| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
Shaping the Future 2020 Notice of Annual Meeting and Proxy Statement ANNUAL MEET ING OF SHAREHOLDERS TO BE HELD ON MAY 12, 2020
THE HANOVER INSURANCE GROUP, INC. Notice of Annual Meeting
and Proxy Statement
Annual Meeting
of Shareholders
to be held
May 16, 2017
Corporate Headquarters
440 Lincoln Street Worcester, Massachusetts 01653
THE HANOVER INSURANCE GROUP, INC.
440 Lincoln Street
Worcester, Massachusetts 01653
| Letter to our Shareholders from Joseph M. Zubretsky,P. Kevin Condron, Chair of our Board, and
John C. Roche, our President and Chief Executive Officer |
March 30, 201727, 2020 TO OUR FELLOW SHAREHOLDERS: You are cordially invited to attend the Annual Meeting of Shareholders of The Hanover Insurance Group, Inc. to be held on Tuesday, May 16, 2017,12, 2020, at 9:00 a.m. localEastern time, at the Company’s headquarters in Worcester, Massachusetts. While we intend to hold our Annual Meeting in person, we are monitoring the public health impact of the novel coronavirus outbreak and the COVID-19 illness. If we determine that holding an in-person Annual Meeting could pose a risk to the health and safety of our shareholders, employees, and directors, or if we are otherwise required by state, local or other authorities to limit physical attendance and/or access to the meeting site, the Company may decide to hold the Annual Meeting solely by means of remote communication. Please see the notice on the following page for additional information. The accompanying Notice and Proxy Statement describe in detail the matters to be acted on at the Annual Meeting. This Proxy Statement also describes the corporate governance policies and practices that foster the Board’s effective oversight of the Company’s business, risks and conduct for the long-term benefit of our stakeholders. The Board, on behalf of our shareholders, is actively engaged in the governance, audit and compensation matters addressed in this Proxy Statement. Your vote is important.important to us. We hope that you will vote as soon as possible. Please review the instructions concerning each of your voting options described in the accompanying Proxy Statement. Your cooperation will assure that your shares are voted and will also greatly assist us in preparing for the Annual Meeting. On behalf of the Board of Directors, the executive leadership team and all our employees, we would like to thank you for your investment and continued support of The Hanover Insurance Group. Sincerely, | | 
| 
| 
| 
| P. Kevin Condron Chair of the Board of Directors and Independent Presiding Director | John C. Roche President, Chief Executive Officer and Director |
Joseph M. Zubretsky
President and Chief Executive Officer
THE HANOVER INSURANCE GROUP, INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 16, 201712, 2020 To the Shareholders of The Hanover Insurance Group, Inc.: Below please find theSet forth below are details regarding the 20172020 Annual Meeting of Shareholders of The Hanover Insurance Group, Inc.:
| | | LOCATION: Our principal executive office and corporate headquarters, 440 Lincoln Street, Worcester, Massachusetts 01653* 
DATE AND TIME: Tuesday, May 12, 2020, at 9:00 a.m. Eastern time 
ITEMS OF BUSINESS: 1. The election of four individuals to the Board of Directors; 2. The advisory approval of the Company's executive compensation; 3. The ratification of the appointment of PricewaterhouseCoopers LLP to serve as the Company's independent, registered public accounting firm for 2020; and 4. Such other business as may properly come before the Annual Meeting or any adjournment thereof. 
RECORD DATE: The Board of Directors has fixed March 16, 2020 as the record date for determining the shareholders entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. TLOCATION: | | Our corporate headquarters, 440 Lincoln Street, Worcester, Massachusetts 01653 | | | | | | DATE AND TIME:
| | Tuesday, May 16, 2017, at 9:00 a.m. local time | | | | | | ITEMS OF BUSINESS:
| | 1. The election of four individuals to the Board of Directors;
2. The advisory approval of the Company’s executive compensation;
3. An advisory vote on the frequency of holding an advisory vote on executive compensation;
4. The ratification of the appointment of PricewaterhouseCoopers LLP to serve as the Company’s independent, registered public accounting firm for 2017; and
5. Such other business as may properly come before the Annual Meeting or any adjournment thereof.
| | | | | | RECORD DATE:
| | The Board of Directors has fixed March 17, 2017 as the record date for determining the shareholders entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. |
By Order of the Board of Directors, 
CCHARLES F. CRONIN Vice President and Secretary Worcester, Massachusetts March 30, 201727, 2020 
* While we intend to hold our Annual Meeting in person, we are monitoring the public health impact of the novel coronavirus outbreak and the COVID-19 illness. If we determine that holding an in-person Annual Meeting could pose a risk to the health and safety of our shareholders, employees, and directors, or if we are otherwise required by state, local or other authorities to limit physical attendance and/or access to the meeting site, the Company may decide to hold the Annual Meeting solely by means of remote communication. In the event we decide to hold the Annual Meeting solely by remote communication, we will announce that determination in advance as promptly as practicable, and details on how to participate and demonstrate your ownership as of the record date will be issued by press release, posted on both our website (www.hanover.com) and our proxy hosting website (www.proxydocs.com/THG) and filed with the U.S. Securities and Exchange Commission as additional proxy material. As always, we encourage you to vote your shares prior to the Annual Meeting. Your vote is important. Whether or not you plan to attendparticipate in the Annual Meeting, you are requested to vote your shares. Please follow the voting instructions set forth in the Proxy Statement. If you attend the Annual Meeting and desire to withdraw your proxy and vote in person,at the meeting, you may do so. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 16, 2017:12, 2020: The Proxy Statement and Annual Report to Shareholders are available atwww.envisionreports.com/thgwww.proxydocs.com/THG.
2017PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS
The Hanover Insurance Group, Inc. 2017 Proxy StatementPROXY STATEMENT SUMMARY
PROXY STATEMENT SUMMARY
This summary provides highlights of the important information contained elsewhere in our Proxy Statement. It does not contain all of the information you should consider. We encourage you to read the entire Proxy Statement before voting.  
GENERAL INFORMATION (see pages 1-5) Meeting: Annual Meeting of Shareholders Date: Tuesday, May 12, 2020 Time: 9:00 a.m., Eastern time Location: 440 Lincoln Street, Worcester, MA 01653* Record Date: March 16, 2020 Common Stock Outstanding: 38,169,806 shares Voting: One vote per share of Common Stock Registrar & Transfer Agent: Computershare Limited Corporate Website: www.hanover.com Investor Relations: www.hanover.com – under “Investors” Annual Report: www.hanover.com – under “Investors – Annual Reports” Corporate Responsibility Website: www.hanover.com – under “About Us – Corporate Responsibility” EXECUTIVE COMPENSATION (see pages 22-53) 2019 Company Performance Highlights: Net income of $425.1 million Stock price appreciated 17% Increased ordinary dividend by 8% and declared $2.50 special dividend Net premium written increased 4.5% Repurchased 4.2 million shares of our Common Stock for approximately $563.6 million Principal Components of Executive Compensation: Annual base salary Short-term incentive comp Long-term incentive comp Significant Compensation Practices: Multi-year vesting for long-term awards Significant stock ownership requirements for directors/officers “Double trigger” for change in control benefits Clawback policy Prohibition on pledging/hedging Company stock Limited perquisites Cap on payouts under variable incentive compensation programs No “280G tax gross ups” for new participants in the Employment Continuity Plan History of not re-pricing stock options CORPORATE GOVERNANCE (see pages 6-17) Director Nominees: (each for a three-year term expiring in 2023) Jane D. Carlin – Independent; Daniel T. Henry – Independent; Wendell J. Knox – Independent; and Kathleen S. Lane – Independent. Director Election Standard: Majority of votes cast Current Board Composition: 12 members (11 independent) Board Meetings in 2019: 6 Standing Board Committees (Meetings in 2019): Committee of Independent Directors (6); Audit (16); Compensation and Human Capital (7); Nominating and Corporate Governance (8) Board Leadership: Separate CEO and Chair Board Communications: Mail: The Hanover Insurance Group, Inc. Board of Directors, Attn: Corporate Secretary 440 Lincoln Street, Worcester, MA 01653 Web: www.HanoverAlertLine.com Phone: 1-800-533-2547 Code of Conduct: www.hanover.com under “About Us-Corporate Governance—Company Policies—Code of Conduct” MATTERS TO BE VOTED ON Agenda Item Board Recommendation See Pages 1. Election of four director nominees FOR each nominee 18 2. Advisory vote on executive compensation FOR 19 3. Ratification of the appointment of PwC as our independent, registered public accounting firm for 2020 FOR 20-21 * While we intend to hold our Annual Meeting in person, we are monitoring the public health impact of the novel coronavirus outbreak and the COVID-19 illness and may decide to hold the Annual Meeting solely by means of remote communication. Please see the notice preceding the table of contents for additional information. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy StatementTHE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT i
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PROXY STATEMENT We have made these proxy materials available to you on or about March 30, 201727, 2020 via the Internet or, at your request, have forwarded you paper copies of these proxy materials by mail, in connection with the solicitation of proxies by the Board of Directors (the “Board”) of The Hanover Insurance Group, Inc. (“THG” or the “Company”) for use at our Annual Meeting of Shareholders to be held on May 16, 201712, 2020 (the “Annual Meeting” or “Meeting”). In accordance with rules and regulations adopted by the Securities and Exchange Commission (the “SEC”), we have provided access to our proxy materials over the Internet. If you received a Notice of Internet Availability of Proxy Materials (the “Notice”) by mail, you will not receive a paper copy of the proxy materials unless you request one. The Notice instructs you on how to access the proxy materials via the Internet. The Notice also instructs you on how to vote your shares via the Internet. If you received a Notice by mail and would like to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. QUESTIONS AND ANSWERS ABOUT PROXY MATERIALS AND THE ANNUAL MEETING What is included in these proxy materials?These proxy materials include our Proxy Statement for the Annual Meeting and our Annual Report to Shareholders for the fiscal year ended December 31, 20162019 (the “Annual Report”), including our financial statements and the report of PricewaterhouseCoopers LLP (“PwC”) thereon. The Annual Report is neither a part of this Proxy Statement nor incorporated herein by reference. If you requested a paper copy of these materials by mail, these materials also include the proxy card for submitting your vote prior to the Annual Meeting. What is the purpose of the Annual Meeting?At the Annual Meeting, shareholders will act on the following matters: election of four directors; advisory approval of the Company’s executive compensation; advisory vote on the frequency of holding an advisory vote on executive compensation; and
ratification of the appointment of PwC to serve as the Company’s independent, registered public accounting firm for 2017.2020. Any other business that properly comes before the Annual Meeting also will also be considered. In addition, management will provide comments and respond to questions from shareholders. Who is entitled to vote at the Annual Meeting?Only shareholders of record at the close of business on March 17, 201716, 2020 (the “Record Date”) are entitled to vote at the Meeting. What are the voting rights of the holders of the Company’s common stock? Each share of THG’s common stock, par value $0.01 per share (the “Common Stock”), entitles its holder to one vote. Who is soliciting my vote?The Board is soliciting your vote at the Annual Meeting. We have retained Georgeson LLC of New York, N.Y., to help us solicit proxies personally or by mail, phone or Internet. We anticipate the costs of this service will be approximately $9,500, plus reasonable expenses. Proxies also may also be solicited on the Board’s behalf by directors, officers or employees of the Company, in person or by telephone, mail, or electronic transmission or facsimile transmission. The Company will pay the cost of soliciting proxies, including reimbursing banks, brokerage firms and others for the reasonable expenses incurred by them for forwarding proxy material on behalf of the Board to beneficial owners of Common Stock. How does the Board recommend that I vote?Our Board recommends that you vote your shares “FOR” the election of each nominee to the Board for every “ONE” year for the frequency of holding advisory votes on executive compensation, and “FOR” each of the other proposals specifically identified in this Proxy Statement for action at the Annual Meeting. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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How many shares are entitled to vote at the Annual Meeting?As of the Record Date, 42,673,49638,169,806 shares of Common Stock were issued, outstanding and entitled to be voted. How many shares must be present to hold the Annual Meeting?A quorum (a majority of the issued and outstanding shares of Common Stock entitled to vote at the Annual Meeting) must be present either in person or by proxy. Abstentions will be treated as present at the Annual Meeting for the purpose of determining a quorum and, because brokers have the discretionary authority to vote on one proposal (the ratification of auditors), broker non-votes also will also be treated as present at the Annual Meeting for the purpose of determining a quorum. A “broker non-vote” occurs when a broker holding shares for a beneficial owner returns a proxy but does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received voting instructions from the beneficial owner. Banks and brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf on any matter specifically identified for action at the Annual Meeting other than the ratification of the appointment of PwC to serve as the Company’s independent, registered public accounting firm for 2017.2020. WhatHow do I vote? You may either participate in and vote is required to approve each item, and how are abstentions and broker non-votes treated?
