants and were frozen as of December 31, 2014 for the Legacy BNY SERP and as of June 30, 2015 for the BNY MellonTax-Qualified Retirement Plan, the Legacy BNY Excess Plan and the Legacy Mellon IRC Section 401(a)(17) Plan. Benefits for Legacy BNY participants under the BNY MellonTax-Qualified Retirement Plan, the Legacy BNY Excess Plan and the Legacy BNY SERP were determined under a career average pay formula for service on and after January 1, 2006 and under a final average pay formula for service prior to 2006. Benefits for Legacy Mellon participants under the BNY MellonTax-Qualified Retirement Plan and the Legacy Mellon IRC Section 401(a)(17) Plan were determined under a final average pay formula. The BNY MellonTax-Qualified Retirement Plan was Because each of Messrs. Hassell, Gibbons and Because Messrs. Hassell, Gibbons and Messrs. Scharf and Shea and Ms. Engle do not participate in any plan that provides for specified payments and benefits (other than defined contribution plans) and accordingly, BNY MellonTax-Qualified Retirement Plan — Legacy BNY Provisions.The Legacy BNYTax-Qualified Retirement Plan (the “Legacy BNY Plan”) formula is a career average pay formula subject to IRC limits on eligible pay for determining benefits. Benefits are based on eligible base pay (maximum of Legacy BNY Excess Plan.This plan is an unfunded nonqualified plan designed to provide the same benefit to Legacy BNY employees as under the BNY MellonTax-Qualified Retirement Plan to the extent their benefits are limited under such plan as a result of IRC limits on accrued benefits and eligible base pay. Benefits are paid in a lump sum. Legacy BNY SERP. Legacy Mellon IRC Section 401(a)(17) Plan. This plan is
Nonqualified Deferred Compensation The following table provides information with respect to each defined contribution or other plan that provides for nonqualified deferred compensation in which the named
BNY Mellon Nonqualified Deferred Compensation Plans BNY Mellon 401(k) Benefits Restoration Plan. BNY Mellon Deferred Compensation Plan.
Mellon Elective Deferred Compensation Plan for Senior Officers. The Mellon Elective Deferred Compensation Plan for Senior Officers is a nonqualified, unfunded plan that permitted executives, including Mr. Harris, to defer receipt of earned salary and cash bonus/incentive amounts above the Social Security wage base until a later date while employed, upon retirement or after retirement not to exceed age 70. Deferred compensation may be paid in a lump sum or annual payments over 2 to 15 years. If an executive terminates employment prior to age 55, his benefit is paid in a lump sum shortly after termination. The executive may allocate his deferrals to receive earnings based on multiple variable rates or a declared rate (for 2017, 2.91%). Previously deferred amounts allocated to the declared rate must remain in the declared rate. Although the plan is unfunded, funds have been set aside in an irrevocable grantor trust for the purpose of paying benefits under the plan to participants. Potential Payments upon Termination or Change in Control
The following discussion summarizes any arrangements, agreements and policies of the company relating to potential payments upon termination or change in control. Retirement Benefits As shown in the
In addition, we provide accelerated or continued vesting of equity awards for participants who are eligible for retirement, with the eligibility dependent on the individual’s age and length of service and the terms of the applicable Other Potential Payments upon Termination or Change in Control Change in Control and Severance Arrangements. Since 2010, our Board has implemented a “Policy Regarding Stockholder Approval of Future Senior Officer Severance Arrangements.” The policy provides that the company will not enter into a future severance arrangement with a senior executive that provides for severance benefits (as defined in the policy) in an amount exceeding 2.99 times the sum of the senior executive’s annual base salary and target bonus for the year of termination (or, if greater, for the year before the year of termination), unless such arrangement receives approval of the stockholders of the company. Under the
against the company, or solicit our customers and employees, for Payments and benefits that are payable under the plan will be reduced to the extent that the amount of such payments or benefits would exceed the amount permitted to be paid under the company’s “Policy Regarding Stockholder Approval of Future Senior Officer Severance Arrangements” and such amounts are not approved by the company’s stockholders in accordance with the policy. Unvested Equity Awards.Equity awards granted to our named Table of Other Potential Payments.The following table is based on the following:
The termination event listed in the table is assumed to be effective as of December 31, 2017. The value of our common stock of $53.86 per share is based on the closing price of our common stock on the NYSE on December 29, 2017, the last trading day in 2017.
