UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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☑ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material under §240.14a-12 |
THE PNC FINANCIAL SERVICES GROUP, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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2017 PROXY STATEMENT THE PNC FINANCIAL SERVICES GROUP Together, We Prosper
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Dear Shareholder,
We invite you to attend the 20172018 Annual Meeting of Shareholders of The PNC Financial Services Group, Inc. on Tuesday, April 25, 2017.24, 2018.
The meeting will be held in Pittsburgh, Pennsylvania in the James E. Rohr Auditorium in The Tower at PNC Plaza, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222, beginning at 11:00 a.m., Eastern time. Time.
We will consider the matters described in this proxy statement and also review significant developments since last year’s annual meeting of shareholders.
We are again making our proxy materials available to you electronically. We hope that this continues to offer you convenience while allowing us to reduce the number of copies that we print.
The proxy statement contains important information and you should read it carefully. Even if you plan to attend the meeting in person,Your vote is important and we strongly encourage you to designatevote your shares using one of the proxies named onvoting methods described in the proxy card to vote your shares. statement. Please see the notice that follows for more information.
If you will not be thereare unable to attend the meeting in person, you will be able to listen to the meeting by webcast or conference call. Please see the notice that follows for more information.
We look forward to your participation and thank you for your support of PNC.
March | Sincerely, |
William S. Demchak
Chairman, President and Chief Executive Officer
PARTICIPATE IN THE FUTURE OF PNC – PLEASE CAST YOUR VOTE
Your vote is important to us and we want your shares to be represented at the annual meeting. Please cast your vote on the proposals listed below.
Under New York Stock Exchange (NYSE) rules, if you hold your shares through a broker, bank, or other nominee (“street(referred to as holding your shares in “street name”), and you do not provide any voting instructions, your broker has discretionary authority to vote on your behalf for itemswith respect to proposals that are considered “routine”. items. The only routine item on this year’s ballot is the ratification of our auditor selection.If an item isnon-routine and you do not provide voting instructions, no vote will be cast on your behalf.behalf with respect to that item.
Proposals requiring your vote
More information | Board recommendation | Routine item? | ||||||
Item 1 | Election of | Page 11 | FOR each nominee | No | ||||
Item 2 |
Ratification of independent registered public accounting firm for |
Page |
FOR |
Yes | ||||
Item 3 |
Advisory approval of the compensation of PNC’s named executive officers(say-on-pay) |
Page |
FOR |
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No |
With respect to each item, a majority of the votes cast will be required for approval. Abstentions will not be included in the total votes cast and will not affect the results.
Vote your shares
Please read thisthe proxy statement with care and vote right away. We offer a number of ways for you to vote your shares. We include votingVoting instructions are included in the Notice of Internet Availability of Proxy Materials and the proxy card. If you hold shares in street name, you will receive information on how to give voting instructions to your broker, bank, or bank.other nominee. For registered holders, we offer the following methods to vote your shares and give us your proxy:
www.envisionreports.com/PNC | Follow the instructions on the proxy card. | Complete, sign and date the proxy card and return it in the envelope provided. |
Attend our 20172018 Annual Meeting of Shareholders
Directions to attend the annual meeting | Tuesday, April | |
are available at | The Tower at PNC Plaza – James E. Rohr Auditorium | |
www.pnc.com/annualmeeting | 300 Fifth Avenue | |
Pittsburgh, Pennsylvania 15222 |
4 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
PROXY STATEMENT SUMMARY
Proxy Statement Summary
To assist you in reviewing the proposals to be acted upon at the annual meeting, we have included a summary of certain relevant information. This summary does not contain all of the information that you should consider, and youconsider. You should review ourthe entire proxy statement and the 20162017 Annual Report before you vote.
You may also read ourthe proxy statement and 2016the 2017 Annual Report at www.envisionreports.com/PNC.
Who can vote (page 89)90)
You are entitled to vote if you were a PNC shareholder on the record date of February 3, 2017.2, 2018.
How to voteVoting methods (page 90)91)
We offer our shareholders a number of ways to vote, including by Internet, telephone, or mail. Shareholders may also vote in person at the annual meeting.
Voting mattersItems of business
Item 1: Election of 1312 nominated directors (page 11)
Item 2: Ratification of independent registered public accounting firm for 20172018 (page 80)84)
Item 3: “Say-on-pay” (page 83)87)
Item 4: Frequency of “say-on-pay” (page 85)
Item 5: Shareholder proposal requesting additional diversity disclosure (page 86)
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 5
PROXY STATEMENT SUMMARY
20162017 PNC performance (page 38)39)
We | ||
We grew | ||
We delivered value for our shareholders. | ||
| We | |
We also continued to execute | ||
| We returned |
20162017 compensation decisions (page 46)44)
The table below shows, for each named executive officer, the incentive compensation target for 20162017 and the actual annual cash incentive and long-term equity-based incentives awarded in 20172018 for 20162017 performance.
William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III | Steven C. Van Wyk | William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III | Steven C. Van Wyk | |||||||||||||||||||||||||||||||
Incentive compensation target | $ | 10,500,000 | $ | 3,000,000 | $ | 6,050,000 | $ | 6,900,000 | $ | 2,750,000 | $ | 10,500,000 | $ | 3,250,000 | $ | 6,050,000 | $ | 6,900,000 | (1) | $ | 2,750,000 | |||||||||||||||||||
Incentive compensation awarded for 2016 performance | $ | 10,150,000 | $ | 3,050,000 | $ | 5,900,000 | $ | 6,600,000 | $ | 2,660,000 | ||||||||||||||||||||||||||||||
Incentive compensation awarded for 2017 performance | $ | 14,700,000 | $ | 4,225,000 | $ | 7,800,000 | $ | 8,900,000 | $ | 3,300,000 | ||||||||||||||||||||||||||||||
Annual cash incentive portion | $ | 3,400,000 | $ | 1,275,000 | $ | 1,940,000 | $ | 2,250,000 | $ | 1,080,000 | $ | 5,220,000 | $ | 1,862,500 | $ | 2,700,000 | $ | 3,200,000 | $ | 1,400,000 | ||||||||||||||||||||
Long-term incentive portion | $ | 6,750,000 | $ | 1,775,000 | $ | 3,960,000 | $ | 4,350,000 | (1) | $ | 1,580,000 | $ | 9,480,000 | $ | 2,362,500 | $ | 5,100,000 | $ | 5,700,000 | $ | 1,900,000 | |||||||||||||||||||
Incentive compensation disclosed in the Summary compensation table(2) | $ | 11,200,000 | $ | 3,175,000 | $ | 6,020,000 | $ | 7,050,000 | $ | 2,680,000 | $ | 11,970,000 | $ | 3,637,500 | $ | 6,660,000 | $ | 7,550,000 | $ | 2,980,000 | ||||||||||||||||||||
Annual cash incentive portion (2016 performance) | $ | 3,400,000 | $ | 1,275,000 | $ | 1,940,000 | $ | 2,250,000 | $ | 1,080,000 | ||||||||||||||||||||||||||||||
Long-term incentive portion (2015 performance) | $ | 7,800,000 | $ | 1,900,000 | $ | 4,080,000 | $ | 4,800,000 | $ | 1,600,000 | ||||||||||||||||||||||||||||||
Annual cash incentive portion (2017 performance) | $ | 5,220,000 | $ | 1,862,500 | $ | 2,700,000 | $ | 3,200,000 | $ | 1,400,000 | ||||||||||||||||||||||||||||||
Long-term incentive portion (2016 performance) | $ | 6,750,000 | $ | 1,775,000 | $ | 3,960,000 | $ | 4,350,000 | (1) | $ | 1,580,000 |
(1) | The long-term incentive award that Mr. |
(2) | Due to SEC regulations, the incentive compensation amounts disclosed in the Summary compensation table on page |
PNC corporate governance (page 17)
6 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
PROXY STATEMENT SUMMARY
–
– | Audit Committee |
– | Personnel and Compensation Committee (Compensation) |
– | Nominating and Governance Committee (Governance) |
– | Risk Committee |
��
• | You can find additional information about our governance policies and principles atwww.pnc.com/corporategovernance. |
Board nominees (page 11)
Name | Age | Director since | Independent | Primary Standing Committee Memberships | ||||
Charles E. Bunch | 67 | 2007 | ☑ | Compensation; Governance | ||||
Marjorie Rodgers Cheshire | 48 | 2014 | ☑ | Audit; Risk | ||||
William S. Demchak | 54 | 2013 | ☐ | Risk | ||||
Andrew T. Feldstein | 52 | 2013 | ☑ | Compensation; Risk (Chair) | ||||
Daniel R. Hesse | 63 | 2016 | ☑ | Risk | ||||
Kay Coles James | 67 | 2006 | ☑ | Governance; Risk | ||||
Richard B. Kelson | 70 | 2002 | ☑ | Audit (Chair); Compensation | ||||
Jane G. Pepper | 71 | 1997 | ☑ | Risk | ||||
Donald J. Shepard | 70 | 2007 | ☑ | Audit; Governance (Chair); Risk | ||||
Lorene K. Steffes | 71 | 2000 | ☑ | Risk | ||||
Dennis F. Strigl | 70 | 2001 | ☑ | Compensation (Chair); Governance | ||||
Michael J. Ward | 66 | 2016 | ☑ | Compensation; Governance | ||||
Gregory D. Wasson | 58 | 2015 | ☑ | Audit |
Name | Age | Director since | Independent | Primary Standing Board Committee Memberships | ||||
Charles E. Bunch | 68 | 2007 | ☑ | Compensation; Governance | ||||
Debra A. Cafaro | 60 | 2017 | ☑ | Audit | ||||
Marjorie Rodgers Cheshire | 49 | 2014 | ☑ | Audit; Risk | ||||
William S. Demchak | 55 | 2013 | ☐ | Risk | ||||
Andrew T. Feldstein | 53 | 2013 | ☑ | Compensation; Risk (Chair) | ||||
Daniel R. Hesse | 64 | 2016 | ☑ | Risk | ||||
Richard B. Kelson | 71 | 2002 | ☑ | Audit (Chair); Compensation | ||||
Linda R. Medler | 61 | 2018 | ☑ | Risk | ||||
Martin Pfinsgraff | 63 | 2018 | ☑ | Audit; Risk | ||||
Donald J. Shepard | 71 | 2007 | ☑ | Audit; Governance (Chair); Risk | ||||
Michael J. Ward | 67 | 2016 | ☑ | Compensation; Governance | ||||
Gregory D. Wasson | 59 | 2015 | ☑ | Audit |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 7
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS | 10 | |||
ELECTION OF DIRECTORS (ITEM 1) | 11 | |||
CORPORATE GOVERNANCE | 17 | |||
17 | ||||
17 | ||||
17 | ||||
19 | ||||
19 | ||||
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS | ||||
RELATED PERSON TRANSACTIONS | ||||
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | ||||
DIRECTOR COMPENSATION | ||||
COMPENSATION DISCUSSION AND ANALYSIS | ||||
Stakeholder engagement and impact of | ||||
44 | ||||
49 | ||||
COMPENSATION COMMITTEE REPORT | ||||
COMPENSATION AND RISK | ||||
8 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 9
of Shareholders
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Tuesday, April 25, 201724, 2018
11:00 a.m. (Eastern time)Time)
The Tower at PNC Plaza – James E. Rohr Auditorium, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222
WEBCAST
A listen-only webcast of ourthe annual meeting will be available atwww.pnc.com/annualmeeting. An archive of the webcast will be available on our website for thirty30 days.
CONFERENCE CALL
You may access the listen-only conference call of the annual meeting by calling 877-272-3498877-272-3515 or 303-223-4384303-223-4381 (international). A telephone replay will be available for one week by calling800-633-8284 or402-977-9140 (international), conference ID 21843204.21881374.
ITEMS OF BUSINESS
1. |
2. |
3. |
An advisory vote to approve the |
Such other business as may properly come before the meeting. |
RECORD DATE
The close of business on February 3, 20172, 2018 is the record date for determining shareholders entitled to receive notice of and to vote at the annual meeting and any adjournment.
MATERIALS TO REVIEW
We began providing access to thisthe proxy statement and a form of proxy card on March 15, 2017.13, 2018. We have made our proxy materials available electronically. Certain shareholders will receive a noticeNotice of Internet Availability of Proxy Materials explaining how to access our proxy materials and vote. Other shareholders will receive a paper copy of thisthe proxy statement and a proxy card.
PROXY VOTING
Even if you plan to attend the annual meeting in person, we encourage you to cast your vote over the Internet, or if you have a proxy card, by mailing the completed proxy card or by telephone. This Notice of Annual Meeting and Proxy Statement and our 20162017 Annual Report are available atwww.envisionreports.com/PNC.PNC.
ADMISSION
To be admitted to ourthe annual meeting, you must present proof of your stock ownership as of the record date and valid photo identification. Each shareholder may bring one guest who must present valid photo identification. Please follow the admission procedures described beginning on page 8889 of thisthe proxy statement.
March By Order of the Board of Directors, |
Christi Davis
Corporate Secretary
10 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
ELECTION OF DIRECTORS (ITEM 1)
Our Board of Directors (the Board) determines the number of directors to nominate for election.election to the Board. OurBy-laws contemplate a Board that rangesrange in the size of the Board from five to 36 directors. For thisthe annual meeting, ourthe Board fixed the number of directors to be elected at 13.12.
On August 10, 2017, the Board appointed Debra A. Cafaro to serve as a director. Ms. Cafaro was initially recommended as a director candidate by our CEO. On January 4, 2018, the Board appointed Linda R. Medler and Martin Pfinsgraff to serve as directors. Ms. Medler was initially recommended as a director candidate by our Presiding Director and Mr. Pfinsgraff was initially recommended as a director candidate by our CEO. Each of the candidates initially recommended by our CEO was reviewed with our Presiding Director, as Chair of the Nominating and Governance Committee. The Presiding Director concurred with each recommendation before the candidate, along with a pool of potential candidates provided by a third-party search firm, was evaluated by the Nominating and Governance Committee, and each candidate ultimately recommended for appointment by the Committee was reviewed by the Board. Each of Ms. Cafaro, Ms. Medler and Mr. Pfinsgraff are included as nominees for election to the Board at the annual meeting.
Each of the 1312 nominees currently serves on ourthe Board. Beginning on page 12, we include the following information for ourregarding the nominees:
The directors elected at the annual meeting will serve for one year, unless they leave the Board early. We do not stagger our elections—the entire Board will be considered for election at the 2017
annual meeting. If elected, each nominee will hold office until the next annual meeting of our shareholders, and until the election and qualification of his or her successor.
Each nominee consents to being named in this proxy statement and to serve if elected. OurThe Board has no reason to believe that any nominee will be unavailable or unable to serve as a director.
In addition to information onregarding the background and qualifications of each director,nominee, this proxy statement contains other important information related to your evaluation of our nominees. We discuss:the nominees, including:
See the following sections for more details on these topics:
If you sign, date and return your proxy card but do not give voting instructions, or if you do not provide voting instructions when voting over the Internet, we will vote your shares FOR all of the nominees namedlisted on pages 12 to 16. See page 9192 for information regarding the vote required for election of the nominees as directors.director nominees.
The Board of Directors recommends a vote FOR each of the nominees listed on pages 12 to 16.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 11
ELECTION OF DIRECTORS (ITEM 1)
Charles E. Bunch
Age 68
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Director Since 2007
Experience, Qualifications, Attributes, or Skills
Charles E. Bunch is the retired Executive Chairman and former Chief Executive Officer of PPG Industries, Inc., a Pittsburgh-based global supplier of paints, coatings, optical products, specialty materials, chemicals, glass and fiberglass.
Mr. Bunch received an undergraduate degree from Georgetown University and an MBA from the Harvard Business School.
Mr. Bunch’s service as a public company CEO, his extensive management and finance experience, and his involvement in the Pittsburgh community add significant value to ourthe Board. In addition, Mr. Bunch brings regulatory and banking industry experience to ourthe Board as he formerly served as a Director and the Chairman of the Federal Reserve Bank of Cleveland, our principal banking regulator.
PNC Board Committee Memberships
Nominating and Governance Committee
Personnel and Compensation Committee
Public Company Directorships
ConocoPhillips
H.J. Heinz Company (until June 2013)
Marathon Petroleum Corporation
Mondelēz International, Inc.
PPG Industries, Inc. (until September 2016)
Debra A. Cafaro
Age 60
Director Since 2017
Experience, Qualifications, Attributes, or Skills
Debra A. Cafaro is Chairman of the Board and Chief Executive Officer of Ventas, Inc., an S&P 500 company that is a leading owner of seniors housing, healthcare, and research properties.
Building on an early career in law and her19-year tenure at Ventas, Ms. Cafaro is broadly engaged across business, public policy, andnon-profit sectors. She is Chair elect of the Real Estate Roundtable, is a member of the Business Council, and serves on the boards of the Economic and Executives’ Clubs of Chicago, University of Chicago, Chicago Infrastructure Trust, Chicago Symphony Orchestra, World Business Chicago and the management committee of the Pittsburgh Penguins.
Ms. Cafaro received a JD cum laude in 1982 from the University of Chicago Law School and a BA magna cum laude from the University of Notre Dame in 1979.
The Board values Ms. Cafaro’s extensive corporate leadership, knowledge, and experience. Her years of experience as a public company CEO in the financial sector provide insight into the oversight of financial and accounting matters. Her vision as a strategic thinker adds depth and strength to the Board in its oversight of PNC’s continued growth. The Board also values Ms. Cafaro’s active involvement in the Chicago and Pittsburgh communities.
PNC Board Committee Memberships
Audit Committee
Public Company Directorships
Ventas, Inc.
Weyerhaeuser Company (until February 2016)
Marjorie Rodgers Cheshire Age 49 Director Since 2014 Experience, Qualifications, Attributes, or Skills Marjorie Rodgers Cheshire is President and Chief Operating Officer of A&R Development Corp. A&R is |
Corp., a diversified real estate development organization focused on the Baltimore and Washington markets. A&R’s portfolio includes residential, commercial, andmixed-use developments, ranging in value from $1 million to $152 million,million. In its history, A&R has developed 50 projects with an aggregate value of more than $900 million.
Prior to joining A&R, Ms. Cheshire spent many years in the media and sports industries. Her most recent position was as Senior Director of Brand & Consumer Marketing for the National Football League. Prior to that, Ms. Cheshire held positions as Vice President of Business Development for Oxygen Media, Director and Special Assistant to the Chairman & CEO of ESPN, and Manager of Strategic Marketing for ABC Daytime. Ms. Cheshire also worked as a consultant with The Boston Consulting Group, a strategic consulting firm serving Fortune 500 companies.
Ms. Cheshire hasreceived a BS in Economics from the Wharton School of the University of Pennsylvania and an MBA from the Stanford University Graduate School of Business. She is a Trustee of Baltimore Equitable Insurance, Baltimore School for the Arts, Johns Hopkins Bayview Medical Center, and Johns Hopkins Hospital.
OurThe Board values Ms. Cheshire’s executive management experience and her background in real estate, marketing, and media, as well as her involvement in the Baltimore community and her familiarity with this important market for PNC.
PNC Board Committee Memberships
Audit Committee
Risk Committee
Special Compliance CommitteeSubcommittee (Chair)
Public Company Directorships
None
12 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
ELECTION OF DIRECTORS (ITEM 1)
William S. Demchak
Age 55
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Director Since 2013
Experience, Qualifications, Attributes, or Skills
William S. Demchak is Chairman, President and Chief Executive Officer of The PNC Financial Services Group, Inc., one of the largest diversified financial services companies in the United States. Mr. Demchak joined PNC in 2002 as chief financial officer. In July 2005, he was named head of PNC’s Corporate & Institutional Banking segment responsible for PNC’s middle market and large corporate businesses, as well as capital markets, real estate finance, equity management, and leasing. Mr. Demchak was promoted to senior vice chairman in 2009, named head of PNC businesses in August 2010, elected president in April 2012 and chief executive officer in April 2013, and appointed chairman in April 2014.
Before joining PNC in 2002, Mr. Demchak served as the Global Head of Structured Finance and Credit Portfolio for JPMorgan Chase. He also held key leadership roles at JPMorgan prior to its merger with the Chase Manhattan Corporation in 2000. He was actively involved in developing JPMorgan’s strategic agenda and was a member of the company’s capital and credit risk committees.
Mr. Demchak is a director of BlackRock, Inc. He is a member of the Board of The Financial Services Roundtable. In addition, he serves on the boards of directors of the Extra Mile Education Foundation and the YMCA of Pittsburgh. He is Vice-ChairChairman of the Allegheny Conference on Community Development, Chairman of The Clearing House, and a member of the Board of the Pittsburgh Cultural Trust.Trust, and a member of The Business Council. Mr. Demchak also is the Chair of the Advisory Committee of Envision Downtown.
Mr. Demchak received a Bachelor of Science degreeBS from Allegheny College and earned an MBA with an emphasis in accounting from the University of Michigan.
The Board believes that the current CEO should also serve as a director. Under the leadership structure discussed elsewhere in this proxy statement, aCEO-director acts as a liaison between directors and management, and assists the Board in its oversight of the company. Mr. Demchak’s experiences and strong leadership provide ourthe Board with insight into the business and strategic priorities of PNC.
PNC Board Committee Memberships
Executive Committee
Risk Committee
Public Company Directorships
BlackRock, Inc.
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Andrew T. Feldstein
Age 53
Director Since 2013
Experience, Qualifications, Attributes, or Skills
Andrew T. Feldstein is the Chief Executive Officer and Chief Investment Officer of BlueMountain Capital Management, a leading alternative asset manager with $22$20 billion in assets under management and approximately 238245 professionals worldwide. Mr. Feldstein is the Chair of the firm’s Management Committee and a member of the Investment and Risk Committees.
Prior toco-founding BlueMountain in 2003, Mr. Feldstein spent over a decade at JPMorgan where he was a Managing Director and served as Head of Structured Credit; Head of High Yield Sales, Trading and Research; and Head of Global Credit Portfolio. Mr. Feldstein is a Trustee of Third Way, a public policy think tank; a Trustee of the Santa Fe Institute, an independent research and education center; and a member of the Harvard Law School Leadership Council.
Mr. Feldstein received an undergraduate degreea BA from Georgetown University and a JD from Harvard Law School.
OurThe Board values Mr. Feldstein’s extensive financial and risk management expertise. As founder and CEO of BlueMountain Capital and through his senior management positions at JPMorgan, Mr. Feldstein has built a reputation for innovation and significant insight into risk management. The boardBoard believes that these skills are particularly valuable to its effective oversight of risk management and will also be a valuable resource to PNC as it continues to grow its business and strengthen its balance sheet.
PNC Board Committee Memberships
Executive Committee
Personnel and Compensation Committee
Risk Committee (Chair)
TechnologyCompliance Subcommittee
Public Company Directorships
None
Daniel R. Hesse
Age 64 Director Since 2016 Experience, Qualifications, Attributes, or Skills Daniel R. Hesse is the former President and Chief Executive Officer of Sprint Corporation, one of the United States’ largest wireless carriers. |
Mr. Hesse received a bachelor’s degreeBA from the University of Notre Dame, an MBA from Cornell University, and aan MS from Massachusetts Institute of Technology where he was awarded the Brooks Thesis prize.Prize.
Mr. Hesse brings extensive corporate leadership experience to ourthe Board, having served in a variety of executive positions, including as CEO of Sprint Corporation. His years of experience in the wireless communications industry provide insight into the dynamic and strategic issues overseen by the Board. The broad spectrum of technological issues in this industry give him a strong understanding to assist the Board in its oversight of technological issues.
PNC Board Committee Memberships
Risk Committee
Technology Subcommittee
Public Company Directorships
Akamai Technologies, Inc.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 13
ELECTION OF DIRECTORS (ITEM 1)
Richard B. Kelson
Age 71
Director Since 2002 Experience, Qualifications, Attributes, or Skills Richard B. Kelson is the Chairman, President and Chief Executive Officer of ServCo, LLC, a |
African-American community.
From 2001 to 2005, she served as director of the U.S. Office of Personnel Management, where she was President George W. Bush’s principal human resources advisor.
She has also provided consulting services as a former Senior Partner in The J.C. Watts Companies.
Ms. James received an undergraduate degree from Hampton University.
Having supervised the management of thousands of federal employees, Ms. James understands large-scale human resources operations. Our Board values these senior-level federal government and regulatory experiences, Ms. James’ experience as former Chair of the Nominating and Governance Committee and the Compensation Committee at AMERIGROUP Corporation, and her leadership of a non-profit organization in the Greater Washington, D.C. area, a significant market for PNC.
PNC Board Committee Memberships
Nominating and Governance Committee
Risk Committee
Public Company Directorships
AMERIGROUP Corporation (until 2012)
Magellan Health, Inc.
|
strategic sourcing and supply chain management company. He has also served as an Operating Advisor with Pegasus Capital Advisors, L.P., a private equity fund manager.
Mr. Kelson retired in 2006 as Chairman’s Counsel for Alcoa, a leader in the production and management of primary aluminum, fabricated aluminum, and alumina. At Alcoa, he served as a member of the executive council, the senior leadership group for the company. From 1994 to 1997, Mr. Kelson served as Alcoa’s General Counsel. From 1997 through 2005, he served as Alcoa’s Chief Financial Officer.
Mr. Kelson received an undergraduate degreea BA from the University of Pennsylvania, and a law degreeJD from the University of Pittsburgh.
Mr. Kelson’s service as a public company CFO and his designation as an “audit committee financial expert” assist the Board and Audit Committee with the oversight of financial and accounting issues. His financial background provides strong leadership of our Audit Committee as its Chair. The Board also values Mr. Kelson’s executive management experience and his background as a public company general counsel, although he does not serve in a legal capacity or provide legal advice to PNC or ourthe Board.
PNC Board Committee Memberships
Audit Committee (Chair)
Executive Committee
Personnel and Compensation Committee
Special Compliance CommitteeSubcommittee
Public Company Directorships
ANADIGICS, Inc. (until March 2016)
Commercial Metals Company (Lead Director)
Ingevity Corporation (Non-Executive(Non-Executive Chairman of Board)
MeadWestvaco Corp. (until July 2015)
Linda R. Medler
Age 61
Director Since 2018
Experience, Qualifications, Attributes, or Skills
Linda R. Medler, Brigadier General, United States Air Force (Retired), is Founder, President and CEO of L A Medler & Associates, LLC, providing cyber strategy consulting services to commercial clients and numerous U.S. Department of Defense customers. Ms. Medler served as the Chief Information Security Officer and Director of IT Security of Raytheon Missile Systems, a major business unit of Raytheon Company, in December 2017. Raytheon Company is a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. She was Director of Cyber for the Advanced Missile Systems Product Line of Raytheon Missile Systems from June 2015 to December 2016.
In 2014, she completed 30 years of total military service, including 27 years of service in the U.S. Air Force, retiring as a Brigadier General. She began her military service as an enlisted U.S. Marine. Her last position held was Director of Capability and Resource Integration for the United States Cyber Command. Her previous assignments included Director of Communications and Networks for the Joint Staff, Joint Chiefs of Staff Deputy CIO, Chief of Staff for Air Force Materiel Command, and Commander/Vice Commander for the 75th Air Base Wing.
Ms. Medler received a BBA in Management & Computer Information Systems from the University of Arkansas at Little Rock, an MS in National Security & Strategic Studies from the Naval War College, and an MBA in Management Information Systems Concentration from the University of Arizona.
The Board values Ms. Medler’s extensive leadership experience and her deep knowledge of cybersecurity and information technology. Her years of experience leading cybersecurity, information technology, and multi-function organizations facing a broad range of technology and operational issues provide the Board with additional skills to facilitate oversight of the cybersecurity and technology issues facing PNC.
PNC Board Committee Memberships
Risk Committee
Technology Subcommittee
Public Company Directorships
None
14 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
ELECTION OF DIRECTORS (ITEM 1)
Martin Pfinsgraff
Age 63
|
Ms. PepperDirector Since 2018
Experience, Qualifications, Attributes, or Skills
Martin Pfinsgraff retired as Senior Deputy Comptroller Large Bank Supervision of the Office of the Comptroller of the Currency (OCC) in February 2017. He held the position of Deputy Comptroller for Credit and Market Risk from 2011 to 2013. Mr. Pfinsgraff served on the Executive Committee of the OCC and as a member of the Senior Supervisors Group, an international committee comprised of supervisors from 10 Organisation for EconomicCo-operation and Development member countries and the European Central Bank.
Prior to his career with the OCC, Mr. Pfinsgraff held various positions from 2000 to 2009 at iJet International, a provider of operating risk management solutions, including Chief Operating Officer and Chief Financial Officer. Mr. Pfinsgraff held various positions with Prudential Securities from 1989 through 2000, the latest of which was President Capital Markets, Prudential Securities from 1997 to 2000.
Mr. Pfinsgraff received undergraduatea BBA in Psychology from Allegheny College and graduate degreesan MBA from Harvard Business School.
The Board values Mr. Pfinsgraff’s leadership experience as well as his extensive knowledge of the Universityfinancial services industry and the regulatory requirements applicable to the industry. His experience in banking regulation, risk management, and finance, along with his years of Delaware.
Ms. Pepper brings a diverse set of experiences to our Board, beginning with her management experience at PHS. For 30 years, Ms. Pepper led this Philadelphia-based organization, supervising over 100 employees, and executing a strategic plan with a vision of sustainability and community impact. Beyond thisexecutive leadership, provide the Board appreciates her insights as PNC continueswith additional skills to expand our own environmentally conscious initiatives.
Ms. Pepper brings additionaloversee complex regulatory, risk management, and banking industry experience to our Board, having formerly served as a director and the Chairwoman of the Federal Reserve Bank of Philadelphia.financial matters.
PNC Board Committee Memberships
Audit Committee
Risk Committee
Special Compliance Committee (Chair)
Public Company Directorships
None
Donald J. Shepard
Age 71 Director Since 2007 Experience, Qualifications, Attributes, or Skills Donald J.
|
Mr. Shepard received a master’s degree in business administrationan MBA from the University of Chicago.
Mr. Shepard joined ourthe Board following PNC’s acquisition of Mercantile Bankshares Corporation. He joined the Mercantile Board of Directors in 1992.
Mr. Shepard’s service as the CEO of a large, international public company, particularly a company in the financial services sector, gives him insights into many issues facing PNC, and supports the Board’s ability to oversee complex and dynamic issues. Mr. Shepard’s duties and experiences at AEGON also assist ourthe Board with its oversight of financial and risk issues. OurThe Board also values Mr. Shepard’s experience on the board of a public company in the banking business and his familiarity with the Baltimore community.
PNC Board Committee Memberships
Audit Committee
Executive Committee (Chair)
Nominating and Governance Committee (Chair)
Risk Committee
Public Company Directorships
CSX Corporation (until June 2017)
The Travelers Companies, Inc.
Michael J. Ward Age 67 Director Since 2016 Experience, Qualifications, Attributes, or Skills Michael J. Ward is |
and information technology industries. She formerly served as Vice President and General Manager, Global Electronics Industry, for IBM, an information technology company. Ms. Steffes also served as the Presidentformer Chairman and Chief Executive Officer of TransarcCSX Corporation, a software development firm, which was later acquired by IBM.
Ms. Steffes received undergraduate and master’s degrees from Northern Illinois University.
Our Board values Ms. Steffes’s managerial experiences throughout the technology industry, including as a chief executive. Her wide array of experiences in this industry and her understanding of operational and technological issues assist the Board in its oversight of technological and cyber security, which have become increasingly important for large, complex banking organizations.
PNC Board Committee Memberships
Risk Committee
Technology Subcommittee (Chair)
Public Company Directorships
RadiSys Corporation (until September 2015)
|
Inc., one of the world’s leading providers of communications services, until his retirement in December 2009. Prior to that, he was the President and Chief Executive Officer of Verizon Wireless, a joint venture controlled by Verizon.
Mr. Strigl received an undergraduate degree from Canisius College and a master’s degree in business administration from Fairleigh Dickinson University.
Our Board values Mr. Strigl’s service as a senior executive at a large public company, and his former executive management expertise as the CEO of Verizon Wireless. His management of a large workforce at Verizon informs his judgment as the Chair of our Personnel and Compensation Committee and gives him a strong understanding of human resources and compensation matters. Mr. Strigl’s additional responsibility for internal functional services, such as finance and real estate, adds depth and experience to the Board’s ability to oversee the operations of our company.
PNC Board Committee Memberships
Executive Committee
Nominating and Governance Committee
Personnel and Compensation Committee (Chair)
Technology Subcommittee
Public Company Directorships
ANADIGICS, Inc. (until March 2016)
Eastman Kodak Company (until September 2013)
Nokia Corporation (May 2014 to May 2015)
Tellabs, Inc. (until December 2013)
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 15
ELECTION OF DIRECTORS (ITEM 1)
|
Mr. Ward received a bachelor’s degreeBS from the University of Maryland and an MBA from the Harvard Business School.
Mr. Ward has extensive operations, sales, marketing, and finance experience from his various management roles with CSX and its subsidiaries. As a public company CEO with years of corporate leadership experience in a regulated industry, he brings knowledge and insight to the Board in its oversight of complex issues. His management of an executive team and a large group of employees adds value to his oversight of compensation issues.
PNC Board Committee Memberships
Nominating and Governance Committee
Personnel and Compensation Committee
Public Company Directorships
CSX CorporationAshland Inc. (until September 2016)
Ashland Global Holdings, Inc.
CSX Corporation (until March 2017)
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 15 ELECTION OF DIRECTORS (ITEM 1) Gregory D. Wasson Age 59 Director Since 2015 Experience, Qualifications, Attributes, or Skills Gregory D. Wasson is the former President and Chief Executive Officer of Walgreens Boots Alliance, a globalpharmacy-led health and wellbeing enterprise.
|
Mr. Wasson received a bachelor’s degreeBS from Purdue University in Pharmaceutical Science.
Mr. Wasson has extensive operational and executive management experience at a complex organization with a large, diverse workforce. Mr. Wasson brings anin-depth knowledge of the retail industry and insight into the consumer experience. His background of leading a company with thousands of retail locations in an industry that, like banking, is undergoing rapid transformation will provide insight that benefits PNC as we work on our strategic priorities. His service as a public company CEO and his designation as an “audit committee financial expert” assist the Board and Audit Committee with the oversight of financial and accounting issues.
PNC Board Committee Memberships
Audit Committee
Technology Subcommittee
Public Company Directorships
AmerisourceBergen Corporation (until January 2015)
Verizon Communications Inc.
16 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
OurThe Board is committed to maintaining strong corporate governance practices. Through the Nominating and Governance Committee, the Board evaluates its corporate governance policies and practices against evolving best practices. This section highlights some of our corporate governance policies and practices. Please seeSeewww.pnc.com/corporategovernance for additional information about corporate governance at PNC, including:
To receive free printed copies of any of these
documents, please send a request to:
Corporate Secretary
The PNC Financial Services Group, Inc.
300 Fifth Avenue
Pittsburgh, Pennsylvania 15222
or
corporate.secretary@pnc.com
This proxy statement is also available at
www.pnc.com/proxystatement
Recent corporate governance developments
Three of our current directors, Jane G. Pepper, Lorene K. Steffes, and Dennis F. Strigl, reach the mandatory retirement age of 72 in connection with the annual meeting and are not nominated for election as directors. As part of its continuing efforts to provide for director succession and strong Board composition in light of these anticipated retirements, on August 10, 2017, the Board appointed Debra A. Cafaro to serve as a director
and on January 4, 2018, the Board appointed Linda R. Medler and Martin Pfinsgraff to serve as directors, in each case upon the recommendation of the Nominating and Governance Committee.
In addition, Kay Coles James resigned from the Board effective following the February 15, 2018 meeting of the Board due to a change in Ms. James’ principal occupation.
Corporate governance guidelines
OurThe Board has approved corporate governance guidelines. Our Board’s Nominating and Governance Committee reviews the corporate governance guidelines at least once a year. Any changes recommended by the Committee are approved by the Board. The guidelinesthat address important principles adopted by the Board, including:
The Nominating and Governance Committee reviews the corporate governance guidelines at least once a year. Any changes recommended by the Committee are approved by the Board.
Our Board leadership structure
Based on an assessment of its current needs and composition, as well as the composition, skills and qualifications of the directors, the Board believes that the appropriate Board leadership structure should include the following attributes:
The Board’s current leadership structure includes all three attributes. The Board has not adopted a policy with respect to separating the Chairman and CEO positions. The Board believes that the leadership
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 17
CORPORATE GOVERNANCE
structure should be flexible enough to accommodate different approaches based on an evaluation of relevant facts and circumstances. The Board considers its structure and leadership each
year. The Personnel and Compensation Committee discusses whether to separate the positions of Chairman and CEO as part of its ongoing evaluation of management succession plans.
William S. Demchak, our current CEO, also serves as Chairman of the Board. Donald J. Shepard, the Board’s Presiding Director and Chair of the Nominating and Governance Committee, serves as our lead independent director. We describe his duties in more detail below.
Substantial majority of independent directors. We have long maintained a Board with a substantial majority of directors who are not PNC employees. The NYSENew York Stock Exchange (NYSE) requires at least a majority of our directors to be independent from management.
Mr. Demchak is the only director who is not independent under the NYSE’s “bright-line” rulestests for independence because he is our CEO. The Board has affirmed the
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 17
CORPORATE GOVERNANCE
independence of each of our other 1211 nominees for director. Please seeSeeDirector and Executive Officer Relationships beginning on pages 29 andpage 30 for a description of how we evaluate the independence of our directors, including information about the NYSE’s bright-line tests for independence.
Presiding Director duties. As the Presiding Director, Mr. Shepard is the lead independent director for ourthe Board. The Board’s independent andnon-management directors selected him for this role. The Board approved the following duties for the Presiding Director, which are included in our corporate governance guidelines:
|
During the course of the year, the Presiding Director may suggest, revise, or otherwise discuss agenda items for the Board meetings with the Chairman or CEO. In between meetings, each director is encouraged to raise any topics or issues with the Presiding Director that the director believes should be discussed among the non-management or independent directors.in executive session.
As ChairmanChair of the Nominating and Governance Committee, the Presiding Director leads the boardBoard and committee annual self-evaluation process and the evaluation of the independence of directors. That committeeThe Nominating and Governance Committee also reviews, and the Presiding Director as chairmanChair of the committeeCommittee reports to the board,Board, significant developments in corporate governance.
Regular executive sessions of independent directors. Our independent directors have met and will continue to meet in regularly scheduled executive sessions without management present. The NYSE requires our independent directors to meet in executive session at least once a year. Under ourthe Board’s own policy, our independent directors meet by themselvesin executive session at least quarterly. Our Presiding Director leads these executive sessions.
18 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
CORPORATE GOVERNANCE
Communicating with ourthe Board
Shareholders and other interested parties who wish to communicate with the Board, of Directors, any director (including the Presiding Director), thenon-management or independent directors as a group, or any Board committee may send either (1) an email to corporate.secretary@pnc.com or (2) a letter to the following address:
Presiding Director
The PNC Financial Services Group, Inc.