| | | | | Proposal | | Vote Required | | Effect of Broker Non-Votes and Abstentions | 1. Election of a director nominee | | The affirmative vote of a majority of the votes properly cast (in person or by proxy). For purposes of electing directors, “the affirmative vote of a majority of the votes cast” means that the number of votes cast “for” a director must exceed the number of votes cast “against” that director.
| | Broker non-votes and abstentions, because they are not votes cast, are not counted for this proposal and will have no effect on the outcome. | 2. Advisory vote on executive compensation | | The affirmative vote of a majority of the votes properly cast (in person or by proxy). | | Broker non-votes and abstentions, because they are not votes cast, are not counted for this proposal and will have no effect on the outcome. | 3. Advisory vote on the frequency of holding an advisory vote on executive compensation | | The affirmative vote of a majority of the votes properly cast (in person or by proxy). If none of the three frequency options receives the vote of the holders of a majority of the votes properly cast, we will consider the frequency option (one year, two years or three years) receiving the highest number of votes cast by shareholders to be the frequency that has been recommended by shareholders. | | Broker non-votes and abstentions, because they are not votes cast, are not counted for this proposal and will have no effect on the outcome. | 4. Ratification of the appointment of PwC to serve as the Company’s independent, registered public accounting firm for 2017 | | The affirmative vote of a majority of the votes properly cast (in person or by proxy). | | Abstentions, because they are not votes cast, will not be counted and will have no effect on the outcome. However, banks and brokers that havenot received voting instructions from their clients may vote their clients’ shares on this proposal. |
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What happens if a director nominee is not elected at the Annual Meeting?If a nominee who is currently serving as a director is not re-elected at the Annual Meeting then under Delaware law, the director would continue to serve on the Board as a “holdover director.” However, under our by-laws, any director who is nominated but fails to be re-elected is required to promptly tender his or her resignation to the Board, effective at the end of his or her current term. The Nominating and Corporate Governance Committee (the “NCGC”) will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. In making their determinations, the NCGC and the Board may consider any factors deemed relevant. The Board will act on the NCGC’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results. The director who tenders his or her resignation will not vote on the NCGC’s recommendation or the Board’s decision.
How do I vote?You may either vote in person at the Annual Meeting or by proxy without attending the Meeting.
How do I vote by proxy?If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and such brokerage firm or nominee will forward the Notice and/or a printed copy of the proxy materials to you, together with voting instructions. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 1
If you are a registered shareholder (that is, if you hold stock certificates directly in your name), you may vote via the Internet in accordance with the instructions set forth in the Notice. If you have requested a paper copy of the proxy materials, you may vote by mail, via the Internet, or via the toll-free number in accordance with the instructions set forth on the proxy card. The shares of Common Stock represented by your proxy will be voted as you directed or, if the proxy card is signed, dated and returned without instructions, in accordance with the Board’s recommendations as set forth in this Proxy Statement. The proxy also confers discretionary authority with respect to any other proposals that may properly be brought before the Annual Meeting. As of the date of this Proxy Statement, neither the Board nor management is not aware of any other matters to be presented for action at the Annual Meeting. However, if any other matters properly come before the Annual Meeting, then the proxies solicited hereby will be voted in accordance with the recommendations of the Board. Can I change my vote after I submit my proxy?Yes. Any registered shareholder giving a proxy may revoke it at any time before it is exercised by delivering written notice thereof to the Company’s Corporate Secretary, The Hanover Insurance Group, Inc., 440 Lincoln Street, Worcester, MA 01653. If you are a beneficial owner of shares held in street name, you may revoke or change your voting instructions prior to the Meeting by timely instructing your broker, trustee or nominee. Any shareholder of record attendingparticipating in the Annual Meeting may vote in personat the Meeting regardless of whether or not the shareholder has previously fileddelivered a proxy. Shares held beneficially in street name by holders participating in the Annual Meeting may be voted in person only vote at the meeting if you obtain and bring or present to the Meeting a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares. PresenceParticipation at the Annual Meeting by a shareholder who has submitted a proxy, however, does not in itself revoke a submitted proxy. What vote is required to approve each item, and how are abstentions and broker non-votes treated? | | | Proposal | Vote Required | Effect of Broker Non-Votes and Abstentions | 1. Election of a director nominee | The affirmative vote of a majority of the votes properly cast (in person or by proxy). For purposes of electing directors, “the affirmative vote of a majority of the votes cast” means that the number of votes cast “for” a director must exceed the number of votes cast “against” that director. | Broker non-votes and abstentions, because they are not votes cast, are not counted for this proposal and will have no effect on the outcome. | 2. Advisory vote on executive compensation | The affirmative vote of a majority of the votes properly cast (in person or by proxy). | Broker non-votes and abstentions, because they are not votes cast, are not counted for this proposal and will have no effect on the outcome. | 3. Ratification of the appointment of PwC to serve as the Company’s independent, registered public accounting firm for 2020 | The affirmative vote of a majority of the votes properly cast (in person or by proxy). | Abstentions, because they are not votes cast, will not be counted and will have no effect on the outcome. However, banks and brokers that have not received voting instructions from their clients may vote their clients’ shares on this proposal. |
What happens if a director nominee is not elected at the Annual Meeting? If a nominee who is currently serving as a director is not re-elected at the Annual Meeting, then under Delaware law, the director would continue to serve on the Board as a “holdover director.” However, under our by-laws, any director who is nominated but fails to be re-elected is required to promptly tender his or her resignation to the Board, effective at the end of his or her current term. The Nominating and Corporate Governance Committee (the “NCGC”) will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. In making their determinations, the NCGC and the Board may consider any factors deemed relevant. The Board will act on the NCGC’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results. The director who tenders his or her resignation will not vote on the NCGC’s recommendation or the Board’s decision. How do participants in The Hanover Employee Stock Purchase Plan and The Chaucer Share Incentive Plan vote their shares?Participants in The Hanover Insurance Group Employee Stock Purchase Plan (the“(the “ESPP”) vote their shares?
ESPP”) participants who retain shares that have beentheir issued to themshares are considered to hold such shares in “street name” in a brokerage account. Such shares may be voted like other “street name” holders. The brokerage firm or nominee will forward ESPP participants the Notice and/or a printed copy of the proxy materials, together with voting instructions. If you are a participant in The Chaucer Share Incentive Plan (the “Chaucer SIP”) and you have shares of Common Stock allocated to your account, then you may provide voting instructions to the trustee under the plan
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in accordance with the instructions provided by the trustee. The trustee will vote the shares allocated to your account in accordance with your instructions. If you do not instruct the trustee how to vote, then the trustee will not vote your shares.