The amounts shown in the table include the estimated potential payments and benefits that are payable as a result of the triggering event and do not include any pension, deferred compensation, or equity award vesting that would be earned on retirement as described above. We have only included amounts by which a named executive’s retirement benefit is enhanced by the triggering event, or additional equity awards that vest on the triggering event that would not vest on retirement alone. See “Retirement Benefits” on page 66 above for information on the acceleration or continued vesting of equity awards upon retirement.
The designation of an event as a termination in connection with a change of control is dependent upon the termination being either an involuntary termination by the company without cause or a termination by the named executive for good reason.
“Cash Compensation” includes payments of salary, bonus, severance or death benefit amounts payable in the applicable scenario. The actual amounts that would be payable in these circumstances can only be determined at the time of the executive’s separation, would include payments or benefits already earned or vested and may differ from the amounts set forth in the tables below. In some cases a release may be required before amounts would be payable. Although we may not have any contractual obligation to make a cash payment or provide other benefits to any named executive
Messrs.
The 2017 annual total compensation of the median employee of BNY Mellon (other than our CEO) was $55,970; The 2017 annual total compensation of our CEO, Mr. Scharf, was $19,837,535; and For 2017, the ratio of the annual total compensation of Mr. Scharf to the median annual total compensation of all our employees was 354 to 1. Background To identify our median employee, we used our world-wide employee population (without exclusions) as of October 31, 2017 and measured compensation based on total pay actually received over the period November 1, 2016 –October 31, 2017. Total pay includes base salary, cash bonus and the value of equity awards upon vesting, and excludes overtime pay and anysign-on andbuy-out awards. As required by SEC rules, after identifying our median employee (who is located in the U.S.), we calculated 2017 annual total compensation for both our median employee and Mr. Scharf using the same methodology that we use to determine our named executive officers’ annual total compensation for the Summary Compensation Table, except that for purposes of pay ratio disclosure we annualized Mr. Scharf’s compensation. Mr. Scharf became CEO on July 17, 2017. In calculating our pay ratio disclosure, we annualized his 2017 compensation by increasing his salary, matching contribution under our 401(k) plan and cash incentive compensation to the amounts he would have received for a full year of service (for the 401(k) plan, based on his contribution rate as of December 31, 2017). The pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Proposal We are asking stockholders to ratify the Audit Committee’s appointment of KPMG LLP (“KPMG”) as our independent registered public accountants for the year ending December 31, Background
The following table shows information relating to the number of shares authorized for issuance under our equity compensation plans as of December 31,
Beneficial Ownership of Shares by Holders of More Than 5% As of February
We and our affiliates engage in ordinary course brokerage, asset management or other transactions or arrangements with, and may provide ordinary course financial services to, holders of 5% or more of our outstanding common stock, including asset servicing, clearing, issuer services, treasury services, global markets, broker-dealer, liquidity investment and credit services. These transactions are negotiated on anarm’s-length basis and contain terms and conditions that are substantially similar to those offered to other customers under similar circumstances. Beneficial and Executive Officers The table below sets forth the number of shares of our common stock beneficially owned as of the close of business on February
Also includes the following additional number of RSUs, deferred share units and phantom stock: Ms. Engle, 68,046; Mr. Gibbons, 56,922; Mr. Harris, 40,230; Mr. Hassell, 155,091; Mr. Hinshaw, 18,931; Ms. Morgan, 2,989; Mr. Scharf, 36,740; Mr. Shea, 57,722; and current directors and executive officers as a group, 395,165. These individuals do not have voting or investment power with respect to the underlying shares, nor the right to acquire the underlying shares within 60 days of February 9, 2018.