Board of Directors
P.O. Box 2705
Pittsburgh, Pennsylvania 15230-2705
The Corporate Secretary will forward the email communication to the appropriate director(s) named. The Corporate Secretary may elect not to forward communications that she believes are: (i) a commercial, charitable, or other solicitation; (ii) a
complaint about PNC products or services that would be customarily handled in the ordinary course of business; (iii) abusive, improper, or otherwise irrelevant to the Board’s duties and responsibilities; or (iv) subject to the policies or procedures that specify the proper handling of a communication that addresses such subject matter.
The Corporate Secretary will not open the written communication addressed to the Board, of Directors, any director (including the Presiding Director), or group of directors, thenon-management or independent directors as a group, or any Board committee. The Corporate Secretary will forward the communication to the Presiding Director who will determine how to respond. Depending on the content, the Presiding Director may forward the communication to a PNC employee, a third party, another director, a Board committee, or the full board.Board.
18 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
CORPORATE GOVERNANCE
Our Code of Business Conduct and Ethics
PNC has adopted, and the Audit Committee has approved, a Code of Business Conduct and Ethics that applies generally to all employees and directors.
OurThe Code of Business Conduct and Ethics addresses these important topics, among others:
The Code of Business Conduct and Ethics is available on our website atwww.pnc.com/corporategovernance. Any shareholder may also request a free printed copy by writing to our Corporate Secretary at the address givenprovided on page 17.
We intend that this code satisfiesOur adoption of the SEC’sCode of Business Conduct and Ethics is intended to satisfy the Securities and Exchange Commission’s (SEC) requirement to adopt a code that applies to a company’s CEO and senior financial officers. Our Board’sThe Audit Committee must approve any waivers of or exceptions to code provisions forgranted to our directors or executive officers. We will post on our website any future amendments to, or waivers from, a provision of the Code of Business Conduct and Ethics that applies to any of our directors or executive officers (including our Chairman and CEO, CFO, and Controller).
PNC has also adopted, and ourthe Audit Committee has approved, Ethics Guidelines for Directors to supplement the PNC Code of Business Conduct and Ethics.
All of our new directors undergo a director orientation and education program. In addition to written materials provided to new directors,in-person orientation sessions are held forwith each new director. In-person orientationThesein-person sessions generally include meetings with members of senior management to familiarize
new directors with PNC’sour strategic plans, its significant financial, accounting, and risk management issues, its capital markets activities, its compliance programs, itsregulatory and legal matters, the Code of Business Conduct and Ethics and related policies, its principal officers, itsand internal and independent auditors, andas
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 19
CORPORATE GOVERNANCE
well as specific matters related to the Board committees or subcommittees to which a new director has been appointed.
OurWe also provide a continuing education program for our directors that considers the directors’their knowledge and experience and PNC’sour risk profile, and includes training on complex products and services, PNC’sour lines of business, significant risks to PNC, appropriatethe company, applicable laws, regulations, and supervisory
requirements, and other relevant topics identified by the boardBoard and management. ItThe continuing education program is provided through a combination ofin-person sessions and coordination of attendance by directors at outside seminars relevant to the duties of a director. Thein-person sessions may be held in connection with, or as part of, a meeting of the Board or a Board committee.
OurThe Board currently has five standing committees. Four of theseThe four primary standing committees—Audit, Nominating and Governance, Personnel and Compensation, and Risk—meet on a regular basis. The Executive Committee, meets as needed andwhich is composed of our Chairman and CEO and the chairs of our otherthe four primary standing committees.committees, meets as needed. The Executive Committee may act on behalf of the Board and reports regularly to the full Board. Our Presiding Director chairs the Executive Committee, which did not meet in 2016.2017.
OurBy-laws authorize the Board to create other committees. Unless provide that, unless otherwise stated in its charter,
each committee may form and delegate its authority to subcommittees of one or more committee members. OurThe Risk Committee has formed a Technology Subcommittee to facilitate Board-level oversight responsibilities with respect toof technology risk, technology risk management, cybersecurity, information security, business continuity, and significant technology initiatives and programs. Our BoardThe Risk Committee has also createdformed a Special Compliance CommitteeSubcommittee to assistfacilitate Board-level oversight of compliance risk, significant compliance-related initiatives and programs, and the maintenance of a
strong compliance risk management culture. OurBy-laws also authorize the Board in its oversight and reporting responsibilities under certain regulatory consent orders.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 19to establish other committees.
CORPORATE GOVERNANCE
Each committee operates under a written charter approved by the Board, or inand each subcommittee operates under a written charter approved by the case of a subcommittee the applicable standing committee. Each committee and subcommittee annually reviews and reassesses its charter. The Nominating and Governance Committee assesses the Executive Committee charter.
Each committee and subcommittee, other than the Executive Committee, performs an annual self-evaluation to determine whether the committee or
subcommitteeit is functioning effectively and fulfilling its charter duties.
We describe the main responsibilities of the Board’s four primary standing committees below. The descriptions of the committee functions in this proxy statement are qualified by reference to the chartersapplicable committee charter and our relevantBy-law provisions. The charters for the four primary standing Board committees discussed in this section are all available on our website atwww.pnc.com/corporategovernance.
20 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
CORPORATE GOVERNANCE
Audit Committee
Chair | Other members: | |||
Richard B. Kelson |
Debra A. Cafaro | |||
Marjorie Rodgers Cheshire | ||||
Martin Pfinsgraff | ||||
Donald J. Shepard | ||||
Gregory D. Wasson | ||||
The Audit Committee consists entirely of directors who are independent as defined in the NYSE’s corporate governance rules and in theSEC regulations of the Securities and Exchange Commission related to audit committee members. When ourthe Board meets on April 25, 201724, 2018 to organize its committees, only independent directors will be appointed to the Committee.
The Board has determined that each Audit Committee member is financially literate and that at least two members possess accounting or related financial management expertise. The Board made these determinations in its business judgment, based on its interpretation of the NYSE’s requirements for audit committee members. Acting on the recommendation of the Nominating and Governance Committee, the Board of Directors determined that each of Mr. Kelson and Mr. Wasson are eachis an “audit committee financial expert,” as that term is defined by the SEC.
Our Board most recently approved the charter of the Audit Committee on November 17, 2016, and it is available on our website.
The Audit Committee satisfies the requirements of SEC Rule10A-3, which includesaddresses the following topics:
• | The independence of committee members |
• | The responsibility for selecting and overseeing our independent auditors |
• | The establishment of procedures for handling complaints regarding our accounting practices |
• | The authority of the committee to engage advisors |
• | The determination of appropriate funding for payment of the independent auditors and any outside advisors engaged by the committee and for the payment of the committee’s ordinary administrative expenses |
The Board most recently approved the charter of the Audit Committee on November 14, 2017, and it is available on our website atwww.pnc.com/corporategovernance.
The Audit Committee’s primary purposes are to assist the Board by:
• | Monitoring the integrity of our consolidated financial statements |
• | Monitoring our internal control over financial reporting |
• | Monitoring compliance with our Code of Business Conduct and Ethics |
• | Evaluating and monitoring the qualifications and independence of our independent auditors |
• | Evaluating and monitoring the performance of our internal audit function and our independent auditors |
At eachin-person meeting of ourthe full Board, the Chair of the Audit Committee presents a report of the items discussed and the actions approved at previous meetings.meetings of the Committee.
The Audit Committee’s responsibility is one of oversight. Our management is responsible for preparing our consolidated financial statements, for maintaining internal controls, and for our compliance with laws and regulations, and the independent auditors are responsible for auditing our consolidated financial statements.
The Audit Committee typically reviews and approves the internal and external audit plans.
The Audit Committee has the authority to retain independent legal, accounting, economic, or other advisors. The Committee is directly responsible for the selection, appointment, compensation, and oversight of our independent auditors (including the resolution of any disagreements that may arise between management and the auditors regarding financial reporting if disagreements occur)reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditors report directly to the Committee. We describe the role of the Committee in regardas it relates to the independent auditors, including consideration of the rotation of the independent audit firm, in more detail on page 80. For84
With respect to work performed by the independent auditors, the Audit Committee mustpre-approve all audit engagement fees and terms, as well as all permittednon-audit engagements. The Committee (or its delegate)pre-approves all audit services, audit-related services, and permittednon-audit services. The Committee also considers whether providing audit services, audit-related services, and permittednon-audit services will impair the auditors’ independence. We describe the Committee’s procedures for thepre-approval of audit services, audit-related services, and permittednon-audit services on page 85
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 21
CORPORATE GOVERNANCE
We describe the Committee’s procedures for the pre-approval of audit services, audit-related services, and permitted non-audit services on page 81. The Audit Committee receives routine reports on finance, reserve adequacy, ethics, and internal and external audit.
The Audit Committee hasalso appoints our General Auditor, who leads our internal audit function and reports directly to the authority to retain independent legal, accounting, economic, or other advisors.Committee. The Committee holds regular executive sessions with our management, the General Auditor, the Chief Ethics Officer, and the independent auditors. The independent auditors report directly to the Committee. The Committee annually reviews with the CEO the General Auditor succession plan. The Committee appoints our General Auditor, who leads PNC’s internal audit function and reports directly to the Committee. The Committee reviews the performance and approves the compensation of ourthe General Auditor.Auditor, and annually reviews the General Auditor succession plan with the CEO.
Under our corporate governance guidelines, Audit Committee members may serve on the audit committeecommittees of no more than three public companies at the same time, including PNC.
The Audit Committee has approved the report on page 8286 as required under its charter and in accordance with SEC regulations.
22 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
CORPORATE GOVERNANCE
Nominating and Governance Committee
Chair | ||||
Donald J. Shepard | Other members:
Charles E. Bunch | |||
Dennis F. Strigl | ||||
Michael J. Ward | ||||
The Nominating and Governance Committee consists entirely of independent directors. When ourthe Board meets on April 25, 2017,24, 2018 to organize its committees, only independent directors will be appointed to the Nominating and Governance Committee.
OurMr. Strigl will not stand forre-election to the Board at the annual meeting and, following the annual meeting, will no longer be a member of the Nominating and Governance Committee.
The Board most recently approved the charter of the Nominating and Governance Committee on November 17, 2016,14, 2017, and it is available on our website.website atwww.pnc.com/corporategovernance.
At eachin-person meeting of ourthe full Board, the Chair of the Nominating and Governance Committee presents a report of the items discussed and the actions approved at previous meetings.meetings of the Committee. The primary purpose of ourthe Nominating and Governance Committee is to assist ourthe Board in promoting the best interests of PNC and its shareholders through the implementation of sound corporate governance principles and practices. The Committee also assists the Board by identifying individuals qualified to become Board members. The Committee recommends to the Board the director nominees for each annual meeting of shareholders, and may also recommend the appointment of qualified individuals as directors between annual meetings.
In addition to conducting its annual committee self-evaluation, the Nominating and Governance Committee oversees the annual evaluation of the performance of the Board and other Board committees and reports to the Board on the evaluation results as necessary or appropriate. The Committee also annually reviews and recommends any changes to the Executive Committee charter.
How we evaluate directors and director candidates. At least annually, the Nominating and Governance Committee assesses the skills, qualifications, and experience of our directors and recommends a slate of director nominees to the Board. From time to time, the Committee also considers whether to change the composition of ourthe Board. In evaluating existing directors or new director candidates, the Committee assesses the needs of the Board and the qualifications of the individual. Please seeSee the discussion on pages 12 to 16 for moreadditional information onregarding each of our current director nominees.
OurThe Board and its committees must satisfy SEC, NYSE, and banking regulatory standards. At least a majority of our directors must be independent under the NYSE standards; however, ourstandards. Our corporate governance guidelines impose a more rigorous standard and require that a substantial majority (at least 2/3) of our directors be independent. We require a sufficient number of independent directors to satisfy the membership needs of Board committees that also require independence.
Beyond that, theThe Nominating and Governance Committee expects directors to gain a sound understanding of our strategic vision, our mix of businesses, and our approach to regulatory relations and risk management. The Board must possess a mix of qualities and skills adequate to address the various risks facing PNC. For a discussion of ourthe Board’s oversight of risk, please see the section entitledCorporate Governance—Board committees—Risk Committee beginning on pages 27 and 28.page 27.
The Nominating and Governance Committee has not adopted any specific minimum qualifications for director candidates. When evaluating each director, as well as new director candidates for nomination, the Committee considers the following Board-approved criteria:
• | A sustained record of high achievement in financial services, business, industry, government, academia, the professions, or civic, charitable, ornon-profit organizations |
• | Manifest competence and integrity |
• | A strong commitment to the ethical and diligent pursuit of shareholders’ best interests |
• | The strength of character necessary to challenge management’s recommendations and actions when appropriate and to confirm the adequacy and completeness of management’s responses to such challenges to his or her satisfaction |
• |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 23
CORPORATE GOVERNANCE
• | Personal qualities that will help to sustain an atmosphere of mutual respect and collegiality among the members of |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 23
CORPORATE GOVERNANCE
The Nominating and Governance Committee also considers the diversity of perspective, experience, knowledge, education, age, and skills experience in the context of each director, as well as the current needs of the Board and its committees, meeting attendance and participation, and the value of a director’s contributionscontribution to the effectiveness of ourthe Board and its committees.
Although the Board has not adopted a formal policy on diversity, the Board recognizes the value of a diverse Board. Therefore, the Nominating and Governance Committee considers the diversity of directors in the context of the Board’s overall needs. The Committee evaluates diversity in a broad sense, recognizing the benefits of demographic diversity, but also considering the breadth of diverse backgrounds, skills, and experiences that directors may bring to ourthe Board.
How we identify new directors. The Nominating and Governance Committee may identify potential directors in a number of ways. The Committee may consider recommendations made by our current or former directors or members of executive management. The Committee may also identify potential directors through contacts in the business, civic, academic, legal, andnon-profit communities. When appropriate, the Committee may retain a search firm to identify candidates.
In addition, the Nominating and Governance Committee will consider director candidates recommended by our shareholders for nomination at the next year’s annual meeting.meeting of shareholders. For the Committee to consider a director candidate for nomination,recommended by a shareholder, the shareholder must submit the recommendation in writing to the Corporate Secretary at our principal executive office. Eachoffices. The submission to be considered for the 2018 annual meeting, must include the information requireddescribed under “Director nomination process” in Section 3 of our corporate governance guidelines, which can be found atwww.pnc.com/corporategovernance and. To be considered for the 2019 annual meeting of shareholders, the submission must be received by November 15, 2017.13, 2018.
The Nominating and Governance Committee will evaluate director candidates recommended by a shareholder in the same manner as candidates identified by the Committee or recommended by others. The Committee will not consider any candidate with an obvious impediment to serving as one of our directors.
The Nominating and Governance Committee will meet to consider relevant information regarding a director candidate in light of the Board approvedBoard-approved evaluation criteria and the needs of ourthe Board. If the Committee doesdecides not to recommend a candidate for nomination or appointment, or for moreadditional evaluation, no further action is taken. The Chair of the Committee will later report thisthat decision to the full Board. ForBoard, and in the case of a shareholder-recommended candidates,candidate, the Corporate Secretary will communicate the decision to the shareholder.
If the Nominating and Governance Committee decides to recommend a director candidate to ourthe Board as a nominee for election at an annual meeting of shareholders or for appointment by ourthe Board, the Chair of the Committee will report that decision to the full Board. After allowing forFollowing a discussion regarding the recommendation, the full Board will vote on whether to nominate the candidate for election or appoint the candidate to the Board.
As our corporate governance guidelines describe, invitationsBoard, as applicable. Invitations to join the Board come fromare extended by the Chairman of the Board and the Presiding Director, and the Chairman, jointly acting on behalf of ourthe Board.
Shareholders who wish to directly nominate a director candidate directly at an annual meeting of shareholders or nominate and include a director candidate in PNC’sour annual meeting proxy materials must do so in accordance with the procedures contained in ourBy-laws, and should follow as described inShareholder Proposals for the instructions in2019 Annual Meeting on page 94 under the section entitledheadingsShareholder proposals for 2018 annual meeting—Advance notice procedures orand—Proxy access procedures,respectively, on page 93.respectively.
24 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
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Personnel and Compensation Committee
Chair | ||||
Dennis F. Strigl | Other members:
Charles E. Bunch | |||
Andrew T. Feldstein | ||||
Richard B. Kelson | ||||
Michael J. Ward | ||||
The Personnel and Compensation Committee consists entirely of independent directors. The Committee membership is intended to satisfy the independence standards established by applicable federal income tax and securities laws, as well as NYSE standards. When ourthe Board meets on April 25, 2017,24, 2018 to organize its committees, only independent directors will be appointed to the Committee.
OurMr. Strigl will not stand forre-election to the Board at the annual meeting and, following the annual meeting, will no longer be a member of the Personnel and Compensation Committee. The new Chair of the Committee will be selected when the Board meets on April 24, 2018 to organize its committees.
The Board most recently approved the charter of the Personnel and Compensation Committee on November 17, 2016,14, 2017, and it is available on our website.website atwww.pnc.com/corporategovernance.
The Personnel and Compensation Committee’s principal purpose is to discharge ourthe Board’s oversight responsibilities relating to the compensation of our executive officers and other specified responsibilities related to personnel and compensation matters affecting PNC. The Committee may also evaluate and approve, or recommend for approval, benefit, incentive compensation, severance, equity-based, or other compensation plans, policies, and programs.
The Personnel and Compensation Committee has the authority to retain independent legal, compensation, accounting, or other advisors. The charter provides the Committee with the sole authority to retain and terminate an independent compensation consultant acting on the Committee’s behalf, and to approve the consultant’s fees and other retention terms. The Committee retained an independent compensation consultant in 20162017 and prior years. SeeRole of compensation consultants below.
The Personnel and Compensation Committee also reviews with management the Compensation Discussion and Analysis (CD&A) section of the proxy statement, with management. See thewhich begins on page 39. The Compensation Committee Report is included on page 53.57. The CD&A begins on page 38. The Committee also evaluates the relationship between risk management and our incentive compensation programs and plans. SeeCompensation and Risk beginning on pages 54 and 55.page 58.
The Personnel and Compensation Committee has responsibility for reviewing and evaluating the development of an executive management succession plan and for reviewing our workforce diversity objectives. The executive management succession plan, including for the CEO, is reviewed with the full Board from time to time. The Committee reviews a detailed succession planning report at least annually. The materials in the report typically include a discussion of the individual performance of each executive officersofficer as well as succession plans and development initiatives for other emerging talent. These materials provide necessary background and context to the Committee, and give each Committee member a familiarity with the employee’s position, duties, responsibilities, and performance.
How we make decisions. The Personnel and Compensation Committee meets at least four times a year. Before each meeting, the Chair of the Committee reviews the agenda, materials, and issues with members of our management and the Committee’s independent executive compensation consultant, as appropriate. The Committee may invite legal counsel or other external consultants to advise the Committee during meetings and preparatory sessions.
The Personnel and Compensation Committee regularly meets in executive sessions without management present. At eachin-person meeting of ourthe full Board, during an executive session of the Board, the Chair of the Committee presents a report of the items discussed and the actions approved at previous meetings. The Chair provides these reports during an executive sessionmeetings of the Board.Committee. The Committee consults with independent directors before approving the CEO’s compensation.
The Personnel and Compensation Committee has adopted guidelines for information that will be presented to the Committee. The guidelines contemplate, among other things, that any major changes in policiesmaterial change to a compensation program, plan, or programsarrangement will be considered over the course of at least two separate meetings of the Committee, meetings, with any vote occurring atno earlier than the latersecond meeting.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 25
CORPORATE GOVERNANCE
The Personnel and Compensation Committee reviews all of the elements of theour compensation programs periodically and adjusts those programs as appropriate. Each year, the Committee makes decisions regarding the amount of annual compensation and equity-based or other longer-term compensation for our executive officers and other designated senior employees. For the most part, these decisions are made in the first quarter of each year, following thean evaluation of the prior year’s performance.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 25
CORPORATE GOVERNANCE
Delegations of authority. The Personnel and Compensation Committee has delegated authority to management to make certain decisions or to take certain actions with respect to compensation or benefit plans or arrangements (other than those that are solely or predominantly for the benefit of executive officers).
For employee benefit, bonus, incentive compensation, severance, equity-based, and other compensation or incentive plans and arrangements, the Committee has delegated to our Chief Human Resources Officer (or her designee) the ability to adopt a new plan or arrangement or amend an existing one if:
• | the decision is not expected to result in a material increase in incremental expense to PNC |
• | the change is of a technical nature, is required by a change in applicable law, or is otherwise not material. |
This delegation also includes the authority to take certain actions to implement, administer, interpret or construe, or make eligibility determinations under the plans and arrangements, except forwith respect to plans that are overseen by the PNC administrative committee under its charter.
For grants of equity or equity-based awards, the Personnel and Compensation Committee has delegated to our Chief Executive Officerthe CEO and ourthe Chief Human Resources Officer (or the designee of either) the responsibility to make decisions with respect to equity grants for individuals who are not designated by the Committee as executives, including the determination of participants and grant sizes, allocation of the pool from which grants will be made, establishment of the terms of such grants, approval of amendments to outstanding grants, and exercise of any discretionary authority pursuant to the terms of the grants.grants and the applicable plan.
The Personnel and Compensation Committee has also delegated to the Audit Committee (or a qualified subcommittee) and to a qualified subcommittee of the Risk Committee the authority to make equity-based grants and award other compensation under applicable plans to theour General Auditor and our Chief Risk Officer, respectively.
Management’s role in compensation decisions. Our executive officers, including ourthe CEO and ourthe Chief Human Resources Officer, often review information with the Personnel and Compensation Committee during meetings and may present management’s views or recommendations. The Committee evaluates these recommendations, generally in consultation with an independent compensation consultant retained by the Committee who attends each meeting.
The Chair of the Personnel and Compensation Committee typically meets with management and an independent compensation consultant before each meeting of the Committee meeting to discuss agenda topics, areas of focus, or outstanding issues. The Chair of the Committee schedules other meetings with the Committee’s compensation consultant without management present as needed. Occasionally, management will schedule meetings with eachthe Chair of the Committee memberor other Committee members to discuss substantive issues. For more complicated issues, theseone-on-one meetings provide a dedicated forum for Committee members to ask questions outside of the meeting environment.
During Personnel and Compensation Committee meetings, the CEO often reviews corporate and individual performance as part of the compensation discussions, and other members of executive management may be invited to speak to the Committee about specific elements of performance or risk management. Our Chief Risk Officer regularly presents to the Committee regarding risk management, including its impact on the Committee’s discussions and decisions regarding executive compensation. The Committee reviews any compensation decisions for the Chief Human Resources Officer and the CEO in executive session, without either officer present for the discussion of their compensation. Any recommendations for CEO compensation are also discussed with the full Board, with no members of management present for the discussion.
Role of compensation consultants. The Personnel and Compensation Committee has the sole authority to retain and terminate any compensation consultant directly assisting it. The Committee also has the sole authority to approve fees and other engagement terms. The Committee receives comparative compensation data from our management, from proxy statements and other public disclosures, and through surveys and reports prepared by compensation consultants.
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CORPORATE GOVERNANCE
The Personnel and Compensation Committee retained Meridian Compensation Partners as its independent compensation consultant for 2016.2017. In this capacity, Meridian reported directly to the Committee. In 2016,2017, one or more representatives of Meridian attended all of thein-person and telephonic meetings of the Committee, and met regularly with the Committee without members of management present. Meridian also reviewed meeting agendas and materials prepared by management.
Meridian and members of management assisted the Personnel and Compensation Committee in its review of proposed compensation packages for our executive officers. For the 20162017 performance year, Meridian prepared discussion materials for the compensation of the CEO, which were reviewed in executive session without any members of management present.session. Meridian also prepared other benchmarking reviews and pay for performance analyses for the Committee. PNC did not pay anypaid no fees to Meridian in 20162017 other than fees paid in connection with work performed by Meridian for the Committee.
The Personnel and Compensation Committee evaluated whether the work of Meridian raised any conflictconflicts of interest. The Committee considered various factors, including the six factors mandated by the SEC rules, and determined that no conflict of interest was raised by the work ofperformed by Meridian described in this proxy statement.
for the Committee.
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CORPORATE GOVERNANCE
Our managementManagement retains other compensation consultants for its own use. In 2016, our2017, management retained McLagan to provide certain market data in the financial services industry. ItManagement also usesengages Willis Towers Watson, a global professional services firm, to provide, from time to time, various actuarial and management consulting services, to us, including:
• | Preparing specific actuarial calculations on values under our retirement plans |
• | Preparing surveys of competitive pay practices |
• | Analyzing our director compensation packages and providing reports to |
• |
• | Providing guidance on certain aspects of total rewards, talent management, and other human resources initiatives |
Reports prepared by Willis Towers Watson and McLagan that relate to executive compensation may also be shared with the Personnel and Compensation Committee.
Compensation committee interlocks and insider participation. None ofDuring 2017, the current members of the Personnel and Compensation Committee areincluded Charles E. Bunch, Andrew T. Feldstein, Richard B. Kelson, Dennis F. Strigl (Chair), and Michael J. Ward. None of these directors were officers or employees orof PNC during 2017, nor are they former officers of PNC or any of our subsidiaries. No PNCDuring 2017, no executive officer of PNC served on the board of directors or compensation committee (or other board committee performing equivalent functions) of anotheran entity that employedhad an executive officer who also served on our Board. No PNC executive officer served as a director of an entity that employed an executive officer who also served on ourthe Board or the Personnel and Compensation Committee.
Certain members of the Personnel and Compensation Committee, their immediate family members, andor entities with which they are affiliated were our customers or had transactions with us (or our subsidiaries) during 2016.2017. Transactions that involved loans or commitments by subsidiary banks were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features, and otherwise complied with regulatory restrictions onapplicable to such transactions.
PleaseFor additional information, seeDirector and Executive Officer Relationships—Regulation O policies and procedures, which begins beginning on page 32, for more information.33.
Risk Committee
Chair | Other members: | |||||
Andrew T. Feldstein | Marjorie Rodgers Cheshire | Jane G. Pepper | ||||
William S. Demchak | ||||||
Daniel R. Hesse | ||||||
Lorene K. Steffes | ||||||
The Board performs its risk oversight function primarily through the Risk Committee, which includes both independent and management directors.
OurNeither Ms. Pepper nor Ms. Steffes will stand forre-election to the Board at the annual meeting and, following the annual meeting, neither will be a member of the Risk Committee.
The Board most recently approved the charter of the Risk Committee on November 17, 2016,14, 2017, and it is available on our website.website atwww.pnc.com/corporategovernance.
At each in-person meeting of our full Board, the Chair of the Committee presents a report of the items discussed and the actions approved at previous meetings. THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 27
CORPORATE GOVERNANCE
The Risk Committee’s purpose is to require and oversee the establishment and implementation of our enterprise-wide risk governance framework, including related policies, procedures, activities, and the processes to identify, measure, monitor, and manage material risks at PNC, including (Credit, Liquidity, Market, Operational (including compliance), Strategicconsisting primarily of credit, market, liquidity, compliance, operational, strategic, and Reputational risks). PNC’s majorreputational risks. Accounting and financial reporting risk exposures, and related reputational risks, are the responsibility of the Audit Committee. The Risk Committee serves as the primary point of contact between our Board and the management-level committees dealing with risk management. The Committee’s responsibility is one of oversight, and the Committee has no duty to assure compliance with laws and regulations.
The Risk Committee serves as the primary point of contact between the Board and the management-level committees dealing with risk management. The Committee receives regular reports on enterprise-wide risk management and Credit, Liquidity, Market, Operational (including compliance), Strategiccredit, market, liquidity, compliance, operational, strategic, and Reputationalreputational risks.
At eachTHE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 27in-person meeting of the full Board, the Chair of the Risk Committee presents a report of the items discussed and actions approved at previous meetings of the Committee.
CORPORATE GOVERNANCE
The Risk Committee also appoints our Chief Risk Officer, who leads our risk management function. The Committee reviews the performance and approves the compensation of the Chief Risk Officer, except with respect to his equity-based grants, which are approved by a qualified subcommittee of the Risk Committee.
The Risk Committee, along with the Personnel and Compensation Committee, reviews the risk components of our incentive compensation plans. For a discussion of the relationship between compensation and risk, seeCompensation and Risk beginning on page 58.
Subcommittees. The Risk Committee may also form subcommittees as appropriate from time to time. The Committee has formed a subcommitteeTechnology Subcommittee to assist in fulfilling the Committee’s oversight responsibilities with respect to technology risk, technology risk management, cybersecurity, information security, business continuity, and significant technology initiatives and programs. The members of the Technology Subcommittee are:
The Committee appoints our Chief Risk Officer, who leads PNC’s risk management function. The Committee reviews
Chair | Other members: | |||
Lorene K. Steffes | Daniel R. Hesse | |||
Linda R. Medler | ||||
Dennis F. Strigl | ||||
Gregory D. Wasson |
Neither Ms. Steffes nor Mr. Strigl will stand for re-election to the performanceBoard at the annual meeting and, approvesfollowing the compensationannual meeting, neither will be a member of our Chief Risk Officer.the Technology Subcommittee.
The Risk Committee alonghas also formed a Compliance Subcommittee to assist in fulfilling the Committee’s oversight responsibilities with respect to compliance risk, significant compliance-related initiatives and programs, and the Personnel and Compensation Committee, each reviews themaintenance of a strong compliance risk components of our incentive compensation plans. For a discussionmanagement culture. The members of the relationship between compensationCompliance Subcommittee are:
Chair | Other members: | |||
Marjorie Rodgers Cheshire | Andrew T. Feldstein | |||
Richard B. Kelson | ||||
Jane G. Pepper |
Ms. Pepper will not stand for re-election to the Board at the annual meeting and, risk, please seefollowing the annual meeting, will no longer be a member of the Compliance Subcommittee.
Charles E. Bunch Debra A. Cafaro Marjorie Rodgers Cheshire William S. Demchak Andrew T. Feldstein Daniel R. Hesse Kay Coles James Richard B. Kelson Jane G. Pepper Donald J. Shepard Lorene K. Steffes Dennis F. Strigl Michael J. Ward Gregory D. Wasson
28 THE PNC FINANCIAL SERVICES GROUP, INC. - Compensation and Risk,2018 Proxy Statement beginning on page 54.
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The table below showssets forth the namesmembership of our directorseach Board committee as of December 31, 2016,2017 and indicates the number of Board committee meetings held in 2016, andby each committee during 2017. The table also identifies the members and chairsChair of each committee. We also identifycommittee, the Presiding Director, any management directors, and each director who has been designated by ourthe Board as an “audit committee financial expert,”expert” as defined under SEC regulations.
OurThe Board held 1311 meetings in 2016.2017. Each director attended at least 75% of the combined total number
of meetings of the Board and all Board committees on which the director served. OurThe average attendance of all directors at Board and applicable committee meetings was approximately 99%. The Board has adopted a policy that strongly encourages each director to attend the annual meeting of shareholders in person. We remind each director of this policy beforeprior to the date of the annual meeting. All of our directors then serving attended PNC’s 2016our 2017 annual meeting of shareholders.
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(2) | (1) | (3) | (1) | (2) | (1) | (3) | (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Audit | l | l | l | 12 | l | l |
| l | l | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Nominating and Governance | l | l | l | l | 5 | l | l |
| l | l | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Personnel and Compensation | l | l | l | l | 6 | l | l | l |
| l | 6 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Risk | l | l | l | l | l | l | l | 9 | l | l |
| l | l | l | l | l | 9 |
Chair |
(1) | Designated as “audit committee financial expert” under SEC regulations |
(2) | Management director |
(3) | Presiding |
28 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 29
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
This section discusses relationships between PNC and(including its subsidiariessubsidiaries) and our directors, executive officers, their immediate family members, orand certain of their affiliated entities. These relationships include transactions that we analyzed to determineconsidered in determining the independence of our directors.
In this section, we describe the NYSE independence standards for directors and our Board-adopted independence guidelines.
OurThe Board must affirmatively determine that a director does not have ahas no “material relationship” with PNC for the director to bequalify as independent under NYSE rules. A material relationship between a director and PNC could also includecan exist as a result of a relationship between PNC and an organization affiliated with athe director.
NYSE rules describe specific relationships that will always impair independence. The absence of one of these “bright-line” relationships does not mean that a director is automatically independent. The Board must consider all relevant facts and circumstances in determining whether a material relationship exists.
Material relationships that we may consider include commercial, industrial, banking, consulting, legal, accounting, charitable, and family relationships. The ownership of a significant amount of PNC stock, by itself, will not prevent a finding of independence under NYSE rules.
NYSE rules describe specific relationships that will always impair independence. The absence of one of the enumerated relationships under this “bright-line” test does not mean that a director is deemed independent. The Board must consider all relevant facts and circumstances in determining whether a material relationship exists.
The NYSE bright-line independence tests. Each of the following relationships will automatically impair a director’s independence under the NYSE’s “bright-line”bright-line tests:
An employee-director in any of PNC (or a director with an immediate family member who is a PNC executive officer) will not be independent untilthe last three fiscal years after the employment relationship ends. The other
For purposes of these bright-line tests, will impair independence if they existed at any time within the past three years.references to PNC include certain of PNC’s subsidiaries.
MoreAdditional information about the NYSE’s bright-line director independence tests, including the commentary explainingregarding the application of the tests, can be found on the NYSE’s website atwww.nyse.com.
Our Board guidanceguidelines on independence. To help assess whether a material relationship exists, ourdirector independence, the Board adopted guidelines that describe four categories of relationships that will not be considereddeemed to be material. If a relationship involving a director meets the criteria outlined in this guidance, it will not be deemed to be a material relationship. This guidance can be found in our corporate governancethe guidelines, on our website atwww.pnc.com/corporategovernance. Thethe Board may then affirm athe director’s independence without further analysis of thisthat relationship, provided that the director otherwise meets the other relevant independence tests. These guidelines are included in our corporate governance guidelines, which can be found on our website atwww.pnc.com/corporategovernance.
The four categories of relationships described in this guidancethe director independence guidelines include:
30 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
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DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
TheseThe director independence guidelines also allow investors to assessunderstand the quality of aconsiderations underlying the Board’s independence determinations.
In applying this guidance,these guidelines, an “immediate family member” includes a person’s spouse, parents, children, siblings, mothers- andfathers-in-law, sons- anddaughters-in-law, brothers- andsisters-in-law, and anyone (other than domestic employees) who shares such person’s home.
If a director has a relationship that would be not be considered material under our guidelines for independence but crossesis one of the relationships described in the NYSE’s bright-line tests, the NYSE test governsrules govern and the director will not be treatedqualify as independent.
OurThe Board’s independence determinations. At a meeting held on February 16, 2017,15, 2018, the Board made an independence determination for each of our 13 directors, including our director nominees.
In making these determinations, ourthe Board relied on the evaluation and recommendations made by the
Nominating and Governance Committee. The Board considered relevant facts and circumstances, when making these determinations, including an evaluation of the relationships described below.in this proxy statement.
Our Board based the independence decisions on information known as of February 16, 2017. Each director has been asked to provide updates on changes that could impact the director’s status as an independent director. The Nominating and
Governance Committee and Board will consider information throughout the year that may impact independence.
Non-independent directors. Our Board affirmatively determined that Mr. Demchak is the only non-independent director. Mr. Demchak meets the NYSE’s bright-line relationship test as an executive officer of PNC.
Independent directors. Our Board affirmatively determined that each of the directors listed below has no material relationship with PNC under the NYSE corporate governance listing standards. These determinations were based, in part, on an evaluation of the facts and circumstances of relevant relationships in light of PNC’s own independence guidelines. In some cases, the relationships that we analyzed includethe Board evaluated included relationships that a director has as a partner, member, shareholder, officer, or employee of an organization that has a relationship with PNC. TheyThe relationships evaluated may have also includeincluded relationships where an immediate family member of a director is a partner, member, shareholder, or officer of an organization that has a relationship with PNC.
The Board based its independence decisions on information known as of February 15, 2018. Each director has been asked to provide updates regarding any changes in circumstances that could impact the director’s status as an independent director. The Nominating and Governance Committee and the Board will consider information received throughout the year that may impact director independence.
Non-independent directors. The Board determined that Mr. Demchak is anon-independent director under the NYSE’s bright-line tests because he is an executive officer of PNC.
Independent directors. Based on these evaluations, ourits evaluation of the facts and circumstances of relevant relationships, the Board affirmatively determined that each of our directors,director and director nominee other than Mr. Demchak qualifies as independent under the NYSE’s corporate governance listing standards. Paul W. Chellgren, Anthony A. Massaro and Thomas J. Usher, who served as directors until April 26, 2016, also qualified as independent until they retired from the Board.NYSE rules.
30 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 31
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
This chartThe table below reflects banking relationships between PNC and eacha director, the director’san immediate family members, andmember of a companydirector, or an affiliated entity. Affiliated entities include companies of which thea director is, or was during 2016,2017, a partner, executive officer, or employee, anycompanies of which an immediate family member of a director is, or was during 2016,2017, a partner or executive officer, orand companies in which thea director or any immediate family
member holds a
significant ownership or voting position (an affiliated entity).position. The charttable below also reflects relationships where PNC contributed to a charitable organization of which a director or immediate family member of a director was a trustee, director, or executive officer. All of these transactions meet our Board guidance onsatisfy the Board’s director independence guidelines as transactions that do not impair independence.
Personal or Family Relationships | Deposit, Wealth Management and Similar Banking Products(1) | l | l | l | l | l | l | l | l | l | l | l | l | l | l | |||||||||||||||||||
Credit Relationships(2) | l | l | l | l | l | l | l | l | l | l | l | l | l | |||||||||||||||||||||
Charitable Contributions(3) | l | l | l | l | l | l | l | l | l | l | l | |||||||||||||||||||||||
Affiliated Entity Relationships | Deposit, Wealth Management and Similar Banking Products(1) | l | l | l | l | l | l | l | ||||||||||||||||||||||||||
Credit Relationships or Commercial Banking Products(4) | l | l | l | l | l | l |
(1) | Includes deposit accounts, trust accounts, certificates of deposit, safe deposit boxes, workplace banking, |
(2) | Includes extensions of credit, including mortgages, commercial loans, home equity loans, credit cards, |
(3) | Does not include matching gifts provided to charities personally supported by the director, because under |
(4) | Includes extensions of credit, including commercial loans, credit cards, |
Customer relationships. We provide financial services to most of our directors. We also provide financial services to some of their immediate family members and affiliated entities. We offer these services in the ordinary course of our business. Webusiness and provide the services on substantially the same terms and conditions, including price, as we provide to other similarly situated customers.
We also extend credit to some of our directors and their immediate family members and affiliated entities. Federal banking law (Regulation O) governs these extensions of credit. We discuss the impact of Regulation O and our process for managing these extensions of credit on pages 32underDirector and 33.Executive
Officer Relationships—Regulation O policies and procedures beginning on page 33.
Business relationships. We also enter into other business relationships with certain entities affiliated with our directors or their immediate family members. These relationships are entered into in the ordinary course of business.
Certain charitable contributions. We make contributions to charitable organizations where our directors serve as directors, trustees, or executive officers. We also match charitable contributions made by our directors. We describe thishave a matching gift program on page 36.whereby we will match a director’s personal gifts to qualifying charities up to a limit of $5,000 per year.
32 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 31
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Code of Business Conduct and Ethics
Our Code of Business Conduct and Ethics contains several provisions that regulate related person transactions. The Code of Business Conduct and Ethics applies generally to all employees, including our executive officers, and directors.