ESPP and Chaucer SIP participants’ voting instructions are kept confidential by the administrator of the ESPP and the trustee of the Chaucer SIP, respectively.ESPP. Who can attend the Annual Meeting?The Meeting is open to all THG shareholders of record as of the Record Date and to invited guests of the Board. Individuals who hold shares in “street name” may be required to provide a brokerage account statement or some other proof of their share ownership as of the Record Date. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 2
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COMPANY STOCKSTOCK OWNERSHIP Stock Ownership by the Company’s Directors and Executive Officers The following table sets forth information regarding the number of shares of Common Stock beneficially owned as of March 15, 2017 (unless otherwise indicated)13, 2020 by (i) each director (and director nominee) of THG, (ii) the named executive officers (the “NEOs”) in the Summary Compensation Table appearing later in this Proxy Statement, and (iii) all current directors and executive officers of THG, as a group. This information has been furnished by the persons listed in the table. Name of Beneficial Owner | | | Shares Beneficially Owned† | | | Percent of Class | | | | | | | | | | | Name of Beneficial Owner | | Shares Beneficially
Owned† | | Percent of
Class | | Michael P. Angelini | | | 54,306 | (1) | | * | | Richard H. Booth | | | 500 | (2) | | * | | Eugene M. Bullis | | | — | (3) | | * | | Kevin J. Bradicich | | | 2,494 | | | * | Jane D. Carlin | | | — | (4) | | * | | — | (1) | | * | P. Kevin Condron | | | 15,370 | (5) | | * | | 24,039 | (2) | | * | Cynthia L. Egan | | | 1,435 | (6) | | * | | 6,981 | | | * | Frederick H. Eppinger | | | 95,994 | (7) | | * | | Jeffrey M. Farber | | | 2,500 | (8) | | * | | 159,171 | (3) | | * | Karen C. Francis | | | 787 | (9) | | * | | Daniel T. Henry | | | 9,094 | | | * | | 12,889 | | | * | J. Kendall Huber | | | 96,265 | (10) | | * | | 105,935 | (4) | | * | Martin P. Hughes | | | 218 | | | * | Wendell J. Knox | | | 24,234 | (11) | | * | | 27,463 | (5) | | * | Kathleen S. Lane | | | 1,884 | | | * | Richard W. Lavey | | | 101,419 | (6) | | * | Michael D. Price (7) | | | 3,462 | | | * | Joseph R. Ramrath | | | 22,437 | (8) | | * | | 26,232 | (8) | | * | Andrew S. Robinson | | | 2,177 | (12) | | * | | John C. Roche | | | 125,704 | (13) | | * | | 226,138 | (9) | | * | Johan G. Slabbert | | | 5,697 | (14) | | * | | Bryan J. Salvatore | | | 49,694 | (10) | | * | Harriett “Tee” Taggart | | | 14,884 | (8) | | * | | 11,164 | (8) | | * | Joseph M. Zubretsky | | | — | | | * | | Current directors and executive officers, as a group (20 persons) | | | 464,607 | (15) | | 1.08% | | Current directors and executive officers, as a group (21 persons) | | | 867,092 | (11) | | 2.23% |
† | As to shares listed in this column, each person has sole voting and investment power, except as indicated in other footnotes to this table. Certain directors and executive officers have deferred, or under certain compensation programs were required to defer, receipt of certain stock grants from the Company. Deferred shares are held in a rabbi trust (the “Rabbi Trust ”), by the trustee, of which is Wells Fargo Bank, N.A. TheAs of March 13, 2020, the Rabbi Trust held 43,53010,509 shares of Common Stock pursuant to deferrals by the directors and executive officers. In accordance with rules and regulations prescribed by the SEC, and even though such director or executive officer has a direct economic interest in such deferred shares, shares held in the Rabbi Trust arenot included in the amounts set forth in this column. These shares may be voted by the trustee of the Rabbi Trust, but not by the individuals on whose behalf the shares are held in the Rabbi Trust. For information regarding specific deferrals, please refer to the footnotes below. |
(1) | Excludes 13,542 shares held by the Rabbi Trust, the receipt of which Mr. Angelini has deferred. |
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(2) | Excludes 6,344 shares held by the Rabbi Trust, the receipt of which Mr. Booth has deferred. |
(3) | Mr. Bullis retired from the Company effective November 11, 2016. Based on information provided to the Company as of February 7, 2017. |
(4) | Excludes 6474,442 shares held by the Rabbi Trust, the receipt of which Ms. Carlin has deferred. |
(5)(2) | Excludes 7,3692,495 shares held by the Rabbi Trust, the receipt of which Mr. Condron has deferred. |
(6)(3) | Excludes 1,751Includes 143,487 shares held by the Rabbi Trust, the receiptunderlying options exercisable within 60 days of which Ms. Egan has deferred. |
(7) | March 13, 2020. Mr. Eppinger retired from the Company effective June 19, 2016. Based on information provided to the Company as of February 10, 2017. |
(8) | SharesFarber shares voting and investment power with spouse.his wife with respect to 2,500 shares. |
(9)(4) | Excludes 7,545 shares held by the Rabbi Trust, the receipt of which Ms. Francis has deferred. |
(10) | Excludes 3,1461,320 shares held by the Rabbi Trust, the receipt of which Mr. Huber was required to defer. Mr. Huber shares voting and investment power with his wife with respect to 14,387 shares. Includes 58,52672,773 shares underlying options exercisable within 60 days of March 15, 2017.13, 2020. Mr. Huber has announced his retirement from the Company, effective April 1, 2020. |
(11)(5) | Excludes 3,1862,252 shares held by the Rabbi Trust, the receipt of which Mr. Knox has deferred. |
(12)(6) | Mr. Robinson resigned from the Company effective September 1, 2016. Based on information provided to the Company as of March 1, 2017. |
(13) | Includes 103,62083,927 shares underlying options exercisable within 60 days of March 15, 2017.13, 2020. |
(14)(7) | Citing personal reasons, on February 21, 2020, Mr. Slabbert resignedPrice notified the Board of his intention to resign from the CompanyBoard, effective February 20, 2017. Based on information as of February 20, 2017. Includes 330 shares held byat the trustee of the Chaucer SIP.Annual Meeting. |
(15)(8) | Shares voting and investment power with spouse. |
(9) | Includes 224,360187,643 shares underlying options exercisable within 60 days of March 15, 2017;13, 2020 and 7007,652 shares held by the trusteehis spouse. |
(10) | Includes 44,769 shares underlying options exercisable within 60 days of the Chaucer SIP.March 13, 2020. |
(11) | Includes 601,056 shares underlying options exercisable within 60 days of March 13, 2020. Excludes 43,53010,509 shares held by the Rabbi Trust. See footnotes 1 through 141-10 above. Group calculation excludes Messrs. Eppinger, Bullis, Robinson and Slabbert since they were not serving as officers as of March 15, 2017. |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 3
Stock Ownership Guidelines for Named Executive Officers and Directors Named Executive Officers Within 18 months of becoming subject to our stock ownership guidelines, each NEO, and each of our other executive officers (as well as certain other senior officers designated by the CEO) should achieve an ownership level in our Common Stock with a value equal to one times his or her base salary. Within three years of becoming subject to these guidelines, each NEO (as well as each executive officer) should achieve and maintain an ownership level with a value equal to two to four times his or her base salary (four to six times base salary for the CEO)CEO and one to two times base salary for other senior officers). The guidelines credit shares held outright by the officer and by immediate family members residing in the same household, whether held individually or jointly by the officer or the immediate family member, unvested restricted stock, restricted stock units, performance-based restricted stock units (measured at target), and any shares that have been earned but the payment of which has been deferred. SharesRegardless of their vesting status, shares subject to unexercised stock options whether or not vested, are not counted when determining ownership under the guidelines. For these purposes, shares are valued based upon the then-current market value, or if higher, the value on the date of acquisition. Each of our current NEOs is in compliance with the guidelines. Set forth below is a table that indicates, as of March 15, 2017,13, 2020, each current NEO’s share ownership as a multiple of his current annualized base salary.salary rate. Such figures are calculated in accordance with our stock ownership guidelines, and the multiple presented below has been determined | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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assuming a based upon the current market value of $91.30($103.03 per share, (thethe closing price of our Common Stock on March 15, 2017).13, 2020), or if higher, the value of the shares on the date of acquisition.
NEO | | | Year Hired | | Number of Shares Counted under Stock Ownership Guidelines | | | Ownership Level as a Multiple of Base Salary | | | | | | | | | | | | | | | | | | | | | | NEO | | Year Hired | | | Number of Shares Counted under
Stock Ownership Guidelines | | | Ownership Level as
a Multiple of Base Salary | | | Joseph M. Zubretsky | | | 2016 | | | | 52,750 | | | | 4.8 | | | John C. Roche | | | 2006 | | | 85,663 | | | | 10.1 | | Jeffrey M. Farber | | | 2016 | | | | 15,915 | | | | 2.2 | | | 2016 | | | 41,464 | | | | 6.8 | | J. Kendall Huber | | | 2000 | | | | 53,600 | | | | 8.9 | | | 2000 | | | 43,126 | | | | 7.9 | | John C. Roche | | | 2006 | | | | 34,319 | | | | 5.9 | | | Richard W. Lavey | | | 2004 | | | 28,975 | | | | 6.0 | | Bryan J. Salvatore | | | 2017 | | | 18,658 | | | | 4.0 | |
Board of Directors Within four years from the date of first being elected to the Board, each non-employee director should achieve an ownership level in our Common Stock with a value equal to four times the value of the regular annual stock retainer paid to directors for service on the Board. This requirement can be satisfied by purchases in the open market or by holding grants received from the Company (including share grants that the director has elected to defer under Company-sponsored deferred compensation programs). The guidelines credit directors for shares held outright by the director and by his or her immediately family members residing in the same household, whether held individually or jointly by the director or the immediate family member. For these purposes, shares are valued based upon the then-current market value, or if higher, the value on the date of acquisition. Each of our non-employee directors is in compliance with our stock ownership guidelines, or is expected to become compliant within the prescribed time following his or her initial election to the Board. Set forth below is a table that indicates, as of March 15, 2017,13, 2020, each director’s share ownership as a multiple of the value of the current annual stock retainer ($125,000)135,000). Such figures are calculated in accordance with our stock ownership guidelines, and the multiple presented below has been determined assuming abased upon the current market value of $91.30($103.03 per share, (thethe closing price of our Common Stock on March 15, 2017).13, 2020), or if higher, the value of the shares on the date of acquisition. | | | | | | | | | | | | | Non-Employee Director | | Year First Elected to
Board | | | Number of Shares Counted
under Stock Ownership
Guidelines | | | Ownership Level as
a Multiple of the Value
of the Annual Stock
Retainer | | Michael P. Angelini | | | 1995 | | | | 67,848 | | | | 49.6 | | Richard H. Booth | | | 2013 | | | | 6,844 | | | | 5.0 | | Jane D. Carlin | | | 2016 | | | | 647 | | | | 0.5 | | P. Kevin Condron | | | 2007 | | | | 22,739 | | | | 16.6 | | Cynthia L. Egan | | | 2015 | | | | 3,186 | | | | 2.3 | | Karen C. Francis | | | 2014 | | | | 8,332 | | | | 6.1 | | Daniel T. Henry | | | 2014 | | | | 9,094 | | | | 6.6 | | Wendell J. Knox | | | 1999 | | | | 27,420 | | | | 20.0 | | Joseph R. Ramrath | | | 2004 | | | | 22,437 | | | | 16.4 | | Harriett “Tee” Taggart | | | 2009 | | | | 14,884 | | | | 10.9 | |
Non-Employee Director | | Year First Elected to Board | | Number of Shares Counted under Stock Ownership Guidelines | | | Ownership Level as a Multiple of the Value of the Annual Stock Retainer | | | | | | | | | | | | | Kevin J. Bradicich | | 2018 | | | 2,494 | | | | 2.2 | | Jane D. Carlin | | 2016 | | | 4,442 | | | | 3.7 | | P. Kevin Condron | | 2007 | | | 26,534 | | | | 20.5 | | Cynthia L. Egan | | 2015 | | | 6,981 | | | | 5.6 | | Daniel T. Henry | | 2014 | | | 12,889 | | | | 10.1 | | Martin P. Hughes | | 2020 | | | 218 | | | | 0.2 | | Wendell J. Knox | | 1999 | | | 29,715 | | | | 23.0 | | Kathleen S. Lane | | 2018 | | | 1,884 | | | | 1.7 | | Michael D. Price | | 2017 | | | 3,462 | | | | 2.9 | | Joseph R. Ramrath | | 2004 | | | 26,232 | | | | 20.3 | | Harriett “Tee” Taggart | | 2009 | | | 11,164 | | | | 8.8 | |
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy StatementTHE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 4
| | 7 | | |
Largest Owners of thethe Company’s Stock The following table lists the only persons who, to the best of the Company’s knowledge, are “beneficial owners” (as defined by SEC regulations) of more than five percent of the issued and outstanding shares of Common Stock as of March 15, 2017.13, 2020. | | | | | | | | | Name and Address of Beneficial Owner | | Shares
Beneficially
Owned | | | Percent of
Class | | The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | | | 3,626,251 | (1) | | | 8.50 | % | BlackRock, Inc. 55 East 52ndStreet New York, NY 10055 | | | 3,334,572 | (2) | | | 7.81 | % | Dimensional Fund Advisors LP Building One 6300 Bee Cave Road Austin, TX 78746 | | | 2,934,454 | (3) | | | 6.88 | % |
Name and Address of Beneficial Owner | | Shares Beneficially Owned | | | Percent of Class | | | | | | | | | | The Vanguard Group, Inc. | | 4,416,584 | (1) | | | 11.55 | % | 100 Vanguard Blvd. | | | | | | | | Malvern, PA 19355 | | | | | | | | BlackRock, Inc. | | 3,668,766 | (2) | | | 9.60 | % | 55 East 52nd Street | | | | | | | | New York, NY 10055 | | | | | | | |
(1) | Based on a Schedule 13G/A filed on February 13, 201712, 2020 by The Vanguard Group, Inc. that reported sole voting power with respect to 25,15020,815 shares, sole dispositive power with respect to 3,598,5234,395,907 shares, shared voting power with respect to 4,7995,676 shares and shared dispositive power with respect to 27,72820,677 shares. The Schedule 13G/A filed by The Vanguard Group, Inc. also reported that Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 22,92915,001 shares and Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 7,02011,490 shares. |
(2) | Based on a Schedule 13G/A13G filed on January 27, 2017February 5, 2020 by BlackRock, Inc. that reported sole voting power with respect to 3,173,0753,517,749 shares and sole dispositive power with respect to 3,334,5723,668,766 shares. |
(3) | Based on a The Schedule 13G/A13G filed on February 9, 2017 by DimensionalBlackRock, Inc. also reported that BlackRock Fund Advisors, LP (“DFA”) that reported sole voting power with respect to 2,885,418 shares and sole dispositive power with respect to 2,934,454 shares. In its Schedule 13G/A filing, DFA disclaimsa subsidiary of BlackRock, Inc., is the beneficial ownershipowner of 5% or greater of the shares and states that it serves as investment manager or sub-adviser to certain commingled funds, group trusts and separate accounts and that alloutstanding shares of the Company are owned by such commingled funds, group trusts and separate accounts.Common Stock. |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 5
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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CORPORATE GOVERNANCEGOVERNANCE The Board has long been focused on and committed to responsible and effective corporate governance in order to promote sustainable, long-term shareholder value. The following section identifies our directors and their qualifications, describes the Board leadership structure, outlines the standing Board committees and their responsibilities and highlights certain key aspects of our corporate governance. The Board has adopted Corporate Governance Guidelines that can be found on the Company’s website atwww.hanover.com under “About Us-Corporate Governance.” For a printed copy of the guidelines, shareholders should contact the Company’s Corporate Secretary, The Hanover Insurance Group, Inc., 440 Lincoln Street, Worcester, MA 01653. Information on our website is not part of or incorporated into this Proxy Statement. There are four nominees for election to the Board this year. Each of the nominees has served as a director since the last Annual Meeting, except for Ms.Mses. Carlin who was elected to the Board in December 2016. In order to comply with our director retirement policy, Mr. Angelini is being nominated to serve for a one-year term expiring in 2018. Ms. Carlin, Mr.and Lane, and Messrs. Henry and Mr. Knox are each being nominated to serve for a three-year term expiring in 2020. During 2016, the NCGC conducted a search process2023. Citing personal reasons, on behalf ofFebruary 21, 2020, Mr. Price notified the Board of his intention to resign from the Board, effective at the Annual Meeting. Each Board member and retainednominee has served as a third-party recruiting firm to assistdirector since the NCGC in (i) identifying director candidates that meetlast Annual Meeting, with the Company’s Director Qualifications set forth below, (ii) coordinating interviews with those qualified candidates selected by the NCGC for further consideration, and (iii) complementing the due diligence workexception of the Committee in conducting reference checks. During the search process and prior to her electionMr. Hughes, who was elected to the Board Ms. Carlinin February 2020. Mr. Hughes was identified as a potential director candidate by a non-management member of the Board and presented to the Nominating and Corporate Governance Committee (the “NCGC”) by Mr. Roche, who knew of Mr. Hughes’s extensive experience as a leader of an international, independent insurance broker in the property and casualty industry. Once he was identified, the NCGC reviewed Mr. Hughes’s qualifications following the process described below under “Consideration of Director Nominees” on page 13 and the Board by the third-party recruiting firm. Ms. Francis informed the Company in December 2016 that she would not be seeking re-electionrecommended his election to the Board at the Annual Meeting, when her current term as a director is scheduled to expire, due to her increasing commitments to business activities in the automotive industry, including engagement on three boards of directors in the industry.Board.