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors and executive officers and any beneficial owner of more than 10% of any class of our equity securities to file with the SEC initial reports of beneficial ownership and reports of changes in ownership of any of our securities. These reports are made on documents referred to as Forms 3, 4 and 5. Our directors and executive officers must also provide us with copies of these reports. We have reviewed the copies of the reports that we have received and written representations from the individuals required to file the reports. Based on this review, we believe that during
The Board of Directors is soliciting your proxy for our
We encourage stockholders topre-register in advance of the Annual Meeting by visiting www.proxyvote.com. You will need your16-digit control number to access www.proxyvote.com, which you can find on your proxy card or voting instruction form.
In addition, if other matters are properly presented for voting at the Annual Meeting, the proxy holders are also authorized to vote on such matters as they shall determine in their sole discretion. As of the date of this proxy statement, we have not received notice of any other matters that may be properly presented for voting at the Annual Meeting. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Q: | What If I Want To Revoke My Proxy? |
| A: | You may revoke your proxy at any time before it is voted at the Annual Meeting by: |
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| Q: | What Is A Quorum? |
| A: | A quorum is the minimum number of shares required to conduct business at the Annual Meeting. Under ourby-laws, to have a quorum, a majority of the outstanding shares of stock entitled to vote at the Annual Meeting must be represented in person or by proxy at the meeting. Abstentions and brokernon-votes (as defined below) are counted as present for determining the presence of a quorum. Inspectors of election appointed for the Annual Meeting will tabulate all votes cast in person or by proxy at the Annual Meeting. In the event a quorum is not present at the Annual Meeting, we expect that the Annual Meeting will be adjourned or postponed to solicit additional proxies. |
| BNY Mellon | 2018 Proxy Statement | 83 |
| ADDITIONAL INFORMATION > Annual Meeting Q&A |
| Q: | What Vote Is Required For Approval Of A Proposal At The Annual Meeting? |
| A: | Ourby-laws provide for a majority vote standard in an uncontested election of directors, such as this year’s election. Accordingly, each of the |
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BNY Mellon 2015 Proxy Statement 71
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| Q: | What If I Hold My Shares Through A Broker? |
| A: | If your shares are held through a broker, the broker will ask you how you want your shares to be voted. If you give the broker instructions, your shares will be voted as you direct. If you do not give instructions, one of two things can happen, depending on the type of proposal. For the ratification of the auditor (Proposal 3), the broker may vote your shares in its discretion. For all other proposals, the broker may not vote your shares at all if you do not give instructions (this is referred to as a “brokernon-vote”). |
84 | BNY Mellon | 2018 Proxy Statement |
| ADDITIONAL INFORMATION | > | |
Stockholder Proposals for 20162019 Annual Meeting
Stockholder proposals intended to be included in our proxy statement and voted on at our 20162019 Annual Meeting of stockholders (other than proxy access nominations) must be received at our offices at One Wall225 Liberty Street, New York, NY 10286, Attention: Corporate Secretary, on or before November 14, 2015.9, 2018. Stockholders who wish to submit a proxy access nomination for inclusion in our proxy statement in connection with our 2019 Annual Meeting of Stockholders may do so by submitting a nomination in compliance with the procedures and along with the other information required by ourby-laws to 225 Liberty Street, New York, NY 10286, Attention: Corporate Secretary, no earlier than October 10, 2018 and no later than November 9, 2018. Applicable SEC rules and regulations and the provisions of ourby-laws govern the submission, and our consideration, of stockholder proposals or proxy access candidates for inclusion in the 20162019 Annual Meeting proxy statement and form of proxy.