Doing business with PNC.PNC. An employee or an immediate family member may want to engage in a business arrangement, such as the sale or lease of property or the provision of services, with PNC. For these transactions, we require prior approval from a supervisor and our Corporate Ethics Office. If a director desires to engage in a business arrangement with PNC, approval is required from the Corporate Ethics Office and from a Board committee.
Financial services to employees.employees. Our employees and their extended families are encouraged to use PNC for their personal financial services. AnyThese services must be provided on the same terms as are available to the general public, all employees in a market or business, or all similarly situated employees.
Transacting PNC business.business. We prohibit directors and employees from transacting business on behalf of PNC with a supplier or customer in which the director, employee, or an extended family member has a significant personal or financial interest. We also prohibit directors and employees from transacting business on behalf of PNC with respect to their own accounts, extended family member accounts, or accounts for anyone whose close relationship may reasonably be viewed as creating a conflict of interest. Our phrase “extended family member” is similar to the SEC’s definition of “immediate family member” in Item 404(a) of RegulationS-K. We have established procedures in certain of our businesses to permit employees to transact business with family members, subject to appropriate oversight and compliance with applicable laws and regulations, including Regulation O.
Employing relatives.relatives. We employ relatives of certain executive officers and directors, in some cases under circumstances that constitute related person transactions. SeeFor additional information, seeDirector and Executive Officer Relationships—Family relationships on page 33.34. We track the employment and compensation of relatives of our executive officers and directors. Wedirectors, and we have policies that restrict special treatment in the hiring or compensation of a relative of an executive officer or director. Our employment of a director’s relative would beis also a factor in the determination of the director’s independence under NYSE rules and our own adopted guidelines forregarding director independence. SeeDirector and Executive Officer Relationships—Director independence, which begins beginning on page 29.30.
Waivers. UnderEmployees may generally request waivers or exceptions from certain provisions of the Code of Business Conduct and Ethics employees may generally request waivers or exceptions from our Corporate Ethics Office. In the case of directors and executive officers, any proposed waiver or exception must be approved by both the Corporate Ethics Office and the appropriate committee of our Board.Board committee. In 2016,2017, no directors or executive officers requested an exemption undera waiver of any of the provisions described above.
Ethics guidelinesGuidelines for directorsDirectors. The Audit Committee has adopted Ethics Guidelines for Directors that contain comprehensive guidance regarding the various PNC policies that governgoverning the conduct of our directorsdirectors. The guidelines are designed to supplement and assist directors in understanding these policies. These guidelines were most recently approved on August 10, 2016. The guidelines include reference to ourrelevant policies, and procedures applicable to directors, including ourthe Code of Business Conduct and Ethics described above, and our Related Person Transactions Policy and Regulation O policies and procedures, each described in more detail below, as well as our DirectorPre-Clearance of Securities Policy, and our Anti-Corruption Policy. The Ethics Guidelines for Directors were most recently approved on August 9, 2017.
Regulation O policies and procedures
We maintain additional policies and procedures to help ensure our compliance with Regulation O, which imposes various conditions on a bank’s extension of credit to directors and executive officers and related interests. Any extensions of credit we make must comply with our policies and procedures in accordance with Regulation O. A director can only meet our guidelines for independence forwith respect to extensions of credit if the credit complied with Regulation O at the time PNC extended it.
Our Regulation O policies and procedures require:
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32 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
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Our subsidiary bank, PNC Bank, National Association, has a Regulation O Credit Officer to reviewwho reviews extensions of credit to determine our compliance with these policies. If an extension of credit would result in an aggregate credit extension
of more than $500,000, the bank’s Board of Directors must approve it. The bank’s Board of Directors receives a report of all extensions of credit made to directors and executive officers under Regulation O.
All loans to directors, executive officers, and related interests outstanding during 2016:2017:
No family relationship exists betweenrelationships exist among any of our directors or executive officers and any of our other directors or executive officers. There are family relationships between certain of our directors and executive officers and some of the approximately 52,00053,000 PNC employees. These employees, including those discussed below, participate in compensation and incentive plans or arrangements on the same basis as other similarly situated employees.
Abrother-in-law of Gregory Jordan, one of our executive officers, is employed by PNC and had been for many years before Mr. Jordan joined PNC in 2013. He participates in compensation and incentive plans or arrangements on the same basis as similarly situated employees. He does not share a household with Mr. Jordan, is not an executive officer of PNC, and does not report directly to an executive officer of PNC. His compensation paid in 20162017 exceeded the $120,000 related person transaction threshold and as a result was reviewed by the Audit Committee.
A son of Michael Hannon, one of our executive officers, is employed by PNC. He participates in compensation and incentive plans or arrangements on the same basis as similarly situated employees. He does not share a household with Mr. Hannon, is not an executive officer of PNC, and does not report directly to an executive officer of PNC. His compensation paid in 20162017 exceeded the $120,000 related person transaction threshold and as a result was reviewed by the Audit Committee.
The daughter of Charles E. Bunch, one of ournon-management directors, has been employed by PNC for several years. She participates in compensation and incentive plans or arrangements on the same basis as similarly situated employees. She does not share a household with Mr. Bunch, is not an executive officer of PNC, and does not report directly to an executive officer of PNC. Her compensation paid in 20162017 exceeded the $120,000 related person transaction threshold. Her compensationthreshold and as a result was reviewed by the Nominating and Governance Committee.
Indemnification and advancement of costs
We indemnify directors, executive officers, and in some cases employees and agents against certain liabilities. The covered person may have incurred a liability as a result of service on our behalf or at our request. On behalf of a covered person, weWe may also advance the costs of certain claims or proceedings.proceedings on behalf of a covered person. If we advance costs, the covered person agrees to repay us if it is determined that the person was not entitled to indemnification. The insurance policies
we maintain for our directors and executive officers also provide coverage against certain liabilities.
The indemnification provisions, the advancement of costs, and our insurance coverage may provide benefits to our directors and executive officers. During 2016,2017, we advanceddid not advance legal costs on behalf of anto any director or executive officer with respect to pending litigation in which neither PNC nor the executive officer was named as a defendant.officer.
34 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 33
Related person transactions policy
Our policy for the review and approval of related person transactions was most recently approved on August 11, 2016. A related person transaction is generally any transaction in which PNC or its subsidiaries is or will be a participant, in which the amount involved exceeds $120,000, and a director (or nominee), executive officer, family member, or any beneficial owner of more than 5% of our common stock has or will have a direct or indirect material interest. Our policy for the review and approval of related person transactions was most recently approved on August 10, 2017.
This policy provides guidance on the framework for reviewing potential related person transactions and approving or ratifying related person transactions, and establishes our Presiding Director as the
individual who decides how transactions should be evaluated.
In general, a potential related person transaction that involves a director would be reviewed by ourthe Nominating and Governance Committee, as the transaction could also impact independence. A transaction involvingthat involves an executive officer or beneficial owner of more than 5% of our common stock would generally be reviewed by the Audit Committee. Under this policy, ourThe full Board receives reports on approved, disapproved, and ratified transactions. Under the policy, a permitted related person transaction must be considered to be in, or not inconsistent with, the best interestinterests of PNC and its shareholders.
Certain related person transactions
Based on information contained in a Schedule 13G filed with the SEC, BlackRock, Inc. (BlackRock), through certain of its subsidiaries, indicated that it beneficially owned more than 5% of our outstanding shares of common stock as of December 31, 20162017 (seeSecurity Ownership of Management and Certain Beneficial Owners—Security ownership of certain beneficial owners on page 79)83). BlackRock is the beneficial owner of our common stock as a result of being a parent company or control person of the subsidiaries disclosed in its Schedule 13G, each of which holds less than 5% of theour outstanding shares of common stock.
During 2016, PNC2017, we paid BlackRock approximately $6$7 million for use of BlackRock’s enterprise investment system and related services, which include risk analytics, portfolio management, compliance and operational processing. PNCWe also paid BlackRock approximately $4 million for securities trading related services, and approximately $1 million for investment advisory and administration services provided to certain PNCof our subsidiaries and separate accounts assets for a fee based on assets under management. These transactions were entered into on an arm’s length basis and contain customary terms and conditions.
During 2016, PNC2017, we received approximately $8$7 million in fees from BlackRock for distribution and shareholder servicing activities. These transactions were entered into on an arm’s length basis and contain customary terms and conditions.
PNCWe may in the ordinary course of business engage in transactions with BlackRock mutual funds, including using the BlackRock funds as treasury management vehicles for PNC’sour corporate clients,
selling BlackRock investment products to PNCour customers or placing PNCour customer funds in BlackRock mutual funds, using BlackRock funds as
an investment vehicle for the PNC 401(k) accounts, providing commercial loan servicing to BlackRock funds, or providing shareholder services to PNCour clients who are shareholders of BlackRock mutual funds.
PNCWe may also make loans to BlackRock or the BlackRock funds. These loans are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to PNC;PNC, and do not involve more than the normal risk of collectability.
PNC holdsWe hold an equity investment of approximately 22% in BlackRock. In connection with this equity investment, PNC haswe have entered into various agreements governing the terms of this relationship. PNCWe received cash dividends from BlackRock of $331approximately $354 million during 2016.2017.
Based on information contained in separate Schedule 13G filings with the SEC, Wellington Management Group, LLP and certain subsidiaries (Wellington) and The Vanguard Group (Vanguard) each indicated that it beneficially owned more than 5% of our outstanding shares of common stock as of December 31, 20162017 (seeSecurity Ownership of Management and Certain Beneficial Owners—Security ownership of certain beneficial ownerson page 79)83). In the ordinary course of business during 2016, PNC’s2017, our Corporate & Institutional Banking business engaged in treasury management and capital markets transactions with Vanguard. These transactions were entered into on an arm’s length basis and contain customary terms and conditions. This business is also a party to several credit facilities with Vanguard and a counterparty clearing line with Wellington. These credit transactions were on substantially the same terms, including interest rates and collateral, as those prevailing at the time for
34 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 35
RELATED PERSON TRANSACTIONS
basis and contain customary terms and conditions. This business is also a party to several credit facilities with Vanguard and a counterparty clearing line with Wellington. These credit transactions were on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable facilities with persons not related to PNC, and do not involve more than the normal risk of collectability. In addition, PNC’sour Asset Management
Group includes Vanguard and Wellington funds and Vanguard exchange traded funds in its investment platform. PNC Investments
includes Vanguard funds and exchange traded funds in its investment platform. While PNC investmentsInvestments does not currently include Wellington funds in its platform, it may do so in the ordinary course when evaluating the funds to be included.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires persons who own more than ten percent of a registered class of our equity securities (currently, none) and our directors and executive officers to file with the SEC initial reports of ownership and reports inof changes in ownership of any PNC equity
securities. To the best of our knowledge, all formssuch reports were filed on a timely basis during 2016.2017. In making this statement, we have relied in part on the written representations of our directors and executive officers and on copies of the reports provided to us.
Our Board’sThe Nominating and Governance Committee of the Board reviews all elements ofnon-employee director compensation, explainedwhich are described below, and makes an annual compensation recommendation to the Board. In addition to annual compensation, the Committee may approve special compensation to a director for extraordinary service. The primary objectives of the Committee’s annual review are to confirm continued alignment
with business and
shareholder interests, evaluate the competitiveness of our director compensation program relative to the peer group, and identify and respond to continued changes in director compensation in light of the competitive environment. The Nominating and Governance Committee conducted its annual compensation review for 20162017 on April 26, 2016.25, 2017.
Mr. Demchak receives no additional compensation for serving as a PNC director.
The following table describes the components of director compensation in 2016:2017:
Annual Retainer | ||||
Each director | $ | 67,500 | ||
Additional retainer for Presiding Director | $ | 30,000 | ||
Additional retainer for Chairs of Audit, Risk, and Personnel and Compensation Committees | $ | 20,000 | ||
Additional retainer for Chair of Nominating and Governance Committee | $ | 15,000 | ||
Additional retainer for Chair of Executive Committee | $ | 10,000 | ||
Additional retainer for Chairs of Special Compliance Committee and Technology Subcommittee | $ | 15,000 | ||
Meeting Fees (Board) | ||||
Each meeting (except for quarterly scheduled telephonic meetings) | $ | 1,500 | ||
Each quarterly scheduled telephonic meeting | $ | 1,000 | ||
Meeting Fees (Committee/Subcommittee) | ||||
First six meetings | $ | 1,500 | ||
All other meetings | $ | 2,000 | ||
Equity-Based Grants | ||||
Value of 1,547 deferred stock units awarded as of April 26, 2016 | $ | 137,497 |
Annual Retainer | ||||
Each director | $ | 90,000 | ||
Additional retainer for Presiding Director | $ | 30,000 | ||
Additional retainer for Chairs of Audit, Nominating and Governance, Personnel and Compensation, and Risk Committees | $ | 25,000 | ||
Additional retainer for Chairs of Compliance Subcommittee and Technology Subcommittee | $ | 25,000 | ||
Meeting Fees (Committee/Subcommittee) | ||||
First six meetings | $ | 1,500 | ||
All other meetings | $ | 2,000 | ||
Equity-Based Grants | ||||
Value of 1,197 deferred stock units awarded as of April 25, 2017 | $ | 144,969 |
Deferred compensation plans.Our non-managementnon- management directors may choose to defer the compensation they receive fromfor meeting fees and retainers under our Directors Deferred Compensation Plan. Our Outside Directors Deferred Stock Unit Plan, used for director stock unit grants through 2016, provided for automatic deferrals of
any stock unitsUnder this plan, the directors may elect to defer compensation into an account that we awarded under the plan. For compensation deferred under these plans:
The deferred compensation account tracks the price of PNC common stock (the Directors Deferred Compensation Plan allows a director to trackor an interest rate option instead). Additionally,defined in the plan. The accounts that track the price of PNC common stock are credited
with a number of units
THE (including fractional shares) that could have been purchased with the equivalent of PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 35
DIRECTOR COMPENSATION
In November 2016, our Nominating and Governance Committee approved a new deferred stock unit program under the 2016 Incentive Award Plan, for any stock unit grants madelump sum or up to non-management directors beginning in 2017.
Other director benefits. We generally limit the benefits that we provide to our directors, but we regularly provide the following:
|
We may also provide other incidental benefits to our directors from time to time, including tickets to cultural, social, sporting or other events and small gifts for holidays, birthdays, or special occasions. We may also provide travel for directors on corporate aircraft for personal purposes in limited circumstances, such as a family emergency or when a seat is available on a previously scheduled flight. We determine the value of these benefits based on the incremental cost to PNC, as described on page 51 and we include the amount in the “All Other Compensation” column below.
Director stock ownership requirement. Our Board has adopted a common stock purchase guideline for our non-management directors. Under this guideline, each director must own at least 5,000 shares of PNC common stock (including phantom stock units). Until a director meets this ownership level, he or she must purchase or acquire common stock or stock units that equal at least 25% of the10 annual retainer for that year. A director may satisfy this requirement through open market purchases, or by deferring compensation into stock units under the Directors Deferred Compensation Plan. As of December 31, 2016, the minimum ownership threshold for directors was valued at $584,800, and all of our directors serving at that time, other than Marjorie Rodgers Cheshire, who was appointed in October 2014, and Daniel R. Hesse and Michael J. Ward, who were appointed in January 2016, satisfied the ownership guideline.installment payments.
For the fiscal year 2016, we provided the following compensation to our non-employee directors:
Director Name | Fees Earned(a) | Stock Awards(b) | All Other Compensation(c) | Total | ||||||||||||
Charles E. Bunch | $ | 101,500 | $ | 137,497 | $ | 42,754 | $ | 281,751 | ||||||||
Paul W. Chellgren* | $ | 47,750 | - | $ | 100,307 | $ | 148,057 | |||||||||
Marjorie Rodgers Cheshire | $ | 127,000 | $ | 137,497 | $ | 16,696 | $ | 281,193 | ||||||||
Andrew T. Feldstein | $ | 141,000 | $ | 137,497 | $ | 21,838 | $ | 300,335 | ||||||||
Daniel R. Hesse** | $ | 109,350 | $ | 137,497 | $ | 2,404 | $ | 249,251 | ||||||||
Kay Coles James | $ | 108,000 | $ | 137,497 | $ | 54,783 | $ | 300,280 | ||||||||
Richard B. Kelson | $ | 143,000 | $ | 137,497 | $ | 66,863 | $ | 347,360 | ||||||||
Anthony A. Massaro* | $ | 49,250 | - | $ | 34,880 | $ | 84,130 | |||||||||
Jane G. Pepper | $ | 122,000 | $ | 137,497 | $ | 63,790 | $ | 323,287 | ||||||||
Donald J. Shepard | $ | 167,000 | $ | 137,497 | $ | 81,584 | $ | 386,081 | ||||||||
Lorene K. Steffes | $ | 130,000 | $ | 137,497 | $ | 72,866 | $ | 340,363 | ||||||||
Dennis F. Strigl | $ | 135,000 | $ | 137,497 | $ | 99,920 | $ | 372,417 | ||||||||
Thomas J. Usher* | $ | 59,750 | - | $ | 60,413 | $ | 120,163 | |||||||||
Michael J. Ward** | $ | 94,850 | $ | 137,497 | $ | 2,927 | $ | 235,274 | ||||||||
Gregory D. Wasson | $ | 121,000 | $ | 137,497 | $ | 4,338 | $ | 262,835 |
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36 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
DIRECTOR COMPENSATION
Under the Outside Directors Deferred Stock Unit Program, a subprogram of the 2016 Incentive Award Plan, eachnon-employee director is eligible to receive an annual grant of deferred stock units that vest immediately upon grant and are paid out in shares of PNC common stock at retirement. The deferred stock units accrue dividends with reinvestment equal to the number of units that could have been purchased with the equivalent of PNC common stock cash dividends (rounded down to the nearest whole share).
Other director benefits. We generally limit the benefits that we provide to our directors, but we regularly provide the following:
• | Charitable matching gifts.We will match a director’s personal gifts to qualifying charities up to a limit of $5,000 per year. Mr. Demchak is only eligible to participate in our employee matching gift program, which has a $2,500 annual limit. |
• | Insurance policies.We pay for various insurance policies that protect directors and their families from personal loss connected with Board service. |
• | Expenses related to Board service. We pay for expenses connected with our directors’ Board service, including travel on corporate, private, or commercial aircraft, lodging, meals, and incidentals. |
We may also provide other incidental benefits to our directors from time to time, including tickets to
cultural, social, sporting, or other events and small gifts for holidays, birthdays, or special occasions. In limited circumstances, we may also provide travel for directors on corporate aircraft for personal purposes, such as when a family emergency arises or a seat is available on a previously scheduled flight. We determine the value of these benefits based on the incremental cost to PNC and we include the amount in the “All Other Compensation” column of the director compensation table below.
Director stock ownership requirement. The Board has adopted a common stock purchase guideline for ournon-management directors. Under this guideline, each director must own at least 5,000 shares of PNC common stock (including phantom stock units). Until a director meets this ownership level, he or she must purchase or acquire common stock or stock units that equal at least 25% of the annual retainer for that year. A director may satisfy this requirement through open market purchases or by deferring compensation into stock units under the Directors Deferred Compensation Plan. As of December 31, 2017, the minimum ownership threshold for directors was valued at $721,450. All of our directors serving at that time, other than Daniel R. Hesse, who was appointed in January 2016, and Debra A. Cafaro, who was appointed in August 2017, satisfied the ownership guideline.
For fiscal year 2017, we provided the following compensation to ournon-employee directors:
Director Name | Fees Earned(a) | Stock Awards(b) | All Other Compensation(c) | Total | ||||||||||||
Charles E. Bunch | $103,250 | $144,969 | $ 57,396 | $305,615 | ||||||||||||
Debra A. Cafaro* | $ 41,344 | – | $ 5,176 | $ 46,520 | ||||||||||||
Marjorie Rodgers Cheshire | $158,750 | $144,969 | $ 11,803 | $315,522 | ||||||||||||
Andrew T. Feldstein | $146,250 | $144,969 | $ 31,809 | $323,028 | ||||||||||||
Daniel R. Hesse | $114,750 | $144,969 | $ 10,208 | $269,927 | ||||||||||||
Kay Coles James | $109,250 | $144,969 | $ 64,418 | $318,637 | ||||||||||||
Richard B. Kelson | $152,750 | $144,969 | $ 73,792 | $371,511 | ||||||||||||
Jane G. Pepper | $108,750 | $144,969 | $ 83,877 | $337,596 | ||||||||||||
Donald J. Shepard | $187,250 | $144,969 | $109,243 | $441,462 | ||||||||||||
Lorene K. Steffes | $139,750 | $144,969 | $ 89,556 | $374,275 | ||||||||||||
Dennis F. Strigl | $141,250 | $144,969 | $117,136 | $403,355 | ||||||||||||
Michael J. Ward | $101,750 | $144,969 | $ 10,761 | $257,480 | ||||||||||||
Gregory D. Wasson | $120,750 | $144,969 | $ 10,501 | $276,220 |
* | Ms. Cafaro was appointed as a director on August 10, 2017. |
(a) | This column includes the annual retainer, additional retainers for the Presiding Director and the chairs of standing committees and subcommittees, and meeting fees earned for 2017. The amounts in this column also include the fees voluntarily deferred by certain directors under our Directors Deferred Compensation Plan, anon-qualified defined contribution plan, as follows: Debra A. Cafaro ($37,639); Marjorie Rodgers Cheshire ($ |
(b) | The |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 37
DIRECTOR COMPENSATION
As of December 31, 2017, thenon-employee directors listed in the table below had outstanding stock units in the following amounts: Charles E. Bunch Debra A. Cafaro Marjorie Rodgers Cheshire Andrew T. Feldstein Daniel R. Hesse Kay Coles James Richard B. Kelson Jane G. Pepper Donald J. Shepard Lorene K. Steffes Dennis F. Strigl Michael J. Ward Gregory D. Wasson | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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None of ournon-employee directors had any outstanding stock options or unvested stock awards as of December 31, |
(c) | This column includes income under the Directors Deferred Compensation Plan, the Outside Directors Deferred Stock Unit Plan, and the Mercantile Bankshares Corporation Deferred Compensation Plan (for Mr. Shepard only) as follows: Charles E. Bunch ($ |
38 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 37
COMPENSATION DISCUSSION AND ANALYSIS
This sectionCompensation Discussion and Analysis (CD&A) explains our executive compensation philosophy, describes our compensation programs and reviews compensation decisions for the following named executive officers (NEOs):
Name of NEO | Title | |
William S. Demchak | Chairman, President and Chief Executive Officer | |
Robert Q. Reilly | Executive Vice President and Chief Financial Officer | |
Michael P. Lyons * | Executive Vice President and Head of Corporate & Institutional Banking | |
E William Parsley, III * | Executive Vice President, Treasurer, Chief Investment Officer | |
Steven C. Van Wyk | Executive Vice President and Head of Technology and |
* | In 2018, Mr. Lyons became the Head of the Asset Management Group in addition to his existing duties, and Mr. Parsley became Chief Operating Officer. |
We grew | ||
We delivered value for our shareholders. | ||
| We | |
We also continued to execute | ||
| We returned |
On pages 44 to 48,49, we discuss in more detail how our 20162017 performance affected our compensation decisions.
This section talks aboutdiscusses how we view executive compensation and why we make the decisions that we do.do regarding executive compensation. Our Board’s Personnel and Compensation Committee
Committee (the(referred to in this CD&A as the Committee) relies on key principles to help guide its executive compensation decisions:
COMPENSATION PRINCIPLES
| |||||||||
Pay for performance Provide appropriate
| Create value Align executive
|
Provide competitive compensation opportunities to attract, retain, and motivate high-quality executives
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Discourage excessive risk-taking Encourage focus on the long-term success of PNC and discourage excessive risk-taking
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38 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 39
COMPENSATION DISCUSSION AND ANALYSIS
The Committee believes that the successful application of these principles requires a thoughtful program design, which includes a balanced evaluation of performance. The Committee believes that discretion, flexibility, and judgment are critical to its ability to deliver incentive compensation that reflects
reflects near-term performance results and progress toward longer-term priorities that allow PNC to create value for our shareholders. The following table illustrates some important features of our executive compensation program:
WHAT WE DO | WHAT WE DON’T DO | |||||
| We pay for performance. |
û | We do not allow taxgross-ups.We do not provide excise taxgross-ups in our current change | |||
| We discourage excessive |
û | We will not enter into substantial severance arrangements without shareholder approval. If a severance arrangement would pay more than 2.99 times base and bonus (in the year of termination), it requires shareholder approval. | |||
| We require executives to hold PNC stock.Our executives must hold a substantial amount of PNC stock, and this amount continues to increase as their equity awards vest. |
û | We | |||
| We have a clawback and forfeiture |
û | We do not reprice stock options. Although we currently do not grant stock options, our equity plan does not permit us to reprice stock options that areout-of-the-money, unless approved by shareholders. | |||
| We limit the perquisites we provide.We limit the primary perquisites that we offer to our |
û | We do not enter into employment agreements. We do not enter into individual employment agreements with our NEOs – they serve at the will of the Board. | |||
| We retain an independent compensation consultant. |
û | We prohibit hedging, pledging, or short sales of PNC securities. We do not allow any director or employee to hedge or short-sell PNC securities. We do not allow any director or executive officer to pledge PNC securities. | |||
| We engage with our shareholders.We actively engage with our shareholders on governance and compensation issues. |
Stakeholder engagement and impact of 2016 2017say-on-pay vote
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| For the past several years, we have initiated outreach efforts with certain institutional investors. In | |
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40 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 39
COMPENSATION DISCUSSION AND ANALYSIS
Key program features
The Committee reviews and approves the compensation to be paid to our NEOs and other senior leaders. We strive forseek clarity and transparency in our compensation structure, using features that we believe will help to create a balanced program. While we try to reflectconsider the
expectations of various
stakeholders, we want our compensation program to achieve multiple objectives, consistent with our compensation principles. The Committee also regularly reviews the operation of our compensation program to help ensure that our objectives continue to be met.
Taken as a whole, our executive compensation program includes several complementary features:
| We provide incentives for performance over different time horizons (short and long-term). | |
| We embed performance goals in our long-term incentives, and include a risk-based | |
| We reward achievement against both quantitative and qualitative goals, while allowing for discretion. | |
| We connect pay to our own performance, as well as the performance of a carefully selected peer group. | |
| We consider market data and trends when making pay decisions. | |
| We place a substantial majority of compensation at | |
| We pay some incentive compensation in cash today, while deferring potential equity-based payouts for several years. |
Regulatory expectations
As a large financial institution, we must also comply with various regulatory requirements. The Board of Governors of the Federal Reserve (Federal Reserve) regulates PNC as a bank holding company and has provided guidance and set expectations with respect to our current compensation program. The Office of the Comptroller of the Currency (OCC) regulates our primary banking subsidiary, and also sets expectations for our compensation program. We expect that theThe Federal Reserve, the OCC and
other financial industry regulatory entities, including the SEC, will continue tomay provide periodic guidance periodically on compensation matters.
Total compensation targets
Each NEO receives a total compensation target for the year – consisting of a base salary and an incentive compensation target (cash and equity-based awards). We generally set these targets in the first quarter of the year, or when an executive joins PNC or assumes new responsibilities.
Total compensation targets include the following components:
A total compensation target includes the following components:
40 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 41
COMPENSATION DISCUSSION AND ANALYSIS
When constructing an appropriate total compensation target for an NEO, the Committee
uses a framework that is consistent with our compensation principles:
Targets are informed by data but take several factors into account.The Committee reviews available market data, but does not use a formula to set the target. The Committee evaluates many factors, including the appropriateness of the job match and market data, the responsibilities of the position and the executive’s demonstrated performance, skills, and experience. | ||
At least 50% of compensation is equity-based and not payable for several years.The Committee believes that a significant portion of compensation should be at risk, tied to PNC stock performance, and not payable, if at all, for several years. Long-term equity-based awards make up at least 50% of the value of the total compensation target, with that percentage rising to 60% for our CEO (and | ||
The equity-based incentive is split |
The equity-based awards are made under PNC’s shareholder-approved 2016 Incentive Award Plan. The table below summarizes the material terms and conditions of these awards:
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 41
COMPENSATION DISCUSSION AND ANALYSIS
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EPS | Payout % |
ROCE as % of COCE |
Payout % | Annual TSR | Payout % | |||||||||||||
1 | 125% | >= 110% | 125% | >= +25% | 125% | |||||||||||||
2 | 125% | 105% | 100% | 0% | 100% | |||||||||||||
3 | 125% | 100% | 75% | <= -25% | 75% | |||||||||||||
4 | 120% | 75% | 50% | |||||||||||||||
5 | 115% | <= 50% | 0% | |||||||||||||||
6 | 105% | |||||||||||||||||
7 | 95% | |||||||||||||||||
8 | 80% | |||||||||||||||||
9 | 60% | |||||||||||||||||
10 | 40% | |||||||||||||||||
11 | 0% | |||||||||||||||||
12 | 0% | |||||||||||||||||
ALM IPUs: | ||||||||||||||||||
ALM vs. Index | Payout % | |||||||||||||||||
>= +40 basis points | 200% | |||||||||||||||||
+20 basis points | 150% | |||||||||||||||||
0 to -25 basis points | 100% | |||||||||||||||||
-35 basis points | 40% | |||||||||||||||||
<= -40 basis points | 0% | |||||||||||||||||
What are other important provisions? | • If we do not meet or exceed the Tier 1 risk-based capital ratio for “well-capitalized” institutions, the award will not vest. • If our return on economic capital does not exceed our cost of capital, the Committee may reduce or eliminate the award. • No long-term incentive award has voting rights. • Dividends will accrue until vesting and be paid out in cash, adjusted for actual performance (Standard IPUs and performance-based RSUs) – the ALM IPUs do not have any accrued dividends.
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The Committee believes that the total compensation targets collectively provide an appropriate balance between fixed and variable amounts, measuring short-term and long-term performance, immediate and deferred payouts, and
cash and equity-based awards. For information on how the 20162017 incentive compensation decisions by the Committee compared to the targets, please see page 46.
Other compensation and benefits
In addition to the components included in the total compensation target outlined above, our executive
compensation program also includes the following components:
Perquisites | • Limited perquisites provided to • No tax gross-ups on the perquisites we provide. | |
Change in Control Arrangements | • Provide for continuity of management in connection with a change in control. • Described in more detail beginning on | |
Health and Retirement Plans | • Promote health and wellness. • Help employees achieve financial security after retirement. |
Evaluating performance:performance
The Committee uses several metrics to help evaluate performance when making compensation decisions. These metrics align, to the extent possible, the objectives of our management,
long-term shareholders and banking regulators. In some cases, these stakeholders have different objectives that cannot be easily reconciled – for example, long-term shareholders seeking higher
42 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
returns may be willing to tolerate more risk than a federal banking
regulator would. That is one reason we use multiple metrics, representing achievement against both objective and subjective goals, as well as significant adjustments for risk management. The
Committee does not necessarily favor one metric over another. Instead, the Committee uses these metrics to gain a comprehensive understanding of our overall performance.
42 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The following chart describes some of the key metrics that the Committee evaluates, and provides a brief explanation of why we use them.each metric. We consider all of these metrics in our overall evaluation
of executive compensation, and some of these metrics are also used to calculate payouts under the long-term incentive program.
Capital and risk metrics | ||
Capital ratios | The federal banking regulators have adopted capital rules that establish risk-based and leverage capital ratios to evaluate the capital adequacy and financial strength of banking organizations. The regulatory capital rules establish certain minimum requirements for these ratios. For example, bank holding companies, like PNC, must maintain minimum risk-based capital ratios of 4.5% for common equity Tier 1 capital, 6% for Tier 1 capital ratio, and 8% for total capital. Other federal banking regulations reference the regulatory capital rules and establish requirements based on regulatory capital ratios in order for bank holding companies to, among other things, engage in new or expanded activities and make acquisitions. | |
Economic capital | Economic capital represents the capital that we should hold against unexpected losses. Economic capital serves as a “common currency” of risk that allows us to compare different risks on a similar basis across our company. | |
Return on economic capital (ROEC) vs. cost of capital | ROEC is our annualized net income divided by our economic capital. Comparing our profits to how much capital we are holding against potential losses helps to provide a risk-based evaluation of profitability. When we compare ROEC to our cost of capital – that is, a minimum rate of return on the overall capital that we hold – it provides a good measure of the excess value that we provide to shareholders. | |
| ||
Expense metrics | ||
Efficiency ratio | The efficiency ratio helps us evaluate how efficiently we operate our business. The ratio divides our noninterest expense (such as compensation and benefits, occupancy costs, equipment, and marketing) by our revenue. In general, a smaller ratio is better. A bank’s efficiency ratio will be affected, however, by its particular mix of businesses. | |
Profitability metrics | ||
Earnings per share (EPS) | EPS is a common metric used by investors to evaluate the profitability of a company. It shows the earnings (net income) we make on each outstanding share of common stock. | |
EPS growth | While EPS represents a specific dollar amount, EPS growth represents the percentage growth of EPS since last year. EPS growth helps us to compare our annual earnings strength to our peers. | |
Return on assets (ROA) | Investors often evaluate banks by their asset size, with loans and investment securities making up the largest components of assets. ROA is our annualized net income divided by our average assets and represents how efficiently we use assets to generate profit. | |
Return on | Return on equity (including return on common equity) measures profitability by showing how much profit we generate (net income) with the money our shareholders have invested (equity). It shows how efficiently we deploy our investors’ funds. Return on equity measures total annualized net income divided by average total shareholders’ equity. Return on common equity is our annualized net income attributable to our common shareholders, divided by average common shareholders’ equity. | |
Revenue metrics | ||
Net interest income | Net interest income measures the revenue generated from lending and other activities minus all interest expenses (such as interest paid on deposits and | |
Noninterest income | Noninterest income measures the fees and other revenue we derive from our businesses (other than interest income). A healthy mix of net interest income and noninterest income provides diverse earnings streams and lessens a bank’s reliance on the interest rate environment. | |
Valuation metrics | ||
Tangible book value per share | Thisnon-GAAP financial measure takes our total tangible common shareholders’ equity (intangible assets, such as goodwill, are excluded) and divides that by the number of shares outstanding. This provides investors with an objective valuation method and allows them to compare relative values of similar companies. | |
Total shareholder return (TSR) | TSR is a common metric used to show the total returns to an investor in our common stock. Annual TSR takes into account the change in stock price from the beginning to the end of the year, as well as the reinvestment of any dividends issued throughout the year. |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 43
COMPENSATION DISCUSSION AND ANALYSIS
20162017 compensation decisions
20162017 total compensation targets
For 2016,
At the beginning of 2017, the Committee set the following total compensation targets for our NEOs:
William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III | Steven C. Van Wyk | ||||||||||||||||
Base salary (annualized) | $ | 1,100,000 | $ | 500,000 | $ | 700,000 | $ | 600,000 | $ | 500,000 | ||||||||||
Incentive compensation target | $ | 10,500,000 | $ | 3,000,000 | $ | 6,050,000 | $ | 6,900,000 | $ | 2,750,000 | ||||||||||
Annual cash incentive portion | $ | 3,540,000 | $ | 1,250,000 | $ | 2,000,000 | $ | 2,400,000 | $ | 1,125,000 | ||||||||||
Long-term incentive portion | $ | 6,960,000 | $ | 1,750,000 | $ | 4,050,000 | $ | 4,500,000 | (1) | $ | 1,625,000 | |||||||||
Total compensation target | $ | 11,600,000 | $ | 3,500,000 | $ | 6,750,000 | $ | 7,500,000 | $ | 3,250,000 |
William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III | Steven C. Van Wyk | ||||||||||||||||
Base salary (annualized) | $ | 1,100,000 | $ | 500,000 | $ | 700,000 | $ | 600,000 | $ | 500,000 | ||||||||||
Incentive compensation target | $ | 10,500,000 | $ | 3,250,000 | $ | 6,050,000 | $ | 6,900,000 | $ | 2,750,000 | ||||||||||
Annual cash incentive portion | $ | 3,540,000 | $ | 1,375,000 | $ | 2,000,000 | $ | 2,400,000 | $ | 1,125,000 | ||||||||||
Long-term incentive portion | $ | 6,960,000 | $ | 1,875,000 | $ | 4,050,000 | $ | 4,500,000 | $ | 1,625,000 | ||||||||||
Total compensation target | $ | 11,600,000 | $ | 3,750,000 | $ | 6,750,000 | $ | 7,500,000 | $ | 3,250,000 |
The market data reviewed by the Committee show that our CEO’s total compensation target generally fell within 20% of the median compensation for peers, as adjusted for PNC’s size. The total compensation targets for our other NEOs are generally aligned with the market, based on our size relative to peers. For the 20162017 performance year, the Committee increased the incentivetotal compensation targetstarget for Mr. DemchakReilly (from $9,900,000$3,500,000 to $10,500,000), Mr. Lyons (from $4,800,000 to $6,050,000), and Mr. Parsley (from $5,500,000 to $6,900,000). The Committee also approved a base salary increase for Mr. Parsley (from $500,000 to $600,000)$3,750,000). The Committee approved these increasesthis increase based on theMr. Reilly’s performance, skills and experience, of the executive, as well as changes in market information for similar executives at other financial institutions. Mr. Parsley’s target increase was also based on the significant expansion of his duties at the end of 2015 and beginning of 2016, which
includes responsibility for our mortgage and home equity businesses, and for consumer lending and pricing, in addition to his previous responsibilities.
20162017 performance
We review various performance metrics with the Committee each quarter and after the end of our performance year. For the key metrics listed below, we comparedthe Committee evaluates this year’s performance to how we performed last year, how we performed against this year’s budget, and how we performed against peers (see page 4952 for the companies in our 20162017 peer group). WeThe Committee also provide information to the Committee onreviews other important capital, risk, expense and business metrics, some of which are shown below. For a general explanation of the metrics that we use to evaluate our compensation program, and our rationale for using them, see page 43.
KEY PERFORMANCE METRICS | 2016 actual(1) | 2015 actual(1) | 2016 budget | |||||||||
Net interest income (in millions) | $ | 8,391 | $ | 8,278 | $ | 8,528 | ||||||
Noninterest income (in millions) | $ | 6,771 | $ | 6,947 | $ | 6,902 | ||||||
Diluted EPS | $ | 7.30 | $ | 7.39 | $ | 7.40 | ||||||
Return on common equity without goodwill (non-GAAP) | 11.32% | 12.22% | 11.48% | |||||||||
Return on assets | 1.10% | 1.17% | 1.11% | |||||||||
Efficiency ratio | 62% | 62% | 62% | |||||||||
Net income (in millions) | $ | 3,985 | $ | 4,143 | ||||||||
Annual total shareholder return | 25.8% | 6.81% | ||||||||||
Tangible book value per common share (non-GAAP) | $ | 67.26 | $ | 63.65 | ||||||||
Tier 1 risk-based capital ratio | 12.00% | 12.00% | ||||||||||
Return on economic capital vs. cost of capital (non-GAAP) | 5.64% | 5.06% |
These tables include non-GAAP financial measures. See Annex A for additional information.