Information regarding the business experience and qualifications of each nominee and each continuing director is provided below. For a description of the skill set that the Board seeks in a director and how the individual director qualifications set forth below tie to the Board’s expectations, see “Director Qualifications” on page 13. Director Nominees | | | Michael P. AngeliniJane D. Carlin
 
Age: 7464 Director since 1995
| | Mr. Angelini has been Chairman of the Board since 2002, and was a director of a predecessor company from 1984 to 1996. Mr. Angelini is Chairman of the law firm of Bowditch & Dewey LLP, Worcester, Massachusetts, with which he has been associated since 1968. He is currently the Chairman of the Massachusetts Port Authority. Mr. Angelini is also a director of Commerce Bank & Trust Company, a regional bank headquartered in Worcester, Massachusetts, and a number of privately held businesses. We believe Mr. Angelini’s qualifications to serve on our Board include his years of legal and management experience, and his experience as a member of the board of directors of numerous other businesses.
Mr. Angelini is Chairman of the Board. If re-elected, Mr. Angelini’s term will expire in 2018.
|
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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| | | Jane D. Carlin
Age: 61
Director since 2016 | | Ms. Carlin has provided advisory and consultancy services to financial services companies since 2012. Prior to that, Ms. Carlin served in senior roles with leading companies, including Morgan Stanley Group Inc. and Credit Suisse Group AG. At Morgan Stanley, she held a number of leadership positions, most recently, as managing director, global head of financial holding company governance and assurance, from 2006 to 2012, and previously from 1987 to 2003, when she served as managing director and deputy general counsel. From 2003 to 2006, Carlin was managing director and global head of bank operational risk oversight at Credit Suisse. In 2010, Carlin was appointed by the U.S. Treasury Department as chair of the Financial Services Sector Coordinating Council for Critical Infrastructure Protection and Homeland Security (FSSCC) and served in that role until 2012. Prior to that, from 2009 to 2010, she served as vice chair of the FSSCC and as chair of its Cyber Security Committee. Ms. Carlin serves as a trustee of iShares Trust and iShares U.S. ETF Trust. Ms. Carlin also served as a director of PHH Corporation, a publicly traded provider of end-to-end mortgage solutions, and iShares Inc., and as a trustee of iShares Trust and iShares U.S. ETF Trust. Ms. Carlin served as a director of Astoriafrom September 2012 until its acquisition by Ocwen Financial Corporation a publicly traded bank holding company, and its wholly owned subsidiary, Astoria Bank, from January 2014 to February 2015.in October 2018. We believe Ms. Carlin’s qualifications to serve on our Board include her many years of management experience in compliance, risk oversight, and cyber security in the financial services industry, and her experience on the boards of other publicly traded companies. Ms. Carlin is a member of the Audit Committee. If elected,re-elected, Ms. Carlin’s term will expire in 2020.2023. | | | | | Daniel T. Henry  
Age: 6770 Director since 2014 | | Until his retirement, Mr. Henry served as Chief Financial Officer of American Express Company, a global financial services company, from 2007 to 2013. Mr. Henry joined American Express in 1990 and served in a variety of senior finance roles including Comptroller. Prior to joining American Express, Mr. Henry was a Partner with Ernst & Young LLP. Mr. Henry is also a director of Veritiv Corporation, a publicly traded company that provides business-to-business distribution solutions. Mr. Henry previously served as a director of Groupon, Inc., a publicly traded operator of online local marketplaces, from 2012 to 2016. We believe Mr. Henry’s qualifications to serve on our Board include his experience as a CFO at a major financial services company, and his experience on the boards of directors of other publicly traded companies. Mr. Henry is a member of the AuditCompensation and Human Capital Committee. If re-elected, Mr. Henry’s term will expire in 2020.2023. | | | | |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 6
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 10 | | |
| | | Wendell J. Knox  
Age: 6972 Director since 1999 | | Until his retirement in 2009, Mr. Knox was President and CEO of Abt Associates Inc., a policy research and business consulting firm, where he had been employed since 1969. Mr. Knox is also a director of Abt Associates Inc. and Eastern Bank, a mutually owned commercial bank, and is a trustee of the Natixis and Loomis Sayles Mutual Fund Complex, a fund complex comprised of 4352 funds. He also serves on the Advisory Board of Maine Pointe, LLC, a logistics and supply chain management consulting firm. We believe Mr. Knox’s qualifications to serve on our Board include his experience as a CEO, combined with his corporate governance expertise and experience with other boards of directors. Mr. Knox is a member of the Compensation and Human Capital Committee. If re-elected, Mr. Knox’s term will expire in 2020.2023. |
Directors Continuing in Office
| | | Richard H. BoothKathleen S. Lane
 
Age: 7062 Director since 20132018 | | Mr. Booth provides independent consultingMs. Lane served as Executive Vice President and advisory services to financial services companies. From 2009 until his retirement in 2014, Mr. Booth was Vice Chairman of Guy Carpenter & Company, LLC, a global risk management and reinsurance specialist and a wholly owned subsidiary of Marsh McLennanChief Information Officer at The TJX Companies, Inc. Mr. Boothfrom 2008 to 2013. Prior to joining TJX, Ms. Lane was Chairman of HSB Group Inc., a specialty insurer and reinsurer,Chief Information Officer at National Grid plc from 20002006 to 2009, and President and CEO of HSB Group from 2000 to 2007.2008. In 2008 and 2009, Mr. Boothaddition, she served as Vice Chairman, Transition PlanningChief Information Officer at the Gillette Company, GE Oil & Gas, and Chief Administrative Officer,GE Vendor Financial Services. Ms. Lane also served as Director, Technology Services of HSB Group’s parent company, AmericanPepsi Cola International Group, Inc., an insurance and financial services company. Prior to this, Mr. Booth held progressively senior positions in the insurance industry. Mr. Boothbegan her career at The Procter & Gamble Company. Ms. Lane is also a director of Adamas Pharmaceuticals,Armstrong Flooring, Inc., a publicly traded specialty pharmaceutical company. Mr. Boothleading global producer of flooring products. Ms. Lane previously served as a director of Sun Life FinancialEarthLink Holdings Corp., an IT services, network and communications provider, from 2013 to 2017, and of Bob Evans Farms, Inc., an operator of over 500 restaurants and a publicly traded lifeproducer and health insurancedistributer of food products, from 2014 to 2018. We believe Ms. Lane’s qualifications to serve on our Board include her many years of executive and financial services company from 2011 to 2015, andmanagement experience as a trusteeChief Information Officer at leading companies and her experience on other public company boards of Eversource Energy, a publicly traded utility company from 2001 to 2015. Mr. Boothdirectors.