Pursuant to ourby-laws, in order for any business not included in the notice of meeting for the 20162019 Annual Meeting to be brought before the meeting by a stockholder entitled to vote at the meeting (including nominations of candidates for director), the stockholder must give timely written notice of that business to our Corporate Secretary. To be timely, the notice must not be received any earlier than November 14, 20159, 2018 (at least 120 days prior to March 13, 2016)9, 2019), nor any later than December 14, 20159, 2018 (90 days prior to March 13, 2016)9, 2019). The notice also must contain the information required by ourby-laws. The foregoingby-law provisions do not affect a stockholder’s ability to request inclusion of a proposal in our proxy statement within the procedures and deadlines set forth in Rule14a-8 of the SEC’s proxy rules and referred to in the paragraph above. A proxy may confer discretionary authority to vote on any matter at a meeting if we do not receive notice of the matter within the timeframes described above. A copy of ourby-laws is available upon request to: The Bank of New York Mellon Corporation, One Wall225 Liberty Street, New York, NY 10286, Attention: Corporate Secretary. The officer presiding at the meeting may exclude matters that are not properly presented in accordance with these requirements.
Corporate Governance Guidelines and Codes of Conduct
Our Board of Directors has adopted Corporate Governance Guidelines covering, among other things, the duties and responsibilities and independence of our directors. The Corporate Governance Guidelines cover a number of other matters, including the Board’s role in overseeing executive compensation, compensation and expenses for independent directors, communications between stockholders and directors, the role of our Lead Director, and Board committee structures and assignments.
Our Board of Directors also has adopted a Code of Conduct, which applies to all of our employees, to provide a framework to maintain the highest standards of professional conduct for the company, and a Code of Conduct for directors of the company to provide guidance to our directors to help them recognize and deal with ethical issues, provide mechanisms to report possible unethical conduct and foster a culture of honesty and accountability.
Our Corporate Governance Guidelines, Code of Conduct and Directors’ Code of Conduct are available on our website (See(see “Helpful Resources” on page 75)88). We intend to disclose any amendments to, or waivers from, our Code of Conduct or our Directors’ Code of Conduct for executive officers and directors, respectively, by posting such information on our website.
Business Relationships and Related Party Transactions Policy
In the ordinary course of business, we periodically have, and expect to continue to have, banking and other transactions with “related persons.” A “related person” includes directors, nominees for director, executive officers, greater than 5% beneficial owners, members of such persons’ immediate families and any firm, corporation or other entity in which any of the foregoing persons is employed as a general partner or principal or in a similar position or in which such person and all other related persons has a 10% or greater beneficial interest.
The Board has adopted a policy on related party transactions (our “related party transactions policy”) which was reviewed by the CG&N Committee. Our related party transactions policy provides that the CG&N Committee, or another Board committee consisting solely of independent directors, must approve any transaction(s) in which we or any of our subsidiaries was, is or will be a
BNY Mellon 2015 Proxy Statement 72
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participant and where the amount involved exceeds $120,000, and in which any related person“related person” had, has or will have a direct or indirect material interest, such transactions constituting disclosable related party transactions under SEC rules. A “related person” includes directors, nominees for director, executive officers, greater than 5% beneficial owners and members of such persons’ immediate families. Consistent with SEC rules, our related party transactions policy provides that certain transactions, including employment relationships and ordinary coursenon-preferential transactions, entered into with a related person, are not considered to be related party transactions and are not required to be disclosed or approved by the CG&N Committee. In 2014,2017, there were no related party transactions that required CG&N Committee approval or disclosure in this proxy statement.
| BNY Mellon | 2018 Proxy Statement | 85 |
| ADDITIONAL INFORMATION > Other Information |
In the ordinary course of business, we periodically have, and expect to continue to have, banking and other transactions, including asset management services, banking services, broker services and credit services, with related persons. Any loans to related persons, and any transactions involving financial products and services provided by the company to such persons and entities, are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral (where applicable), as those prevailing at the time for comparable transactions with persons and entities not related to the company, and do not involve more than the normal risk of collectability or present other unfavorable features.