KEY PERFORMANCE METRICS | 2017(1) | 2016(1) | 2017 budget | |||||||||
Net interest income (in millions)* | $ | 9,134 | $ | 8,391 | $ | 8,856 | ||||||
Noninterest income (in millions) | $ | 7,221 | $ | 6,771 | $ | 6,795 | ||||||
Diluted earnings per common share* | $ | 8.04 | $ | 7.30 | $ | 7.70 | ||||||
Return on common equity (without goodwill)* | 12.02% | 11.32% | 11.38% | |||||||||
Return on assets* | 1.15% | 1.10% | 1.10% | |||||||||
Efficiency ratio* | 63.58% | 62.50% | 61.62% | |||||||||
Net income (in millions) | $ | 5,388 | $ | 3,985 | ||||||||
Annual total shareholder return | 26.0% | 25.8% | ||||||||||
Tangible book value per share* | $ | 72.28 | $ | 67.26 | ||||||||
Tier 1 risk-based capital ratio | 11.60% | 12.01% | ||||||||||
Return on economic capital vs. cost of capital*(2) | 5.66% | 5.64% |
* | Non-GAAP financial measure. See Annex A for a reconciliation of non-GAAP financial measures to GAAP, and for additional information. |
(1) | Some of the results include certain adjustments to PNC’s performance. The |
(2) | This risk-based metric is used |
44 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
At meetings held during the first quarter of 2017,2018, the Committee reviewed PNC’s performance for the 2016 performance year.2017. The Committee noted that PNC delivered consistent performancea successful year in 2016,2017, with record net income, somewhat down from 2015, but withrecord fee income, and growth in loans and deposits. PNC added customers across the businesses, expanded into new markets, and continued to focus on expense management. Compared to the peer group, net interest income, noninterest income and feereturn on assets were at or above the 75th percentile, while EPS growth, efficiency ratio, and return on common equity without goodwill were all near or above the median. One- and three-year TSR were above the 75th percentile for our peer group, and we ranked first in our peer group for five-year TSR.
The Committee reviewed these and other metrics and concluded that in the aggregate, they reflected
PNC’s strong performance in 2017, on both an absolute basis and against peers. The Committee took into account that PNC achieved strong growth in its loan portfolio and net interest income growth, strong shareholder returns,while staying within its desire risk appetite and continued execution against our strategic priorities. We also maintained disciplined risk and expense management, and positioned ourby maintaining an asset-sensitive balance sheet to benefitthat benefited from a rising interest rate environment.
Despite showing net interest income growth year over year, we lagged our peer group. This In the Committee’s opinion, these outcomes reflected in part, our deliberate choices to stay within our risk appetite and not grow our loan portfolio without receiving appropriate returns. Recognizing the cyclicality of the traditional lending business, we believe that this approach positions us well for the future. We also trailed our peers in noninterest income growth, which was driven primarily by a year-over-year decrease in our other income (such as lower net gains on sales of our Visa stock) – while our fee income, a non-GAAP financial measure, was up 1% from last year. Our return on common equity (without
goodwill), a non-GAAP financial measure, and our efficiency ratio were both near the median for our peers, and our return on assets was above the median. See Annex A for more information on non-GAAP financial measures.
The Committee noted the ongoing impactmanagement’s patient execution of a low interest rate environment on our business results, and our strategy to manage balance sheet risk by not pursuing loans and other assets that are outside of our enterprise risk appetite. The Committee also noted that we grew net interest income despite continuing to lose income fromprudent, risk-balanced, long-term strategy.
At these meetings held in early 2018, the impaired loans that we acquired in prior acquisitions (referred to as purchase accounting accretion runoff), and that we grew fee income.
The Committee also reviewed PNC’s performance against the following key strategic priorities listed below, which werehad previously been reviewed with ourthe Board at the beginning of 2016.in 2017. Despite the challenging environment, management continued to drive growth across the franchise and make strategic investments to position PNC for long-term success.
2017 STRATEGIC PRIORITIES | |||||
Building a leading banking franchise in our underpenetrated markets | We achieved year-over-year growth across most of our lines of business in the Southeast, with increases in average loans, discretionary assets under management, average household demand deposit accounts, and new primary Corporate Banking clients. | ||||
| We expanded our middle market franchise into new markets. | ||||
Redefining the retail banking experience |
| We earned the #1 rank in the J.D. Power national bank satisfaction survey. | |||
We continued | |||||
62% of | |||||
Deposit transactions via ATM and
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Capturing more investable assets |
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| Brokerage fees | ||||
Brokerage account client assets were $49 billion at year
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In addition to evaluating our corporate performance based on these financial and strategic metrics, the Committee also reviewed the individual performance of each NEO. The CEO discussed the individual performance of the NEOs with the Committee, and, where appropriate, discussed the performance of the lines of business or functions managed by the NEOs. The Committee approved compensation awards for each NEO based on an evaluation of corporate, business and individual performance. ForThe Committee discussed compensation recommendations for our CEO the Committee approved the compensation amounts in an executive session, with no members of management present. Meridian, the Committee’s independent compensation consultant for 2016, participated in2017. Following this discussion, with the Committee.Committee approved the compensation amounts for our CEO in an executive session.
The Committee also reviewed the CEO compensation decisions in an executive session of
the independent members of the board of directors of PNC, with no members of management present. In that executive session, the Committee allowed time for the independent directors to provide comments or questions about the CEO’s performance or compensation.
Based on anthe overall evaluation of PNC’s 20162017 performance, including a review of the performance metrics described above and management’s execution against the strategic priorities, the Committee determined that it was appropriate to award incentive compensation for each NEO that was generally belowsignificantly above the target amount, and generally belowsignificantly above last year’s awards. While theThe Committee believed that PNC continued to deliver consistent resultsPNC’s strong absolute and relative performance in a challenging environment, overall enterprise performance was generally lower than in 2015, and lower than our 2016 budget,2017, achieving growth while staying within the desired risk appetite, and the incentive compensation decisions forcontinued execution against strategic objectives, particularly in bolstering the technology and risk
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 45
COMPENSATION DISCUSSION AND ANALYSIS
management infrastructure while managing overall expenses, were key contributing factors in the NEOs reflected that relatively lower performance.Committee’s compensation decisions. The actual
incentive compensation payouts also reflect individual performance, including business unit (or function) performance and consideration of risk management. Mr. Reilly’s incentive compensation award amount was slightly higher than his target amount. This reflected, in part, current market data
for compensation for chief financial officers. In light of that data and Mr. Reilly’s skills and performance, the Committee increased Mr. Reilly’s 2017 incentive compensation target to $3,250,000. In making the 2016 incentive compensation awards, the Committee considered, among other things the achievements described on pages 46 to 48 for each NEO.
20162017 compensation decisions
The table below shows, for each NEO, the incentive compensation target for 20162017 and the actual annual
cash incentive and long-term equity-based incentives awarded in 2018 for 2017 for 2016 performance.
William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III | Steven C. Van Wyk | ||||||||||||||||
Incentive compensation target | $ | 10,500,000 | $ | 3,000,000 | $ | 6,050,000 | $ | 6,900,000 | $ | 2,750,000 | ||||||||||
Incentive compensation awarded for 2016 performance | $ | 10,150,000 | $ | 3,050,000 | $ | 5,900,000 | $ | 6,600,000 | $ | 2,660,000 | ||||||||||
Annual cash incentive portion | $ | 3,400,000 | $ | 1,275,000 | $ | 1,940,000 | $ | 2,250,000 | $ | 1,080,000 | ||||||||||
Long-term incentive portion | $ | 6,750,000 | $ | 1,775,000 | $ | 3,960,000 | $ | 4,350,000 | (1) | $ | 1,580,000 | |||||||||
Incentive compensation disclosed in the Summary compensation table(2) | $ | 11,200,000 | $ | 3,175,000 | $ | 6,020,000 | $ | 7,050,000 | $ | 2,680,000 | ||||||||||
Annual cash incentive portion (2016 performance) | $ | 3,400,000 | $ | 1,275,000 | $ | 1,940,000 | $ | 2,250,000 | $ | 1,080,000 | ||||||||||
Long-term incentive portion (2015 performance) | $ | 7,800,000 | $ | 1,900,000 | $ | 4,080,000 | $ | 4,800,000 | $ | 1,600,000 |
William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III | Steven C. Van Wyk | ||||||||||||||||
Incentive compensation target | $ | 10,500,000 | $ | 3,250,000 | $ | 6,050,000 | $ | 6,900,000 | (1) | $ | 2,750,000 | |||||||||
Incentive compensation awarded for 2017 performance | $ | 14,700,000 | $ | 4,225,000 | $ | 7,800,000 | $ | 8,900,000 | $ | 3,300,000 | ||||||||||
Annual cash incentive portion | $ | 5,220,000 | $ | 1,862,500 | $ | 2,700,000 | $ | 3,200,000 | $ | 1,400,000 | ||||||||||
Long-term incentive portion | $ | 9,480,000 | $ | 2,362,500 | $ | 5,100,000 | $ | 5,700,000 | $ | 1,900,000 | ||||||||||
Incentive compensation disclosed in the Summary Compensation Table(2) | $ | 11,970,000 | $ | 3,637,500 | $ | 6,660,000 | $ | 7,550,000 | $ | 2,980,000 | ||||||||||
Annual cash incentive portion (2017 performance) | $ | 5,220,000 | $ | 1,862,500 | $ | 2,700,000 | $ | 3,200,000 | $ | 1,400,000 | ||||||||||
Long-term incentive portion (2016 performance) | $ | 6,750,000 | $ | 1,775,000 | $ | 3,960,000 | $ | 4,350,000 | (1) | $ | 1,580,000 |
(1) | The long-term incentive award that Mr. |
(2) | Due to SEC regulations, the incentive compensation amounts disclosed in the Summary compensation table on page |
The long-term incentive portion of the incentive compensation granted by the Committee in 2018 consisted of two new grants, the material terms and conditions of which are summarized beginning on page 49.
The charts below show the base salary for 20162017 for
each executive, and the annual cash incentive and long-term incentive awarded in 20172018 for 20162017 performance. The bar surroundingblue and orange portions of each circle showsshow the amount of total compensation that isat-risk and not guaranteed.
William S. Demchak Chairman, President and Chief Executive Officer | ||
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• As our CEO, Mr. Demchak
•
•
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46 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Robert Q. Reilly Executive Vice President and Chief Financial Officer | ||
•As our CFO, Mr. Reilly provided
•
• • He enhanced investor confidence in the | ||
Michael P. Lyons Executive Vice President and Head of Corporate & Institutional Banking | ||
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THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 47
COMPENSATION DISCUSSION AND ANALYSIS
E William Parsley, III Executive Vice President, Treasurer, Chief Investment Officer | ||
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•
•
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Steven C. Van Wyk Executive Vice President and Head of Technology and | ||
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•
•
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Prior long-term incentive awards
At meetings held in the first quarter of 2018, the Committee also approved payouts from awards that had previously been granted to each of our NEOs. The Committee evaluated performance and risk-based metrics for the three forms of outstanding long-term incentive awards. For each of the three awards, the Committee approved a payout based on a formula that compared our actual results to previously established performance-based metrics. In addition to confirming the achievement under the performance metrics, the Committee also confirmed that PNC met or exceeded applicable risk-based metrics. SeeOutstanding equity awards at 2017 fiscalyear-endbeginning on page 64 for additional
information regarding these grants, including the established goals, the results achieved, the payout percentage grids, and the payouts under each grant.
For the incentive performance units (Standard IPUs) granted in 2015 to all NEOs, the Committee approved a payout of 107.18% of target based on the results achieved against the goals established for the three-year performance period (2015-2017). These units are paid out in stock up to the target amount and in cash for the amount above target.
For the incentive performance units related to Asset & Liability Management performance (ALM IPUs) granted in 2015 to Mr. Parsley, the Committee
48 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
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approved a payout of 200% of target based on the results achieved against the goals established for the three-year performance period (2015-2017). These units are paid out in cash.
For the performance-based restricted share units (PRSUs) granted in 2014, 2015, 2016, and 2017 to all NEOs, the Committee approved a payout of 125% of target for the 2017 tranche based on our TSR for the year. These units are paid out in stock.
2018 compensation program changes
Throughout several meetings held in 2017 and 2018, the Committee reviewed potential changes to the long-term incentive compensation portion of our executive compensation program. The current long-term incentive awards consist of two separate grants: incentive performance units and performance-based restricted share units. The Committee first introduced these grants in 2011, and their material terms and conditions have remained generally consistent since 2013.
In evaluating a potential redesign of the long-term incentives provided to executives, the Committee focused on a few goals:
The Committee engaged in an extensive discussion of potential changes to long-term incentives, with discussions led by management and feedback
provided by the Committee’s independent compensation consultant. Before making its decision, the Committee reviewed several options and features, considered various performance metrics, evaluated financial models (including expected outcomes and backtesting), and considered input from a range of stakeholders.
Following this process and evaluation, the Committee approved certain changes to the long-term incentive awards granted in 2018 (based on 2017 performance). These decisions are summarized below.
Changes to 2018 Long-Term Incentive Compensation Awards
The Committee approved two separate grants under a new long-term incentive compensation program for our NEOs (and other senior executives). These grants consisted of Performance Share Units (PSUs) and Restricted Share Units (RSUs).
Grant Year
| Name of Award | % Value of Total Long Term-Incentive | Name of Award | % Value of Total Long Term-Incentive | ||||||
2017
| Incentive Performance Units | 50% | Performance-Based Restricted Share Units | 50% | ||||
2018
| Performance Share Units (PSU) | 60% | Restricted Share Units (RSU) | 40% |
Performance Share Units (PSUs).The Committee granted PSU award opportunities, representing an opportunity to receive an award paid in shares of PNC common stock to certain of our senior officers, including all of the NEOs. The award payout is based on PNC’s corporate performance over a three-year performance period (2018-2020) with respect to two corporate performance metrics, described below. Performance on these two metrics generates a percentage (the corporate performance factor). This percentage is also subject to a potential downward adjustment if PNC fails to satisfy a risk performance factor. After applying the risk-related performance adjustment (if any), the resulting
percentage is applied to the number of target units to determine the final number of units available for settlement. The Committee retains limited discretion to reduce or increase the size of the final payout as it deems equitable to maintain the intended economics of the award in light of changed circumstances. These circumstances are limited to external events affecting PNC or members of its peer group or its financial statements that are outside of PNC’s control and not reasonably anticipated. The PSUs will have a maximum payout opportunity of 150%. Payout of any award under the PSUs requires the satisfaction of service requirements and other conditions of the award.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 49
COMPENSATION DISCUSSION AND ANALYSIS
Corporate performance metrics. The two corporate performance metrics include an absolute metric (internal PNC measurement against a target) and a relative metric (PNC performance against peers). The relative metric is PNC’s3-year average EPS growth, as adjusted, compared to the3-year average EPS growth of PNC peers, and the absolute metric is PNC’s3-year average return on equity (ROE), as adjusted, compared to3-year performance targets established in advance by the Committee.
The EPS growth metric will be calculated for each year of the performance period. At the end of the three-year performance period, the annual EPS
growth percentages will be averaged. PNC’s3-year average EPS growth will be compared to the3-year average of each company in the peer group to determine our percentile rank.
The ROE metric will be calculated annually during each year of the performance period. At the end of the three-year performance period, average ROE for the performance period will be determined as the average of PNC’s annual ROE for each year.
Once PNC’s percentile rank relating to average EPS growth and PNC’s average ROE are determined, a corporate performance factor, ranging from 0–150%, will be calculated using the grid below and applying bilinear interpolation.
Three-year average EPS Growth (relative)
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Percent rank at the 25th percentile or below
| Percent rank at the 50th percentile
| Percent rank at the 75th percentile or above
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Three-year average ROE (absolute) | 13.00% | 100.0% | 125.0% | 150.0% | ||||
11.50% | 87.5% | 112.5% | 137.5% | |||||
10.50% | 75.0% | 100.0% | 125.0% | |||||
9.50% | 62.5% | 87.5% | 100.0% | |||||
8.00% | 50.0% | 75.0% | 87.5% | |||||
Below | 0.0% | 25.0% | 50.0% |
ROE measures the efficiency of generating profit – how much net income we create using the equity investments from our shareholders. When calculating our average ROE for this award, we will reverse the after-tax impact of our provision for credit losses – that is, we will add back the provision amount to our reported net income. We will then subtract charge-offs from the net income amount. Charge-offs represent the amount of a loan (or portion of a loan) that we remove from our balance sheet because we deem it to be uncollectible. We expect this adjusted ROE to present a good measurement of how efficiently we create profit, as it will replace a forecasted loss amount (provision) with the actual losses incurred (charge-offs).
Risk-based performance factor. A risk-based performance factor is then reviewed to determine whether to apply a negative adjustment to the corporate performance factor. The risk-based performance factor looks at whether or not, as of the end of a given performance year, PNC has a Basel III common equity Tier 1 capital ratio (which may be on a pro forma fully phased-in basis, if applicable) of at least 7.0% based on current definitions and requirements (CET1 Ratio Test).
If PNC satisfies the CET1 Ratio Test each year during the performance period, there will be no adjustment to the corporate performance factor at the end of the three-year performance period. For each year during the performance period that PNC fails to satisfy the CET1 Ratio Test, one-third of the target number of PSUs granted will be eligible for forfeiture. At the end
of the performance period, the Committee will conduct its final performance review and adjust the number of target shares available for payout if PNC failed to satisfy the CET1 Ratio Test for one or more years during the performance period.
Dividends. The PSUs will accrue cash dividend equivalents during the overall performance period. These accrued dividend equivalents will be adjusted by the same percentage as the target PSUs at the time of payout, and will then be paid out in cash.
Restricted Share Units (RSUs).The Committee also granted RSU award opportunities, with three-yearpro-rata vesting, in shares of PNC common stock to certain of our senior officers, including all of the NEOs. Each annual installment (tranche) requires the satisfaction of service requirements and other conditions of the award.
Risk-based performance factor. Each RSU tranche is subject to the CET1 Ratio Test, the same risk-related performance factor that will be applied to the PSUs. With respect to each tranche of the RSUs, if PNC fails to meet or exceed the capital test, there will be no payout for that tranche. Otherwise, all of the RSUs are eligible to vest in that year.
Dividends. The RSUs will accrue cash dividend equivalents. These accrued dividend equivalents with respect to a tranche will pay out in cash at the same time, and will be adjusted by the same payout percentage, as to the share units to which they relate.
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COMPENSATION DISCUSSION AND ANALYSIS
Changes to Incentive Performance Units (Asset & Liability Management)
For the past several years, Mr. Parsley received, as part of his long-term incentive compensation awards, a grant of cash-settled incentive performance units based on the performance of our Asset & Liability Management function, which he manages. PNC no longer grants these awards to Mr. Parsley. In 2018, Mr. Parsley received a grant of
PSUs and RSUs that all of the other NEOs received, as described above.
Comparison of 2017 to 2018 Long-Term Incentive Award Grants
All equity-based awards are made under PNC’s shareholder-approved 2016 Incentive Award Plan. The table below summarizes the material terms and conditions of the awards made in 2017 and 2018:
Grant Year | Name of Award | % of | Vesting Schedule | Metrics | Payout Range (% of target) | Stock or Cash Payout | ||||||
2017 (for 2016 | Incentive Performance Units (a) | 50% | After3-year performance period ends | PNC’s return on common equity EPS growth rank against | 0-125% | Stock (up to Cash (above | ||||||
Incentive Performance Units (ALM) (b) | (b) | After3-year performance period ends | Based on PNC’s Asset & Liability Management function performance, compared to a benchmark index | 0-200% | Cash | |||||||
Performance-based Restricted Share Units (a) | 50% | Annual | Adjustment based on PNC’s annual TSR | 75-125% | Stock | |||||||
2018 (for 2017 | Performance Share Unit (PSU) | 60% | After3-year performance period ends | PNC’s return on equity EPS growth rank against our peer group | 0-150% | Stock | ||||||
Restricted Share Units (RSU) | 40% | Annual installments over 3 years | Time-based | 0-100% | Stock |
(a) | These grants are also subject to various risk-based performance factors, which can otherwise reduce or eliminate the payouts regardless of the performance-based metrics achieved. See the discussion below and Outstanding equity awards at 2017 fiscal year-end beginning on page 64 for information regarding these risk-based performance factors. |
(b) | Mr. Parsley was the only NEO to receive this grant, which relates to his management of our Asset & Liability Management function. |
Each of the 2017 grants have separate payout percentage grid ranges, based on performance against the metrics. For PRSUs and ALM IPUs, actual payout percentages are based on straight-line interpolation between the data points reflected in the payout percentage grid. For Standard IPUs, actual payout percentages are interpolated, which takes into account how close the actual performance or peer group rank is to the metric or rank above and below. The payout percentage grids for the 2017 grants are included inOutstanding equity awards at 2017 fiscalyear-end beginning on page 64.
In addition, except for the ALM IPUs, the 2017 grants include risk-based performance factors that affect vesting or payout. If PNC does not meet or exceed the Tier 1 risk-based capital ratio for “well-capitalized” institutions, the award will not vest. In addition, if our return on economic capital does not exceed our cost of capital, the Committee may reduce or eliminate the award.
Except for the ALM IPUs, which do not accrue dividends at all, the 2017 long-term incentive awards will accrue dividends that are paid out in cash, adjusted for actual performance.
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COMPENSATION DISCUSSION AND ANALYSIS
Compensation policies and practices
The Committee adopts policies and procedures to assist in the fulfillment of its duties, and we describe some of the significant policies and procedures in this section. In addition to formal policies and procedures, the Committee has several practices that it follows in the fulfillment of its duties and responsibilities. Some of those practices are described below.
Compensation and risk
The Committee evaluates the risks inherent in the incentive compensation program. For a detailed
discussion of how the Committee evaluates risk, please seeCompensation and Risk, which begins beginning on page 54.58.
Independent compensation consultant
The Committee retains Meridian Compensation Partners, LLC as its independent compensation consultant. For a discussion of this relationship and the considerations that the Committee takes into account when determining independence, please see the discussion under the headingRole of compensation consultants beginning on page 26.
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Peer group
The Committee selects a peer group each year. We use this group to help measure relative performance
and to determine our incentive performance unit payouts. We also use this group for general compensation comparisons. In approving a peer group, the Committee analyzes several factors, including the mix and complexity of businesses, the markets being served, market capitalization, asset size, and changes resulting from mergers or shifts in strategic direction. We also look at the companies with whom we generally compete for talent.
The Committee annually reviews the composition of the peer group with management and its
independent compensation consultant. For 2016,2017, the Committee believed that the existing peer group generally provided a balanced mix of institutions in light of our size, mix and scope of businesses, products, and services, and sources of executive talent. PNC is larger than a majority of the peers, positioned between the median and the 75th percentile of the peer group, based on total assets, revenue, and market capitalization.
The 2017 peer group for 2017 remained unchanged from 2016includes PNC and included 12the following 11 companies, (including PNC), with assets revenues and market capitalization for each company measured as of December 30, 2016:31, 2017, and revenue measured for the full year:
Peer Group Company | Ticker Symbol | Peer | Assets (in billions) | Peer | Revenue (in billions) | Peer | Market (in billions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 Peer Group Company | Ticker Symbol | Peer | Assets (in billions) | Peer | Revenue (in billions) | Peer | Market Capitalization (in billions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank of America Corporation | BAC | JPM | $ | 2,491.0 | JPM | $ | 95.7 | JPM | $ | 307.3 | BAC | JPM | $ | 2,533.6 | JPM | $ | 99.6 | JPM | $ | 366.3 | ||||||||||||||||||||||||||||||||||||||||
BB&T Corporation | BBT | BAC | $ | 2,187.7 | WFC | $ | 88.3 | WFC | $ | 276.4 | BBT | BAC | $ | 2,281.2 | WFC | $ | 88.4 | BAC | $ | 303.7 | ||||||||||||||||||||||||||||||||||||||||
Capital One Financial Corporation | COF | WFC | $ | 1,930.1 | BAC | $ | 83.7 | BAC | $ | 222.2 | COF | WFC | $ | 1,951.8 | BAC | $ | 87.4 | WFC | $ | 296.8 | ||||||||||||||||||||||||||||||||||||||||
Fifth Third Bancorp | FITB | USB | $ | 446.0 | COF | $ | 25.5 | USB | $ | 87.2 | FITB | USB | $ | 462.0 | COF | $ | 27.2 | USB | $ | 88.7 | ||||||||||||||||||||||||||||||||||||||||
JPMorgan Chase & Co. | JPM | PNC | $ | 366.4 | USB | $ | 21.1 | PNC | $ | 56.7 | JPM | PNC | $ | 380.8 | USB | $ | 21.9 | PNC | $ | 68.2 | ||||||||||||||||||||||||||||||||||||||||
KeyCorp | KEY | COF | $ | 357.0 | PNC | $ | 15.2 | COF | $ | 41.9 | KEY | COF | $ | 365.7 | PNC | $ | 16.3 | COF | $ | 48.3 | ||||||||||||||||||||||||||||||||||||||||
M&T Bank Corporation | MTB | BBT | $ | 219.3 | BBT | $ | 10.8 | BBT | $ | 38.1 | MTB | BBT | $ | 221.6 | BBT | $ | 11.3 | BBT | $ | 38.9 | ||||||||||||||||||||||||||||||||||||||||
Regions Financial Corporation | RF | STI | $ | 204.9 | STI | $ | 8.6 | STI | $ | 26.9 | RF | STI | $ | 206.0 | STI | $ | 9.0 | STI | $ | 30.4 | ||||||||||||||||||||||||||||||||||||||||
SunTrust Banks, Inc. | STI | FITB | $ | 142.2 | FITB | $ | 6.3 | MTB | $ | 24.4 | STI | FITB | $ | 142.2 | FITB | $ | 7.0 | MTB | $ | 25.7 | ||||||||||||||||||||||||||||||||||||||||
U.S. Bancorp | USB | KEY | $ | 136.5 | RF | $ | 5.6 | FITB | $ | 20.2 | USB | KEY | $ | 137.7 | KEY | $ | 6.3 | KEY | $ | 21.6 | ||||||||||||||||||||||||||||||||||||||||
Wells Fargo & Company | WFC | RF | $ | 126.0 | MTB | $ | 5.3 | KEY | $ | 19.7 | WFC | RF | $ | 124.3 | RF | $ | 5.6 | FITB | $ | 21.1 | ||||||||||||||||||||||||||||||||||||||||
MTB | $ | 123.4 | KEY | $ | 5.0 | RF | $ | 17.4 | MTB | $ | 118.6 | MTB | $ | 5.6 | RF | $ | 19.6 |
The peer group for 2018 remained unchanged from 2017, except for the addition of Citizens Financial Group, Inc. (CFG). Citizens was added to the peer group based on several factors, including financial metrics that are comparable to the existing peer group, an overlap in geographic markets with PNC, similar products and services offered, and the inclusion of Citizens in the peer groups of some of PNC’s other peers.
Executive stock ownership and retention
Our executive officers historically have held a significant portion of their assets in the form of our common stock (or other equity-based instruments that reflect the performance of our common stock). The Committee believes it is important to require our executive officers to meet minimum stock ownership guidelines, denominated in shares.
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Each executive officer is subject to additional ownership requirements, even after the original ownership target is met. The ownership requirements increase the number of PNC shares that an individual needs to own over time. As new awards vest, designated executives need to retain more shares of stock, which they must then hold
until they retire or leave PNC. This ownership policy reflects compensation awards over an executive’s career, and also ties an executive’s personal wealth closely to the performance of PNC and the interests of our long-term shareholders.
Equity interests that count toward satisfaction of the ownership guidelines include shares owned outright by the officer, or his or her spouse and dependent children, restricted shares (subject to vesting requirements), certain equity awards and shares or stock units held in a benefit plan. We count 50% of any unvested equity-based award (that is payable in common shares) toward satisfaction of the ownership guidelines. The guidelines are as follows:
Officer/Category | Base ownership | Base ownership | Ongoing retention (as a % of newly vested | Base ownership requirement (in shares) | Base ownership requirement (in dollars)(1) | Ongoing retention (as a % of newly vested equity) | ||||||
President and Chief Executive Officer | 125,000 | $14,620,000 | 33% | 125,000 | $18,036,250 | 33% | ||||||
All other NEOs(2) | 15,000 – 25,000 | $1,754,400 – $2,924,000 | 25% | 15,000 – 25,000 | $2,164,350 – $3,607,250 | 25% |
(1) | Value based on PNC closing price of |
(2) | The stock ownership guidelines apply to certain other senior executives as well, including all executive officers. One executive officer |
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COMPENSATION DISCUSSION AND ANALYSIS
Newly hired or promoted executives who become subject to these guidelines will have up to six years to satisfy the guidelines. The Committee monitors compliance with these stock ownership guidelines and has determined that our current NEOs satisfy the guidelines. All other executivesemployees subject to the guidelines either satisfy the guidelines or are within the compliance period.
Clawback and forfeiture
We have a “clawback” policy that applies to all of our NEOs and other executive officers, as well as other senior executives and those employees receiving equity-based compensation. This policy applies to all incentive compensation provided on or after January 1, 2013, although some elements of the policy were in effect previously.
A summary of PNC’sour clawback and incentive compensation adjustment policy is describedprovided below.
Clawback | Negative | |||||||
Trigger | Inaccurate Metrics
Applies to incentive compensation awarded as the result of materially inaccurate performance metrics (see below for additional details) | Detrimental Conduct
Applies when an individual (1) engages in competitive activity without prior consent – either as an employee of PNC or for one year after employment; (2) commits fraud, misappropriation, or embezzlement; or (3) is convicted of a felony | Risk Metrics Performance
May apply when there is less than desired performance against corporate or business unit risk metrics, as applicable | Risk-Related Actions
May apply when an individual’s actions, or the failure to act, either as an individual or supervisor, demonstrates a failure to provide appropriate consideration of risk (see below for additional details) | ||||
Applies to | All incentive compensation – vested or unvested | Unvested long-term incentive compensation |
incentive compensation | |||||
Employees affected | NEOs and other senior leaders | All equity recipients | All equity recipients |
For purposes of the clawback for materially inaccurate performance metrics, performance metrics include any metric, including corporate financial results, used directly or indirectly to determine whether or not incentive compensation is to be provided to an executive (or group of executives) or to determine the amount of any such compensation. The portion of the incentive compensation that represents the excess over what would have been provided if there had been no
material inaccuracy in the performance metric will be subject to clawback. The Committee retains discretion, to the extent legally permissible, to determine that it would not be in PNC’s best interests to seek to enforce the clawback.
For purposes of the negative adjustment resulting from risk-relatedrisk related actions, the Committee may reduce or cancel unvested long-term incentive compensation granted to an employee who takes
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COMPENSATION DISCUSSION AND ANALYSIS
action (or fails to take action) that result in, or are reasonably expected to result in, a material adverse impact to PNC or a business unit, such as:
This applies both to individual employees who took risk-related actions (or failed to take action) and their supervisors. The types of adverse impacts could include matters such as impacts to PNC’s or a business segment’s or corporate function’s financial performance, capital or liquidity positions, reputation or business prospects.
The negative adjustment resulting from risk-relatedrisk related actions allows PNC to recoup unvested equity awards from recipients whose inappropriate risk-taking activities have resulted in, or are expected to result in, a material adverse impact to PNC in the future. By doing so, PNC is able to add further risk-balancing to our incentive arrangements by accounting for both forward- and backward-looking risk adjustments.
The policy provides that if PNC applies the policy to recoup or clawback incentive compensation or negatively adjust incentive compensation as a result of risk-related actions and the underlying factual circumstances are otherwise publicly reported by PNC (1) in a filing with the SEC or (2) in disclosure that would otherwise meet the requirements for public disclosure by PNC under the SEC’s Regulation FD or (3) are disclosed by a third party in a publicly available court or administrative filing, then PNC will disclose in its annual shareholder meeting proxy statement, a current report on Form8-K or other public filing made by it with the SEC or a posting in a clearly identifiable location in the Investor Relations section of its corporate website:
a general description of the circumstances giving rise to the incentive compensation recovery or
adjustment, including items such as number of employees, seniority of employees, and line of business impacted; and50 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
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PNC may limit such disclosure if it would be likely to result in, or exacerbate, any existing or threatened, employee, shareholder, or other litigation, arbitration, or proceeding against PNC.
Shareholder approval of severance agreements
We have a Board-approved policy regarding the shareholder approval of future severance
arrangements. Under this policy, PNC will not enter into an arrangement with an executive officer that provides for additional severance benefits in an amount exceeding 2.99 times the sum of the executive officer’s annual base salary and target bonus for the year of termination, unless the future severance arrangement is approved by the affirmative vote of a majority of votes cast by shareholders on the matter.
OurThe Board retains the right to amend, terminate, or waive the policy and will promptly disclose any such change. We have made this policy available atwww.pnc.com/corporategovernance.corporategovernance.
Since 2009, no newNone of our change inof control agreement has included anagreements contain any excise tax gross-up. In addition, in 2016, we eliminated excise tax gross-ups for all existing change in control agreements.“gross-up” provisions. For a more detailed discussion on the change inof control arrangements, pleaseagreements, seeChange in control agreementsof Control Agreements beginning on page 71.75.
Limiting perquisites
The Committee believes in limiting the amount of perquisites provided to our executives.
We consider a benefit to be a perquisite or personal benefit unless its purpose is clearly and exclusively business-related. We determine the value of perquisites based on their incremental cost to us.
The principal perquisites that we may provide to our executive officers include financial consulting and tax preparation services and limited personal use of corporate aircraft, as approved by our CEO. In 2016, the Committee also approved a perquisite for Mr. Demchak related to the installation of home security services. With respect to that perquisite, Mr. Demchak has agreed to pay the ongoing maintenance costs personally. The perquisites that we provide to our executive officers under thisthe program do not include any tax “gross ups”. Weups.” Some of our executive officers participate in benefit programs that we no longer offer to current executives. In addition, we may provide additional perquisites to an executive officer from time to time, but this is not common.
In addition to these perquisites, eachcertain executive officerofficers (other than the CEO) receives, including all NEOs, receive a $10,000 allowance for personal aircraft usage. As the
Committee has previously recommended that Mr. Demchak take all flights (personal or business) on the corporate aircraft, the Committee has approved an allowance, not to exceed $100,000, for personal flights taken on the aircraft by Mr. Demchak.
The Committee has previously approved the execution of lease (“time-sharing”) agreements between PNC and certain executive officers, including our CEO and one other NEO (Mr. Reilly). These agreements help us to comply with Federal Aviation Administration (FAA) rules and regulations that would otherwise prohibit executives from reimbursing PNC for the incremental cost of personal flights. Under the terms of these time-sharing agreements, Mr. Demchak and Mr. Reilly will pay for the costs of any personal flights that exceed the allowances described above.
Due to certain operational restrictions and administrative efficiencies, we operate our
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corporate aircraft under FAAFederal Aviation Administration rules and regulations that limit our ability to accept reimbursement for personal aircraft usage unless an individual has a time-sharing agreement. The time-sharing agreements provide a mechanism to obtain reimbursement from the executive. The costs paid by our executive officers under the terms of the agreements include incremental costs, as well as a federal excise tax and other fees. For flights subject to these time-sharing agreements, the officer is required to pay us for the following costs:
The Committee has adopted an aviation policy and written procedures to document the principles to be applied in determining the classification of a flight as business or personal and the calculation of aggregate incremental cost for perquisite purposes, including definitions of personal use and enhanced methods for allocating costs between business and personal use in complex situations and an approach for capturing deadhead flights, where appropriate, in the calculation of incremental costs for personal aircraft use.
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COMPENSATION DISCUSSION AND ANALYSIS
Guidelines on the use of discretion
The Committee has adopted guidelines regarding the use ofon using discretion in incentive compensation plans. Under these guidelines, the use of discretion will be exercised, when permitted under a plan, so that incentive compensation awards are reasonably aligned with risk-adjusted performance. TheCertain plans have discretionary and formulaic components, while other plans are fully discretionary. For plans with both discretionary and formulaic components, the guidance provides, among other things, that a discretionary increasesincrease in otherwise formulaically-determined incentive compensation should be based on behaviors, actions, or results that are deemed to be extraordinary, exceed expectations, or provide meaningful direct or indirect benefits to PNC or our businesses. At the same time, discretionary reductions in compensation should be based on behaviors, actions, or results that fail to meet expectations or negatively impact our performance, reputation, or work environment. The guidelines specifically address the need to evaluate
both inappropriate risk-taking behaviors during the performance year, as well as the outcome of prior inappropriate risk-taking behaviors, when making discretionary incentive compensation decisions. In addition, managers are generally required to document how discretion was applied in considering risk-taking behaviors and outcomes in employees’ performance evaluations or incentive compensation recommendations, particularly for our most senior executives.
Restrictions on trading, hedging and pledging
Our Code of Business Conduct and Ethics and related policies, which apply to all of our employees, include anti-hedging provisions that prohibit all employees from day trading or short selling PNC securities and from engaging in transactions in any derivative of PNC securities (other than securities issued under a PNC compensation plan), including buying and writing options.
We prohibit certain employees, including all of our executive officers, from purchasing or selling our securities beginning the 16th day of the last month of
each calendar quarter until the second business day after we release our earnings for that quarter. We may also impose additional trading restrictions on certain employees, including all of our executive officers, due to the availability of material,non-public information regarding PNC or our securities. In addition, we require certain employees, including all executive officers, topre-clear personal investments (other than in specified types of securities) made by the individual or any immediate family members.
Additionally, we do not allow directors, executive officers, and certain other senior employees to pledge PNC securities.
Consideration of tax deductibility
Section 162(m) of the Internal Revenue Code does not generally allow a company to deduct compensation over $1 million paid to certain executive officers. Under the tax rules in effect for the 2017 performance year, the executive officers whose compensation is subject to Section 162(m) includes the CEO and the next three highest-compensated executive officers (other than the CEO and the CFO).
One exception to this disallowance applies to performance-based compensation paid under shareholder-approved plans. Awards made under our shareholder-approved plans—plans — the 1996 Executive Incentive Award Plan (annual incentive awards) and the 2016 Incentive Award Plan (other equity-based awards)—are intended to be eligible for the performance-based exception and, therefore, deductible by PNC for federal income tax purposes.
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COMPENSATION DISCUSSION AND ANALYSIS
Although the Committee considers the desirability of limiting PNC’snon-deductible expenses when it makes compensation decisions, the Committee believes in maintaining the flexibility and competitive effectiveness of the executive compensation program. Tax deductibility, while an important consideration, is analyzed as one component of the overall program.
The Tax Cuts and Jobs Act eliminated the performance-based compensation exception under
Section 162(m) for tax years beginning on and after January 1, 2018. As a result, beginning with the 2018 performance year, NEOs will no longer be designated as eligible to participate in the Executive Incentive Award Plan. Instead, all annual incentive awards made to NEOs will be under the same program as other executive officers of PNC. In addition, beginning January 1, 2018, the CFO is included in the scope of covered employees under Section 162(m).
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We have reviewed and discussed the Compensation Discussion and Analysis with PNC’s management, and based on our review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
The Personnel and Compensation Committee of the Board of Directors of The PNC Financial Services Group, Inc.
Dennis F. Strigl,Chair
Charles E. Bunch
Andrew T. Feldstein
Richard B. Kelson
Michael J. Ward
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 5357
This section explains how we consider risk at PNC, and the relationship between risk management, performance, and compensation. We also discuss the risk reviews presented to ourthe Board’s Personnel
and Compensation Committee, and the methodology we use to assess the potential risks in our incentive compensation plans.
We encounter risk as part of the normal course of operating our business. The successful execution of our strategy requires effective management of the risks we decide to take to maintain the trust of our customers and provide the best overall customer experience.