Ms. Lane is a certified public accountant, chartered life underwriter, chartered financial consultant, a certified Board Leadership Fellow with the National Association of Corporate Directors, and a former member of the Financial Accounting Standards Advisory CouncilAudit Committee. If re-elected, Ms. Lane’s term will expire in 2023. | |
Directors Continuing in Office Kevin J. Bradicich 
Age: 62 Director since 2018 | Mr. Bradicich served as Senior Partner at McKinsey & Company, Inc. until his retirement in 2017. Mr. Bradicich began his career at McKinsey in 1983 and its Steering Committee.also held the titles of Manager, Principal and Director while with the firm. He spent the last 25 years at McKinsey focused on serving insurance company clients. While at McKinsey, Mr. Bradicich was a core member of the firm’s Global Insurance Practice’s leadership group. During his career, he also led the firm’s North American Property and Casualty Insurance Practice and helped lead the Practice’s and the firm’s people processes. We believe Mr. Booth’sBradicich’s qualifications to serve on our Board include his high levelexperience as a Senior Partner at McKinsey, including his 25 years of experience focused on advising boards and senior executives at global insurance financial and accounting literacy and operating and management experience, gained through his roles as Vice Chairmancompany clients on all aspects of Guy Carpenter, Chairman and CEO of HSB Group, and through his service with the Financial Accounting Standards Advisory Council. their business. Mr. BoothBradicich is a member of the Audit Committee and the Nominating and Corporate Governance Committee. Mr. Booth’sBradicich’s term expires in 2019.2021. | | | | |
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| | | P. Kevin Condron  
Age: 7174 Director since 2007 | | Mr. Condron has served as Chairman and CEOExecutive Chair of The Granite Group LLC, a plumbing and heating wholesaler, and one of its predecessor companies, since 1972. Mr. Condron is a director of TD Bank, Inc., a financial services company, and is former ChairmanChair of the Board of Trustees at the College of the Holy Cross. We believe Mr. Condron’s qualifications to serve on our Board include his experience as a CEO, his experience on numerous other boards of directors, including TD Bank, which was a public company during much of his tenure on that board, and his experience as an entrepreneur with substantial business experience. Mr. Condron is Vice ChairmanChair of the Board and Chaira member of the CompensationNominating and Corporate Governance Committee. Mr. Condron’s term expires in 2018.2021. | | | | |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 7
Cynthia L. Egan  
Age: 6164 Director since 2015 | | From 2007 until her retirement in 2012, Ms. Egan was President, Retirement Plan Services for T. Rowe Price Group, a global investment management organization. From 1989 to 2007, Ms. Egan held progressively senior positions with Fidelity Investments, a multinational financial services corporation, serving as Executive Vice President, Head of Fidelity Institutional Services Company, and President of the Fidelity Charitable Gift Fund.Fund, and executive vice president of Fidelity Management Research Co. From 2014 to 2015, she was appointed as an advisor to the U.S. Department of Treasury specializing in retirement security. Ms. Egan began her professional career at the Board of Governors of the Federal Reserve in 1980, and prior to joining Fidelity, worked at KPMG Peat Marwick and Bankers Trust Company. Ms. Egan is also a director of UNUM Corporation, a publicly traded insurance company providing group long-term disability insurance, employee benefits, individual disability insurance and special risk reinsurance, and of the BlackRock Closed EndFixed Income Funds Complex, a fund complex comprised of 75 closed-end110 mutual funds. From 2013 to 2016, she was a director of Envestnet, Inc., a publicly traded provider of wealth management software and services. Ms. Egan also serves as Chair of the Board of Visitors of the University of Maryland School of Medicine. We believe Ms. Egan’s qualifications to serve on our Board include her many years of management experience in the financial services industry at Fidelity and T. Rowe Price and her experience on other public company boards of directors. Ms. Egan is a memberVice Chair of the NominatingBoard and Corporate GovernanceChair of the Compensation and Human Capital Committee. Ms. Egan’s term expires in 2018.2021. | | Martin P. Hughes 
Age: 71 Director since 2020 | Mr. Hughes serves as non-executive Chair of the Board of Directors of HUB International Limited (“HUB”), a privately held insurance brokerage firm providing an array of property, casualty, risk management, life and health, employee benefits, investment, and wealth management products and services across North America. Mr. Hughes previously served as Chair and CEO of HUB from 1999 to 2018, including while it was a public, New York Stock Exchange-listed company, before its sale to private investors. In addition, Mr. Hughes was Executive Chair of HUB from 2018 to January 2020. He joined Mack and Parker, Inc., an independent insurance agency (now a part of HUB), in 1973, where he served as President from 1990 to 1999, and as Chair from 1999 to 2001. Mr. Hughes has also served as chair of both the Council of Insurance Agents & Brokers, an association of the top commercial insurance and employee benefits intermediaries, as well as Assurex Global, a leading worldwide insurance services organization. We believe Mr. Hughes’s qualifications to serve on our Board include his over 40 years of experience in the insurance brokerage industry, his knowledge of both the property and casualty insurance industry and the agency and brokerage sales channel, his prior service as chief executive officer of a public company, and his many years of management and transactional experience in the insurance industry. Mr. Hughes’s term expires in 2022. | | Joseph R. Ramrath  
Age: 6063 Director since 2004 | | Mr. Ramrath has been Managing Director of Colchester Partners LLC, an investment banking and strategic advisory firm, since 2002. Mr. Ramrath was Executive Vice President and Chief Legal Officer of the United Asset Management division of Old Mutual plc, an international financial services firm headquartered in London, England, from 2000 to 2002. Prior to that, he was Senior Vice President, General Counsel and Secretary of United Asset Management Corporation from 1996 until its acquisition by Old Mutual in 2000. Earlier in his career, Mr. Ramrath was a partner at Hill & Barlow, a Boston law firm, and a certified public accountant with Arthur Andersen & Co. We believe Mr. Ramrath’s qualifications to serve on our Board include his accounting, financial and legal background, his experience as a member of management and on the board of directors with other public companies, as well as his years of experience as an advisor to investment advisory companies. Mr. Ramrath is Chair of the AuditNominating and Corporate Governance Committee. Mr. Ramrath’s term expires in 2019.2022. | |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 8
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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| | | Harriett “Tee” TaggartJohn C. Roche
 
Age: 6856 Director since 2017 | Mr. Roche became President and Chief Executive Officer in November 2017. Prior to that, he served as Executive Vice President and President, Hanover Agency Markets since February 2017. Until February 2017, Mr. Roche was Executive Vice President, President Business Insurance since 2013 and head of Field Operations since 2014. Prior to that, he served as Senior Vice President, President Business Insurance from 2009 to 2013 and has held the following other positions since joining the Company in 2006: Vice President, Field Operations and Vice President, Underwriting and Product Management, Commercial Lines. From 1994 to 2006, Mr. Roche served in a variety of leadership positions at St. Paul Travelers Companies, Inc., last serving as Vice President, Commercial Accounts. Previously, Mr. Roche served in a variety of underwriting and management positions at Fireman’s Fund Insurance Company and Atlantic Mutual Insurance Company. We believe Mr. Roche’s qualifications to serve on our Board include his more than twenty-five years of experience in the property and casualty insurance industry, his management experience leading significant business units both at the Company and at St. Paul Travelers and his detailed understanding of the Company and its business. Mr. Roche’s term expires in 2022. | |
Harriett “Tee” Taggart
Age: 71 Director since 2009 | | Ms. Taggart currently manages a professional practice, Taggart Associates. She also serves as an endowment investment committee member, evaluating global portfolio managers and asset allocation strategies, for several major non-profit organizations. From 1983 through 2006, Ms. Taggart was a Partner, Senior Vice President and sector portfolio manager at Wellington Management LLC, a global investment company. Ms. Taggart is a director of Albemarle Corporation, a publicly traded specialty chemical manufacturer, and ismanufacturer. Ms. Taggart served as a trustee of the Eaton Vance Mutual Fund Complex a fund complex comprised of 176 funds. She served as a director of The Lubrizol Corporation, a publicly traded specialty chemical manufacturer, from 2007 until its acquisition by Berkshire Hathaway in 2011.2011 to 2018. Ms. Taggart is also on the boards of trustees and advisory committees of several non-profit organizations and active in a number of corporate governance organizations. We believe Ms. Taggart’s qualifications to serve on our Board include her threefour decades of experience in the financial services industry, as well as her executive leadership and management experience and experience with other public company boards of directors. Ms. Taggart is Chaira member of the Nominating and Corporate GovernanceAudit Committee. Ms. Taggart’s term expires in 2018. | | | | Joseph M. Zubretsky
Age: 60
Director since 20162021.
| | Mr. Zubretsky is President and Chief Executive Officer of the Company. He joined the Company after almost nine years at Aetna, Inc., one of the nation’s largest healthcare benefits and insurance providers, where he most recently served as Chief Executive Officer of Healthagen Holdings, a group of healthcare services and information technology companies. Prior to that, from 2013 to 2014, he served as Senior Executive Vice President leading Aetna’s National Businesses, and from 2007 to 2013 served as Aetna’s Chief Financial Officer. Prior to joining Aetna in 2007, Mr. Zubretsky served in a variety of senior management roles in the healthcare and financial services sector. Mr. Zubretsky began his career as an accountant, rising to partnership in the national insurance industry group at the accounting firm then known as Coopers & Lybrand. We believe Mr. Zubretsky’s qualifications to serve on our Board include his more than 35 years in the insurance and financial services industry, his management experience leading significant business units at Aetna and elsewhere, his financial experience obtained as the Chief Financial Officer of Aetna and other prominent insurance companies, and as a partner at a major national accounting firm in its national insurance industry group.
Mr. Zubretsky’s term expires in 2019.
|
Director Independence Under the New York Stock Exchange (“NYSE”) rules, a member of the Board only qualifies as “independent” if the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). The Company’s Corporate Governance Guidelines include standards to assist the Board in determining whether a director has a material relationship with the Company. The standards conform to the standards established by the NYSE. The portion of our Corporate Governance Guidelines addressing director independence is attached to this Proxy Statement asAppendix A. Until his retirement on January 1, 2020, Mr. Hughes served as executive chairman of HUB, at which time he continued to serve as chairman, but he was no longer an executive or employee of HUB. We conduct regular business activities with HUB. Most significantly, HUB is one of the Company’s appointed agents, placing both commercial lines and personal lines business with us. The Board hasand the NCGC examined these relationships, as well as those of Mr. Hughes’s immediate family member who is a HUB executive, in light of the independence standards adopted by the NYSE and our Corporate Governance Guidelines and concluded that Mr. Hughes is independent under these standards. This conclusion was supported by the fact that the commission amounts paid to HUB did not exceed the relevant objective thresholds set forth in the applicable independence standards, Mr. Hughes is no longer an executive or employee of HUB, and because neither Mr. Hughes nor his family member are directly or indirectly involved in any transactions with the Company or any of its subsidiaries, nor will either of their compensation be directly or indirectly impacted by such transactions. After review by and following the recommendation of, the NCGC, the Board determined that every director and nominee for director is independent under the applicable standards, with the exception of Mr. Zubresky,Roche, who is the President and Chief Executive Officer of the Company. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 13 | | |
There are no family relationships among any of the directors, director nominees or executive officers of the Company. Related-Person Transactions The Board has established a written procedure for the review, approval and/or ratification of “transactions with related persons” (as such term is defined by the SEC, provided that the dollar threshold for review and approval in our policy is $100,000, which is more stringent than the $120,000 threshold established by the SEC). Pursuant to such policy, any related-person transaction will THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 9
must be reviewed, approved and/or ratified bypresented to the Audit Committee except that, infor review, and the Audit Committee may approve, ratify or reject the transaction. In the event management determines that it is impractical to convene an Audit Committee meeting to consummate a particular transaction, the Chair of the Audit Committee (or the Independent Presiding Director, in the event the Chair or any of his or her immediate family members is the “related person”) has the authority to approve the transaction. The Chair of the Committee, or Independent Presiding Director, as applicable, shall report to the Audit Committee at its next meeting any approval under this policy pursuant to this delegated authority. No member of the Audit Committee may participate in any approval or ratification of a transaction with respect to which such member or any of his or her immediate family members is the related person. In preparing the Company’s SEC filings and in determining whether a transaction is subject to this policy, the Company’s General Counsel is entitled to make the determination of whether a particular relationship constitutes a material interest by a related person. In evaluating a transaction with a related person, the Audit Committee shall consider all relevant facts and circumstances available to it and shall approve or ratify only those transactions that are in, or not inconsistent with, the best interests of the Company and its shareholders, as it determines in good faith. The Company employs the daughter of Ann K. Tripp, Executive Vice President, Chief Investment Officer and Treasurer and President, Opus Investment Management, Inc., who received compensation (salary and bonus) of approximately $130,000 in 2019. Ms. Tripp’s daughter does not report either directly or indirectly to Ms. Tripp, and Ms. Tripp was not involved in the recruiting or hiring of this family member, or in any decisions affecting her individual compensation. Her compensation was established by the Company in accordance with its compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions. Although the approval of employment of a related person who works for the Company in the ordinary course of business and whose employment is consistent with the Company's policies and practices with respect to the employment of non-related persons in similar positions is not required under our policy, the Audit Committee reviewed and approved this employment relationship in 2019. The Company and the Board are unaware of any transactions that required approval under thisthe related-person transaction policy in 2016.2019. The Related Person Transaction Policy can be found on the Company’s website atwww.hanover.com under “About Us-Corporate Governance—Company Policies.” For a printed copy of the policy, shareholders should contact the Company’s Corporate Secretary. Board Leadership Structure We separate the roles of CEO and ChairmanChair of the Board in recognition of the differences between the two positions.  