Our related party transactions policy provides that the CG&N Committee may recommend to our Board from time to time adoption of resolutionspre-approving certain types or categories of transactions that the CG&N Committee determines in good faith are in, or are not inconsistent with, our best interests and the best interests of our stockholders. The Board has adopted a resolutionpre-approving transactions that involve the sale or other provision of products and services (not subject to Regulation O or other specific regulatory requirements) by our company or its subsidiaries to directors and members of their immediate family, director-related companies, and executive officers and members of their immediate family and beneficial owners of more than 5% of our common stock in the ordinary course and on terms generally offered in transactions withnon-related persons. Transactions subject to Regulation O or other specific regulatory requirements are approved as required in such regulations.
Under the related party transactions policy, in making its determination to approve a disclosable related party transaction, the CG&N Committee may take into consideration all relevant facts and circumstances available to it, including but not limited to:
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The CG&N Committee also may consider the impact on a director’s independence in the event the related person is a director or an immediate family member of a director or a director-related company.director.
Under the related party transactions policy, no member of the CG&N Committee may participate in the review, consideration, approval or ratification of any disclosable related party transaction with respect to which such member or any of his or her immediate family members or director-related company is the related person. The CG&N Committee may approve only those disclosable related party transactions that are in, or are not inconsistent with, our best interests and the best interests of our stockholders, as the CG&N Committee determines in good faith.
Under the related party transactions policy, if a disclosable related party transaction is identified after it is already ongoing or completed, it must be submitted to the CG&N Committee promptly for ratification, applying the standards described above. In this circumstance, the CG&N Committee will evaluate all options available, including ratification, amendment, termination or rescission of the transaction.
Our related party transactions policy does not limit or affect the application of our other policies applicable to our directors, executive officers and other related persons, including our Codes of Conduct.
How Our Board Solicits Proxies; Expenses of Solicitation
We will pay all costs of soliciting proxies. We have retained Georgeson, Inc. to assist with the solicitation of proxies for a fee of approximately $17,500, plus reimbursement of reasonableout-of-pocket expenses. In addition, we have agreed to pay Computershare Shareowner Services LLCBroadridge, our proxy distribution agent, a fee of approximately $45,000$46,600 plus reimbursement of reasonableout-of-pocket expenses in connection with project management and technical services relating toin connection with the distribution of this proxy statement and theour Annual Report to employees and former employees participating in employee benefit and stock option programs. In addition, weReport. We may also use our officers and employees, at no additional compensation, to solicit proxies either personally or by telephone, Internet, letter or facsimile.
| 86 | BNY Mellon | 2018 Proxy Statement |
| ADDITIONAL INFORMATION > Other Information |
To reduce the expense of delivering duplicate proxy materials to our stockholders, we are relying on SEC rules that permit us to deliver only one proxy statement to multiple stockholders who share an address unless we receive contrary instructions from any stockholder at that address. This practice, known as “householding,” reduces duplicate mailings, saves printing and postage costs
BNY Mellon 2015 Proxy Statement 73
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as well as natural resources and will not affect dividend check mailings. If you wish to receive a separate copy of the Annual Report or proxy statement, or if you wish to receive separate copies of future Annual Reports or proxy statements, please contact our transfer agent, Computershare Shareowner Services LLC,Annual Meeting provider, Broadridge, by phone at 1-800-729-9606 (U.S.) or 1-201-680-6651 (International)1-800-579-1639, by internet at www.proxyvote.com or by mailemail at Computershare Shareowner Services LLC, P.O. Box 3550, South Hackensack, New Jersey 07606-9250.sendmaterial@proxyvote.com. We will deliver the requested documents promptly upon your request.
If you and other stockholders of record with whom you share an address currently receive multiple copies of annual reports or proxy statements, or if you hold our stock in more than one account and, in either case, you wish to receive only a single copy of the Annual Report or proxy statement, please contact our transfer agent, Computershare Shareowner Services LLC, with the names in which all accounts are registered and the name of the account for which you wish to receive mailings.
As of the date of this proxy statement, we do not know of any other matters that may be presented for action at the meeting. Should any other business properly come before the meeting, the persons named on the enclosed proxy will, as stated therein, have discretionary authority to vote the shares represented by such proxy in accordance with their best judgment.