We want our decisions to reflect our desired risk appetite. It is our responsibility to establish an enterprise risk management framework that facilitates risk management for the benefit of our customers and shareholders.
Enterprise risk appetite statement
We dynamically manage our risk appetite to optimize long-term shareholder value while supporting our employees, customers, and communities. In doing so, we:
| Achieve our business objectives and protect our brand by accepting risks that are understood, quantifiable, and analyzed through all phases of the economic cycle.
| |||
| Earn trust and loyalty from all stakeholders, including employees, customers, communities, and shareholders.
| |||
| Reward individual and team performance by taking into account risk discipline and performance measurement.
| |||
| Practice disciplined capital and liquidity management so that
|
We strive to embed a culture of risk management throughout PNC. With each of our employees, we reinforce the importance of managing risks in executing on our strategic objectives and in support of our desired risk appetite.
We approve our Enterprise Risk Management Framework and key risk policies at the Board level. We discuss our risk management approach in the Risk Management section of Item 7 of this year’s Annual Report on Form10-K.
We reflect our desired enterprise risk appetite by helping to ensure that our performance management and compensation arrangements for all employees are balanced in ways that do not create incentives for imprudent or excessive risk-taking, are designed to provide a superior customer experience, and are reflective of our business model, management structure, and risk appetite.
Our compensation philosophy supports and reflects PNC’s risk appetite and risk management culture. Our risk policies and procedures guide our management decisions, including how we pay employees. By setting and communicating our risk appetite in advance, we seek to manage and control the risks that employees can take or influence, consistent with their roles and responsibilities.
All employees have performance goals tied to business and individual performance, but each
employee, no matter their role at PNC, also has
customer focus and risk management goals. We evaluate employee performance against these goals, in addition to considering risk outcomes from actions taken in prior years. This year, we also required, for each of our employees, a rating for how well they achieved the risk management goal. We incorporate this comprehensive evaluation of employee risk management into our performance and incentive compensation decisions. In addition, all employees are encouraged to collaborate across groups to identify and mitigate risks and elevate and address identified issues or concerns.
Our compensation program is designed to encourage management of risk within our appetite and discourage inappropriate risk-taking by granting a diverse portfolio of incentive compensation awards to our executives and other senior employees that is expected to reward desired behavior over time. Specifically, we balance our portfolio of awards between fixed and variable compensation; cash and equity-based compensation; and annual and long-term compensation. We base awards on the Committee’s assessment of a variety of quantitative and qualitative performance measurements, both on an absolute and a relative basis. Compensation decisions also rely on discretion to consider other factors, such as effective risk management, commitment to delivering a superior customer experience, compliance with controls and ethical duties, competition for top talent, market-based pay levels, and the need to attract and engage our leaders.
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experience, compliance with controls and ethical duties, competition for top talent, market-based pay levels, and the need to attract and engage our leaders.
As discussed in ourthe CD&A, the long-term incentive program includes grants to our NEOs and certain other executives that include robust risk-based performance metrics. Payouts under these grants could be reduced or eliminated if we do not meet specific risk criteria over the vesting period. We also have a broad-based clawback policy, which is described on pages 50 and 51.page 53.
We maintain an equity program for approximately 120130 senior leaders below the executive levels that is designed to help ensure that their incentive
compensation awards reflect risk-adjusted performance outcomes that would pay out, if at all, over a four-yearthree-year period. These senior leaders receive
a portion of their incentive compensation in an equity-based award that is subject to a risk-based review trigger. The equity award agreements for our senior leaders all contain an enterprise-wide risk-based review trigger, while the agreements for senior leaders in business segments (as opposed to those in administrative or control functions) contain an additional business-specific risk-based review trigger. If a risk-based review is triggered, the applicable review committee will determine whether a downward adjustment is warranted, up to a complete cancellation of the share units in that year’s tranche.
Risk review of compensation plans
Our Chief Risk Officer (CRO) reports at least quarterly to ourthe Board’s Personnel and Compensation Committee to discuss risk management and review the connection between effective risk management and incentive compensation. Our CROThe Chief Risk Officer also presents the Committee with a risk assessment for each of our principal business units as well as a collective assessment of staff functions including finance, human resources, legal, operations, and technology. In addition, we have at least one director who is a member of both the Personnel and Compensation and Risk Committees. At present, the Chair of the Risk Committee also serves on the Personnel and Compensation Committee.
We also have systematically identified individuals — or groups of employees — who could potentially expose us to material financial loss, either individually or as a collective group.loss. As with our incentive compensation risk assessment described below, we have established a cross-functional team that continues to identify and monitor these individuals. These individuals or groups.are subject to a supplemental risk management review as part of the performance management process by the Chief Risk Officer and his designees – we take this review into account when determining incentive compensation awards for our most senior executives.
We have developed a standardized governance framework for our incentive compensation plans to help monitor and validate these plans. We wantthat our plans to achievebalance risk and reward, comply with applicable laws and regulations, demonstrate fiscal responsibility, and
maintain an appropriate balance of compensation, customer orientation, and risk-adjusted performance — thisfocus. This framework helps to ensure that we have the appropriate procedures,
controls, and independent challenges in place to do so. We continue to assess and, where appropriate, modify our incentive compensation plans in accordance with this framework to help ensure our plans appropriately reflect risk considerations, andincluding the management of identified issues, the duration of the risks, and to enhance the documentation of existing risk-balancing strategies.alignment with our desired risk appetite. Examples of incentive plan modifications include:
Based on our approach to risk management, our comprehensive incentive plan governance framework, our risk assessments for significant businesses and staff functions, and the inclusion of risk-based metrics in our long-term incentive compensation programs, we believe that the risks arising from our compensation plans, policies, and practices are not reasonably likely to have a material adverse effect on PNC.
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Name & Principal Position | Year | Salary ($)(a) | Stock Awards ($)(b) | Non-Equity Incentive Plan Compensation ($)(c) | Change in Value & ($)(d) | All Other Compensation ($)(e) | Total ($) | Year | Salary ($)(a) | Stock Awards ($)(b) | Non-Equity Incentive Plan Compensation ($)(c) | Change in Pension Value & Nonqualified Deferred Compensation Earnings ($)(d) | All Other Compensation ($)(e) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
William S. Demchak | 2016 | $ | 1,100,000 | $ | 7,799,958 | $ | 3,400,000 | $ | 623,494 | $ | 218,008 | $ | 13,141,460 | 2017 | $ | 1,100,000 | $ | 6,749,956 | $5,220,000 | $666,341 | $165,556 | $ | 13,901,853 | |||||||||||||||||||||||||||||||||
Chairman, President | 2015 | $ | 1,100,000 | $ | 6,959,910 | $ | 4,100,000 | $ | 393,715 | $ | 165,501 | $ | 12,719,126 | 2016 | $ | 1,100,000 | $ | 7,799,958 | $3,400,000 | $623,494 | $218,008 | $ | 13,141,460 | |||||||||||||||||||||||||||||||||
& Chief Executive Officer | 2014 | $ | 1,089,615 | $ | 5,999,978 | $ | 3,540,000 | $ | 650,626 | $ | 57,685 | $ | 11,337,904 | 2015 | $ | 1,100,000 | $ | 6,959,910 | $4,100,000 | $393,715 | $165,501 | $ | 12,719,126 | |||||||||||||||||||||||||||||||||
Robert Q. Reilly | 2016 | $ | 500,000 | $ | 1,899,844 | $ | 1,275,000 | $ | 295,003 | $ | 47,495 | $ | 4,017,342 | 2017 | $ | 500,000 | $ | 1,774,900 | $1,862,500 | $339,545 | $ 47,817 | $ | 4,524,762 | |||||||||||||||||||||||||||||||||
Executive Vice President & | 2015 | $ | 500,000 | $ | 1,874,944 | $ | 1,400,000 | $ | 193,677 | $ | 43,344 | $ | 4,011,965 | 2016 | $ | 500,000 | $ | 1,899,844 | $1,275,000 | $295,003 | $ 47,495 | $ | 4,017,342 | |||||||||||||||||||||||||||||||||
Chief Financial Officer | 2014 | $ | 500,000 | $ | 1,549,936 | $ | 1,375,000 | $ | 316,836 | $ | 60,922 | $ | 3,802,694 | 2015 | $ | 500,000 | $ | 1,874,944 | $1,400,000 | $193,677 | $ 43,344 | $ | 4,011,965 | |||||||||||||||||||||||||||||||||
Michael P. Lyons | 2016 | $ | 700,000 | $ | 4,079,848 | $ | 1,940,000 | $ | 22,610 | $ | 36,228 | $ | 6,778,686 | |||||||||||||||||||||||||||||||||||||||||||
Michael P. Lyons* | 2017 | $ | 700,000 | $ | 3,959,882 | $2,700,000 | $ 24,170 | $ 14,529 | $ | 7,398,581 | ||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President & Head of | 2015 | $ | 700,000 | $ | 4,019,824 | $ | 2,020,000 | $ | 22,953 | $ | 6,754 | $ | 6,769,531 | 2016 | $ | 700,000 | $ | 4,079,848 | $1,940,000 | $ 22,610 | $ 36,228 | $ | 6,778,686 | |||||||||||||||||||||||||||||||||
Corporate & Institutional Banking | 2014 | $ | 700,000 | $ | 4,079,882 | $ | 1,980,000 | $ | 21,677 | $ | 6,577 | $ | 6,788,136 | 2015 | $ | 700,000 | $ | 4,019,824 | $2,020,000 | $ 22,953 | $ 6,754 | $ | 6,769,531 | |||||||||||||||||||||||||||||||||
E William Parsley, III | 2016 | $ | 588,462 | $ | 4,799,872 | $ | 2,250,000 | $ | 123,239 | $ | 148,341 | $ | 7,909,914 | |||||||||||||||||||||||||||||||||||||||||||
E William Parsley, III* | 2017 | $ | 600,000 | $ | 4,349,903 | $3,200,000 | $183,992 | $ 18,696 | $ | 8,352,591 | ||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, Chief Investment | 2015 | $ | 500,000 | $ | 4,549,900 | $ | 1,300,000 | $ | 50,634 | $ | 22,108 | $ | 6,422,642 | 2016 | $ | 588,462 | $ | 4,799,872 | $2,250,000 | $123,239 | $148,341 | $ | 7,909,914 | |||||||||||||||||||||||||||||||||
Officer, Treasurer & Head of Consumer Lending | 2014 | $ | 500,000 | $ | 4,574,917 | $ | 1,050,000 | $ | 164,669 | $ | 10,200 | $ | 6,299,786 | 2015 | $ | 500,000 | $ | 4,549,900 | $1,300,000 | $ 50,634 | $ 22,108 | $ | 6,422,642 | |||||||||||||||||||||||||||||||||
Steven C. Van Wyk | 2016 | $ | 500,000 | $ | 1,599,984 | $ | 1,080,000 | $ | 19,399 | $ | 20,591 | $ | 3,219,974 | |||||||||||||||||||||||||||||||||||||||||||
Steven C. Van Wyk** | 2017 | $ | 500,000 | $ | 1,579,890 | $1,400,000 | $ 20,528 | $ 20,685 | $ | 3,521,103 | ||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, Head of | 2016 | $ | 500,000 | $ | 1,599,984 | $1,080,000 | $ 19,399 | $ 20,591 | $ | 3,219,974 | ||||||||||||||||||||||||||||||||||||||||||||||
Technology & Operations |
* | In 2018, Mr. Lyons became the Head of the Asset Management Group in addition to his existing duties, and Mr. Parsley became Chief Operating Officer. |
** | Mr. Van Wyk was not an NEO in 2015. |
(a) |
(b) | In 2017, stock awards were granted on February 16, 2017 consisting of Standard IPUs and PRSUs, and for Mr. Parsley, a separate grant of ALM IPUs. The amounts in |
Grant Date Fair Value of Maximum Award | Grant Date Fair Value of Maximum Award | |||||||||||||||
NEO | Incentive Performance Units | Performance-Based Restricted Share Units | Incentive Performance Units | Performance-Based Restricted Share Units | ||||||||||||
William S. Demchak | $4,874,916 | $4,874,916 | $4,218,627 | $4,218,627 | ||||||||||||
Robert Q. Reilly | $1,187,402 | $1,187,402 | $1,109,250 | $1,109,250 | ||||||||||||
Michael P. Lyons | $2,549,905 | $2,549,905 | $2,474,831 | $2,474,831 | ||||||||||||
E William Parsley, III* | $1,124,944 | $1,124,944 | $1,781,249 | $1,781,249 | ||||||||||||
Steven C. Van Wyk | $ 999,951 | $ 999,951 | $ 987,368 | $ 987,368 |
* | The grant date fair value of Mr. Parsley’s ALM |
See the Grants of plan-based awards in |
(c) | Our NEOs received an annual incentive award paid in cash early in |
(d) | The dollar amounts in this column include the increase in the actuarial value of our Qualified Pension Plan, ERISA Excess Pension Plan and Supplemental Executive Retirement Plan. We describe these plans on page |
We do not pay above-market or preferential earnings on any compensation that is deferred on a basis that is nottax-qualified, including such earnings onnon-qualified defined contribution plans. For |
5660 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
SUMMARY COMPENSATION TABLE
(e) | The amounts in this column include, for all NEOs, net of any reimbursements to PNC: |
NEO | Perquisites and Other Personal Benefits* | Registrant ISP Contributions | Insurance Premiums** | Other*** | Total to Summary Compensation Table | Perquisites and Other Personal Benefits* | Registrant ISP Contributions | Insurance Premiums** | Other*** | Total to Summary Compensation Table | ||||||||||||||||||||||||||||||
William S. Demchak | $ | 141,772 | $ | 10,600 | $ | 45,129 | $ | 20,507 | $ | 218,008 | $109,975 | $10,800 | $44,736 | $ 45 | $165,556 | |||||||||||||||||||||||||
Robert Q. Reilly | $ | 11,143 | $ | 10,600 | $ | 20,927 | $ | 4,825 | $ | 47,495 | $ 15,491 | $10,800 | $20,927 | $599 | $ 47,817 | |||||||||||||||||||||||||
Michael P. Lyons | $ | 9,843 | $ | 10,600 | – | $ | 15,785 | $ | 36,228 | $ 3,811 | $10,600 | – | $118 | $ 14,529 | ||||||||||||||||||||||||||
E William Parsley, III | $ | 11,596 | $ | 10,600 | – | $ | 126,145 | $ | 148,341 | $ 10,000 | $ 8,600 | – | $ 96 | $ 18,696 | ||||||||||||||||||||||||||
Steven C. Van Wyk | $ | 9,975 | $ | 10,600 | – | $ | 16 | $ | 20,591 | |||||||||||||||||||||||||||||||
Steven Van Wyk | $ 9,975 | $10,600 | – | $110 | $ 20,685 |
* | The dollar amount of the perquisite represents the incremental cost to PNC of providing the benefit. |
** | We pay premiums for certain of the NEOs in connection with our Key Executive Equity Program, which is a split-dollar insurance arrangement. |
*** | This column reflects the dollar amount of matching gifts made by us to charitable organizations under our employee charitable matching gift program for Mr. Reilly ($500) and the cash paid for fractional shares of the |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 5761
GRANTS OF PLAN-BASED AWARDS IN 2016FISCAL 2017
Grants of plan-based awards in 2016fiscal 2017
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(a) | Estimated Future Payouts Under Equity Incentive Plan Awards(b) | Grant Date Fair Value of Stock and Option Awards ($)(c) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(a) | Estimated Future Payouts Under Equity Incentive Plan Awards(b) | Grant Date Fair Value of Stock and Option Awards ($)(c) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Award Type | Grant Date | Thres- hold ($) | Target ($) | Maximum ($) | Thres- hold ($) | Target (#) | Maximum (#) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold ($) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||
William S. Demchak | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive Award | February 11, 2016 | – | $ | 3,540,000 | $ | 10,836,000 | February 16, 2017 | – | $ | 3,540,000 | $ | 11,016,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | February 11, 2016 | – | 49,891 | 62,363 | $ | 3,899,979 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 11, 2016 | – | 49,891 | 62,363 | $ | 3,899,979 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Standard IPUs | February 16, 2017 | – | 26,583 | 33,228 | $ | 3,374,978 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs | February 16, 2017 | – | 26,583 | 33,228 | $ | 3,374,978 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert Q. Reilly | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive Award | February 11, 2016 | – | $ | 1,250,000 | – | February 16, 2017 | – | $ | 1,375,000 | – | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | February 11, 2016 | – | 12,152 | 15,190 | $ | 949,922 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 11, 2016 | – | 12,152 | 15,190 | $ | 949,922 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Standard IPUs | February 16, 2017 | – | 6,990 | 8,737 | $ | 887,450 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs | February 16, 2017 | – | 6,990 | 8,737 | $ | 887,450 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael P. Lyons | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive Award | February 11, 2016 | – | $ | 2,000,000 | $ | 10,836,000 | February 16, 2017 | – | $ | 2,000,000 | $ | 11,016,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | February 11, 2016 | – | 26,096 | 32,620 | $ | 2,039,924 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 11, 2016 | – | 26,096 | 32,620 | $ | 2,039,924 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Standard IPUs | February 16, 2017 | – | 15,595 | 19,493 | $ | 1,979,941 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs | February 16, 2017 | – | 15,595 | 19,493 | $ | 1,979,941 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
E William Parsley, III | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive Award | February 11, 2016 | – | $ | 2,400,000 | $ | 10,836,000 | February 16, 2017 | – | $ | 2,400,000 | $ | 11,016,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | February 11, 2016 | – | 11,513 | 14,391 | $ | 899,971 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 11, 2016 | – | 11,513 | 14,391 | $ | 899,971 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ALM Incentive Performance Units | February 11, 2016 | – | 38,377 | 76,754 | $ | 2,999,930 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Standard IPUs | February 16, 2017 | – | 11,224 | 14,030 | $ | 1,424,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs | February 16, 2017 | – | 11,224 | 14,030 | $ | 1,424,999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ALM IPUs | February 16, 2017 | – | 11,814 | 23,628 | $ | 1,499,905 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven C. Van Wyk | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive Award | February 11, 2016 | – | $ | 1,125,000 | $ | 10,836,000 | February 16, 2017 | – | $ | 1,125,000 | $ | 11,016,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | February 11, 2016 | – | 10,234 | 12,792 | $ | 799,992 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 11, 2016 | – | 10,234 | 12,792 | $ | 799,992 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Standard IPUs | February 16, 2017 | – | 6,222 | 7,777 | $ | 789,945 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSUs | February 16, 2017 | – | 6,222 | 7,777 | $ | 789,945 |
(a) | The amounts listed in the “Target” column relate to the target annual cash incentive award for the |
(b) | The amounts listed in these columns include the |
58 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
GRANTS OF PLAN-BASED AWARDS IN 2016
the grant and the “Maximum” amount represents 200% of the |
In determining the payout for |
• | items resulting from a change in tax law |
• | discontinued operations (as such term is used under GAAP) |
• | acquisition costs and merger integration costs |
62 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2017
• | any costs or expense arising from specified Visa litigation and any other gains recognized on redemption or sale of Visa shares, as applicable |
• |
• | acceleration of the accretion of any remaining issuance discount in connection with the redemption of any preferred stock |
• | any other charges or benefits related to the redemption of trust preferred or other preferred securities |
(c) | The grant date fair |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 5963
OUTSTANDING EQUITY AWARDS AT 20162017 FISCALYEAR-END
Outstanding equity awards at 20162017 fiscalyear-end
The following tables show, for each NEO, the outstanding equity awards as of December 31, 2016.2017. These awards include the following:
– | Standard |
– |
|
– |
ratio for “well-capitalized” institutions established by our primary regulator; payout for these awards may be adjusted by 25% up or down based on TSR in |
With respect to the following three forms of equity-basedperformance-based equity awards included in the table, the Personnel and Compensation Committee made performance-based orand risk-based determinations in the first quarter of 2017,2018, as described in more detail below:below. The payout percentage grids are included below for each type of performance-based equity award. For PRSUs and ALM IPUs, actual payout percentages are based on straight-line interpolation between the data points reflected in the payout percentage grid. For Standard IPUs, actual payout percentages are interpolated, which takes into account how close the actual performance or peer group rank is to the metric or rank above and below.
Performance-based restricted share units
The performance-based restricted share unitsPRSUs that vest based on 20162017 performance are included in the following table as of December 31, 2016.2017. At a meeting held on January 26, 2017, our Board’s29, 2018, the Personnel and Compensation Committee certified the levelslevel of performance achieved and determined the payout for the 20162017 tranche of each of the 2013 grants, the 2014, grants, the 2015, grants2016, and the 2016 grants and determined the payout level.2017 grants. The Committee certified that the required Tier 1 risk-based capital ratio of 6% established by our primary regulator had been
achieved. The Committee then determined the sizelevel of the payout, which could range from 75% to 125% of the target
number of units based on 2016 TSR. The Committee approved a payout at 125%TSR for the applicable tranche of each of the 2013, 2014, 2015 and 2016 grants.2017. As noted above, these awards also have an ROEC relatedROEC-related risk metric that could trigger an additional review or adjustment. Noadjustment; however, no additional review or adjustment was required, as ROEC exceeded the cost of capital hurdle in 2017. The Committee approved hurdle.a payout at 125% for the 2017 tranche of each of the 2014, 2015, 2016, and 2017 grants. In accordance with the terms of these awards, the PRSUs were paid out in PNC common stock.
| ||
|
Annual | Payout % | 2017 TSR | 2017 Payout % | |||||||||
>= +25% | 125% | 126% | 125% | |||||||||
0% | 100% | |||||||||||
<= -25% | 75% |
6064 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
OUTSTANDING EQUITY AWARDS AT 20162017 FISCALYEAR-END
IncentiveStandard incentive performance units
The incentive performance unitsStandard IPUs granted in 20142015 that vest based on performance for the three-year period ended December 31, 2017 are included in the following table as of December 31, 2016.2017. At a meeting held on February 15, 2017, our Board’s14, 2018, the Personnel and Compensation Committee certified the levelslevel of performance achieved and determined the payout for the January 1, 20142015 to December 31, 20162017 performance period andperiod. The Committee certified that the required Tier 1 risk-based capital ratio of 6% established by our primary regulator had been achieved. The Committee then determined the payout level. The units provided an opportunity for the executive to receive a payout after the endlevel of the performance periodpayout, which could range from 0% to 125% of the target
number of units based on our earnings per share growth (EPS growth) as compared to our peers and our ROCE performance compared to our COCE, each adjusted as defined in the award agreement. The
Committee certified that the required Tier 1 risk-based capital ratio of 6% established by our primary regulator had been achieved. TheseAs noted above, these awards were alsoare subject to the same ROEC relatedan ROEC-related risk metric as noted earlier whichthat could have reducedreduce the payout; however, no reduction was required, as ROEC exceeded the cost of capital hurdle and thein 2017. The Committee approved a payout at 99.54%107.18% for these awards.the Standard IPUs granted in 2015. In accordance with the terms of these awards, the incentive performance unitsStandard IPUs were payablepaid out in PNC common stock.stock up to target (100%) and were paid out in cash above target.
Payout % | Overall Payout
| |||||||||||||
Metric | 2014 | 2015 | 2016 | |||||||||||
EPS Growth Payout | 61.90% | 86.73% | 73.62% | 99.54% | ||||||||||
(PNC Ranking in peer group) | (10 out of 13) | (8 out of 12) | (8 out of 12) | |||||||||||
ROCE Payout | 125.00% | 125.00% | 125.00% | |||||||||||
(ROCE as a percentage of COCE) | (169.75%) | (160.41%) | (161.41%) |
ROCE as % | Payout % | |
>= 110% | 125% | |
105% | 100% | |
100% | 75% | |
75% | 50% | |
<= 50% | 0% |
EPS Growth Rank | Payout % | |
1 | 125% | |
2 | 125% | |
3 | 125% | |
4 | 120% | |
5 | 115% | |
6 | 105% | |
7 | 95% | |
8 | 80% | |
9 | 60% | |
10 | 40% | |
11 | 0% | |
12 | 0% |
2015 | 2016 | 2017 | ||||||||||||
ROCE as % of COCE | EPS Growth | ROCE as % | EPS Growth | ROCE as % | EPS Growth | 2015-2017 Payout % | ||||||||
Metric | 160.41% | 8th | 161.41% | 8th | 164.10% | 6th | 107.18% | |||||||
Payout | 125% | 86.73% | 125% | 73.62% | 125% | 107.73% |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 65
OUTSTANDING EQUITY AWARDS AT 2017 FISCALYEAR-END
ALM incentive performance units
The ALM incentive performance unitsIPUs granted in 2014 to Mr. Parsley were outstanding as ofin 2015 that vest based on performance for the three-year period ended December 31, 2016 and2017 are included in the following table.table as of December 31, 2017. At a meeting held on January 26, 2017, our Board’s29, 2018, the Personnel and Compensation Committee certified the levelslevel of performance achieved under Mr. Parsley’s ALM-based grant and determined the final award.payout for the January 1, 2015 to December 31, 2017 performance period. The maximum potential payoutCommittee determined the
percentage waslevel of the payout, which could range from 0% to 200%. The maximum permitted payout for these units is generated by applying of the performance factor to thetarget number of target share units of 36,973.based on our Asset & Liability Management function performance against a benchmark index. The Committee approved a payout at 200% of target.for the ALM IPUs granted in 2015. In accordance with the terms of this award, the ALM incentive performance unitsIPUs awarded to Mr. Parsley were paid out entirely in cash share equivalents.cash.
Payout Percentage | ||||||||
Metric | 2014 | 2015 | 2016 | Overall | ||||
Performance of ALM unit against benchmark index | 200.00% | 200.00% | 200.00% | 200.00% |
ALM Performance vs. Index | Payout % | 2015 | 2016 | 2017 | 2015-2017 Payout % | |||||||||||||||
>= +40 basis points | 200% | 200% | 200% | 200% | 200% | |||||||||||||||
+20 basis points | 150% | |||||||||||||||||||
0 to -25 basis points | 100% | |||||||||||||||||||
-35 basis points | 40% | |||||||||||||||||||
<= -40 basis points | 0% |
66 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
OUTSTANDING EQUITY AWARDS AT 2017 FISCALYEAR-END
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(a) | Option Exercise Price ($) | Option Expiration Date | Performance Period(b) | Number of Shares or Units of Stock That Have Not Vested (#)(c) | Market Value of Shares or Units of Stock That Have Not Vested ($)(d) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(e) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) | ||||||||||||||||||||||||||
William S. Demchak |
| |||||||||||||||||||||||||||||||||
Options | PRSUs | |||||||||||||||||||||||||||||||||
April 26, 2010 | 75,000 | $ | 66.77 | April 26, 2020 | Jan. 1, 2014–Dec. 31, 2017 | 11,555 | $ | 1,667,271 | ||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 11,772 | $ | 1,698,582 | 9,418 | $ | 1,358,923 | ||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2019 | 15,591 | $ | 2,249,625 | 24,946 | $ | 3,599,458 | ||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2020 | 8,306 | $ | 1,198,473 | 19,938 | $ | 2,876,854 | ||||||||||||||||||||||||||||
Standard IPUs | ||||||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 40,374 | $ | 5,825,564 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 62,363 | $ | 8,998,357 | |||||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2019 | 33,228 | $ | 4,794,468 | |||||||||||||||||||||||||||||||
Robert Q. Reilly |
| |||||||||||||||||||||||||||||||||
Options | PRSUs | |||||||||||||||||||||||||||||||||
February 12, 2009 | 50,000 | $ | 31.07 | February 12, 2019 | Jan. 1, 2014–Dec. 31, 2017 | 2,985 | $ | 430,706 | ||||||||||||||||||||||||||
April 26, 2010 | 25,000 | $ | 66.77 | April 26, 2020 | Jan. 1, 2015–Dec. 31, 2018 | 3,171 | $ | 457,544 | 2,537 | $ | 366,064 | |||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2019 | 3,797 | $ | 547,869 | 6,076 | $ | 876,706 | ||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2020 | 2,183 | $ | 314,985 | 5,243 | $ | 756,512 | ||||||||||||||||||||||||||||
Standard IPUs | ||||||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 10,876 | $ | 1,569,298 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 15,190 | $ | 2,191,765 | |||||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2019 | 8,737 | $ | 1,260,662 | |||||||||||||||||||||||||||||||
Michael P. Lyons |
| |||||||||||||||||||||||||||||||||
PRSUs | ||||||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2017 | 7,857 | $ | 1,133,687 | |||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 6,798 | $ | 980,883 | 5,440 | $ | 784,938 | ||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2019 | 8,155 | $ | 1,176,685 | 13,048 | $ | 1,882,696 | ||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2020 | 4,872 | $ | 702,981 | 11,697 | $ | 1,687,760 | ||||||||||||||||||||||||||||
Standard IPUs | ||||||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 23,319 | $ | 3,364,699 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 32,620 | $ | 4,706,740 | |||||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2019 | 19,493 | $ | 2,812,645 | |||||||||||||||||||||||||||||||
E William Parsley, III |
| |||||||||||||||||||||||||||||||||
PRSUs | ||||||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2017 | 3,033 | $ | 437,632 | |||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 2,621 | $ | 378,184 | 2,098 | $ | 302,720 | ||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2019 | 3,597 | $ | 519,011 | 5,757 | $ | 830,678 | ||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2020 | 3,507 | $ | 506,025 | 8,418 | $ | 1,214,633 | ||||||||||||||||||||||||||||
Standard IPUs | ||||||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 8,991 | $ | 1,297,311 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 14,391 | $ | 2,076,477 | |||||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2019 | 14,030 | $ | 2,024,389 | |||||||||||||||||||||||||||||||
ALM IPUs | ||||||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 64,948 | $ | 9,371,347 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 76,754 | $ | 11,074,835 | |||||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2019 | 23,628 | $ | 3,409,284 |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 6167
OUTSTANDING EQUITY AWARDS AT 20162017 FISCALYEAR-END
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Grant Date or Performance Period(a) | No. of Securities Underlying Unexercised Options (#) Exercisable(b) | Option Exercise Price ($) | Option Expiration Date | Grant Date or Performance Period(a) | No. of Shares or Units of Stock That Have Not Vested (#)(c) | Market Value of Shares or Units of Stock That Have Not Vested ($)(d) | Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not Vested (#)(e) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) | ||||||||||||||||||||||||||
William S. Demchak |
| |||||||||||||||||||||||||||||||||
Options | Performance-Based Restricted Share Units | |||||||||||||||||||||||||||||||||
February 12, 2009 | 180,000 | $ | 31.07 | February 12, 2019 | Jan. 1, 2013–Dec. 31, 2016 | 9,452 | $ | 1,105,506 | ||||||||||||||||||||||||||
April 26, 2010 | 75,000 | $ | 66.77 | April 26, 2020 | Jan. 1, 2014–Dec. 31, 2017 | 11,553 | $ | 1,351,239 | 9,244 | $ | 1,081,178 | |||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 11,771 | $ | 1,376,736 | 18,836 | $ | 2,203,059 | ||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2019 | 15,590 | $ | 1,823,406 | 37,419 | $ | 4,376,526 | ||||||||||||||||||||||||||||
Incentive Performance Units | ||||||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 36,802 | $ | 4,304,362 | |||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 47,087 | $ | 5,507,296 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 49,891 | $ | 5,835,251 | |||||||||||||||||||||||||||||||
Robert Q. Reilly |
| |||||||||||||||||||||||||||||||||
Options | Performance-Based Restricted Share Units | |||||||||||||||||||||||||||||||||
January 22, 2008 | 33,000 | $ | 57.21 | January 22, 2018 | Jan. 1, 2013–Dec. 31, 2016 | 2,911 | $ | 340,471 | ||||||||||||||||||||||||||
July 21, 2008 | 65,000 | $ | 63.69 | July 21, 2018 | Jan. 1, 2014–Dec. 31, 2017 | 2,985 | $ | 349,126 | 2,388 | $ | 279,300 | |||||||||||||||||||||||
February 12, 2009 | 19,800 | $ | 31.07 | February 12, 2019 | Jan. 1, 2015–Dec. 31, 2018 | 3,171 | $ | 370,880 | 5,074 | $ | 593,455 | |||||||||||||||||||||||
February 12, 2009 | 50,000 | $ | 31.07 | February 12, 2019 | Jan. 1, 2016–Dec. 31, 2019 | 3,797 | $ | 444,097 | 9,114 | $ | 1,065,973 | |||||||||||||||||||||||
April 26, 2010 | 25,000 | $ | 66.77 | April 26, 2020 | Incentive Performance Units | |||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 9,507 | $ | 1,111,939 | |||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 12,685 | $ | 1,483,638 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 12,152 | $ | 1,421,298 | |||||||||||||||||||||||||||||||
Michael P. Lyons |
| |||||||||||||||||||||||||||||||||
Performance-Based Restricted Share Units | ||||||||||||||||||||||||||||||||||
Jan. 1, 2013–Dec. 31, 2016 | 7,715 | $ | 902,346 | |||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2017 | 7,856 | $ | 918,838 | 6,286 | $ | 735,211 | ||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 6,798 | $ | 795,094 | 10,879 | $ | 1,272,408 | ||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2019 | 8,155 | $ | 953,809 | 19,572 | $ | 2,289,141 | ||||||||||||||||||||||||||||
Incentive Performance Units | ||||||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 25,025 | $ | 2,926,924 | |||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 27,196 | $ | 3,180,844 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 26,096 | $ | 3,052,188 | |||||||||||||||||||||||||||||||
E William Parsley, III |
| |||||||||||||||||||||||||||||||||
Options | Performance-Based Restricted Share Units | |||||||||||||||||||||||||||||||||
July 21, 2008 | 25,000 | $ | 63.69 | July 21, 2018 | Jan. 1, 2013–Dec. 31, 2016 | 2,922 | $ | 341,757 | ||||||||||||||||||||||||||
February 12, 2009 | 50,000 | $ | 31.07 | February 12, 2019 | Jan. 1, 2014–Dec. 31, 2017 | 3,032 | $ | 354,623 | 2,427 | $ | 283,862 | |||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 2,621 | $ | 306,552 | 4,195 | $ | 490,647 | ||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2019 | 3,597 | $ | 420,705 | 8,635 | $ | 1,009,950 | ||||||||||||||||||||||||||||
Incentive Performance Units | ||||||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 9,660 | $ | 1,129,834 | |||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016(f) | 73,946 | $ | 8,648,724 | |||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017(f) | 64,948 | $ | 7,596,318 | |||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 10,486 | $ | 1,226,443 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018(f) | 76,754 | $ | 8,977,148 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 11,513 | $ | 1,346,560 |
62 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
OUTSTANDING EQUITY AWARDS AT 2016 FISCAL YEAR-END
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Grant Date or Performance Period(a) | No. of Securities Underlying Unexercised Options (#) Exercisable(b) | Option Exercise Price ($) | Option Expiration Date | Grant Date or Performance Period(a) | No. of Shares or Units of Stock That Have Not Vested (#)(c) | Market Value of Shares or Units of Stock That Have Not Vested ($)(d) | Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not Vested (#)(e) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) | ||||||||||||||||||||||||||
Steven C. Van Wyk |
| |||||||||||||||||||||||||||||||||
Performance-Based Restricted Share Units | ||||||||||||||||||||||||||||||||||
Jan. 1, 2013–Dec. 31, 2016 | 2,787 | $ | 325,968 | |||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2017 | 2,888 | $ | 337,780 | 2,311 | $ | 270,295 | ||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 2,706 | $ | 316,494 | 4,330 | $ | 506,437 | ||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2019 | 3,197 | $ | 373,921 | 7,676 | $ | 897,785 | ||||||||||||||||||||||||||||
Incentive Performance Units | ||||||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 9,200 | $ | 1,076,032 | |||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 10,823 | $ | 1,265,858 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 10,234 | $ | 1,196,969 |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(a) | Option Exercise Price ($) | Option Expiration Date | Performance Period(b) | Number of Shares or Units of Stock That Have Not Vested (#)(c) | Market Value of Shares or Units of Stock That Have Not Vested ($)(d) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(e) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) | ||||||||||||||||||||||||||
Steven C. Van Wyk |
| |||||||||||||||||||||||||||||||||
PRSUs | ||||||||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2017 | 2,888 | $ | 416,710 | |||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 2,706 | $ | 390,449 | 2,165 | $ | 312,388 | ||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2019 | 3,197 | $ | 461,295 | 5,118 | $ | 738,476 | ||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2020 | 1,943 | $ | 280,355 | 4,667 | $ | 673,401 | ||||||||||||||||||||||||||||
Standard IPUs | ||||||||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 9,280 | $ | 1,339,011 | |||||||||||||||||||||||||||||||
Jan. 1, 2016–Dec. 31, 2018 | 12,792 | $ | 1,845,758 | |||||||||||||||||||||||||||||||
Jan. 1, 2017–Dec. 31, 2019 | 7,777 | $ | 1,122,143 |
(a) |
All outstanding stock options are vested in their entirety. |
(b) | This column shows the performance period for the PRSUs, Standard IPUs, and ALM IPUs. |
(c) | This column reflects the number of shares earned with respect to equity awards whose performance period was completed as of December 31, 2017, specifically (i) the 2017 tranche of the PRSUs granted in each of 2014, 2015, 2016, and 2017 based on achievement at 125% of the target |
Grant Date | Performance Period | Vest Date of the | ||
| ||||
February 13, 2014 | Jan. 1, 2014–Dec. 31, 2017 | February 13, | ||
February 13, 2015 | Jan. 1, 2015–Dec. 31, 2018 | February 13, | ||
February 11, 2016 | Jan. 1, 2016–Dec. 31, 2019 | February 11, 2018 | ||
February 16, 2017 | Jan. 1, 2017–Dec. 31, 2020 | February 16, 2018 |
(d) | The market value |
(e) | This column reflects equity awards whose performance period has not been completed as of December 31, 2017, specifically (i) the remaining tranches of |
Grant Date | Performance Period | |||
| ||||
February 13, 2015 | Jan. 1, 2015–Dec. 31, 2018 | |||
February 11, 2016 | Jan. 1, 2016–Dec. 31, 2019 | |||
February 16, 2017 | Jan. 1, 2017–Dec. 31, 2020 | The remaining three tranches vest in approximately equal installments on the second, third and fourth |
68 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 63
OPTION EXERCISES AND STOCK VESTED IN FISCAL 20162017
Option exercises and stock vested in fiscal 20162017
Option Awards | Stock Awards(b) | Option Awards | Stock Awards(b) | |||||||||||||||||||||||||||||||||||||
NEO | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(a) ($) | Number of Shares Acquired on Vesting (#) | Value Realized ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(a) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||||||||||||||||||||||
William S. Demchak | 314,000 | $12,669,071 | 70,197 | $5,763,963 | 165,442 | $ | 15,923,793 | 85,168 | $ | 10,664,655 | ||||||||||||||||||||||||||||||
Robert Q. Reilly | 22,000 | $ 492,250 | 19,745 | $1,621,158 | 117,576 | $ | 9,094,420 | 22,371 | $ | 2,801,526 | ||||||||||||||||||||||||||||||
Michael P. Lyons | - | - | 53,053 | $4,359,255 | – | – | 55,549 | $ | 6,961,548 | |||||||||||||||||||||||||||||||
E William Parsley, III | - | - | 114,239 | $9,416,295 | 71,307 | $ | 7,080,816 | 95,778 | $ | 11,709,295 | ||||||||||||||||||||||||||||||
Steven C. Van Wyk | - | - | 29,088 | $2,428,917 | ||||||||||||||||||||||||||||||||||||
Steven Van Wyk | – | – | 20,778 | $ | 2,603,530 |
(a) | The dollar amount in this column includes the value realized upon the exercise of various options throughout |
(b) | These columns include the |
64 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 69
PENSION BENEFITS AT 20162017 FISCALYEAR-END
Pension benefits at 20162017 fiscalyear-end
The principal elements of our post-employment compensation are a qualified defined benefit cash balance pension plan, anon-qualified excess cash balance pension plan and anon-qualified supplemental executive retirement plan, each described in this section, as well as a qualified defined contribution savings plan and anon-qualified deferred compensation and incentive plan.plan as described inNon-qualified deferred compensation in fiscal 2017 on page 72.