Leadership Structure CEO Responsible for setting the strategic direction for the Company and for the day-to-day leadership and performance of the Company Chair of the Board Provides guidance to the CEO, sets the agenda for Board meetings and presides over shareholder meetings and meetings of the full Board Leadership Structure CEO Responsible for setting the strategic direction for the Company and for the day-to-day leadership and performance of the Company Chair of the Board Provides guidance to the CEO, sets the agenda for Board meetings and presides over shareholder meetings and meetings of the full Board Additionally, we believe that separating the roles and having an independent ChairmanChair of the Board or a designated lead director is consistent with corporate governance best practices and better supports effective management oversight and risk management. We have separated these roles since 2002. While we believe that these goals can be achieved without necessarily separating the CEO and Chairman of the BoardChair designations, we also take into consideration Mr. Angelini’sCondron’s demonstrated skill in leading our Board and counseling management. In accordance with the Company’s Corporate Governance Guidelines, each year the Board elects from among its independent members either a non-executive ChairmanMr. Condron’s duties as Chair of the Board or a lead director to serve as the
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 14 | | |
“Independent Presiding Director.” The duties of the Independent Presiding Director are determined by the Board and include presiding over Board and shareholder meetings and over executive sessions of non-management directors (including the Committee of Independent Directors). Mr. Angelini, the ChairmanThe Chair of the Board may also be appointed to any committee of the Board. Mr. Condron is a member of the Independent Presiding Director.NCGC.
On February 24, 2020, the Board elected Ms. Egan Vice Chair. In recognitionanticipation of Mr. Condron’s years of leadership onmandatory retirement from the Board including his servicein May 2021 in accordance with the Company’s director retirement policy, Ms. Egan was elected Vice Chair to assist in the Board’s orderly transition to a new independent Chair, with the expectation that she will be elected as Chair of the Compensation Committee, the Board electedfollowing Mr. Condron Vice Chairman in 2016.Condron’s retirement. As Vice Chairman, Mr. CondronChair, Ms. Egan helps facilitate the functioning of the Board by assuming the duties and responsibilities that may be assigned to himher from time to time by the ChairmanChair or the full Board of Directors and, in the event Mr. AngeliniCondron is not present at a meeting, assuming the duties of the ChairmanChair. It is the Board’s practice that in advance of regularly scheduled Board and Independent Presiding Director.committee meetings, the Chair of the Board, each Board committee chair and the CEO convene to discuss and set the agendas for the respective meetings, based principally on a THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 10
review of an annual topical calendar, prior discussions among directors and current topics of interest or concern. It is Mr. Condron's practice to speak with each director following regularly scheduled Board meetings and to have other regular discussions with directors as he deems appropriate, to solicit ongoing feedback and reinforce inclusiveness and engagement. He also typically meets individually with the CEO, chief financial officer, and general counsel of the Company following each Board meeting and as he otherwise deems appropriate. The Board generally convenes in executive session (i.e., with no members of management present) in connection with regularly scheduled Board meetings and at other times as deemed appropriate. In addition, the Board regularly meets with the Chief Executive Officer with no other members of management present. Directors have regular access to other members of senior management. Board Meetings and Attendance During 2016,2019, there were 12six meetings of the full Board of Directors. In addition to formal Board and committee meetings held throughout the year, directors routinely engage in communications and interactions and convene informal telephonic or in-person meetings for discussion or planning purposes. The Board routinely convenes meetings at its headquarters in Worcester, Massachusetts, and periodically convenes meetings at other locations. All of the directors attended at least 75% of the Board and committee meetings held in 2016 held2019 while they were members. In addition, all continuing directors and director nominees are expected to attend the Annual Meeting. All the directors serving at the time were present at last year’s annual meeting. Board Committees The standing committees of the Board consist of the Committee of Independent Directors (the “CID”), the Audit Committee, the Compensation and Human Capital Committee, and the NCGC. Each committee is composed solely of directors determined by the Board to be independent. The current responsibilities of each of the committees are set forth in their charters, which are reviewed annually. Committee charters are available on the Company’s website,www.hanover.com, under “About Us-Corporate Governance-Committee Charters.” For a printed copy of any committee charter, shareholders should contact the Company’s Corporate Secretary. The current members of the committees of the Board are: | | | | | | | | | | | | Director | | Independent | | Board Committees | | | | Committee of
Independent
Directors | | Audit
Committee | | Compensation
Committee | | Nominating and
Corporate Governance
Committee | Michael P. Angelini (C) | | ✓ | | ✓ | | | | | | | Richard H. Booth | | ✓ | | ✓ | | ✓ | | | | ✓ | Jane D. Carlin* | | ✓ | | ✓ | | | | | | | P. Kevin Condron (VC) | | ✓ | | ✓ | | | | ✓ (Chair) | | | Cynthia L. Egan | | ✓ | | ✓ | | | | | | ✓ | Karen C. Francis** | | ✓ | | ✓ | | | | ✓ | | | Daniel T. Henry | | ✓ | | ✓ | | ✓ | | | | | Wendell J. Knox | | ✓ | | ✓ | | | | ✓ | | | Joseph R. Ramrath | | ✓ | | ✓ | | ✓ (Chair) | | | | | Harriett “Tee” Taggart | | ✓ | | ✓ | | | | | | ✓ (Chair) | Number of meetings held in 2016† | | 10 | | 11 | | 6 | | 4 |
| | | Board Committees | Director | | Independent | Committee of Independent Directors | Audit Committee | Compensation and Human Capital Committee | Nominating and Corporate Governance Committee | | | | | | | | Kevin J. Bradicich | | ✓ | ✓ | | | ✓ | Jane D. Carlin | | ✓ | ✓ | ✓ | | | P. Kevin Condron (Chair) | | ✓ | ✓ | | | ✓ | Cynthia L. Egan (Vice Chair) | | ✓ | ✓ | | ✓ (Chair) | | Daniel T. Henry | | ✓ | ✓ | | ✓ | | Martin P. Hughes | | ✓ | ✓ | | | | Wendell J. Knox | | ✓ | ✓ | | ✓ | | Kathleen S. Lane | | ✓ | ✓ | ✓ | | | Michael D. Price | | ✓ | ✓ | ✓ (Chair) | | | Joseph R. Ramrath | | ✓ | ✓ | | | ✓ (Chair) | Harriett “Tee” Taggart | | ✓ | ✓ | ✓ | | | Number of meetings held in 2019† | | | 6 | 16 | 7 | 8 |
(C)(Chair) | Denotes the Chairman of the Board; (VC) denotes the Vice Chairman of the Board; (Chair) denotes the Chair of the applicable committee.committee |
* | Ms. Carlin joined the Board in December 2016. |
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement†
| | 15 | | |
** | Ms. Francis has informed the Company that she will not be seeking re-election to the Board at the Annual Meeting, when her current term as a director is scheduled to expire. |
† | Does not include informal meetings held by the committees throughout the year.year |
In addition to the standing committees of the Board listed above, Mr. Condron (chair), Ms. Egan and Messrs. Angelini, Booth and Ramrath comprised the special ad hoc CEO search committee.
Committee of Independent Directors The CID, consisting of all the independent members of the Board, discharges such responsibilities as are referred to it from time to time by the Board or one of its committees. In particular, the committeeCID is responsible for reviewing and approving the recommendations of the Compensation and Human Capital Committee and the NCGC, as applicable, with respect to establishing performance criteria (goals and objectives) for our CEO, evaluating the CEO’s performance and approving CEO compensation. In addition to meeting the independence requirements under the NYSE regulations, each committee member participating in approving the CEO’s compensation must also meet the independence requirements under Section 162(m)16 (“Section 162(m)”) of the Internal Revenue Code (the “Code”) and must meet the independence requirements under Section 16 (“Section 16”) of the Securities Exchange Act of 1934 (the “Exchange Act”). The independent members of the Board typically meet in executive session at every scheduled Board meeting and from time-to-time meet informally or by telephonic committee meetings. In 2016,Topics of discussion at executive sessions include, among other things: the CID met several times in connection withCompany’s strategy, annual business plan and progress; key risks and challenges THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 11
facing the recruiting process for a new chief executive officerCompany; leadership development and succession; and other matters.matters addressed during regular Board sessions with management. Audit Committee The Board has made a determination that the members of the Audit Committee satisfy the requirements of the NYSE as to independence, financial literacy and experience and satisfy the independence requirements of the Sarbanes-Oxley Act of 2002. Accordingly, the Audit Committee is independent from management. The Board has determined that each of Messrs. Booth, Henry and RamrathMr. Price is an Audit Committee financial expert and Mses. Carlin, Lane and Taggart are financially literate, in each case as defined by SEC regulations. The Audit Committee is, among other things, responsible for the selection and engagement, compensation, retention, evaluation, oversight and, when deemed appropriate, termination of the Company’s independent, registered public accounting firm. The Audit Committee annually evaluates the performance of the Company’s independent, registered public accounting firm, and determines whether to reengage it or consider other audit firms. Some of the factors considered by the Audit Committee in deciding whether to retain PwC, the Company’s independent, registered public accounting firm, include: PwC’s technical expertise and capabilities with respect to audit and non-audit services; PwC’s depth of knowledge of the Company’s operations and businesses, accounting policies and practices, and internal control over financial reporting, and PwC’s tenure as independent auditor, including the relative benefits compared to any concerns that may be associated with a longer tenure; PwC’s independence and processes for maintaining its independence; the quality and candor of PwC’s communications with the Audit Committee and management; and the appropriateness of PwC’s fees relative to the scope and efficiency of the audit and non-audit services provided. The committee also has oversight responsibility for the Company’s General Auditor and must approve matters related to the General Auditor’s employment and compensation. The Audit Committee generally meets in executive session separately with representatives of PwC, the Company’s independent, registered public accounting firm, the Chief Financial Officer and the General Auditor, and by themselves, following its in-person, regularly scheduled, in-person committee meeting.meetings. The Audit Committee also meets from time to time in executive sessions with the Company’s Chief Actuary, Chief Risk Officer and General Counsel. The Audit Committee reviews and discusses the Company’s financial statements and earnings press releases with management and PwC prior to their release. Among its other responsibilities, as set forth in its charter, the Audit Committee reviews the arrangements for and the results of the auditor’s examination of the Company’s books and records, auditors’ compensation, internal accounting control procedures, and activities and recommendations of the Company’s internal auditors, as well as any reports relating to the integrity of our financial statements, internal financial controls or auditing matters that are reported on our anonymous Alertline. ItThe Audit Committee also reviews the Company’s significant accounting policies, control systems, reserving practices, information security and disaster recovery programs, compliance with legal and regulatory requirements, outstanding major litigation (if applicable), and major enterprise risks, as well as the resources of PwC dedicated to or otherwise supporting the Company’s audit. As noted elsewhere,above, the committee is also responsible for reviewing related-person transactions and assisting the Board in assessing the adequacy of the Company’s enterprise risk management policies and procedures.program. The Audit Committee annually reviewsreceives periodic reports regarding developments in the regulatory environment and reassesses the adequacy of its charter.relevant legislative reforms. Compensation and Human Capital Committee The Compensation and Human Capital Committee has oversight responsibility with respect to compensation matters involving directors and executive officers of THG.THG and makes compensation decisions regarding our executive officers (other than the CEO). In conjunction with the Chair of the Board and the NCGC, the Compensation and Human Capital Committee annually reviews the CEO’s performance and other relevant external factors and makes a recommendation to the CID for the CEO’s annual compensation. It also provides general oversight of the Company’s compensation | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 16 | | |
structure, including compensation plans and benefits programs. programs applicable to all employees, and oversees a risk-based analysis of the Company’s incentive arrangements. Except to the extent reviewed by the Board of Directors, the Committee is also tasked with periodically reviewing the Company’s strategies, policies, practices and experience relating to recruiting and retention, personnel practices, succession planning, corporate culture and human capital development, including policies and practices relating to inclusion and diversity (“I&D”) and pay equity. In addition to meeting the independence requirements under the NYSE regulations, each committee member must meet the independence requirements under Section 16 and Section 162(m).16. Each of the members of the Compensation and Human Capital Committee satisfies the independence requirements of the NYSE rules and applicable SEC requirements. The Compensation and Code requirements.Human Capital Committee may delegate any of its responsibilities to a subcommittee comprised of one or more of its members. Use of Independent Outside Compensation Consultant In executing its compensation responsibilities, the Compensation and Human Capital Committee engaged Frederic W. Cook & Co., Inc. (“F.W. Cook”), to assist it in making compensation decisions and to provide related information and advice. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 12