March 9, 2018
By Order of the Board of Directors,
Craig T. Beazer
Corporate Secretary
BNY Mellon 2015 Proxy Statement 74
| BNY Mellon |
| 2018 Proxy Statement | 87 |
| ADDITIONAL INFORMATION | >Helpful Resources | |
Annual Meeting
2017 Annual Meeting Voting Results | https://www.bnymellon.com/us/en/investor-relations/ | |
Corporate Governance
| By-laws | https://www.bnymellon.com/_global-assets/pdf/corporate-governance/the-bank-of-new-york-mellon-corporation-amended-and-restated-by-laws.pdf | ||
| Committee Charters | https://www.bnymellon.com/us/en/investor-relations/ | ||
| Corporate Governance Guidelines | https://www.bnymellon.com/ | ||
| Contacting the Board | https://www.bnymellon.com/us/en/investor-relations/ | ||
| Code of Conduct | https://www.bnymellon.com/ethics/codeofconduct.pdf | ||
| Directors’ Code of Conduct | https://www.bnymellon.com/governance/directorscodeofconduct.pdf | ||
| Audit and PermittedNon-Audit ServicesPre-Approval Policy | https://www.bnymellon.com/governance/auditpolicy.pdf | ||
The Bank of New York Mellon Corporation
| Corporate Website | https://www.bnymellon.com | |
| SEC Filings | ||
Corporate Social Responsibility Report | https://www.bnymellon.com/csr | |
| Frequently Asked Questions | https://www.bnymellon.com/us/en/investor-relations/ | |
| Company Profile | https://www.bnymellon.com/us/en/who-we-are/index.jsp | |
| Our Leadership | https://www.bnymellon.com/us/en/who-we-are/leadership/index.jsp | |
| Earnings | https://www.bnymellon.com/us/en/investor-relations/ | |
| Credit Ratings | https://www.bnymellon.com/us/en/investor-relations/ | |
BNY Mellon 2015 Proxy Statement 75
| 88 | BNY Mellon | 2018 Proxy Statement |
| ANNEX A: NON-GAAP RECONCILIATION | ||
Reconciliation of net income and diluted EPS
The following table reconciles our net income and diluted earnings per common share reportedshare. These measures exclude the effects of certain items, as specified in the table. We believe that these measures are useful to investors because they permit a focus on a GAAP basis withperiod-to-period comparisons, which relate to the net incomeability of BNY Mellon to enhance revenues and diluted earnings per common share reported on an operating basis.limit expenses in circumstances where such matters are within BNY Mellon’s control.
Net Income
| Diluted EPS
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2016
| 2017
| 2016
| 2017
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Net income available to common — reported
| $3,425
| $3,915
| $3.15
| $3.72
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Add: Net impact of merger and integration (“M&I”), litigation and restructuring charges as well as 4th quarter 2017 severance and other charges | 33
| 267
| 0.03
| 0.26
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Net recovery related to Sentinel Management Group, Inc. (“Sentinel”) — After tax | (8)
| —
| (0.01)
| —
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Net benefit related to the Tax Cuts and Jobs Act of 2017 (“U.S. tax legislation”) | —
| (427)
| —
| (0.41)
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Net income available to common — operating
| $3,450
| $3,755
| $3.17
| $3.57
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Reconciliation of net incomeEstimated transitional and diluted EPS – GAAP to Non-GAAPfully phased-in CET1 ratio
| 2014 | ||||||||
| (in millions, except per common share amounts) | Net Income | Diluted EPS | ||||||
Net income applicable to common shareholders of the Bank of New York Mellon Corporation – GAAP | $ | 2,494 | $ | 2.15 | ||||
Less: Gain on the sale of our investment in Wing Hang Bank Ltd. | 315 | 0.27 | ||||||
Gain on the sale of the One Wall Street building | 204 | 0.18 | ||||||
Benefit primarily related to a tax carryback claim | 150 | 0.13 | ||||||
Add: Litigation and restructuring charges | 860 | 0.74 | ||||||
Charge related to investment management funds, net of incentives | 81 | 0.07 | ||||||
Net income applicable to common shareholders of the Bank of New York Mellon Corporation, on an operating basis – Non-GAAP | $ | 2,766 | $ | 2.39 | (a) | |||
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The following table presents the reconciliation of our estimated fullyphased-in Basel III CET1 common equity Tier 1 (“CET1”) ratio under the AdvancedStandardized Approach. We believe that the CET1 ratio on a fullyphased-in basis is a measure of capital strength that provides useful information to investors, supplementing the capital ratios which are, or were, required by regulatory authorities.