Cash balance pension plan. We maintain a pension plan for most of our full-time employees. The pension plan is a defined benefit cash balance pension plan under the Employee Retirement Income Security Act of 1974, as amended (ERISA), and is intended to be qualified under Section 401(a) of the Internal Revenue Code. Each calendar quarter, eligible participants receive “earnings credits” based on a percentage of eligible compensation in accordance withcompensation. Earnings credit percentages for employees who were plan participants on December 31, 2009 are based on a schedule based onusing the participant’s age and years of credited service. Earnings credit percentages for plan participants on December 31, 2009service at that date and are frozen at their level earned to that point.level. Earnings credits for all employees who become participants on or after January 1, 2010 are a flat 3% of eligible compensation.
The plan defines eligible “compensation” as regular earnings plus eligible variable compensation, such as paid annual incentives. Eligible “compensation” does not include deferred payments of annual incentives; these are instead taken into account under our excess pension plan described below. We generally limit eligible variable compensation for a plan year to a total of 100% of the first $25,000 plus 50% of the next $225,000.
For participants who had accrued benefits prior to 1999 under the pension plan formula then in effect, an initial cash balance “account” was established based on the present value of the accrued benefits at the time of the conversion to the current program. Employees who were at least age 40 and had at least 10 years of credited service as of January 1, 1999 were awarded additional “Transitional Earnings Credits” under the plan for up to 10 years.
Employees who were alreadyPlan participants at December 31, 2009 generally receive quarterly “interest credits” at a rate ofone-fourth of the annual interest rate on30-year Treasury securities, withsecurities. Employees who were already plan participants as of December 31, 2009 receive a minimum interest credit. New participants on
or after January 1, 2010 are not subject to this minimum interest credit.
At the end of 2008, the cash balance pension plan previously sponsored by National City Corporation was merged into this plan. Earnings and interest credits for National City participants are generally as noted above.
We contribute to the plan an actuarially determined amount necessary to fund the total benefits payable to participants. Actuaries calculate total contributions instead of contributions for each individual participant.
Excess pension plan. We maintain an ERISA excess pension plan, which is a supplementalnon-qualified pension plan. The excess benefits under this plan equal the difference, if any, between a participant’s benefit under the qualified pension plan computed without regard to applicable Internal Revenue Code limits and taking into account bonus amounts deferred under thenon-qualified deferred compensation and incentive plan, and the participant’s actual benefit under the qualified pension plan.
Supplemental executive retirement plan. We maintain a supplemental executive retirement plan for certain executive officers. As part of its ongoing review of compensation practices, the Personnel and Compensation Committee decided in 2007 to eliminate future plan participation for new executive officers. This plan provides earnings credits based on a percentage of annual incentives awarded under eligible executive bonus plans in accordance with a schedule based on the participant’s age and years of credited service. This plan also provides quarterly interest credits that mirror the interest credits under the qualified pension plan.
Executive officers who participated in the supplemental executive retirement plan on December 31, 1998 and who were at least age 50 with five or more years of credited service receive grandfathered benefits based on the pension formula in effect prior to 1999. For executive officers at or above a certain organizational level who participated on December 31, 1998 but who did not meet the requirements for grandfathered benefits, we doubled the earnings credit percentages in order to mitigate the effect of the transition to the cash balance pension formula.
70 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 65
PENSION BENEFITS AT 20162017 FISCALYEAR-END
NEO | Plan Name | Number of Years Credited Service (#)(a) | Present Value of Accumulated Benefit ($)(b) | Payments During Last Fiscal Year | Plan Name | Number of Years Credited Service (#)(a) | Present Value of Accumulated Benefit ($)(b) | Payments During Last Fiscal Year | ||||||||||||||||||||
William S. Demchak | Qualified Pension Plan | 14 | $ | 219,617 | – | Qualified Pension Plan | 15 | $ | 252,264 | – | ||||||||||||||||||
ERISA Excess Pension Plan | 14 | $ | 1,438,728 | – | ERISA Excess Pension Plan | 15 | $ | 1,685,861 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | 14 | $ | 2,134,936 | – | Supplemental Executive Retirement Plan | 15 | $ | 2,521,497 | – | |||||||||||||||||||
Total | $ | 3,793,281 | – | Total | $ | 4,459,622 | – | |||||||||||||||||||||
Robert Q. Reilly | Qualified Pension Plan | 29 | $ | 380,624 | – | Qualified Pension Plan | 30 | $ | 433,378 | – | ||||||||||||||||||
ERISA Excess Pension Plan | 29 | $ | 530,197 | – | ERISA Excess Pension Plan | 30 | $ | 633,193 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | 29 | $ | 805,905 | – | Supplemental Executive Retirement Plan | 30 | $ | 989,700 | – | |||||||||||||||||||
Total | $ | 1,716,726 | – | Total | $ | 2,056,271 | – | |||||||||||||||||||||
Michael P. Lyons | Qualified Pension Plan | 5 | $ | 33,431 | – | Qualified Pension Plan | 6 | $ | 41,446 | – | ||||||||||||||||||
ERISA Excess Pension Plan | 5 | $ | 66,668 | – | ERISA Excess Pension Plan | 6 | $ | 82,823 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | NA | – | – | Supplemental Executive Retirement Plan | N/A | – | – | |||||||||||||||||||||
Total | $ | 100,099 | – | Total | $ | 124,269 | – | |||||||||||||||||||||
E William Parsley, III | Qualified Pension Plan | 13 | $ | 192,594 | – | Qualified Pension Plan | 14 | $ | 226,075 | – | ||||||||||||||||||
ERISA Excess Pension Plan | 13 | $ | 781,493 | – | ERISA Excess Pension Plan | 14 | $ | 932,004 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | NA | – | – | Supplemental Executive Retirement Plan | N/A | – | – | |||||||||||||||||||||
Total | $ | 974,087 | – | Total | $ | 1,158,079 | – | |||||||||||||||||||||
Steven C. Van Wyk | Qualified Pension Plan | 3 | $ | 29,326 | – | Qualified Pension Plan | 4 | $ | 38,244 | – | ||||||||||||||||||
ERISA Excess Pension Plan | 3 | $ | 32,517 | – | ERISA Excess Pension Plan | 4 | $ | 44,127 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | NA | – | – | Supplemental Executive Retirement Plan | N/A | – | – | |||||||||||||||||||||
Total | $ | 61,843 | – | Total | $ | 82,371 | – |
(a) | To compute the number of years of service, we use the same plan measurement date that we use for our |
(b) | We compute the present values shown here as of December 31, |
We calculate the present values for the plans by projecting the December 31, |
See Note 11 in the Notes to Consolidated Financial Statements in our Annual Report on Form10-K for the year ended December 31, |
66 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 71
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 20162017
Non-qualified deferred compensation in fiscal 20162017
Supplemental incentive savings plan (SISP). Prior to 2012, we offered a non-qualified supplemental incentive savings plan for certain designated employees who exceeded a compensation threshold. Effective January 1, 2012, the SISP was frozen to new participants and to the deferral of amounts earned on and after January 1, 2012. Participants with existing account balances can direct the investment of their accounts among the hypothetical investment alternatives made available under the plan and their accounts are adjusted for deemed investment gains or losses resulting from such investment directions.
The SISP was a supplement to theWe offer an incentive savings plan (ISP) in which most of our employees can participate after they meet any applicable service requirements.requirements, and for designated employees who exceed a compensation threshold, we also offer a non-qualified deferred compensation and incentive plan (DCIP). Prior to establishing the DCIP in 2012, we offered a non-qualified supplemental incentive savings plan (SISP), which was a supplement to the ISP, and a non-qualified deferred compensation plan (DCP), in each case for certain designated employees who exceeded applicable compensation thresholds.
Incentive savings plan (ISP). The ISP is a defined contribution 401(k) plan whichthat is intended to be qualified under Section 401(a) of the Internal Revenue Code. During 2016,2017, participants could elect to contribute between 1% and 75% of eligible compensation to the plan each year aspre-tax elective deferrals, subject to Internal Revenue Code limits. Participants who are age 50 or older may contribute additionalpre-tax amounts called “catch-up“catch-up contributions” each year. For 2016,2017, we made employer matching contributions on behalf of eligible participants equal to 100% of elective deferrals up to 4% of eligible compensation. Matching contributions were made in cash. Participants direct the investment of their accounts among the investment options offered under the plan and their account balances are adjusted for gains or losses resulting from those investment directions.
ISP and SISP participants have the same investment options. The employee directs investment of contributions under either plan. Investment options include several collective funds and mutual funds
(including BlackRock mutual funds), a proprietary PNC investment fund, and a PNC common stock fund. We no longer permit new funds to be contributed or transferred into the PNC common stock fund. SISP investments are invested on a phantom basis and are considered “deemed” investments.
Deferred compensation plan (DCP) and deferred compensation and incentive plan (DCIP). We maintain a non-qualified deferred compensation and incentive plan (DCIP)DCIP for designated employees who exceed a compensation threshold. Participants can elect to defer up to 20% of base salary and/or up to 75% of eligible short-term incentive pay earned with respect to a plan year. The DCIP’s plan year is the calendar yearyear.
Supplemental incentive savings plan (SISP) and the DCIP’s first plan year began January 1, 2012. Prior to 2012, we offered a non-qualified deferred compensation plan (DCP) for designated employees who exceeded a compensation threshold.. Effective January 1, 2012, the SISP and DCP waswere frozen to new participants and to the deferral of amounts earned on and after January 1, 2012. Distributions from this planthese plans are paid in cash in accordance with the participant’s election. Participants with existing account balances can direct the investment of their accounts among the hypothetical investment alternatives made available under the plan and their accounts are adjusted for deemed investment gains or losses resulting from such investment directions.
Investment options. ISP, DCIP, SISP, and DCP and DCIP participants currently have many of the same investment options available tolisted on page 74. The employee directs investment of contributions under each plan. Investment options include several collective funds and mutual funds (including BlackRock mutual funds) and a proprietary PNC investment fund. ISP and SISP participants.participants may also hold investments in a PNC common stock fund; however, we no longer permit new funds to be contributed or transferred into the PNC common stock fund. ISP, DCIP, SISP, and DCP and DCIP participants also have additional investment options, including additional BlackRock mutual funds. DCP and DCIP investments are invested on a phantom basis and are considered “deemed” investments.
72 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 67
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 20162017
Executive ($) | Registrant ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | Executive ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | ||||||||||||||||||||||||||||||||
NEO | Name of Plan | (a) | (b) | (c) | Name of Plan | (a) | (b) | (c) | ||||||||||||||||||||||||||||||||
William S. Demchak | Supplemental Incentive Savings Plan | – | – | $ | 163,443 | – | $ | 1,228,715 | Supplemental Incentive Savings Plan | – | $ | 279,701 | – | $ | 1,508,416 | |||||||||||||||||||||||||
Deferred Compensation & Incentive Plan | $ | 512,500 | – | $ | 103,359 | – | $ | 1,215,988 | Deferred Compensation & Incentive Plan | $ | 425,000 | $ | 192,174 | $ | (669,497 | ) | $ | 1,163,666 | ||||||||||||||||||||||
Deferred Compensation Plan | – | – | $ | (9,206 | ) | $ | (1,146,984 | ) | $ | 482,091 | Deferred Compensation Plan | – | $ | 5,908 | $ | (161,793 | ) | $ | 326,205 | |||||||||||||||||||||
Total | $ | 512,500 | – | $ | 257,596 | $ | (1,146,984 | ) | $ | 2,926,794 | Total | $ | 425,000 | $ | 477,783 | $ | (831,290 | ) | $ | 2,998,288 | ||||||||||||||||||||
Robert Q. Reilly | Supplemental Incentive Savings Plan | – | – | $ | 74,299 | – | $ | 720,451 | Supplemental Incentive Savings Plan | – | $ | 149,876 | – | $ | 870,327 | |||||||||||||||||||||||||
Deferred Compensation & Incentive Plan | – | – | – | – | – | Deferred Compensation & Incentive Plan | – | – | – | – | ||||||||||||||||||||||||||||||
Deferred Compensation Plan | – | – | $ | 231,085 | – | $ | 2,551,320 | Deferred Compensation Plan | – | $ | 423,932 | – | $ | 2,975,252 | ||||||||||||||||||||||||||
Total | – | – | $ | 305,384 | – | $ | 3,271,771 | Total | $ | – | $ | 573,808 | $ | – | $ | 3,845,579 | ||||||||||||||||||||||||
Michael P. Lyons | Supplemental Incentive Savings Plan | – | – | – | – | – | Supplemental Incentive Savings Plan | – | – | – | – | |||||||||||||||||||||||||||||
Deferred Compensation & Incentive Plan | – | – | – | – | – | Deferred Compensation & Incentive Plan | – | – | – | – | ||||||||||||||||||||||||||||||
Deferred Compensation Plan | – | – | – | – | – | Deferred Compensation Plan | – | – | – | – | ||||||||||||||||||||||||||||||
Total | – | – | – | – | – | Total | $ | – | $ | – | $ | – | $ | – | ||||||||||||||||||||||||||
E William Parsley, III | Supplemental Incentive Savings Plan | – | – | $ | 200,748 | – | $ | 1,954,937 | Supplemental Incentive Savings Plan | – | $ | 426,402 | – | $ | 2,381,339 | |||||||||||||||||||||||||
Deferred Compensation & Incentive Plan | – | – | – | – | – | Deferred Compensation & Incentive Plan | – | – | – | – | ||||||||||||||||||||||||||||||
Deferred Compensation Plan | – | – | $ | 97,325 | $ | (574,010 | ) | $ | 1,261,424 | Deferred Compensation Plan | – | $ | 78,519 | $ | (633,332 | ) | $ | 706,611 | ||||||||||||||||||||||
Total | – | – | $ | 298,073 | $ | (574,010 | ) | $ | 3,216,361 | Total | $ | – | $ | 504,921 | $ | (633,332 | ) | $ | 3,087,950 | |||||||||||||||||||||
Steven C. Van Wyk | Supplemental Incentive Savings Plan | – | – | – | – | – | Supplemental Incentive Savings Plan | – | – | – | – | |||||||||||||||||||||||||||||
Deferred Compensation & Incentive Plan | $ | 27,500 | – | $ | 8,370 | – | $ | 62,543 | Deferred Compensation & Incentive Plan | $ | 27,500 | $ | 15,845 | – | $ | 105,888 | ||||||||||||||||||||||||
Deferred Compensation Plan | – | – | – | – | – | Deferred Compensation Plan | – | – | – | – | ||||||||||||||||||||||||||||||
Total | $ | 27,500 | – | $ | 8,370 | – | $ | 62,543 | Total | $ | 27,500 | $ | 15,845 | $ | – | $ | 105,888 |
(a) | Amounts in this column |
(b) | No amounts in this column have been reported in the Summary compensation table on page |
(c) | We calculate the dollar amounts in this column by taking the aggregate balance at the end of fiscal year |
68 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2016
The amounts for each year reflect the contributions that were reported in previous summary compensation tables (since 2006). The total represents the aggregate of Executive and Registrant Contributions (thus, without giving effect to any earnings or distributions) that were reported in previous summary compensation tables.
NEO | Plan | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Total* | |||||||||||||||||||||||||||||||||||||||
William S. Demchak | SISP | $ | 77,102 | $ | 97,100 | $ | 75,200 | $ | 63,620 | – | – | – | – | – | – | – | $ | 313,022 | ||||||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | $ | 150,000 | $ | 684,690 | $ | 385,417 | $ | 442,500 | $ | 512,500 | $ | 2,175,107 | ||||||||||||||||||||||||||||||||||
DCP | $ | 1,278,907 | $ | 1,625,000 | $ | 1,125,603 | – | – | – | $ | 745,500 | – | – | – | – | $ | 4,775,010 | |||||||||||||||||||||||||||||||||||
Robert Q. Reilly | SISP | – | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
DCP | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
Michael P. Lyons | SISP | – | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
DCP | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
E William Parsley, III | SISP | – | – | – | – | $ | 665,038 | – | – | – | – | – | – | $ | 665,038 | |||||||||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
DCP | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||
Steven C. Van Wyk | SISP | – | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | – | – | – | – | $ | 27,500 | $ | 27,500 | ||||||||||||||||||||||||||||||||||||||
DCP | – | – | – | – | – | – | – | – | – | – | – | – |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 6973
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 20162017
The following table shows the 20162017 investment options for the DCP, DCIP, ISP, SISP, DCP and DCIP,SISP, along with annual rates of return. See page 6772 for an explanation of ourthe DCP, DCIP, ISP, SISP, DCP and DCIP.SISP. Ticker symbols are listed for investment options available to the general public.
Benchmark Performance | Ticker Symbol | DCP | DCIP | ISP/SISP | Rate of Return | |||||||||||||||||||
BlackRock High Yield BR | BHYIX | X | X | X | % | |||||||||||||||||||
BlackRock Government Short Term Inv. | X | X | X | % | ||||||||||||||||||||
BlackRock LifePath 2020 Fund | X | X | X | % | ||||||||||||||||||||
BlackRock LifePath 2025 Fund | X | X | X | % | ||||||||||||||||||||
BlackRock LifePath 2030 Fund | X | X | X | % | ||||||||||||||||||||
BlackRock LifePath 2035 Fund | X | X | X | % | ||||||||||||||||||||
BlackRock LifePath 2040 Fund | X | X | 19.38 | % | ||||||||||||||||||||
BlackRock LifePath 2045 Fund | X | X | 20.46 | % | ||||||||||||||||||||
BlackRock LifePath 2050 Fund | X | X | 20.82 | % | ||||||||||||||||||||
BlackRock LifePath 2055 Fund | X | X | 20.81 | % | ||||||||||||||||||||
BlackRock LifePath 2060 Fund | X | X | 20.78 | % | ||||||||||||||||||||
BlackRock LifePath Retirement Fund | X | X | X | |||||||||||||||||||||
| % | |||||||||||||||||||||||
BlackRock TIPS | X | X | X | % | ||||||||||||||||||||
Brandywine Intern’l Opp Fixed Inc Fund | LMOTX | X | X | % | ||||||||||||||||||||
PNC Common Stock Fund | PNC | X | X | % | ||||||||||||||||||||
PNC Stable Value Fund | X | X | X | % | ||||||||||||||||||||
SSgA S&P 500 Index Fund | X | X | X | % | ||||||||||||||||||||
SSgaA U.S. Extended Market Index Fund | X | X | X | % | ||||||||||||||||||||
SSgA Global Equity ex U.S. Index Fund | X | X | X | % | ||||||||||||||||||||
SSgA Real Return ex Nat. Res. Index Fund | X | % | ||||||||||||||||||||||
SSgA U.S. Bond Index Fund | X | X | X | % | ||||||||||||||||||||
SSgA International Equity Index Fund | X | X | X | % | ||||||||||||||||||||
SSgA Emerging Markets Equity Index Fund | X | X | X | % | ||||||||||||||||||||
FPA Cresent Fund | FPACX | X | X | % | ||||||||||||||||||||
Aberdeen Emerging Markets Institutional Fund Instl | ABEMX | X | X | % | ||||||||||||||||||||
BlackRock Global Allocation I Fund | MALOX | X | X | % | ||||||||||||||||||||
First Eagle Overseas I Fund | SGOIX | X | X | % | ||||||||||||||||||||
Vulcan Large Cap Value Fund | VVPLX | X | X | % | ||||||||||||||||||||
Fiduciary Mgmt Small Cap Fund | FMIMX | X | X | % |
7074 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Benefits upon termination of employment
Our NEOs may receive various forms of compensation or benefits in connection with a termination of employment. These benefits result from:
We do not have a separate severance plan or program for the NEOs, although theNEOs. The Personnel and Compensation Committee has discretion to provide severance benefits subject to the parameters of our Board-approved policy, as described in the policy we adopted in February 2011 and describedCD&A on page 51 of our CD&A.54.
The benefits will depend on whether PNC or the executive terminated employment and, if PNC terminated employment, whether itthe termination was for cause; whether the terminationcause, resulted from death or disability; whether the terminationdisability, or followed a change in control, and whether the executive is retirement-eligible. If a retirement-eligible employee resigns or is terminated without cause, we consider it a retirement. For these purposes, a “retirement-eligible” employee is someone who is at least 55 years old and has at least five years of service with us. As of December 31, 2016, none2017, one of our NEOs werewas retirement-eligible.
Change inof control agreements
As of December 31, 20162017 we have entered into separate change inof control agreements with each of our NEOs and similar agreements with a limited group of other senior officers. These agreements have been a valuable component of our executive compensation program for several years. We believe that these arrangements mitigate concerns arising from a change inof control, and help to ensure the continued dedicated service of our key employees. Cash payments received undercontemplated by these agreements require a “double��double trigger”—that is, the occurrence of both a change inof control and a qualifying termination of employment. A qualifying termination would occur if the executive resigned for “good reason”“Good Reason” or the surviving company terminated the executive without “cause”other than for “Cause,” “Disability” or death (each as defined in the change inof control agreement). The treatment of equity awards upon a change inof control is handledaddressed in the equity awardsaward agreements themselves, as described below, not in theserather than the change of control agreements.
TheseThe change of control agreements would payprovide for cash payments to our executives,NEOs, calculated based on various compensation components. These components include annual base salary and an annual incentive award (bonus). For purposes of the change of control agreements, annual base salary is equal to 12 times the highest monthly base salary rate payable to the executive in the12-month period preceding the month of the change of control. The cash severance payment related to base salary for our NEOs is based on two
times the base salary, (the highest monthly base salary rate for the twelve months preceding the change in control multiplied by twelve). For our NEOs,and the cash severance payment related to the bonus is two times the applicable average bonus percentpercentage multiplied by the applicable base salary. The agreements also provide for continued benefits under (or compute cash payments by reference to)
some certain of our retirement and health and welfare benefit plans.
Since 2009, we have eliminated theNone of our change of control agreements contain any excise tax “gross-up” provision from new change in control agreements. In addition, in 2016, we eliminated excise tax gross-ups in all existing change of control agreements.provisions. Our current change inof control agreements provide that, in the event the benefits payable to an executive trigger excise taxes under Section 4999 of the Internal Revenue Code, the executive will be entitled to a reduction in benefits so that no excise tax is imposed if such a reduction would result in a greater net(after-tax) benefit to the executive than payment of the full amount of his or her benefits. Our Board adoptedWe have a Board-approved policy in February 2011 that requires shareholder approval of certain future severance arrangements if the arrangement provides for additional severance benefits in an amount exceeding 2.99 times the sum of the executive’s annual base salary and target bonus.
The change inof control agreements prohibit the executive from using or disclosing any of our confidential business or technical information or trade secrets. The executive also may also not employ or solicit any of our officers during theone-year period following termination.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 75
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
While the benefits to be received under a change inof control agreement may be significant to an individual, they first require the occurrence of a significant transaction. As a result, the benefits are highly speculative and are contingent on a variety of facts and circumstances. In recognition of this, ourthe Personnel and Compensation
Committee of the Board does not consider the amount of potential change in control
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 71
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
payments when it makes annual compensation decisions for our NEOs. Change in control protections,
although meaningful, also become relatively less significant to PNC as we increase in size.
If aan NEO resigns or the NEO’s employment is terminated with or without cause, any unvested equity-based compensation is generally forfeited. Equity-based compensation is not forfeited, however,However, if an employee retires—when a retirement eligible employeeNEO retires (a retirement-eligible NEO resigns or is terminated without cause—in which case thecause), equity-based compensation is not forfeited and continues in effect until its originaloriginally scheduled payment date. ItEquity-based compensation is also not forfeited under certain circumstances following a change in control. Beginning in 2015, grants to our executive officers arecontain a “double trigger,”trigger” feature, meaning such grants require the occurrence of both a change in control of PNC and a qualifying termination (which qualifying termination includes a
termination without cause or a
resignation for good reason following a changereason) in control)order to vest prior to the original vesting date, although payout does not occur until the original scheduled payment date. Under outstanding equity grants prior to 2015, upon a change in control, of PNC, payout does not occur until the original scheduled payment date, although the potential payout amount is calculated and fixed at the time of the change in control and is paid out as soon as practicable following the change in control.
A change in control of PNC, retirement of aan NEO, or termination of an NEO’s employment by PNC by reason of disability of a NEO, has the following impact on unvested equity-based compensation:
OUTSTANDING OPTION AWARDS
Change in Control | Retirement | Disability | ||
All outstanding option awards are fully vested and exercisable as of December 31, | All outstanding option awards are fully vested and exercisable as of December 31, | All outstanding option awards are fully vested and exercisable as of December 31, |
GRANTS THAT VEST UPON THE ACHIEVEMENT OF ADDITIONAL PERFORMANCE CRITERIA
Performance-Based Restricted Share Units (Performance RSUs)
Change in Control | Retirement | Disability | ||
The remaining 2014 Dividend equivalents cease to accrue at the change in control |
7276 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
GRANTS THAT VEST UPON THE ACHIEVEMENT OF ADDITIONAL PERFORMANCE CRITERIA (CONTINUED)
Incentive Performance Units (IPUs)
Change in Control | Retirement | Disability | ||||
In each part, the award is calculated by multiplying a performance factor by the target number of units, and then prorating such performance-adjusted amount of units as described below:
Part 1 - The corporate performance factor used to calculate the first part would be the higher of 100% and the actual payout percentage achieved prior to the date of the change in control, and the proration is based on the portion of the overall performance period (measured in quarters) that elapsed before the date of the change in control.
Part 2 - The corporate performance factor used to calculate the second part is 100%, and the proration is based on the remainder of the overall performance period not completed due to the change in control.
Dividend equivalents cease to accrue at the change in control date and receive the same performance adjustment as their related units.
| Outstanding |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 73
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Acceleration upon death. If the executive officer dies,Upon death, generally (1)(i) stock options remain exercisable until the original option termination date, (2) performance RSUs(ii) PRSUs vest and pay out at 100% (provided that if death occurs after the close of a performance year but before that year’s tranche has paid out, payout of that tranche is the same as if still an employee and otherwise at 100%)employee), and (3) for incentive performance units,(iii) all such outstanding unitsStandard IPUs and ALM IPUs may be paid out up to a maximum based on actual corporate and risk performance through the calendar year of the executive officer’sNEO’s death (andand at 100% thereafter) andthereafter, subject to the negative discretion of the Board’s Personnel and Compensation Committee. Vested awards are paid out no later than December 31 of the year following the year of death.
Other material conditions. The retirement and disability awards summarized above are generally
subject to forfeiture by PNC if it is determined that a grantee has engaged in certain competitive activities during employment andor the one yearone-year period following termination of employment, or if the grantee has engaged in other detrimental conduct. In addition, the award is subject to grantee’s agreement not to solicit certain customers or employees of PNC during employment and the one yearone-year period following termination of employment, as well as to at all times maintain the confidentiality of business and technical information, and to disclose certain and assign certain inventions.
Awards are generally subject to PNC’s clawback, adjustment, or similar policies and to any clawback or recoupment that may be required by applicable law or regulations.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 77
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Existing plans and arrangements
As of December 31, 2016,2017, our NEOs could participate in our qualified cash balance pension plan, our ERISA excess pension plan, our ISP, and our DCIP. In addition, Mr. Demchak, Mr. Reilly, and Mr. Parsley participate in our SISP and our DCP (although they may no longer make contributions to these plans). Mr. Demchak and Mr. Reilly also
participate in our supplemental executive retirement plan. The officersNEOs earn these benefits for services provided to us while employed, and many of these plans are also available on a broader basis to other employees. For the most part, an officer’sNEO’s entitlement to these benefits does not depend on how employment terminates.
Mr. Demchak and Mr. Reilly also participate in our supplemental executive retirement plan, a company-paid executive long-term disability (LTD) program, and the Key Executive Equity Program (KEEP), a split-dollar life insurance program. Participants in the executive LTD program are
generally eligible for additional LTD benefits of $10,000 per month until they are no longer disabled or have reached age 65. KEEP provides benefits in the event of a participating executive’s death while actively employed (equal to 1.5 times then-current annual base salary) or following an eligible retirement (retirement after reaching age 55 and five years of service with PNC, generally equal to annual base salary prior to retirement). Following a change in control, the life insurance policy would transfer to the participating executive. The supplemental executive retirement plan, executive LTD program, and KEEP were frozen to new participants as of December 31, 2007.
Certain NEOs are also eligible to receive two years of company-paid financial planning and tax preparation services upon retirement.
Estimated benefits upon termination
The following table shows the estimated incremental benefits payable to our NEOs as of December 31, 20162017 as a result of termination of employment in a variety of situations. These estimated amounts have been calculated as if employment was terminated on December 31, 2016.2017. For change in control benefits, we assumed a change in control of PNC and a termination of employment by the surviving company without cause (or a resignation of the officer for good reason) on that date. To the extent relevant, the amounts assume a PNC stock price of $116.96,$144.29, the
closing price for our common stock on
December 30, 2016.29, 2017 (the last trading day of 2017). If we calculated these amounts using a different price, the amounts could be significantly different. The benefits below do not include the balances under our qualified cash balance pension plan, our ERISA excess pension plan, our supplemental executive retirement plan, ourSISP, ISP, our SISP, ourDCIP, or DCP and our DCIP unless the NEO receives an enhanced benefit under the termination scenario. In addition, the value of vested but unexercised stock options as of December 31, 20162017 are not included as they do not provide an incremental benefit.
William S. Demchak | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||
Cash Severance | – | – | – | $ | 9,593,476 | – | – | |||||||||||||||||
Base Salary | – | – | – | $ | 2,200,000 | – | – | |||||||||||||||||
Bonus | – | – | – | $ | 7,393,476 | – | – | |||||||||||||||||
Enhanced Benefits | – | – | $ | 19,950 | $ | 341,809 | $ | 1,160,000 | $ | 1,650,000 | ||||||||||||||
Defined Benefit Plans | – | – | – | $ | 294,836 | – | – | |||||||||||||||||
Defined Contribution Plans | – | – | – | $ | 21,600 | – | – | |||||||||||||||||
General Benefits & Perquisites | – | – | $ | 19,950 | $ | 25,373 | $ | 1,160,000 | $ | 1,650,000 | ||||||||||||||
Value of Unvested Equity | – | – | $ | 33,111,517 | $ | 31,698,612 | $ | 33,111,517 | $ | 31,698,717 | ||||||||||||||
PRSUs | – | – | $ | 15,104,589 | $ | 13,691,789 | $ | 15,104,589 | $ | 13,691,789 | ||||||||||||||
Standard IPUs | – | – | $ | 18,006,928 | $ | 18,006,823 | $ | 18,006,928 | $ | 18,006,928 | ||||||||||||||
TOTAL | $0 | $0 | $ | 33,131,467 | $ | 41,633,897 | $ | 34,271,517 | $ | 33,348,717 |
7478 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
William S. Demchak | Termination for Cause | Voluntary | Retirement(a) | Change | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Robert Q. Reilly | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Cash Severance | — | — | — | $ | 9,778,901 | — | — | – | – | – | $ | 3,700,000 | – | – | ||||||||||||||||||||||||||||||||||
Base Salary | — | — | — | $ | 2,200,000 | — | — | – | – | – | $ | 1,000,000 | – | – | ||||||||||||||||||||||||||||||||||
Bonus | — | — | — | $ | 7,578,901 | — | — | – | – | – | $ | 2,700,000 | – | – | ||||||||||||||||||||||||||||||||||
Enhanced Benefits | — | — | — | $ | 345,281 | — | — | – | – | – | $ | 187,973 | $ | 1,440,000 | $ | 750,000 | ||||||||||||||||||||||||||||||||
Defined Benefit Plans | — | — | — | $ | 299,472 | — | — | – | – | – | $ | 141,000 | – | – | ||||||||||||||||||||||||||||||||||
Defined Contribution Plans | — | — | — | $ | 21,200 | — | — | – | – | – | $ | 21,600 | – | – | ||||||||||||||||||||||||||||||||||
General Benefits & Perquisites | — | — | — | $ | 24,609 | — | — | – | – | – | $ | 25,373 | $ | 1,440,000 | $ | 750,000 | ||||||||||||||||||||||||||||||||
Value of Unvested Equity | — | — | — | $ | 27,695,090 | $ | 28,753,372 | $ | 27,581,803 | – | – | – | $ | 8,126,695 | $ | 8,490,209 | $ | 8,127,232 | ||||||||||||||||||||||||||||||
Performance-based RSUs | — | — | — | $ | 12,528,263 | $ | 13,699,832 | $ | 12,528,263 | |||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | — | — | — | $ | 15,166,827 | $ | 15,053,540 | $ | 15,053,540 | |||||||||||||||||||||||||||||||||||||||
Reduction Amount(c) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
PRSUs | – | – | – | $ | 3,504,260 | $ | 3,867,237 | $ | 3,504,260 | |||||||||||||||||||||||||||||||||||||||
Standard IPUs | – | – | – | $ | 4,622,435 | $ | 4,622,972 | $ | 4,622,972 | |||||||||||||||||||||||||||||||||||||||
TOTAL | $ | 0 | $ | 0 | $ | 0 | $ | 37,819,272 | $ | 28,753,372 | $ | 27,581,803 | $0 | $0 | $ | 0 | $ | 12,014,668 | $ | 9,930,209 | $ | 8,877,232 |
Robert Q. Reilly | Termination for Cause | Voluntary Termination | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Michael P. Lyons | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Cash Severance | — | — | — | $ | 3,604,386 | — | — | – | – | – | $ | 5,400,000 | – | – | ||||||||||||||||||||||||||||||||||
Base Salary | — | — | — | $ | 1,000,000 | — | — | – | – | – | $ | 1,400,000 | – | – | ||||||||||||||||||||||||||||||||||
Bonus | — | — | — | $ | 2,604,386 | — | — | – | – | – | $ | 4,000,000 | – | – | ||||||||||||||||||||||||||||||||||
Enhanced Benefits | — | — | — | $ | 183,941 | — | — | – | – | – | $ | 98,889 | – | – | ||||||||||||||||||||||||||||||||||
Defined Benefit Plans | — | — | — | $ | 138,132 | — | — | – | – | – | $ | 50,250 | – | – | ||||||||||||||||||||||||||||||||||
Defined Contribution Plans | — | — | — | $ | 21,200 | — | — | – | – | – | $ | 21,600 | – | – | ||||||||||||||||||||||||||||||||||
General Benefits & Perquisites | — | — | — | $ | 24,609 | — | — | – | – | – | $ | 27,039 | – | – | ||||||||||||||||||||||||||||||||||
Value of Unvested Equity | — | — | — | $ | 7,115,299 | $ | 7,398,178 | $ | 7,086,230 | – | – | – | $ | 17,796,100 | $ | 18,625,990 | $ | 17,797,153 | ||||||||||||||||||||||||||||||
Performance-based RSUs | — | — | — | $ | 3,233,500 | $ | 3,545,448 | $ | 3,233,500 | |||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | — | — | — | $ | 3,881,799 | $ | 3,852,730 | $ | 3,852,730 | |||||||||||||||||||||||||||||||||||||||
PRSUs | – | – | – | $ | 7,784,703 | $ | 8,613,540 | $ | 7,784,703 | |||||||||||||||||||||||||||||||||||||||
Standard IPUs | – | – | – | $ | 10,011,397 | $ | 10,012,450 | $ | 10,012,450 | |||||||||||||||||||||||||||||||||||||||
Reduction Amount(c) | — | — | — | $ | (515,988 | ) | — | — | – | – | – | $ | (402,597 | ) | — | — | ||||||||||||||||||||||||||||||||
TOTAL | $ | 0 | $ | 0 | $ | 0 | $ | 10,387,638 | $ | 7,398,178 | $ | 7,086,230 | $0 | $0 | $ | 0 | $ | 22,892,392 | $ | 18,625,990 | $ | 17,797,153 |
E William Parsley, III | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||
Cash Severance | – | – | – | $ | 6,000,000 | – | – | |||||||||||||||||
Base Salary | – | – | – | $ | 1,200,000 | – | – | |||||||||||||||||
Bonus | – | – | – | $ | 4,800,000 | – | – | |||||||||||||||||
Enhanced Benefits | – | – | – | $ | 228,401 | – | – | |||||||||||||||||
Defined Benefit Plans | – | – | – | $ | 180,000 | – | – | |||||||||||||||||
Defined Contribution Plans | – | – | – | $ | 21,600 | – | – | |||||||||||||||||
General Benefits & Perquisites | – | – | – | $ | 26,801 | – | – | |||||||||||||||||
Value of Unvested Equity | – | – | – | $ | 29,690,873 | $ | 30,071,525 | $ | 29,690,895 | |||||||||||||||
PRSUs | – | – | – | $ | 3,926,353 | $ | 4,306,983 | $ | 3,926,353 | |||||||||||||||
Standard IPUs | – | – | – | $ | 4,891,384 | $ | 4,891,406 | $ | 4,891,406 | |||||||||||||||
ALM IPUs | – | – | – | $ | 20,873,136 | $ | 20,873,136 | $ | 20,873,136 | |||||||||||||||
TOTAL | $0 | $0 | $ | 0 | $ | 35,919,274 | $ | 30,071,525 | $ | 29,690,895 |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 7579
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Michael P. Lyons | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||
Cash Severance | — | — | — | $ | 5,413,333 | — | — | |||||||||||||||||
Base Salary | — | — | — | $ | 1,400,000 | — | — | |||||||||||||||||
Bonus | — | — | — | $ | 4,013,333 | — | — | |||||||||||||||||
Enhanced Benefits | — | — | — | $ | 97,772 | — | — | |||||||||||||||||
Defined Benefit Plans | — | — | — | $ | 50,250 | — | — | |||||||||||||||||
Defined Contribution Plans | — | — | — | $ | 21,200 | — | — | |||||||||||||||||
General Benefits & Perquisites | — | — | — | $ | 26,322 | — | — | |||||||||||||||||
Value of Unvested Equity | — | — | — | $ | 16,280,243 | $ | 16,947,880 | $ | 16,206,311 | |||||||||||||||
Performance-based RSUs | — | — | — | $ | 7,369,760 | $ | 8,111,329 | $ | 7,369,760 | |||||||||||||||
Incentive Performance Units | — | — | — | $ | 8,910,483 | $ | 8,836,551 | $ | 8,836,551 | |||||||||||||||
Reduction Amount(c) | — | — | — | $ | (3,136,003 | ) | — | — | ||||||||||||||||
TOTAL | $ | 0 | $ | 0 | $ | 0 | $ | 18,655,345 | $ | 16,947,880 | $ | 16,206,311 |
E William Parsley, III | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||
Cash Severance | — | — | — | $ | 3,940,000 | — | — | |||||||||||||||||
Base Salary | — | — | — | $ | 1,200,000 | — | — | |||||||||||||||||
Bonus | — | — | — | $ | 2,740,000 | — | — | |||||||||||||||||
Enhanced Benefits | — | — | — | $ | 175,712 | — | — | |||||||||||||||||
Defined Benefit Plans | — | — | — | $ | 128,500 | — | — | |||||||||||||||||
Defined Contribution Plans | — | — | — | $ | 21,200 | — | — | |||||||||||||||||
General Benefits & Perquisites | — | — | — | $ | 26,012 | — | — | |||||||||||||||||
Value of Unvested Equity | — | — | — | $ | 27,581,661 | $ | 27,848,346 | $ | 27,553,056 | |||||||||||||||
Performance-based RSUs | — | — | — | $ | 3,009,202 | $ | 3,304,492 | $ | 3,009,202 | |||||||||||||||
Incentive Performance Units | — | — | — | $ | 3,609,017 | $ | 3,580,178 | $ | 3,580,178 | |||||||||||||||
Phantom Units | — | — | — | $ | 20,963,442 | $ | 20,963,676 | $ | 20,963,676 | |||||||||||||||
Reduction Amount(c) | — | — | — | — | — | — | ||||||||||||||||||
TOTAL | $ | 0 | $ | 0 | $ | 0 | $ | 31,697,373 | $ | 27,848,346 | $ | 27,553,056 |
76 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Steven C. Van Wyk | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Steven Van Wyk | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Cash Severance | — | — | — | $ | 3,146,405 | — | — | – | – | – | $ | 3,250,000 | – | – | ||||||||||||||||||||||||||||||||||
Base Salary | — | — | — | $ | 1,000,000 | — | — | – | – | – | $ | 1,000,000 | – | – | ||||||||||||||||||||||||||||||||||
Bonus | — | — | — | $ | 2,146,405 | — | — | – | – | – | $ | 2,250,000 | – | – | ||||||||||||||||||||||||||||||||||
Enhanced Benefits | — | — | — | $ | 77,219 | — | — | – | – | – | $ | 79,064 | – | – | ||||||||||||||||||||||||||||||||||
Defined Benefit Plans | — | — | — | $ | 38,250 | — | — | – | – | – | $ | 38,250 | – | – | ||||||||||||||||||||||||||||||||||
Defined Contribution Plans | — | — | — | $ | 21,200 | — | — | – | – | – | $ | 21,600 | – | – | ||||||||||||||||||||||||||||||||||
General Benefits & Perquisites | — | — | — | $ | 17,769 | — | — | – | – | – | $ | 19,214 | – | – | ||||||||||||||||||||||||||||||||||
Value of Unvested Equity | — | — | — | $ | 6,273,124 | $ | 6,526,581 | $ | 6,245,636 | – | – | – | $ | 7,017,358 | $ | 7,338,975 | $ | 7,017,892 | ||||||||||||||||||||||||||||||
Performance-based RSUs | — | — | — | $ | 2,840,308 | $ | 3,121,253 | $ | 2,840,308 | |||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | — | — | — | $ | 3,432,816 | $ | 3,405,328 | $ | 3,405,328 | |||||||||||||||||||||||||||||||||||||||
PRSUs | – | – | – | $ | 3,054,587 | $ | 3,375,670 | $ | 3,054,587 | |||||||||||||||||||||||||||||||||||||||
Standard IPUs | – | – | – | $ | 3,962,771 | $ | 3,963,305 | $ | 3,963,305 | |||||||||||||||||||||||||||||||||||||||
Reduction Amount(c) | — | — | — | $ | (1,386,095 | ) | — | — | – | – | – | $ | (255,794 | ) | – | – | ||||||||||||||||||||||||||||||||
TOTAL | $ | 0 | $ | 0 | $ | 0 | $ | 8,110,653 | $ | 6,526,581 | $ | 6,245,636 | $0 | $0 | $ | 0 | $ | 10,090,628 | $ | 7,338,975 | $ | 7,017,892 |
(a) | If a retirement-eligible employee resigns or is terminated without cause, we consider it a retirement. |
(b) | The benefits and awards shown under |
(c) | Amount reduced under the agreement to avoid imposition of excise tax under IRC |
80 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
The Dodd-Frank Wall Street Reform and Consumer Protection Act and SEC regulations require us to include information about the ratio between the annual total compensation of our median employee and William S. Demchak, our Chairman, President, and Chief Executive Officer (CEO).