During 2016,2019, a representative of F.W. Cook: regularly attended, either in person or telephonically, Compensation and Human Capital Committee meetings; periodically participated in executive sessions of the committee, at which no members of management were present; provided relevant market and comparative data and information; provided advice regarding compensation trends and developments; provided input to the Compensation Committeecommittee and management regarding the selection of peer companies against which to evaluate compensation levels and practices; assisted in the review and design of our director and executive compensation programs; provided advice with respect to compensation decisions relating to our executive officers; assisted in the reviewofficers and design of our compensation packages offered to our new CEO and CFO;directors; and
reviewed and advised on transition-relatedprovided comments to the executive compensation for certain former executive officers.disclosure in this Proxy Statement. F.W. Cook was selected by, and reports to, the Compensation and Human Capital Committee. F.W. Cook is not engaged by the Company for any other purpose, and the Compensation and Human Capital Committee reviews all compensation payable to this firm. Pursuant to its charter, the Compensation and Human Capital Committee may select its outside compensation consultant only after taking into consideration factors relevant to that consultant’s independence, including such factors required to be considered under the listing standards of the NYSE. The Compensation and Human Capital Committee reviewed such factors as it deemed appropriate, including all such factors required by the NYSE listing standards, and is satisfied as to F.W. Cook’s independence from the Company and its management. Mr. Bullis, who served as our Interim Chief Financial Officer until Mr. Farber’s appointment in November 2016, also served as the Chairman of the compensation committee of another public company that also retained F.W. Cook to assist it in making compensation decisions. Similar to the Company, F.W. Cook was engaged directly by that company’s compensation committee. F.W. Cook was not involved in advising the Company with respect to the form or amount of any of Mr. Bullis’s compensation, and the Company has determined that there was no conflict of interest with respect to this relationship. Mr. Bullis’s term as a director of that company expired in May 2016.
Compensation Committee Interlocks and Insider Participation During 2016,2019, our Compensation and Human Capital Committee consisted of Ms. FrancisEgan and Messrs. CondronHenry and Knox. None of our executive officers serve, or during 20162019 did serve, as a member of the board of directors or compensation committee of any company that has one of its executive officers serving as a member of our Board or Compensation and Human Capital Committee. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 17 | | |
Nominating and Corporate Governance Committee The NCGC advises and makes recommendations to the Board on all matters concerning directorship and corporate governance practices and the selection of candidates as nominees for election as directors. The NCGC coordinates and oversees the Board’s evaluation of the individual directors who are eligible for re-nomination and election at each annual meeting of shareholders. The committee recommended this year’s candidates for election and, in consultation with the Chair of the Board, recommends Board member committee assignments to the full Board. The NCGC is responsible for facilitating the Board’s annual review of the performance of the President and CEO. The NCGC also monitors the Company’s corporate citizenship, charitable giving, sustainability and environmental, social and governance (“ESG”) efforts, as well as shareholder advocacy matters. Director Evaluation Process The NCGC leads an annual review of the Board that examines, at the Board level and at each committee level, overall effectiveness across multiple evaluation areas, including: governance processes; Board composition and function; meeting content, structure and preparation; and management’s interaction with the Board. The NCGC facilitates discussion of the results of the assessment annually among the Board and each Board committee, with the Chair leading the process for the full Board and each committee chair leading the process for their own committee. Our evaluation process encompasses an examination of the Board as a whole, each Board committee, and each individual director whose term is expiring at the next annual meeting, to determine if that director should be re-nominated for another term. Evaluations of individual directors who are up for re-nomination include a peer review questionnaire that is completed by each of the other directors and reviewed by the Board Chair and NCGC Chair. The NCGC considers the feedback in its assessment of individual member contributions when making its nomination recommendations to the full Board, who then make final determinations regarding Board-nominated candidates. In addition to the formal meetingsdirector evaluation process, the Chair solicits informal feedback from directors during his follow-up calls to each director after the conclusion of every regularly scheduled Board meeting. The Board leverages third-party software to facilitate, streamline and provide anonymity to the NCGC, members of the committee met numerous times in connectionreview process, with its director search efforts.a view toward facilitating candor and encouraging constructive insight. Consideration of Director Nominees The NCGC may identify candidates for nomination to the Board through several sources, including recommendations of non-management directors, shareholders, the CEO, other executive officers, an outside search firm or other resources. Committee members review the backgrounds of candidates in light of the current needs of the Board, interview qualified candidates, conduct inquiries with references and review available information pertaining to the candidate’s qualifications and background. Director Qualifications Members of the Board and nominees for election should possess high personal and professional ethics, integrity and values, and be committed to representing the long-term interests of ourthe Company and its shareholders. To maintain a majority of THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 13
independent directors on the Board, as required by our Corporate Governance Guidelines, the NCGC and the Board have a strong preference that nominees meet our independence standards. Board members and nominees should demonstrate initiative, be participatory and contribute a perspective based on practical experience and mature judgment. The Board seeks members who represent a broad array of experiences and expertise in the context of the evolving needs of the Board. While we do not have a formal policy in this regard, when evaluating a candidate for Board membership, the NCGC and the Board may also take into consideration factors such as diversity of race, gender, ethnicity and age. In addition, without the approval of the NCGC, nominees who are CEOs (or others with similar responsibilities) should serve on no more than two other public company boards, and other nominees should serve on no more than three other public company boards. All directors and nominees for election are in compliance with this policy. The NCGC maintains a comprehensive skills and experience matrix for evaluating the background and skill set of the Board on both an individual director and collective basis. The matrix details key competencies, demographic information, and outside public company board, committee, committee chair and CEO experience. The NCGC tracks each director’s level of current and developing expertise across the key competencies in order for the Board to ensure that it can effectively oversee the long-term success of the Company and to align with the Company’s goal of being a premier property and casualty company in the independent agency channel. The categories of key competencies include, among other things: property and casualty insurance (beyond Company Board service), senior management, financial services, finance/accounting, investments/capital markets, technology, and governance. The Board seeks director candidates whose skills, experience, and expertise can augment the key competencies the NCGC and the Board have identified. Shareholder Nominees The NCGC will consider qualified director candidates recommended in writing by shareholders. Shareholders who wish to suggest qualified candidates for consideration by the committee may do so by writing to the Company’s Corporate Secretary, giving the candidate’s name, biographical data, qualifications and confirmation thatevidence the candidate has agreed to serve if nominated and elected. All such submissions will be forwarded to the committeeNCGC chair. To allow the committee sufficient time to consider a candidate in advance of an annual meeting, a shareholder should submit recommendations to the Company’s Corporate Secretary by no later than December 31st of the year prior to the annual meeting. Shareholder-proposed candidates who meet the committee’s minimum qualification standards, discussed in the preceding paragraph,paragraphs, will be evaluated in the same manner as other candidates considered by the committee for Board nomination. Pursuant to the Company’s by-laws, shareholders seeking to nominate a candidate for election to the Board without approval of the Board must deliver written notice of such nomination to the Company’s Corporate Secretary not less than 60 days or more than 90 days prior to the Annual Meeting. The notice must set forth the name, address and number of shares of THG stock held by the shareholder submitting the nomination, as well as information concerning the nominee that is required to be disclosed pursuant to the Exchange Act in a proxy statement soliciting proxies for the election of such nominee as a director, including a signed consent of the | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 18 | | |
nominee to be named in a proxy statement and to serve as a director, if elected.director. In addition, the notice must be accompanied by a petition signed by at least 100 record holders of THGour Common Stock, representing in the aggregate at least one percent of the outstanding shares entitled to vote on the election of directors. Communicating with the Board Shareholders and other interested parties can communicate with the Board, including the non-management directors and the Independent Presiding Director,Chair, by writing to The Hanover Insurance Group, Inc., Board of Directors, Attn: Corporate Secretary, 440 Lincoln Street, Worcester, Massachusetts 01653, through the websitewww.HanoverAlertLine.com or by calling 1-800-533-2547. An independent third-party service retrieves all submissions to the website and answers all calls to the toll-free telephone number and passes the information on to our General Counsel, our General Auditor and the chair of the Audit Committee, who, when appropriate, transmit the information to the appropriate member of the Board. Communications may be anonymous or confidential. Complaints relating to the Company’s accounting, internal accounting controls or auditing matters will be referred to the chair of the Audit Committee. Other concerns will be referred to the ChairmanChair of the Board. All shareholder-related complaints and concerns will be received, processed and acknowledged by the Board. Further information regarding communications with the Board may be found at the Company’s website,www.hanover.com, under “About Us-Corporate Governance—Contact the Board.” Director Compensation The Compensation and Human Capital Committee (the “Committee”) is responsible for reviewing and advising the Board with respect to the Company’s director compensation practices and programs. In executing such responsibilities in 2019, the Committee reviewsreviewed relevant market data provided by F.W. Cook to assist it in developing compensation recommendations. The market data considered includesincluded an analysis of data from the Comparative Proxy Data Companies excluding HCC Insurance Holdings, Inc. due to its acquisition (for more information on these companies, please see pages 34-35)page 27), size-adjusted general industry survey data from F.W. Cook’s 20152018 Non-Employee Director Compensation Report a(a comprehensive survey source comprised of 300 randomly selected companies from various industries categorized based on their revenue and market cap size,capitalization) and a review of recent trends and developments in director pay.compensation. The Committee presentspresented its THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 14
recommendations to the full Board which, usually at its May meeting, makesmade its compensation decision for the succeeding year (beginning immediately following the Annual Meeting of Shareholders and running until the next Annual Meeting of Shareholders (the “Annual Compensation Cycle”)).In setting director compensation, the Board considersconsidered competitive pay levels in light of the amount of time that directors expend in fulfilling their duties to the Company, as well as the level of skill and expertise the Company requires of its Board. Additionally, awards to directors under the Company’s 2014 Long-Term Incentive Plan (the “2014 Plan”) must comply with the annual limits contained in the plan. ForBased upon its review of the 2016/2017information provided above and the Committee’s recommendation, for the 2019/2020 Annual Compensation Cycle, the Committee engaged in a review ofBoard elected not to make any changes to director compensation, including a review of market data from the Comparative Proxy Data Companies and other general industry data. Based on information provided by F.W. Cook and the recommendation of the Committee, all retainer fees remained unchanged from the 2015/2016 Annual Compensation Cycle, with the exception of a
compensation. Fees | | | | 2019/2020 Annual Compensation Cycle | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 19 | | |
$25,000 increase in the Chairman of the Board retainer, which was increased based on review of this data and the results of a competitive assessment.