Dec. 31, 2017
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(dollars in millions)
| Transitional (GAAP)(a)
| Fully phased-in (Non-GAAP)
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Common stockholders’ equity
| $37,859
| $37,709
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Goodwill and intangible assets
| (18,684)
| (19,223)
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Net pension fund assets
| (169)
| (211)
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Equity method investments
| (372)
| (387)
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Deferred tax assets
| (33)
| (41)
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Other
| (8)
| (9)
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Total CET1
| $18,593
| $17,838
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Risk-weighted assets
| $155,621
| $155,324
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CET1 ratio
| 11.9%
| 11.5%
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| (a) | Reflects transitional adjustments to CET1 required under the U.S. capital rules. |
| BNY Mellon | 2018 Proxy Statement | 89 |
Estimated fully phased-in Basel III CET1 ratio – Non-GAAP
| (dollars in millions) | Dec. 31, 2014 | |||
Total Tier 1 capital(a) | $ | 20,502 | ||
Adjustments to determine estimated fully-phased-in Basel III CET1: | ||||
Intangible deduction | (2,329 | ) | ||
Preferred stock | (1,562 | ) | ||
Trust preferred securities | (156 | ) | ||
Other comprehensive (loss) and net pension fund assets: | ||||
Securities available-for-sale | 594 | |||
Pension liabilities | (1,041 | ) | ||
Total other comprehensive (loss) and net pension fund assets | (447 | ) | ||
Equity method investments | (87 | ) | ||
Other | 10 | |||
Total estimated fully phased-in Basel III CET1 – Non-GAAP | $ | 15,931 | ||
Estimated fully-phased-in Basel III risk-weighted assets – Non-GAAP | $ | 162,263 | ||
Estimated fully phased-in Basel III CET1 ratio – Non-GAAP(b) | 9.8% | |||
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BNY Mellon 2015 Proxy Statement 76
Corporate Social Responsibility
Invested in Market Integrity
Stable, well-functioning markets help communities around the world grow and thrive. As a major global financial institution, we have a critical role to play in contributing to market integrity. We continually innovate to make our business stronger, more efficient and more responsible.
Invested in Our People
A company is as good as its people. Among our global workforce, over 50,000 strong, are some of the sharpest minds and most innovative professionals in the investment industry. We start with a diverse and inclusive range of individuals and then invest in their talents to their fullest potential.
Invested in Our World
Invested in the world means to be invested in our individual communities all around the world. With our vast global scope and operations in over 100 markets, BNY Mellon is an integral part of many communities. Our commitment to human rights, the environment and overall community well-being is an essential part of who we are and how we do business.
Cut here
Reservation Form for The Bank of New York Mellon Corporation Annual Meeting of Stockholders
Stockholders who expect to attend the Annual Meeting at 9:00 a.m. on April 14, 2015 at 101 Barclay Street in New York, NY should complete this form and return it to the Office of the Corporate Secretary, The Bank of New York Mellon Corporation, One Wall Street, New York, NY 10286. Admission cards will be provided at the check-in desk at the meeting (please be prepared to show proof of identification).Stockholders holding stock in brokerage accounts will need to bring a copy of a brokerage statement reflecting The Bank of New York Mellon Corporation stock ownership as of the record date, which is February 13, 2015
| BNY Mellon | 2018 Proxy Statement |
BNY MELLON
The Bank of New York Mellon Corporation
One Wall225 Liberty Street
New York, NY 10286
+1 212 495 1784
www.bnymellon.com
Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 8 AM Eastern Time, on April 14, 2015.