For 2017, our most recently completed fiscal year:
Based on this information, for 2017, the ratio of the annual total compensation of our CEO to the annual total compensation of the employee we identified as the median (excluding our CEO) was 201 to 1.
The methodology and the material assumptions and adjustments we used to identify the median employee and to determine the annual total compensation of the median employee are described below.
We selected December 31, 2017 as our determination date. As of that date, we had 52,935 total employees, approximately 110 of whom were located in foreign jurisdictions as follows: Canada (26), Germany (12), and UK (72). In accordance with SEC rules, we excluded all non-U.S. employees, who comprised less than 1% of our total employees, from our employee population. In December 2017, we acquired Trout Group LLC, consisting of approximately 37 employees. As permitted under SEC rules, we also excluded these employees from our employee population in 2017. As a result, our total employee population for pay ratio purposes was 52,788.
The compensation measure we used to identify the median employee was Box 5 of the Form W-2 issued by the IRS for federal tax purposes. Box 5 reports the amount of wages subject to the Medicare tax. We chose Form W-2 because our employee population consisted solely of U.S. employees, and this compensation measure applies to all U.S. employees, allowing for accessibility and broad comparability.
Once we identified the median employee based on this compensation measure, we evaluated the components of total compensation paid to that employee to determine whether the employee received representative total compensation based on the employee’s job and in light of the compensation we offer across our company. We determined that the median employee did receive a representative compensation package.
In calculating the annual total compensation of the median employee, we included the amount of PNC’s contribution to the employee’s health care premiums, which we believe is a significant component of the compensation package we offer to our employees, in addition to amounts computed in accordance with the rules for the Summary compensation table. Because we included this amount in the annual total compensation of the median employee, we also included it in calculating the CEO’s annual total compensation for pay ratio purposes, although SEC rules permit us to exclude this amount from the Summary compensation table because the benefit is available generally to all eligible employees. Therefore, the CEO’s annual total compensation for pay ratio purposes differs slightly from the amount reported for the CEO in the Summary compensation table.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 7781
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Security ownership of directors and executive officers
The table below sets forth information regarding ownership of our common stock ownership by our directors and executive officers. We include beneficial ownership of common stock as of February 3, 20172, 2018, the record date for the annual meeting, for each director (all of whom are(including all nominees for director), each executive officer named in the Summary compensation table on page 56,NEO, and all directors and executive officers as a group. Unless we otherwise note, each person listed in the table below exercises sole voting and investment power over thesethe shares of common stock.stock they beneficially own.
We determine the numberbeneficial ownership of shares in the Common Stock Ownership column as beneficially owned by each director and executive officer pursuant to SEC regulations. This information does not necessarily
indicate beneficial ownership for any other purpose.
Beneficial ownership includes any shares of common stock as to which the individual has sole or shared voting power or investment power. Wepower, and also includeincludes any shares of common stock that the individual has the right to acquire within 60 days of February 3, 20172, 2018 through either the exercise of any option, warrant, or right andor the vesting or payout of any restricted share units or other stock units payable in common stock that vest within 60 days of February 3, 2017. Thestock. Although not considered beneficially owned under SEC rules, the table also shows as of February 3, 2017, the number of cash-payable common stock units credited to the accounts of our directors and executive officers under various benefit plans.plans as of February 2, 2018. Each of our directors standing for election owns shares of our common stock.
Name | Common Stock Ownership* | Options and Restricted Share Units** | Total Number of Shares Beneficially Owned | Common Stock Unit Ownership*** | Total Shares Beneficially Owned Plus Common Stock Units | Common Stock Ownership | Options and Common Stock Units* | Total Number of Shares Beneficially Owned | Cash Payable Common Stock Unit Ownership** | Total Shares Beneficially Owned Plus Cash Payable Common Stock Units*** | ||||||||||||||||||||||||||||||
Non-Employee Directors: | ||||||||||||||||||||||||||||||||||||||||
Charles E. Bunch | 1,781 | — | 1,781 | 19,423 | 21,204 | 2,781 | 1,209 | 3,990 | 19,817 | 23,807 | ||||||||||||||||||||||||||||||
Debra A. Cafaro | 20 | 0 | 20 | 432 | 452 | |||||||||||||||||||||||||||||||||||
Marjorie Rodgers Cheshire | 218 | — | 218 | 4,198 | 4,416 | 218 | 1,209 | 1,427 | 4,792 | 6,219 | ||||||||||||||||||||||||||||||
Andrew T. Feldstein | 83,600 | (1)(2) | — | 83,600 | 9,695 | 93,295 | 83,600 | (1)(2) | 1,209 | 84,809 | 11,071 | 95,880 | ||||||||||||||||||||||||||||
Daniel R. Hesse | 1,100 | — | 1,100 | 1,981 | 3,081 | 1,100 | 1,209 | 2,309 | 2,299 | 4,608 | ||||||||||||||||||||||||||||||
Kay Coles James | 315 | — | 315 | 24,584 | 24,899 | 315 | 1,209 | 1,524 | 25,082 | 26,606 | ||||||||||||||||||||||||||||||
Richard B. Kelson | 119 | — | 119 | 28,161 | 28,280 | 119 | 1,209 | 1,328 | 26,481 | 27,809 | ||||||||||||||||||||||||||||||
Linda R. Medler | 10 | 0 | 10 | 0 | 10 | |||||||||||||||||||||||||||||||||||
Jane G. Pepper | 2,840 | — | 2,840 | 31,007 | 33,847 | 2,840 | 1,209 | 4,049 | 30,273 | 34,322 | ||||||||||||||||||||||||||||||
Martin Pfinsgraff | 350 | 0 | 350 | 0 | 350 | |||||||||||||||||||||||||||||||||||
Donald J. Shepard | 8,967 | (2) | — | 8,967 | 37,887 | 46,854 | 8,967 | (2) | 1,209 | 10,176 | 39,466 | 49,642 | ||||||||||||||||||||||||||||
Lorene K. Steffes | 2,041 | (3) | — | 2,041 | 32,048 | 34,089 | 2,041 | (3) | 1,209 | 3,250 | 32,619 | 35,869 | ||||||||||||||||||||||||||||
Dennis F. Strigl | 10,714 | (3) | — | 10,714 | 32,183 | 42,897 | 10,714 | (3) | 1,209 | 11,923 | 32,837 | 44,760 | ||||||||||||||||||||||||||||
Michael J. Ward | 1,000 | — | 1,000 | 2,794 | 3,794 | 1,000 | 1,209 | 2,209 | 3,680 | 5,889 | ||||||||||||||||||||||||||||||
Gregory D. Wasson | 2,070 | — | 2,070 | 3,607 | 5,677 | 2,070 | 1,209 | 3,279 | 4,651 | 7,930 | ||||||||||||||||||||||||||||||
NEOs: | ||||||||||||||||||||||||||||||||||||||||
William S. Demchak | 447,525 | (3)(4) | 340,168 | 787,693 | 2,923 | 790,616 | 492,959 | (3)(4) | 159,894 | 652,853 | 2,968 | 655,821 | ||||||||||||||||||||||||||||
Robert Q. Reilly | 81,508 | (3)(4) | 215,171 | 296,679 | 2,211 | 298,890 | 94,726 | (3)(4) | 97,284 | 192,010 | 2,253 | 194,263 | ||||||||||||||||||||||||||||
Michael P. Lyons | 89,414 | 55,549 | 144,963 | — | 144,963 | 110,914 | 49,439 | 160,353 | 0 | 160,353 | ||||||||||||||||||||||||||||||
E William Parsley, III | 75,665 | 96,832 | 172,497 | — | 172,497 | 86,237 | 21,147 | 107,384 | 0 | 107,384 | ||||||||||||||||||||||||||||||
Steven C. Van Wyk | 17,529 | (2)(3) | 20,778 | 38,307 | — | 38,307 | 15,165 | (2)(3) | 19,393 | 34,558 | 0 | 34,558 | ||||||||||||||||||||||||||||
8 remaining executive officers | 138,202 | (2)(3)(4) | 159,489 | 297,691 | 3,558 | 301,249 | 152,509 | (2)(3)(4) | 109,917 | 262,426 | 1,256 | 263,682 | ||||||||||||||||||||||||||||
Directors and executive officers as a group (25 persons): | 964,608 | 887,987 | 1,852,595 | 236,260 | 2,088,855 | |||||||||||||||||||||||||||||||||||
Directors and executive officers as a group (28 persons): | | 1,068,655 | | | 471,582 | | | 1,540,237 | | | 239,977 | | | 1,780,214 | |
* | Includes options exercisable within 60 days of February 2, 2018 and common stock units that may vest or pay out within 60 days of February 2, 2018. |
82 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
** | For non-employee directors, includes cash payable common stock units credited to their accounts pursuant to deferrals made under the Directors Deferred Compensation Plan and predecessor plans and cash payable common stock units granted under the Outside Directors Deferred Stock Unit Plan used for non-employee director equity-based grants prior to 2017. For executive officers, includes cash payable common stock units credited under our DCP and SISP. These units are not considered beneficially owned under SEC rules. |
*** | As of February |
78 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
(1) | Includes shares owned by spouse. |
(2) | Includes shares held in a trust. |
(3) | Includes shares held jointly with spouse. |
(4) | Includes shares held in our incentive savings |
Security ownership of certain beneficial owners
BasedThe table below sets forth information regarding the entities that beneficially own more than five percent of our common stock, based on a review as of February 14, 2017, of Schedules 13D and 13G filed with the SEC the following entities beneficially own more than five percentas of our common stock.February 12, 2018. The numbers shownincluded in the
on the table below represent each entity’s holdings as of December 31, 2016 provided2017, as disclosed in the applicable Schedule 13G filed with the SEC, and should be interpreted in light of the relatedaccompanying footnotes.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | (1) | |||||||
| ||||||||
| ||||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | (2) | |||||||
| ||||||||
| ||||||||
Wellington Management Group LLP c/o Wellington Management Company LLP 280 Congress Street Boston, MA 02210 | (3) | |||||||
| ||||||||
| ||||||||
|
(1) | According to the Schedule 13G/A filed by BlackRock, Inc. with the SEC on January |
(2) | According to the Schedule 13G/A filed by The Vanguard Group, Inc. with the SEC on February |
(3) | According to the Schedule 13G/A filed by Wellington Management Group LLP with the SEC on February |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 7983
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 2)
Under the Audit Committee’s charter, the Audit Committee is responsible for the selection, appointment, compensation, retention, and oversight of PNC’sour independent auditors. In connection with this responsibility, the Audit Committee evaluates and monitors the auditors’ qualifications, performance, and independence. This responsibility includesindependence, including a review and evaluation of the lead audit partner. The Audit Committee approves all audit engagement fees and terms associated with the retention of the independent auditors. The Audit Committee has selected PricewaterhouseCoopers LLP (PwC) as PNC’s independent auditors for 2017. PwC has been PNC’s independent auditors since 2007. The Audit Committee carefully considered the selection of PwC as our independent auditors. In connection with this selection, the Audit Committee considered whether there should be a rotation of the independent audit firm.
The Audit Committee charter requires the Audit Committee to consider, not less frequently than when the lead audit partner is rotated, whether PNC should adopt a policy of regular rotation of the independent audit firm. In addition to assuring the required rotation of the lead audit partner, the Audit Committee oversees the selection of the new lead audit partner and the AuditChair of the Committee Chair participates directly in the selection of the new lead audit partner.
The Audit Committee has selected PricewaterhouseCoopers LLP (PwC) as our independent auditors for 2018. PwC has been our independent auditors since 2007. The Committee carefully considered the selection of PwC as our independent auditors, including whether there should be a rotation of the independent audit firm. On February 16, 2017,15, 2018, the Audit Committee presented its conclusions regarding the selection and appointment of PwC as theour independent auditors to
auditors to ourthe Board, of Directors, including a determination that the selection of PwC as our independent auditors is in the best interests of PNC. Following this presentation, the Board voted unanimously to recommend that shareholders vote to ratify the Audit Committee’s selection of PwC as PNC’sour independent registered public accounting firm for 2017.2018. The Audit Committee and the Board of Directors believe that the continued retention of PwC as PNC’sour independent auditors is in the best interestsinterest of PNC.
The Audit Committee and the Board of Directors have adopted a policy that if the ratification of the independent auditors does not receive a majority of the votes cast at the annual meeting, is against ratification, the Audit Committee will reconsider its selection of PwC. The Auditindependent auditors. However, the Committee will be under no obligation however, to select new independent auditors. If the Audit Committee does select new independent auditors for 2017,2018, we will not seek shareholder ratification of the new selection.
We expect representatives of PwC to be available at the annual meeting. They will have an opportunity to make a statement and respond to appropriate questions.
You can learn more about the Audit Committee’s responsibilities with respect to the independent auditors in the Committee’s charter, which is posted onin the corporate governance section of our corporate website atwww.pnc.com/corporategovernance.
Audit, audit-related and permittednon-audit fees
In considering the nature of the services provided by our independent auditors, the Audit Committee determined that the services are compatible with the provision of independent audit services. The Committee discussed these services with the independent auditors and our management to
determine that they are permitted under the SEC
rules and regulations concerning auditor independence.
The following table summarizes the total fees for professional services rendered by PwC to PNC for 20162017 and 2015:2016:
Category | 2016 (in millions) | 2015 (in millions) | 2017 (in millions) | 2016 (in millions) | ||||||||||||
Audit fees | $ | 19.8 | $ | 19.0 | $ | 20.0 | $ | 19.8 | ||||||||
Audit-related fees* | $ | 2.1 | $ | 1.8 | $ | 2.1 | $ | 2.1 | ||||||||
Tax fees | $ | 0.2 | $ | 0.2 | $ | 0.1 | $ | 0.2 | ||||||||
All other fees | $ | 0.2 | – | $ | – | $ | 0.2 | |||||||||
TOTAL FEES BILLED | $ | 22.3 | $ | 21.0 | $ | 22.2 | $ | 22.3 |
* | Excludes fees of $1.6 million in 2017 and $1.8 million in 2016 |
8084 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 2)
Audit fees. These fees consisted primarily of the audit of PNC’sour annual consolidated financial statements, reviews of PNC’sour quarterly consolidated financial statements included in Form10-Q filings, comfort letter procedures, other services related to SEC matters, and required attestation services.
Audit-related fees. These fees consisted primarily of SSAE 16 and compliance and internal control reviews.
Tax fees. These fees were attributable to federal and state tax compliance services and tax planning services.
All other fees. These fees primarily consisted of fees for subscription basedsubscription-based services.
Procedures forpre-approving audit services, audit-related services and permittednon-audit services
The Audit Committee is responsible forpre-approving audit services, audit-related services and permittednon-audit services (such as tax) to be provided to us by our independent auditors. The Committee is given this responsibility to confirm that providing services will not impair our auditors’ independence. The Committee performs this function for us and our subsidiaries.
The Audit Committee’s responsibility also includespre-approval of the fees for such services (although SEC regulations do not require thepre-approval of fees) and the other terms of the engagement. The Committee may eitherpre-approve specific fees or a methodology for determining fees. Any proposed increase in fees that exceeds thepre-approved amounts requirerequires the Committee’s approval.
Pre-approval may be general (categories of services) or specific (individual services). If the Audit Committeepre-approves a general category of services, it will review the scope of services related to such generalpre-approval at least annually. The Committee is responsible for approving any fee or other compensation arrangements for services covered by apre-approval of a general category of services.
The full Audit Committee may exercisepre-approval authority, or the ChairmanChair of the Committee may exercise the authority as required between meetings. The Committee may also delegate this authority, in whole or in part, to one or more Committee members. Any person exercising delegated authority reports on thepre-approvals at
the next scheduled meeting of the Committee,
which will be reflected in the meeting minutes. The Audit Committee may not delegate itspre-approval authority to any other person, including any member of our management or other PNC employee or agent.
The written request forpre-approval includes, at a minimum, a description of the nature of the engagement, the proposed fee for the services, and a statement by the independent auditor that the provision of the services is consistent with SEC and other applicable rules on auditor independence. All requests forpre-approval of services are reviewed by management to ensure the services are permitted under SEC regulations and the Audit Committee charter and include a recommendation of the proposal by the Chief Financial Officer or the Controller and the General Auditor. In reviewing apre-approval request, the Committee or Chairmanthe Chair of the Committee may request that members of our management to provide their views on auditor independence questions.
The Controller or a designee of the Controller reports to the Audit Committee at least quarterly as to the status of services that hadhave beenpre-approved and the related fees.
All audit services, audit-related services and permitted non-audit services and related fees disclosed above were pre-approved by the Audit Committee. The Audit Committee may amend these procedures from time to time.
All audit services, audit-related services and permittednon-audit services and related fees disclosed above werepre-approved by the Audit Committee.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 8185
The Audit Committee’s job is one of oversight, as set forth in its charter. It is not the duty of the Audit Committee to prepare PNC’s consolidated financial statements, to plan or conduct audits, or to determine that PNC’s consolidated financial statements are complete and accurate and are in accordance with generally accepted accounting principles. PNC’s management is responsible for preparing PNC’s consolidated financial statements and for establishing and maintaining effective internal control over financial reporting. PNC’s management is also responsible for its assessment of the effectiveness of internal control over financial reporting. The independent auditors are responsible for the audit of PNC’s consolidated financial statements and the audit of the effectiveness of PNC’s internal control over financial reporting. In addition, the independent auditors are responsible for the audit of management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2016.
The Audit Committee has reviewed and discussed PNC’s audited consolidated financial statements with management and with PricewaterhouseCoopers LLP (PwC), PNC’s independent registered public accounting firm for 2016.2017. The Audit Committee has selected PwC as PNC’s independent auditors for 2017,2018, subject to shareholder ratification. A portion of the Audit Committee’s review and discussion of PNC’s audited consolidated financial statements with PwC occurred in private sessions, without PNC management present.
The Audit Committee has discussed with PwC the matters required to be discussed by Statement on Auditing Standards No. 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board.
The Audit Committee has received the written disclosures and the letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed PwC’s independence with representatives of PwC.
Based on the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited consolidated financial statements be included in PNC’s Annual Report on Form10-K for the year ended December 31, 2016,2017, for filing with the Securities and Exchange Commission.
The Audit Committee of the Board of Directors of The PNC Financial Services Group, Inc.
Richard B. Kelson,Chair
Debra A. Cafaro
Marjorie Rodgers Cheshire
Martin Pfinsgraff
Donald J. Shepard
Gregory D. Wasson
In accordance with SEC regulations, the Report of the Audit Committee is not incorporated by reference into any of our future filings made under the Securities Exchange Act of 1934 or the Securities Act of 1933. The report is not deemed to be soliciting material or to be filed with the SEC under the Exchange Act or the Securities Act.
The Board of Directors recommends a vote FOR the ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for 2017.2018.
8286 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
ON EXECUTIVE COMPENSATION (ITEM 3)
What is the purpose of this item?
We describe this item as an advisory vote on executive compensation, but it is more commonly known as “say-on-pay.“say-on-pay.” We provide this vote under the federal securities laws (Section 14A of the Securities Exchange Act of 1934) and in recognition of our shareholders’ vote in 20112017 recommending that we hold an advisory vote on executive compensation each year. After our shareholders voted in 2011,2017, the Board affirmed that recommendation and elected to hold future “say-on-pay”“say-on-pay” advisory votes on an annual basis, until the
the next shareholder vote on “say-on-pay”“say-on-pay” frequency. As described inWe expect to conduct the next item, we are conducting the shareholder vote on “say-on-pay”“say-on-pay” frequency at this year’sour 2023 annual meeting.meeting of shareholders.
With this item, shareholders may submit an advisory vote on the compensation of our CEO and the other four executive officers named in the Summary compensation table on page 56. That60. The Summary compensation table provides an annual snapshot of the compensation paid or granted to our NEOs.
What does it mean to have a “say-on-pay”“say-on-pay” advisory vote?
As an advisory vote, the outcome will not bind PNC or ourthe Board. We will disclose how many shareholders voted “For” or “Against” the resolution, and how many shareholders abstained from voting.
We believe in soliciting input from our shareholders throughout the year on a variety of issues, and this advisory vote fits within our broader shareholder engagement efforts. We first provided a “say-on-pay” vote in 2009, voluntarily provided the vote again in 2010, provided the vote as required by the federal securities laws in 2011 and as recommended by our shareholders annually since then. We have averaged 92%nearly 93% support insay-on-pay votes over the past five years.
While this vote isnon-binding, our the Board values the opinions of shareholders and will carefully consider
the results when making future compensation decisions. In considering an overall executive compensation program, “say-on-pay”“say-on-pay” cannot convey a shareholder’s view on a discrete element of our compensation program or a specific decision made by our Board’sthe Personnel and Compensation Committee. From 2009 through 2016,Each year, the Committee receivedreceives reports on the outcome of the “say-on-pay”“say-on-pay” vote, how PNCour“say-on-pay” vote compared to itsour peer group and other large public companies, and whether any changes to the compensation program were being consideredrecommended for the Committee’s consideration in light of the results. The Committee expects to undertake a similar evaluation this year.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 83
“SAY-ON-PAY”: ADVISORY VOTE ON EXECUTIVE COMPENSATION (ITEM 3)
Where can I find more information on executive compensation?
We describe our executive compensation program and the compensation awarded under that program in the CD&A, the Compensation Tables,compensation tables, and the related disclosure contained in this proxy statement. See pages 3839 to 77.81 for additional information.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 87
”SAY-ON-PAY”: ADVISORY VOTE ON EXECUTIVE COMPENSATION (ITEM 3)
What are some of the performance and compensation program highlights for 2016?2017?
Please review ourthe CD&A, which begins on page 38,39, as well as the accompanying compensation tables and the related disclosure beginning on page 56.60. Performance and compensation program highlights for 2017, which are also included in ourthe CD&A, should be read in connectionconjunction with the full CD&A, the Compensation Tablescompensation tables and the related disclosure contained in this proxy statement.
The Board of Directors recommends a vote FOR the following advisory resolution:
“RESOLVED, that the holders of the common stock and the voting preferred stock of The PNC Financial Services Group, Inc. (the “Company”)(PNC), voting together as a single class, approve the compensation of the Company’s fivePNC’s named executive officers named in the Summary compensation table of the Company’s proxy statement for the 2017 Annual Meeting of Shareholders (the “2017 Proxy Statement”), as described in the Compensation Discussion and Analysis, the Compensation Tablescompensation tables and the related disclosure contained in PNC’s proxy statement for the 2017 Proxy Statement.2018 Annual Meeting of Shareholders.”
8488 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
FREQUENCY OF “SAY-ON-PAY” VOTE (ITEM 4)
As described in Item 3, we are asking our shareholders to approve an advisory vote on executive compensation, otherwise known as “say-on-pay.” This Item 4 solicits input from our shareholders on how frequently we should hold such a vote in the future. You may vote for a say-on-pay vote to be held every one, two or three years, or you may abstain from voting.
As with “say-on-pay,” we provide this vote pursuant to Section 14A of the Securities Exchange Act of 1934. This item is also an advisory vote, which means that it will not bind PNC or our Board. We will disclose how many shareholders voted for each of the three options (annual, biennial, or triennial votes) as well as how many abstained from voting. We last held a vote regarding the frequency of future “say-on-pay” votes in 2011. Since then, consistent with the recommendation of our shareholders, we have held “say-on-pay” advisory votes on an annual basis.
After careful consideration, our Board recommends that we should continue to seek shareholder input through an annual advisory vote. Our Board of Directors considers regular input on executive compensation from our shareholders an important part of a comprehensive corporate governance program. As discussed in our CD&A, our executive
compensation program consists of a variety of objectives that include linking compensation to performance over time and aligning the interests of our executive leadership and our long-term shareholders. Despite the importance of performance over time periods beyond one year, our Board’s Personnel and Compensation Committee reviews the elements of our executive compensation program periodically and adjusts executive compensation, as appropriate, every year. Therefore, our Board of Directors believes that it may be beneficial to receive input from our shareholders on an annual basis.
While the advisory nature of this vote will not bind our Board, it gives our shareholders an opportunity to vote and inform us of their preferences as to how frequently shareholders should vote on the compensation of our executives. Our Board will carefully consider the results of this recommendation in determining how frequently to ask our shareholders to vote on the compensation of our executives in future say on pay advisory votes.
We expect to conduct our next shareholder vote on “say-on-pay” frequency at our 2023 annual meeting of shareholders.
The Board of Directors recommends that you vote FOR a frequency of “ONE YEAR” for future advisory votes on executive compensation.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 85
SHAREHOLDER PROPOSAL REQUESTING ADDITIONAL DIVERSITY DISCLOSURE (ITEM 5)
We expect the following proposal to be presented by Trillium Asset Management on behalf of Portfolio 21 Global Equity Fund at the annual meeting of shareholders. We include the full text of the shareholder’s proposal below, but do not independently verify the assertions made by the shareholder.
The Board of Directors recommends a vote against this proposal as described below. The address and security holdings of the shareholder will be supplied upon request to the Corporate Secretary at the address listed on page 17. The text of the proposal follows.
“RESOLVED: Shareholders request that PNC prepare a diversity report, at a reasonable cost and omitting confidential information, available to investors including:
“WHEREAS:
A McKinsey & Company report found companies with highly diverse executive teams had higher returns on equity and earnings performance than those with low diversity.
Chairman, President, and CEO Bill Demchak states: “PNC has worked through the years to foster a diverse and inclusive workplace.” And “There is plenty of evidence that tells us diverse teams are more successful. Diverse backgrounds drive different perspectives, which lead to more creative solutions.”
However, PNC does not disclose workforce data, or disclose results of diversity initiatives. As a result, shareholders have insufficient information to determine if PNC has a diverse workforce or has been successful in expanding diversity into senior roles.
Leading financial services firms such as Wells Fargo, JP Morgan, and Bank of New York Mellon provide details of diversity programs and policies, and disclose workforce statistics consistent with data provided to the Equal Employment Opportunity Commission (EEOC).
Asset management firms have begun acknowledging the lack of gender diversity in senior roles and in August, 2016 seven global asset managers including Blackrock, Capital Group, and Fidelity, shared diversity statistics which show, on average, that women represent nearly one-half of their workforce but represent just one-quarter of senior staff.
Research from Mercer confirms that improving gender diversity will require greater attention to closing the gender pay gap. Owing to the widespread and general concern about gender and racial wage disparities the EEOC has recently finalized a new rule to stem wage discrimination by collecting pay data by gender, race and ethnicity in a dozen job categories.
Expanding workforce diversity and closing the wage gap also requires policies and programs that attract and retain diversity in the workplace. A company’s family leave policies, for example, can play a role. McKinsey & Company reports that paid parental leave and the availability of on-site child care can significantly impact women’s ability to rise to higher productivity roles and therefore perpetuate a gender wage gap. The best performing companies on gender diversity have implemented gender neutral policies that improve the workplace for both men and women, according to McKinsey.
Diversity benchmarks can help ensure companies hiring hundreds of financial professionals, such as PNC, create competitive workforces. Companies that are publicly accountable to diversity goals are most likely to make rapid progress toward achieving their goals.”
“Supporting Statement: A report adequate for investors to assess strategy and performance can include a review of appropriate time-bound benchmarks for judging current and future progress, and details of policies and practices designed to reduce unconscious bias in hiring and to build mentorship.”
86 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
SHAREHOLDER PROPOSAL REQUESTING ADDITIONAL DIVERSITY DISCLOSURE (ITEM 5)
Statement by the Board of Directors in opposition to the proposal
After careful consideration, the Board of Directors unanimously recommends that you vote against the proposal submitted by Trillium Asset Management on behalf of Portfolio 21 Global Equity Fund.
PNC is seriously committed to increasing gender and racial diversity in the workplace. We do not believe that adoption of this proposal would enhance PNC’s commitment to promoting diversity in any meaningful way. We do, however, believe that reporting diversity metrics in a form that our management team considers meaningful disclosure for our company at this time is appropriate.
We agree with our shareholder that diverse teams are more successful. PNC has demonstrated its leadership and support for the real issues presented by this proposal. PNC’s commitment to diversity is evidenced in numerous ways as described in its Corporate Social Responsibility Report and Diversity and Inclusion Annual Report, both of which are available on PNC’s website. We believe that these documents already provide a thorough description of PNC’s policies and programs focused on increasing gender and racial diversity. A few of the many ways PNC demonstrates its commitment are described here. PNC’s Corporate Diversity Council, which is chaired by our CEO Bill Demchak, consists of senior executives across the organization who determine methods and strategies for attracting and developing a talented and diverse workforce, incorporating diversity objectives into all areas of the company. PNC’s lines of business each have diversity and inclusion councils to incorporate the diversity and inclusion mission into the specific line of business. PNC sponsors Employee Business Resource Groups, a grass roots effort created by PNC employees that provide opportunities for
diverse participants to network, learn, and develop both professionally and personally. PNC champions an inclusive workplace where employees are encouraged to voice their ideas and openly express their perspectives. During 2016 PNC revised its family leave policies to make them more generous.
We also agree with our shareholder that reporting a form of diversity metrics is appropriate at this time. We now include diversity metrics disclosure on our website in the “Diversity and Inclusion” section, which can be found under the “Corporate Responsibility” tab. However, we do not agree with our shareholder regarding the nature of the disclosure. PNC prepares and files its EEO-1 report with the Equal Employment Opportunity Commission each year. While management does track and review these government defined metrics, we use a variety of other metrics determined by management to be appropriate to monitor PNC’s progress against its diversity objectives. We do not believe that public dissemination of the EEO-1 reported information, which could be manipulated or misinterpreted by those with interests adverse to PNC, is appropriate, nor would it further promote the goal of gender and racial diversity in any meaningful way, or enhance PNC’s serious commitment to gender and racial diversity. We do, however, believe that presenting the metrics that our management team considers meaningful disclosure for our company at this time is appropriate and will demonstrate to our shareholders our commitment to gender and racial diversity in our workplace. We have reviewed this form of disclosure with Trillium Asset Management, who did not accept it as responsive enough to the proposal.
The Board of Directors recommends a vote AGAINST the shareholder proposal requesting additional diversity disclosure.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 87
PNCWe will hold itsour annual meeting of shareholders on Tuesday, April 25, 2017.24, 2018.
This proxy statement includes information about PNC, describes the proposals to be considered at the meeting, and explains the voting process. We encourage you to read it carefully.
This section of the proxy statement reviews important technical points,topics such as how to attend the meeting, how to access our proxy materials, how to vote, and how a proposal gets approved and how shareholder proposals can be brought before a meeting.approved.
Although ourBy-laws provide the ability tothat we may hold a virtual-only annual meeting of shareholders, PNCwe
currently hashave no intention to conduct itsour annual meeting of shareholders in that format.
In this section, we sometimes discuss differences between “registered” and “street name” shareholders. For purposes of reviewing the proxy materials and voting shares, this distinction is important. We refer to those owningwho own PNC shares in their own name as “registered” holders or “shareholders of record.” We refer to those who own PNC shares through an account at an intermediary—such as a brokerage firm or bank—as holding our shares in “street name” or as “beneficial owners.” For purposes of reviewing the proxy materials and voting your shares, this distinction is important.
OurThe annual meeting of shareholders will be held on Tuesday, April 25, 201724, 2018 in the James E. Rohr Auditorium in The Tower at PNC Plaza, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222. The meeting will begin at 11:00 a.m., Eastern time.Time. Directions to the meeting are available atwww.pnc.com/annualmeeting.
General requirements
You must be a PNC shareholder on the record date of February 3, 2017,2, 2018, or hold a valid legal proxy, to attend the annual meeting in person. Each shareholder may bring one guest.
All shareholders, guests of shareholders, and persons holding legal proxies must present a valid form of photo identification, such as a driver’s license, to be admitted to the annual meeting.
Additional requirements
In addition to presenting a valid form of photo identification, please follow these instructions to be admitted to the meeting:
Registered shareholder. Present one of the following: (i) proxy card admission ticket, (ii) Notice of Internet Availability of Proxy Materials, or (iii) admission ticket that you printed if you voted electronically.
Street name shareholder. Present one of the following: (i) brokerage statement or letter from your bankbroker or brokerbank demonstrating PNC share ownership as of ourthe record date of February 3, 2017,2, 2018, (ii) voting instruction form or copy, (iii) Notice of Internet Availability of Proxy Materials, or (iv) a written legal proxy issued by your broker or bank.
Proxy for registered shareholder. Present a written legal proxy to you signed by the registered shareholder and one of the following: (i) proxy card admission ticket, (ii) Notice of Internet Availability of Proxy Materials, or (iii) printed admission ticket if the registered shareholder voted electronically.
Proxy for street name shareholder. Present a written legal proxy from a broker or bank to the street name holder, in assignable form, and a written legal proxy from the street name holder to you, and one of the following: (i) a brokerage statement or letter from the street name holder’s bankbroker or brokerbank demonstrating PNC share ownership as of ourthe record date of February 3, 2017,2, 2018, (ii) voting instruction form or copy, or (iii) Notice of Internet Availability of Proxy Materials.
A shareholder representative (for example, a person representing an entity that is a shareholder) must present satisfactory documentation evidencing his or her authority with respect to the shares in addition to complying with the general and additional requirements.requirements discussed above.
We will decide in our sole discretion whether the documentation presented for admission meets the above requirements.
Everyone attendingAnyone who attends the annual meeting agrees to abide by the regulations for conduct forat the meeting. These regulations for conduct are included in Annex B to this proxy statement and will also be printed on the meeting agenda and distributed and reviewed at the meeting.
No cameras, mobile phones, laptops, tablets, or recording equipment are permitted in the meeting room. In addition, large bags, backpacks, briefcases, and similar items are not permitted in the meeting room.
If you cannot attend the annual meeting in person, you can listen to the meeting by using the webcast or conference call options that are described on the Notice of Annual Meeting of Shareholders on page 10. However, those using the webcast or dial-in numbersconference call options will not be able to vote or ask questions. Please visit the website www.pnc.com/annualmeeting orwww.pnc.com/investorevents orwww.pnc.com/annualmeeting ahead of time to register and download any necessary software and to view or print related materials.
88 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 89
GENERAL INFORMATION
Mailing date. We provided access to our proxy materials beginning on Wednesday,Tuesday, March 15, 2017.13, 2018. On that day, we mailed the Notice of Availability of Proxy Materials, began mailing paper copies of thisthe proxy statement and proxy card and our 20162017 Annual Report to registered shareholders, began mailing the Notice of Internet Availability of Proxy Materials, and deliveredbegan delivering proxy materials electronically to registered shareholders who previously consented to that type ofelectronic delivery. Please note that our 20162017 Annual Report is not considered part of our proxy solicitation materials.
Accessing proxy materials. The SEC allows us to deliver proxy materials to shareholders over the Internet. We believe that this offers a convenient way for shareholders to review our information. It also reduces printing expenses and lessens the environmental impact of paper copies.