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Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
Follow the instructions provided by the recorded message
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THE BANK OF NEW YORK MELLON CORPORATION 225 LIBERTY STREET NEW YORK, NY 10286 ATTN: CRAIG BEAZER | VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Follow the instructions to obtain your records and to create an electronic voting instruction form. | ||||
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | |||||
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and | then follow the instructions. | ||||
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | |||||
SHAREHOLDER MEETING REGISTRATION To vote and/or attend the meeting, go to the “Register for Meeting” link atwww.proxyvote.com. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
| E36237-P01730-Z71711-Z71922 KEEP THIS PORTION FOR YOUR RECORDS | ||||
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
| THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY | ||||
THE BANK OF NEW YORK MELLON CORPORATION | | |||||||||||||||||||||||||||||||||||
The Board of Directors recommends a vote FOR all nominees for director, FOR Proxy Item 2, FOR Proxy Item 3, AGAINST Proxy Item 4, and AGAINST Proxy Item 5. | ||||||||||||||||||||||||||||||||||||
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| Nominees: | For | Against | Abstain | ||||||||||||||||||||||||||||||||||||||
1a. Steven D. Black | ☐ | ☐ | ☐ | For | Against | Abstain | |||||||||||||||||||||||||||||||||||
1b. Linda Z. Cook | ☐ | ☐ | ☐ | 2. | Advisory resolution to approve the | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||
1c. Joseph J. Echevarria | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||||||||
1d. Edward P. Garden | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||||||||||||
1e. Jeffrey A. Goldstein | ☐ | ☐ | ☐ | 3. | Ratification of KPMG LLP as our independent auditor for | ☐ | |||||||||||||||||||||||||||||||||||
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1f. John M. Hinshaw | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||
1g. Edmund F. Kelly | ☐ | ☐ | ☐ | 4. | Stockholder proposal regarding written consent. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||
1h. Jennifer B. Morgan | ☐ | ☐ | ☐ | 5. | Stockholder proposal regarding a proxy voting review report. | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||||
1i. Mark A. Nordenberg | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||
1j. Elizabeth E. Robinson | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||
1k. Charles W. Scharf | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||
1l. Samuel C. Scott III | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||
| Note:Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. | ||||||||||||||||||||||||||||||||||||
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Signature [PLEASE SIGN WITHIN BOX] | ||||||||||||||||||||||||||||||||||||
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Proxy Statement and the 2017 Annual Report to Shareholders are available at www.proxyvote.com.
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E36238-P01730-Z71711-Z71922 Proxy — THE BANK OF NEW YORK MELLON CORPORATION
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION
The undersigned hereby appoints Craig T. Beazer, Bennett E. Josselsohn and
Participants in the 401(k), ESOP, Deferred Share Award and/or Deferred Compensation Plans:Your vote will provide voting instructions to the trustee of the plan to vote the proportionate interest as of the record date. If no instructions are given by the vote cut-off date of April 5, 2018 at 11:59 EDT, the trustee will vote, subject to review by the voting fiduciary, unvoted shares in the same proportion as voted shares. Consequently, a failure to sign and return a ballot is not equivalent to voting with respect to any of the propositions on the ballot. Participants in the UK Stock Accumulation Plan (“SAP”):If voting instructions are properly provided, shares will be voted in accordance with those instructions. If you properly sign and return the attached ballot but fail to provide a specific voting direction for a particular proposition on the ballot, then any shares you hold in the SAP will be voted in accordance with the recommendation of the Board of Directors on such proposition. If you do not properly sign and return the ballot or provide instructions by telephone or Internet, then for shares held in the SAP, no vote will be recorded. Consequently, a failure to provide instructions is not equivalent to voting with respect to any proposition on the ballot. This
(Continued and to be marked, dated and signed, on the |
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