Shareholders may access our proxy materials electronically. Upon request, we will continue to provide email or paper copies of proxy materials to shareholders for the current annual meeting or for future meetings.
If you hold PNC shares in street name, we generally cannot mail our materials to you directly. Your broker or bank must provide you with the Notice of Internet Availability of Proxy Materials or the proxy statement and a voting instruction form, and must also explain the voting process to you.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 2017:24, 2018: This Notice of Annual Meeting and Proxy Statement and the 20162017 Annual Report are available at:
www.envisionreports.com/PNC
Have you received more than one set of proxy materials? If two or more PNC shareholders live in your household, or you maintain more than one shareholder account on the books of our transfer agent, you may have received more than one set of our proxy materials.
In order to reduce duplicate packages and lower expenses, we rely on Securities and Exchange CommissionSEC rules allowingthat allow delivery of one set of proxy materials to multiple shareholders sharing the same address and the same last name, who consent in a mannerif this type of delivery has been consented to as provided by these rules. This is referred to as “householding.”“householding” of the proxy materials. Even if you consent to householding, we will always deliver a separate proxy card or Notice of Internet Availability of Proxy Materials for each account. Householding will not affect your right or ability to vote.
If you would like to opt out of or into householding in the future, or would like to receive a separate copy of the proxy materials, please write or call Computershare Trust Company, N.A., our stock transfer agent, at the address or phone number below:
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
800-982-7652
You may also receive more than one set of our proxy materials if you have more than one brokerage account. Our householding process does not include accounts that you maintain at a brokerage firm or bank. Some brokerage firms and banks offer householding—please contact your broker or bank directly if you are interested.
We want our shareholders, as the owners of PNC, to consider the important matters before them and exercise their right to vote. OurThe Board of Directors is asking for, or soliciting, a proxy from our shareholders. This section describes the different aspects of the voting process and how proxy voting works.
Who can vote? You are entitled to vote if you were a PNC shareholder as of the record date of February 3, 2017.2, 2018.
What is a proxy? For shareholdersIf you are unable to attend and vote at the annual meeting in person, you can tell us exactly how you want to vote your shares and then allow an officer to vote on your behalf. ThatThis is calledreferred to as giving us a “proxy.” By allowinginstructing a proxy to carry out your wishes, you can ensure that your vote counts.is counted.
Soliciting your proxy. OurThe Board of Directors is soliciting your proxy to make sure that your vote is properly submitted and received on time, and to improve the efficiency of the annual meeting. We may ask for, or solicit proxies using several methods.
We may solicit proxiesmethods, including by mail, personal interviews, telephone, or fax. We may also use the Internet to solicit proxies.
PNC officers or employees may solicit proxies, but will not receive any special compensation for doing so.
We will ask brokerage houses, banks, and other custodians of PNC stock to forward proxy materials to their clients who hold PNC stock. Westock, and we will pay for theirthe expenses they incur to do so.
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GENERAL INFORMATION
We hired In addition, we have retained Morrow Sodali, 470 West Ave., Stamford, CT 06902, a proxy soliciting firm, to helpassist us with the solicitation of proxies for the 2017
90 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
GENERAL INFORMATION
annual meeting. We will pay Morrowmeeting for a fee of $15,000, plus its reimbursement of reasonableout-of-pocket expenses, to provide information to our shareholders and to assist with distributing proxy materials. expenses.
Revoking your proxy. What if you change your mind after you give us your proxy to vote? You can amend your voting decisions in several ways. We callrefer to this as “revoking” your proxy.
To revoke your current proxy and replace it with a new proxy, we must receive the newly executed proxy before the applicable deadline. If you revoke by mail, we must receive the new proxy card before the annual meeting begins. Please make sure you have provided enough time for the replacementnew proxy card to reach us. If you revoke by using the telephone or Internet voting options, we must receive your revocation by 1:00 a.m., Eastern timeTime on April 25, 2017.24, 2018.
After the above deadlines have passed, you can only revoke your proxy in person. You cannot useperson at the annual meeting. If you listen to the annual meeting using the webcast or conference call options, you will be
unable to revoke your proxy.proxy during the meeting. Once the polls close at the annual meeting, the right to revoke your proxy ends. If you have not properly revoked your proxy by that time, we will vote your shares in accordance with your most recent valid proxy.
If you hold PNC shares in street name, follow the instructions provided by your broker or bank to revoke your voting instructions or otherwise change your vote.
How to vote. If your shares are registered in your name, you may vote in person by submitting a ballot at the annual meeting. We will distribute ballots at the meeting. To make it convenient and simple for you, we also offer a number of other ways to vote your shares. We include votingVoting instructions are included in the Notice of Internet Availability of Proxy Materials and the proxy card.
For registered holders, we offer the following methods to vote your shares and give us your proxy:
Internet | Go towww.envisionreports.com/PNC and follow the instructions. This voting system has been designed to provide security for the voting process and to confirm that your vote has been recorded accurately. | |
Telephone | Follow the instructions on the proxy card. | |
Complete, sign and date the proxy card and return it in the envelope provided if you were mailed paper copies of the proxy materials. The envelope requires no postage if mailed in the United States. |
If you hold PNC shares in street name, you will receive information on how to give voting instructions to your brokerage firmbroker or bank. Note that if you hold PNC shares in street name and plan to vote at the annual meeting, you must present a written legal proxy from your broker or bank authorizing you to vote the shares it holds for you in its name.
PNC is incorporated inunder the laws of Pennsylvania. Pennsylvania law allows properly authenticated proxies to be transmittedsubmitted by electronic transmission, including by telephone or over the Internet. Pennsylvania law alsoInternet, and permits a shareholder of record, such as a brokerage firm or bank, to communicate a vote by telephone or Internet foron behalf of a beneficial owner.
Brokers voting your shares. If you hold PNC shares in street name, you must give instructions to your broker onor bank regarding how you would like your shares to be voted. If you do not provide any instructions, your broker has discretionary authority to vote your shares ononly with respect to proposals that are “routine” items. New York Stock Exchange (NYSE)NYSE rules define which items are “routine” or “non-routine.“non-routine.” We discuss below underVotes required for approvalwhether the itemsproposals to be acted upon at the annual meeting are “routine” or “non-routine.”“non-routine” items below underHow a proposal gets approved—Vote required for approval.
If ana proposal is considered anon-routine item is non-routineunder NYSE rules and you do not provide voting instructions to your broker or bank, no vote will be cast on your behalf. behalf with respect to that proposal.
This is consideredreferred to as a broker “non-vote”. In determining whether“brokernon-vote” and it will not be counted as a vote was cast for a proposal, we will not count broker non-votes.on the proposal. In some cases, street name holders may need to take additional precautions to ensure that their shares are voted.
Our voting recommendations. If your shares are registered in your name and you sign, date, and return your proxy card but do not giveprovide voting instructions, or if you use Internet or telephone
voting and do not provide voting instructions for each proposal, we will vote your shares will be voted as follows:
Confidential voting. The Board has adopted a “confidential voting” policy. With the exceptions described below, this policy states that all proxies, ballots, voting instructions from employee benefit plan participants, and voting tabulations that identify the vote of a particular shareholder or benefit plan participant be kept permanently confidential and not be disclosed. We keep votes confidential and do not disclose them to our directors, officers, or employees, except:
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 91
GENERAL INFORMATION
Our Board has adopted a “confidential voting” policy. With the exceptions described above, this policy states that all proxies, ballots, voting instructions from employee benefit plan participants and voting tabulations that identify the particular vote of a shareholder or benefit plan participant be kept permanently confidential and not be disclosed.
Computershare Trust Company, N.A., our independent vote tabulator and Judge of Election for the 2017 annual meeting, confirmed that its procedures will be consistent with this policy.
90 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
GENERAL INFORMATION
On the record date, we had approximately 490 million outstanding shares of common stock, as well as additional shares of preferred stock.Quorum. Under Pennsylvania law, we must have a quorum before we can consider proposals at an annual meeting. A quorum is“quorum” refers to the minimum number of shares that must be present at the meeting. In determining if a quorum exists, we count the number of shares represented by shareholders in person as well as the number of shares represented by proxies.
To have a quorum for the annual meeting, we need the presence of PNC shareholders or their proxies who are entitled to cast atleast a majority of the votes that all shareholders are entitled to cast.
In determining if a quorum exists, we count the number of shares represented by shareholders in person at the annual meeting and the number of shares represented by proxies. If you return a proxy, whether you vote for or against a proposal, abstain from voting, or only sign and date your proxy card, your holdingsshares will be counted toward the quorum.
Once a quorum is achieved, different proposals may require different standards of approval. Street name holders may need to take additional precautions to ensure that their vote counts. We discuss the mechanics of proposal approval below.
Issued and outstanding shares. ThisOn February 2, 2018, the record date for the annual meeting, we had approximately 470 million shares of common stock outstanding, as well as additional shares of preferred stock. The table below shows the number of issued and outstanding shares of our common and preferred stock entitled to vote on February 3, 2017, the record date. We have additional issued and outstanding series of preferred stock that are not entitled to vote at the meeting. The table also shows the number of votes for each share for the matters brought before this meeting. The number of votes shown for each share of voting preferred stock equals the number of full shares of PNC common stock that can be acquired upon the conversion of a share of preferred stock. At the meeting, holders of common and preferred stock entitled to vote will vote together as a single class. There is no cumulative voting.
Class | Issued and Outstanding Shares Entitled to Vote | Votes Per Share | Effective Voting Power | Issued and Outstanding Shares Entitled to Vote | Votes Per Share | Effective Voting Power | ||||||||||||||||||
Common | 486,362,046 | 1 | 486,362,046 | 472,214,964 | 1 | 472,214,964 | ||||||||||||||||||
Preferred – Series B | 615 | 8 | 4,920 | |||||||||||||||||||||
Preferred—Series B | 615 | 8 | 4,920 |
VotesVote required for approval. Different proposals may have different voting requirements for approval. This section provides information regarding the vote required for approval of each proposal presented in the proxy statement and additional details regarding the mechanics of proposal approval.
Under Pennsylvania law, if you abstain from voting itor fail to vote, your shares will not countbe counted as a vote “cast.”votes cast on the proposal. To abstain, you must check the “Abstain” box on your proxy card, or select the appropriate option when voting by Internet or telephone. A brokernon-vote is treated as a failure to vote. Therefore, if you do not provide instructions to your broker or bank regarding how to vote on a proposal that is anon-routine item, your shares will not be counted as votes cast on that proposal. If you are a shareholder of record and you sign, date, and return your proxy card but do not provide voting instructions, or if you submit your proxy by Internet or telephone and do not provide voting instructions, when voting over the Internet, we will vote your shares represented by that proxy as recommended by ourthe Board of Directors and this votethose shares will countbe counted as a votevotes cast. A
broker non-vote will also be treated as a failure to record a vote and will not count as a vote cast.
Election of directors (Item 1). UnlessUnder Pennsylvania law, unless a company’s articles of incorporation orby-laws provide otherwise, Pennsylvania law contemplates election of directors are elected by a plurality of the votes cast. In 2009, PNC amended its OurBy-laws to include an eligibility requirement for director nominees in uncontested elections, whereby an incumbent director will offer to resign from the Board if he or she does not receive a majority of the votes cast. To receive a majority of the votes cast, the shares voted “for” a director’s election must exceed 50% of the total number of shares voted with respect to that director’s election. OurBy-laws and corporate governance guidelines describe this majority voting requirement and the related procedure in the event that requires an incumbenta director tomust tender his or her resignation to the Board. To receiveThis is considered a majority of the votes cast means that the shares voted “for” a director’s election exceed 50% of the number of votes castnon-routine item, so there may be brokernon-votes with respect to that director’s election. This will be considered a non-routine item. As a non-routine item, there may be broker non-votes. Any broker this proposal. Brokernon-votes or and abstentions will not be included in the total votes cast and will not affect the results.results of the vote on this proposal.
Ratification of independent registered public accounting firm (Item 2). A majority of the votes cast will be required to approve the ratification of ourthe Audit Committee’s selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2017.2018. This will beis considered a routine item, andso brokers will have the discretion to vote uninstructed shares on behalf of beneficial owners. Asowners with respect to this proposal. Therefore, brokernon-votes are not expected to exist for this proposal, although a routine item, there will be no broker non-votes, although brokers may otherwise fail to submit a vote. Any failuresFailures by brokers
92 THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement
GENERAL INFORMATION
to vote orand abstentions will not be included in the total votes cast and will not affect the results.results of the vote on this proposal.
“Say-on-pay”: advisory Advisory vote on executive compensation (Item 3). A majority of the votes cast will be required to approve this item, an advisory vote on the compensation of our named executive compensation.officers. Because your vote is advisory, it will not be
binding on the Board or PNC. This will beis considered anon-routine item. As a non-routine item, so there may be broker non-votes. Any broker non-votes or with respect to this proposal. Brokernon-votes and abstentions will not be included in the total votes cast and will not affect the results.
Frequencyresults of “say-on-pay” advisorythe vote on executive compensation (Item 4). The frequency of future advisory votes on executive compensation receiving a majority of the votes cast, if any—every one year, every two years or every three years—will be the frequency that shareholders approve. Because your vote is advisory, it will not be binding on the Board or PNC. This will be considered a non-routine item. As a non-routine item, there may be broker non-votes. Any broker non-votes or abstentions will not be included in the total votes cast and will not affect the results.this proposal.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 9193
GENERAL INFORMATION
Shareholder proposal requesting additional diversity disclosure (Item 5). A majority of the votes cast will be required to approve the shareholder proposal. This will be considered a non-routine item. As a
non-routine item, there may be broker non-votes. Any broker non-votes or abstentions will not be included in the total votes cast and will not affect the results.
92 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement
SHAREHOLDER PROPOSALS FOR THE 20182019 ANNUAL MEETING
SEC Rule14a-8. If you are a shareholder who would like us to include your proposal in ourthe notice of the 2018our 2019 annual meeting of shareholders and related proxy materials, you must followcomply with SEC Rule 14a-8. In submitting14a-8, including with respect to submission of your proposal ourby the applicable deadline. Our Corporate Secretary must receive your proposal in writing at our principal executive offices no later than November 15, 2017.13, 2018. If your proposal is not received by the deadline or you do not followotherwise comply with Rule14a-8, we will not consider your proposal for inclusion in next year’s proxy statement.materials.
Advance notice procedures. Under ourBy-laws, a shareholder who wishes to shareholders may nominate an individual for election to the Board of Directorsor propose other business to be brought directly at an annual meeting or to propose any business to be considered at an annual meeting, must deliverof shareholders by giving advance notice of such nomination or business to PNC. TheTo be eligible to do so, a shareholder must be a shareholder of record as of the date the notice is delivered to PNC and at the time of the annual meeting, and must be entitled to vote at the meeting. Theannual meeting, and must comply with the notice and other applicable procedures set forth in ourBy-laws.
A shareholder’s notice of a nomination or other business must be in writing and contain the information specified in ourBy-laws, for and must be delivered on a director nomination or other business.
The company’s 2018timely basis. To be timely, a shareholder’s written notice related to our 2019 annual meeting is currently scheduled to be held on April 24, 2018, and to be timely, the written noticeof shareholders must be delivered to the Corporate Secretary at our principal executive offices not earlier than December 26, 201725, 2018 (the 120th day prior to the first anniversary of this year’s annual meeting) and not later than January 25, 201824, 2019 (the 90th day prior to the first anniversary of this year’s annual meeting) to the Corporate Secretary at our principal executive offices by mail or facsimile..
These advance notice procedures are separate from the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal included in our proxy materials pursuant to SEC Rule14a-8 referred to above, and from the procedures you must follow to submit a director nominee for consideration by the Nominating and Governance Committee for recommendation to the Board for election as described underCorporate Governance—Board committees—Nominating and Governance Committee—How we identify new directors on page 24.
Proxy access procedures.OurBy-laws permit a shareholder, or a group of up to 20 shareholders, who has continuously owned at least 3% of the outstanding shares entitled to vote in the election of directors for at least three years to nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of two directors or 20% of the number of directors
serving on the Board on the last day on which notice of a nomination may be delivered (known generally as “proxy access”).
The proxy access notice must be in writing and contain the information specified in ourBy-laws for a proxy access nomination, and must be delivered on a timely basis. To be timely, a proxy access notice regarding a nomination for our 2019 annual meeting of shareholders must be delivered to the Corporate Secretary at our principal executive offices not earlier than October 14, 2018 (the 150th day prior to the first anniversary of the filing date of the definitive proxy statement for this year’s annual meeting) and not later than November 13, 2018 (the 120th day prior to the first anniversary of the filing date of the definitive proxy statement for this year’s annual meeting).
These proxy access procedures are separate from the advance notice procedures referred to above, from the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal included in our proxy statementmaterials pursuant to SEC Rule14a-8 referred to above.
Proxy access procedures.Our By-laws permit a shareholder, or a group of up to 20 shareholders, who has continuously owned at least 3% of the voting power entitled to vote in the election of directors for at least 3 years to nominateabove, and include in PNC’s annual meeting proxy materials director nominees (known generally as “proxy access”) constituting up to the greater of 2
directors or 20% of the number of directors serving on the board on the last day on which notice of the nomination may be delivered. The notice must be in writing and contain the information specified in our By-laws for a proxy access nomination.
PNC’s By-laws specify that, to be timely, written notice of such nomination for the 2018 annual meeting must be delivered not earlier than October 16, 2017 (the 150th day prior to the first anniversary of the filing date of the definitive proxy statement for the preceding year’s annual meeting) and not later than the November 15, 2017 (the 120th day prior to the first anniversary of the filing date of the definitive proxy statement for the preceding year’s annual meeting) to the Corporate Secretary at our principal executive offices by mail or facsimile.
These proxy access procedures are separate from the procedures you must follow to submit a director nominee for consideration by the Nominating and Governance Committee for recommendation to the Board for election as described underCorporate Governance—Board committees—Nominating and Governance Committee—How we identify new directors, from the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal included in our proxy statement pursuant to SEC Rule 14a-8 referred to above and from the advance notice procedures referred to above. on page 24.
General.The proxies we appoint for the 20182019 annual meeting of shareholders may exercise their discretionary authority to vote on any shareholder proposal timely received and presented at the meeting. Our proxy statement for the 2019 annual meeting must advise shareholders of theany such proposal and how our proxies intend to vote. A shareholder may mail a separate proxy statement to our shareholders and satisfy certain other requirements to remove discretionary voting authority from our proxies.
The Chairperson or other officer presiding at the annual meeting has the sole authority to determine whether any nomination or other business proposed to be brought before the annual meeting was made or proposed in accordance with ourBy-laws, and to declare that a defective proposal or nomination be disregarded.
Please direct any notices or questions about the requirements or noticesdiscussed in this section to our Corporate Secretary at the address givenprovided on page 17.
94 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 93
OurThe Board of Directors does not know of any other business to be presented at the annual meeting. If any other business should properly come before the meeting, or if there is any meeting adjournment, proxies will be voted in accordance with the best judgment of the persons named in the proxies.
March | By Order of the Board of Directors, | |
Christi Davis | ||
Corporate Secretary |
94 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 95
ANNEX A (NON-GAAP TO GAAP RECONCILIATIONS)
We provide information below to reconcile to GAAP those financial metrics used by the Personnel and Compensation Committee that are eithernon-GAAP financial metrics or reflect adjustments approved by the Personnel and Compensation Committee (as described in footnote (1) to the table on page 44). Financial metrics disclosed in the table on page 44 that are not discussed below are GAAP metrics that were not affected by the Personnel and Compensation Committee approved adjustments in 2015 and 2016.2016 and/or 2017.
Net Interest Income
Dollars in millions | Year ended December 31, 2017 | |||
Net interest income | $ | 9,108 | ||
Personnel and Compensation Committee approved adjustments (a) | 26 | |||
Net interest income, as adjusted(Non-GAAP) | $ | 9,134 |
(a) | Adjustment as a result of the Tax Cuts and Jobs Act |
Diluted Earnings per Common Share
Year ended December 31, 2017 | ||||
Diluted earnings per common share | $ | 10.36 | ||
Personnel and Compensation Committee approved adjustments (a) | (2.32) | |||
Diluted earnings per common share, as adjusted(Non-GAAP) | $ | 8.04 |
(a) | As a result of the Tax Cuts and Jobs Act, reflects adjustments in the amount of $26 million to net interest income, or $0.05 per common share, and $(1,155) million to income tax, or $(2.37) per common share. |
Return on Common Equity without Goodwill
Year ended December 31 | Year ended December 31, | |||||||||||||||
Dollars in millions | 2016 | 2015 | 2017 | 2016 | ||||||||||||
Net income attributable to common shareholders | $ | 3,688 | $ | 3,881 | $ | 5,076 | $ | 3,688 | ||||||||
Personnel and Compensation Committee approved adjustments (a) | (1,129 | ) | – | |||||||||||||
Net income attributable to common shareholders, as adjusted(Non-GAAP) | $ | 3,947 | $ | 3,688 | ||||||||||||
Average common shareholders’ equity | $ | 41,694 | $ | 40,873 | $ | 41,985 | $ | 41,694 | ||||||||
Average goodwill | 9,103 | 9,103 | 9,146 | 9,103 | ||||||||||||
Average common shareholders’ equity less average goodwill | $ | 32,591 | $ | 31,770 | ||||||||||||
Return on common equity (a) | 8.85 | % | 9.50 | % | ||||||||||||
Return on common equity without goodwill (b) | 11.32 | % | 12.22 | % | ||||||||||||
Average common shareholders’ equity less average goodwill(Non-GAAP) | $ | 32,839 | $ | 32,591 | ||||||||||||
Return on common equity (b) | 12.09% | 8.85% | ||||||||||||||
Return on common equity without goodwill(Non-GAAP) (c) | 12.02% | 11.32% |
(a) | As a result of the Tax Cuts and Jobs Act, reflects adjustments in the amount of $26 million to net interest income and $(1,155) million to income tax |
(b) | This metric was calculated by dividing net income attributable to common shareholders by average common shareholders’ equity. |
This metric was calculated by dividing adjusted net income attributable to common shareholders by average common shareholders’ equity less average goodwill. |
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ANNEX A (NON-GAAP TO GAAP RECONCILIATIONS)
Return on Assets
Dollars in millions | Year ended December 31, 2017 | |||
Net income | $ | 5,388 | ||
Personnel and Compensation Committee approved adjustments (a) | (1,129) | |||
Net Income, as adjusted(Non-GAAP) | $ | 4,259 | ||
Average Assets | $ | 371,769 | ||
Return on Assets (b) | 1.45% | |||
Return on Assets, as adjusted(Non-GAAP) (c) | 1.15% |
(a) | As a result of the Tax Cuts and Jobs Act, reflects adjustments in the amount of $26 million to net interest income and $(1,155) million to income tax |
(b) | This metric was calculated by dividing net income by average assets. |
(c) | This metric was calculated by dividing adjusted net income by average assets. |
Efficiency Ratio
Dollars in millions | Year ended December 31, 2017 | |||
Revenue | $ | 16,329 | ||
Personnel and Compensation Committee approved adjustments (a) | 26 | |||
Revenue, as adjusted(Non-GAAP) | $ | 16,355 | ||
Noninterest Expense | $ | 10,398 | ||
Efficiency Ratio (b) | 63.68% | |||
Efficiency Ratio, as adjusted(Non-GAAP)(c) | 63.58% |
(a) | As a result of the Tax Cuts and Jobs Act, reflects adjustment in the amount of $26 million to net interest income |
(b) | This metric was calculated by dividing noninterest expense by revenue. |
(c) | This metric was calculated by dividing noninterest expense by adjusted revenue. |
Tangible Book Value per Common Share
Year ended December 31 | Year ended December 31, | |||||||||||||||
Dollars in millions, except per share data | 2016 | 2015 | 2017 | 2016 | ||||||||||||
Book value per common share | $ | 85.94 | $ | 81.84 | $ | 91.94 | $ | 85.94 | ||||||||
Tangible book value per common share | ||||||||||||||||
Common shareholders’ equity | $ | 41,723 | $ | 41,258 | $ | 43,530 | $ | 41,723 | ||||||||
Goodwill and Other Intangible Assets | (9,376 | ) | (9,482 | ) | (9,498 | ) | (9,376) | |||||||||
Deferred tax liabilities on Goodwill and Other Intangible Assets | 304 | 310 | 191 | 304 | ||||||||||||
Tangible common shareholders’ equity | $ | 32,651 | $ | 32,086 | $ | 34,223 | $ | 32,651 | ||||||||
Period-end common shares outstanding (in millions) | 485 | 504 | 473 | 485 | ||||||||||||
Tangible book value per common share (Non-GAAP) | $ | 67.26 | $ | 63.65 | $ | 72.28 | $ | 67.26 |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2018 Proxy Statement 97
ANNEX A (NON-GAAP TO GAAP RECONCILIATIONS)
Return on Economic Capital vs. Cost of Capital
Year ended December 31 | Year ended December 31, | |||||||||||||||
Dollars in millions | 2016 | 2015 | 2017 | 2016 | ||||||||||||
Net income | $ | 3,985 | $ | 4,143 | $ | 5,388 | $ | 3,985 | ||||||||
Personnel and Compensation Committee approved adjustments, on an after-tax basis | (21 | ) | (110 | ) | ||||||||||||
Personnel and Compensation Committee approved adjustments (a) | (947 | ) | (21) | |||||||||||||
Net income, as adjusted | $ | 3,964 | $ | 4,033 | $ | 4,441 | $ | 3,964 | ||||||||
Average economic capital | $ | 30,328 | $ | 31,456 | $ | 32,576 | $ | 30,328 | ||||||||
Plan-specified cost of capital hurdle | 7.43 | % | 7.76 | % | 7.97% | 7.43% | ||||||||||
Return on economic capital less cost of capital hurdle | 5.71 | % | 5.41 | % | 8.57% | 5.71% | ||||||||||
Return on economic capital less cost of capital hurdle, as adjusted | 5.64 | % | 5.06 | % | 5.66% | 5.64% |
(a) | As a result of the Tax Cuts and Jobs Act, reflects adjustments in the amount of $26 million to net interest income and $(1,155) million to income tax. In addition, reflects anafter-tax adjustment in the amount of $182 million for net Visa activity. |
This metric was calculated by dividing net income by economic capital, expressing the quotient as a percentage, and then subtracting the committee-specified cost of capital hurdle. |
This metric was calculated by dividing adjusted net income |
Fee Income
Year ended December 31 | ||||||||||||
Dollars in millions | 2017 | 2016 | % Change | |||||||||
Noninterest income | ||||||||||||
Asset management | $ | 1,942 | $ | 1,521 | ||||||||
Consumer services | 1,415 | 1,388 | ||||||||||
Corporate services | 1,621 | 1,504 | ||||||||||
Residential mortgage | 350 | 567 | ||||||||||
Service charges on deposits | 695 | 667 | ||||||||||
Total fee income | 6,023 | 5,647 | 7% | |||||||||
Other | 1,198 | 1,124 | ||||||||||
Total noninterest income | $ | 7,221 | $ | 6,771 | 7% |
98 THE PNC FINANCIAL SERVICES GROUP, INC. - 2017 Proxy Statement 95
Fee Income
Year ended December 31 | ||||||||||||
Dollars in millions | 2016 | 2015 | % Change | |||||||||
Noninterest income | ||||||||||||
Asset management | $1,521 | $ | 1,567 | |||||||||
Consumer services | 1,388 | 1,335 | ||||||||||
Corporate services | 1,504 | 1,491 | ||||||||||
Residential mortgage | 567 | 566 | ||||||||||
Service charges on deposits | 667 | 651 | ||||||||||
Total fee income | 5,647 | 5,610 | 1% | |||||||||
Other | 1,124 | 1,337 | ||||||||||
Total noninterest income | $6,771 | $ | 6,947 | -3% |
96 THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement
ANNEX B (REGULATIONS FOR CONDUCT AT ANNUAL MEETING)
In the interest of a fair and orderly meeting, and to accommodate as many shareholders as possible who may wish to speak, we have established the following rules:
1. | Calling the Meeting to Order |
Our CEO will preside as the Chairman of the meeting. The Chairman will call the meeting to order promptly at 11:00 a.m. The Chairman will conduct the meeting in accordance with the Agendameeting agenda and these Regulations for Conduct. The Chairman retains sole authority to make any and all determinations with respect to the conduct of the meeting.
2. | How to Vote |
If your shares are registered in your name, you may vote in person by submitting a ballot at the meeting. If you hold PNC shares in street name, you may present a written legal proxy from your broker or bank authorizing you to vote the shares it holds for you in its name. The Chairman will announce the opening and closing of the polls. No proxies or ballots will be accepted after the polls have closed. PNC representatives will be on hand to distribute ballots or to accept proxies. If you have already submitted your proxy, your shares will be voted in accordance with the instructions you provided. Unless you want to change your vote, or have not submitted a proxy, you do not need a ballot.
3. | Questions and Comments |
You will have an opportunity to ask questions or make comments about each Agendaagenda item as it is addressed. Your questions or comments must pertain to the Agendaagenda item. We have scheduled a general question and answer session at the conclusion of the meeting to discuss matters not on the Agenda, but appropriate for discussion.
4. | Procedures for Speaking |
Only shareholders or their proxies may be heard during the meeting. To ask a question or make a comment, please raise your hand and wait to be recognized by the Chairman. All questions or comments must be addressed to the Chairman, once a microphone has been passed to you. Please give your name and state whether you are a shareholder or a proxy for a shareholder. Speaking out of turn or interfering when another speaker has the floor is prohibited. After a shareholder has spoken, the Chairman may respond personally or designate another person to respond.
5. | Speaker Rotation and Time Limits |
The Chairman may limit questions to one at a time. Shareholders who wish to speak will be recognized on a rotating basis. Please keep your comments brief in order to give other shareholders the opportunity to speak. You may speak for up to two minutes on a particular matter and no one person may speak for more than six minutes.
6. | Other Limitations |
The Chairman may refuse to permit a nomination or proposal to be made by a shareholder who has not complied with applicable laws or rules, or the procedures set forth in PNC’sBy-laws. The Chairman may end discussion if it appears that the matter has been adequately addressed, or is not appropriate, or for other reasons. Personal matters are not appropriate for discussion. Representatives of PNC will be available following the meeting to address individual shareholder concerns. Rudeness, personal attacks, comments in bad taste, and the injection of irrelevant controversy are not permitted at any time.
7. | Mobile Devices, Recording Devices, and Briefcases |
No cameras, mobile phones, laptops, tablets, or recording equipment are permitted in the meeting room. In addition, large bags, backpacks, briefcases, and similar items are not permitted in the meeting room. A staffed coat check for personal belongings is available.
8. | Safety and Security |
Failure to comply with these Regulations for Conduct or otherwise impeding a fair and orderly
meeting may be grounds for removal from the meeting.
The Annual Meeting of Shareholders is audio-recorded.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20172018 Proxy Statement 9799
Corporate Headquarters The PNC Financial Services Group, Inc. The Tower at PNC Plaza 300 Fifth Avenue Pittsburgh, PA 15222-2401
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 1:00 a.m., Eastern Time, on April | ||||||||||
|
Vote by Internet | |||||||||
• Go towww.envisionreports.com/PNC | ||||||||||
• Or scan the QR code with your smartphone | ||||||||||
• Follow the steps outlined on the secure website | ||||||||||
Vote by telephone | ||||||||||
• Call toll free 1-800-652-VOTE (8683) within the USA, US | ||||||||||
Using ablack inkpen, mark your votes with anXas shown in ☒ this example. Please do not write outside the designated areas. |
• Follow the instructions provided by the recorded message |
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
A | Proposals — The Board recommends a voteFOR all nominees in Item 1 andFOR Items 2 and |
1. | Election of Directors: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | + | |||||||||||||||||||||||||
01 - Charles E. Bunch | ☐ | ☐ | ☐ | 02 - | ☐ | ☐ | ☐ | 03 - | ☐ | ☐ | ☐ | |||||||||||||||||||||||||
04 - William S. Demchak | ☐ | ☐ | ☐ | 05 - Andrew T. Feldstein | ☐ | ☐ | ☐ | ☐ | ☐ | ☐ | ||||||||||||||||||||||||||
07 - Richard B. Kelson | ☐ | ☐ | ☐ | 08 - | ☐ | ☐ | ☐ | 09 - | ☐ | ☐ | ☐ | |||||||||||||||||||||||||
10 - | ☐ | ☐ | ☐ | 11 | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||
☐ | ☐ | ☐ |
For | Against | Abstain | 1 Year | 2 Years | 3 Years | Abstain | ||||||||||||||
2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2017. | ☐ | ☐ | ☐ | 4. | Recommendation for the frequency of future advisory votes on executive compensation. | ☐ | ☐ | ☐ | ☐ | ||||||||||
For | Against | Abstain | ||||||||||||||||||
3. | Advisory vote to approve named executive officer compensation. | ☐ | ☐ | ☐ | 5. | A shareholder proposal requesting a diversity report with specific additional disclosure, including EEOC-defined metrics. | ☐ | ☐ | ☐ |
For | Against | Abstain | For | Against | Abstain | |||||||||||||||
2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2018. | ☐ | ☐ | ☐ | 3. | Advisory vote to approve named executive officer compensation. | ☐ | ☐ | ☐ |
B | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | ||||||||
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||||||
/ / |
IF VOTING BY MAIL, PLEASE COMPLETE SECTIONS A AND B ON THIS CARD.
Notice of Annual Meeting of Shareholders
THE PNC FINANCIAL SERVICES GROUP, INC.
20172018 Annual Meeting of Shareholders
For the purpose of considering and acting upon the election of 1312 directors to serve until the next annual meeting and until their successors are elected and qualified, the ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2017,2018, the advisory vote to approve named executive officer compensation the recommendation for the frequency of future advisory votes on executive compensation, a shareholder proposal requesting a diversity report with specific additional disclosure, including EEOC-defined metrics and such other business as may properly come before the meeting and any adjournment.
If you sign and date this proxy card in Section B but do not give voting instructions in Section A, this proxy will be voted in accordance with the recommendations of the Board of Directors.
Tuesday, April 25, 201724, 2018 - 11:00 a.m. Eastern Time
The Tower at PNC Plaza - James E. Rohr Auditorium
300 Fifth Avenue
Pittsburgh, Pennsylvania 15222
Upon arrival,To attend the Annual Meeting, please present this admission ticket and valid photo identification at the registration desk.
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
Proxy — The PNC Financial Services Group, Inc.
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This proxy is solicited on behalf of the Board of Directors for the
Annual Meeting of Shareholders on April 25, 2017.24, 2018.
William S. Demchak, Robert Q. Reilly and Christi Davis, and each of them with full power to act alone and with full power of substitution, are hereby authorized to represent the undersigned at The PNC Financial Services Group, Inc. Annual Meeting of Shareholders to be held on April 25, 2017,24, 2018, and at any adjournment, and to vote, as indicated on the reverse side, the shares of common stock and/or preferred stock that the undersigned would be entitled to vote if personally present at said meeting. The above-named individuals are further authorized to vote such stock upon any other business as may properly come before the meeting, and any adjournment, in accordance with their best judgment.
If you are a participant in The PNC Financial Services Group, Inc. Incentive Savings Plan (the ISP or 401(k) plan) with units in the PNC Stock Fund, this proxy also serves as voting instructions to the Trustee of the plan for voting at the Annual Meeting of Shareholders to be held on April 25, 2017,24, 2018, and at any adjournment. You have the right to provide the Trustee with voting instructions for the equivalent shares you hold in your PNC Stock Fund account. Your vote must be received by 11:59 p.m., Eastern Time, on April 20, 201719, 2018 to insureensure that the Trustee has adequate time to tabulate voting instructions.
The Pennsylvania Business Corporation Law of 1988, as amended, 15 Pa. Cons. Stat. § 1759(b), provides that shareholders voting by means of the telephone or the Internet, as instructed, will be treated as transmitting a properly authenticated proxy for voting purposes. Pennsylvania law permits the use of telephone or Internet voting both when a shareholder of record is voting and when a beneficial owner is communicating its vote to a shareholder of record, such as a securities depositary or brokerage firm.
Please sign and return promptly.
C | Non-Voting Items | |||||
Change of Address— Please print new address below. | ||||||
Will attend Meeting ☐ | ||||||
IF VOTING BY MAIL, PLEASE COMPLETE SECTIONS A AND B ON THIS CARD.
∎ | + |
Using ablack inkpen, mark your votes with anXas shown in ☒ this example. Please do not write outside the designated areas. |
q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
A | Proposals — The Board recommends a voteFOR all nominees in Item 1 andFOR Items 2 and |
1. | Election of Directors: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | + | |||||||||||||||||||||||
01 - Charles E. Bunch | ☐ | ☐ | ☐ | 02 - | ☐ | ☐ | ☐ | 03 - | ☐ | ☐ | ☐ | |||||||||||||||||||||||
04 - William S. Demchak | ☐ | ☐ | ☐ | 05 - Andrew T. Feldstein | ☐ | ☐ | ☐ | ☐ | ☐ | ☐ | ||||||||||||||||||||||||
07 - Richard B. Kelson | ☐ | ☐ | ☐ | 08 - | ☐ | ☐ | ☐ | 09 - | ☐ | ☐ | ☐ | |||||||||||||||||||||||
10 - | ☐ | ☐ | ☐ | 11 | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||
☐ | ☐ | ☐ |
For | Against | Abstain | 1 Year | 2 Years | 3 Years | Abstain | ||||||||||||||
2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2017. | ☐ | ☐ | ☐ | 4. | Recommendation for the frequency of future advisory votes on executive compensation. | ☐ | ☐ | ☐ | ☐ | ||||||||||
For | Against | Abstain | ||||||||||||||||||
3. | Advisory vote to approve named executive officer compensation. | ☐ | ☐ | ☐ | 5. | A shareholder proposal requesting a diversity report with specific additional disclosure, including EEOC-defined metrics. | ☐ | ☐ | ☐ |
For | Against | Abstain | For | Against | Abstain | |||||||||||||||
2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2018. | ☐ | ☐ | ☐ | 3. | Advisory vote to approve named executive officer compensation. | ☐ | ☐ | ☐ |
B | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. |
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||||||
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q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
Proxy — The PNC Financial Services Group, Inc.
This proxy is solicited on behalf of the Board of Directors for the
Annual Meeting of Shareholders on April 25, 2017.24, 2018.
William S. Demchak, Robert Q. Reilly and Christi Davis, and each of them with full power to act alone and with full power of substitution, are hereby authorized to represent the undersigned at The PNC Financial Services Group, Inc. Annual Meeting of Shareholders to be held on April 25, 2017,24, 2018, and at any adjournment, and to vote, as indicated on the reverse side, the shares of common stock and/or preferred stock that the undersigned would be entitled to vote if personally present at said meeting. The above-named individuals are further authorized to vote such stock upon any other business as may properly come before the meeting, and any adjournment, in accordance with their best judgment.
The Pennsylvania Business Corporation Law of 1988, as amended, 15 Pa. Cons. Stat. § 1759(b), provides that shareholders voting by means of the telephone or the Internet, as instructed, will be treated as transmitting a properly authenticated proxy for voting purposes. Pennsylvania law permits the use of telephone or Internet voting both when a shareholder of record is voting and when a beneficial owner is communicating its vote to a shareholder of record, such as a securities depositary or brokerage firm.
Please sign and return promptly.