| | | | | Fees
| | 2016/2017 Annual
Compensation Cycle | | Annual Director Retainer | | | Stock Component (issued pursuant to the 2014 Plan) | | $135,000 | Cash Component | | $
$
| 125,000
85,000$95,000
| |
| | | | ChairmanChair of the Board Retainer
| | $ | 125,000 | | | | | Committee Chairperson Retainers NCGC
Compensation
AuditChair Retainers*
| | $
$
$
| 10,000
14,000
24,000
|
| NCGC | | $21,000 | Compensation | | $25,000 | Audit | | $36,000 | | | | Committee Member Annual Retainer | | | NCGC | | $10,000 | Compensation | | $11,000 | Audit | | $
$
$
| 5,000
7,000
12,000
|
| $15,000 |
In addition to the fees set forth in the table above and in recognition of the time and effort devoted by the members of the Board comprising the special CEO search committee (Mr. Condron (chair), Ms. Egan and Messrs. Angelini, Booth and Ramrath), the Committee approved a retainer of $10,000 to each member of the CEO search committee and an additional $10,000 retainer to the chair of the CEO search committee. These retainers were paid at the same time as the annual retainers.
* | Includes both committee chair and committee member retainer. |
The Company reimbursed Mr. Angelini’s employer, Bowditch & Dewey, for estimated expenses for administrative support related to his duties as Chairman of the Board. Additionally, the Company’s charitable foundation provides matching contributions to gifts made by directors to qualified charities, up to $5,000 per director per calendar year.
At the election of each director, (i) cash retainers may be converted to Common Stock, and (ii) cash and stock compensation may be deferred pursuant to our non-employee director deferral plan. Deferred cash amounts are accrued in a bookkeeping account that is credited with notional interest based on the so-called General Agreement on Tariffs and Trade (“GATT”) rate (3.03%(3.36% for 2016,2019 and 2.28% for 2020, as determined using the November 20152018 and 2019 published rates)rates, respectively). Mr. Zubretsky,Roche, as an employee of the Company, receives no additional compensation for his service as a member of the Board. Also, Mr. Eppinger, our former CEO, did not receive any additional compensation for his service as a member of the Board. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 20 | | |
Director Compensation Table The following table sets forth the total compensation forof our non-employee directors for calendar year 2016.the 2019/2020 Annual Compensation Cycle. Unless otherwise indicated, all amounts were paid in 2019. Name | | | Fees Earned in Cash ($) | | Stock Awards ($) (1) | | All Other Compensation ($) (2) | Total ($) | | | | | | | | | | | | | | | | | | | | | | | | Name | | Fees
Earned
in Cash ($) | | Stock
Awards
($) (1) | | All Other
Compensation
($) (2) | | | Total ($) | | | Michael P. Angelini | | | 220,011 | (3) | | | 124,989 | (3) | | | 5,000 | | | | 350,000 | | | Richard H. Booth | | | 112,011 | (3) | | | 124,989 | (3) | | | 5,000 | | | | 242,000 | | | Jane D. Carlin (4) | | | 38,591 | (3) | | | 56,703 | (3) | | | — | | | | 95,294 | | | Kevin J. Bradicich | | | 105,031 | | | 134,969 | | | 1,000 | | 241,000 | | Jane D. Carlin | | | 110,031 | (3) | | 134,969 | (3) | | 5,000 | | 250,000 | | P. Kevin Condron | | | 126,011 | (3) | | | 124,989 | (3) | | | 5,000 | | | | 256,000 | | | 230,031 | (3) | | 134,969 | (3) | | 5,000 | | 370,000 | | Cynthia L. Egan | | | 100,011 | | | | 124,989 | | | | 5,000 | | | | 230,000 | | | 120,031 | | | 134,969 | | | 5,000 | | 260,000 | | Karen C. Francis | | | 92,011 | (3) | | | 124,989 | (3) | | | 5,000 | | | | 222,000 | | | Daniel T. Henry | | | 97,011 | | | | 124,989 | | | | 5,000 | | | | 227,000 | | | 106,031 | | | 134,969 | | | 5,000 | | 246,000 | | Martin P. Hughes (4) | | | 20,658 | | | 29,260 | | | — | | 49,918 | | Wendell J. Knox | | | 92,011 | (3) | | | 124,989 | (3) | | | 5,000 | | | | 222,000 | | | 106,031 | (3) | | 134,969 | (3) | | 5,000 | | 246,000 | | Kathleen S. Lane (5) | | | 110,031 | | | 134,969 | | | — | | 245,000 | | Michael D. Price | | | 131,031 | | | 134,969 | | | 5,000 | | 271,000 | | Joseph R. Ramrath | | | 131,011 | | | | 124,989 | | | | 5,000 | | | | 261,000 | | | 116,031 | | | 134,969 | | | 5,000 | | 256,000 | | Harriett “Tee” Taggart | | | 100,011 | | | | 124,989 | | | | 5,000 | | | | 230,000 | | | 110,031 | | | 134,969 | | | 5,000 | | 250,000 | |
(1) | The amounts in this column reflect the grant date fair value of the 2016-2017 annual stock retainer paid in 2016 and computed in accordance with FASB ASC Topic No. 718. Amounts calculated are based on the closing price of our Common Stock on the NYSE on the date of grant. To the extent applicable, assumptions used in the calculation of grant date fair value amounts are included in Note 1110 to the Company’s audited financial statements for the fiscal year ended December 31, 20162019 included in the Company’s Annual Report. |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 15
None of our non-employee directors held any stock options or other unvested stock-based awards as of December 31, 2016.2019. For information on the share holdingsshareholdings for our directors, please see “Stock Ownership by the Company’s Directors and Executive Officers” on pages 5-6.page 3. (2) | Consists of matching contributions by the Company’s charitable foundation to qualified charitable organizations. |
(3) | All or a portion of this amount has been deferred at the election of the director. |
(4) | Annual cash and stock retainers for the 2019/2020 Annual Compensation Cycle were pro-rated to reflect the fact that Ms. CarlinMr. Hughes joined the Board and was paid for his Board service on December 5, 2016.February 24, 2020. |
(5) | Amounts do not include the pro-rated Audit Committee membership retainer that Ms. Lane received on February 25, 2019 as part of the 2018/2019 Annual Compensation Cycle and that was reported in the director compensation table in the 2019 proxy statement. |
Board’s Role in Risk Oversight The Board of Directors is responsible for assessing majoroverseeing the Company’s risk management program. The Company, being primarily in the business of risk, has established an enterprise-wide risk management group to monitor, assess, manage and mitigate material risks facingto the CompanyCompany. The Board, directly or through its standing committees, regularly receives reports and reviewing options forpresentations from key members of the enterprise-wide risk mitigation.management group and management, including the Company’s CEO, Chief Financial Officer, Chief Risk Officer, Chief Information Security Officer and General Counsel on matters which, in its or management’s view, merit attention from a risk management perspective, such as catastrophe risks, counterparty risks, reserves, insured exposure aggregation levels, ex-catastrophe underwriting risk, reinsurance levels and creditworthiness of our reinsurers, the investment portfolio, litigation and regulatory matters, technology and information security, capital considerations, acquisitions, growth plans, matters relating to human capital management, leadership and succession, other operational risks, and material ESG risks. Management presentations, business updates and financial and strategic planning discussions with the Board and its committees regularly incorporate a discussion of risks and plans for mitigating or managing such risks. The Board, directly or through its standing committees, periodically receives reports and presentations from management,risks, including emerging risks that could impact the Company’s Chief Risk Officer, on various matters which, in its view, merit attention from a risk management perspective, such as with respect to counterparty risks, reserves, insured exposure aggregation levels, reinsurance levels and creditworthiness of our reinsurers, the investment portfolio, litigation and regulatory matters, technology and information security, capital considerations, acquisitions, growth plans and matters relating to leadership and succession.long-term strategy. In order to assist the Board in its responsibility to assess major risks,the adequacy of the Company’s risk management program, the Audit Committee is responsible for reviewingregularly reviews with management certain financial and business risk exposures and the steps management has taken to monitor and control such risk exposures, including the Company’s enterprise risk assessment and risk | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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management policies and procedures. Throughout the year, the Audit Committee receives periodic reports from the Company’s Chief Risk Officer. The Audit Committee reports to the Board its assessment of the Company’s enterprise risk management policies and procedures. Additionally, with respect to examining risks associated with the Company’s compensation programs, each year a committee comprised of a cross-section of officers of the Company, including the Chief Risk Officer, conducts a review and risk assessment of the Company’s material incentive compensation plans. The results of this assessment are presented to the Compensation and Human Capital Committee in connection with the committee’s approval of the Company’s executive compensation plans for the upcoming year and are also reviewed by the committee’s independent compensation consultant. The results of the committee’sCompensation and Human Capital Committee’s risk assessment are also provided to the other members of the Board. For additional information, see “Risk Management and Compensation” in the Compensation Discussion and Analysis section beginning on pages 53-54.page 36. The NCGC is charged with, among other things, assessing with the Board risks associated with succession planning.
Director Retirement Policy It is the policy of the Board that a director submit his or her resignation and retire at the Annual Meeting of Shareholders following his or her attainment of age 72. Notwithstanding the foregoing, by a vote of the Board after completion of an individual director review and assessment process administered by the NCGC, the Board may decline to accept such resignation and (i) with respect to a director who has not served for ten complete annual meeting cycles at the time he or she would otherwise have first been required to retire, such retirement may be deferred for the longer of (X) five additional annual election cycles, or (Y) such number of additional terms such that, including terms previously served, the director will not have served in excess of ten complete annual election cycles; and (ii) with respect to a director whose service is not eligible for an extension under clause (i) above, such director’s retirement may be deferred on an annual basis up to the date of the Annual Meeting of Shareholders following his or her attainment of age 75. Any director whose retirement has been deferred in accordance with the foregoing shall again submit his or her resignation, effective at the end of such director’s term, for the Board’s consideration. In accordance with the director retirement policy, the NCGC has deferred Mr. Angelini’s resignation. If he is re-elected, Mr. Angelini’s resignation will be effective at the end of his new term, which would expire in 2018; he would not be eligible for any additional extensions of his term beyond 2018 under the director retirement policy.
Code of Conduct The Company has adopted a Code of Conduct whichthat is applicable to all directors, officers and employees of the Company, including our Chief Executive Officer, Chief Financial Officer and Corporate Controller. In addition, we expect our agents, contractors and others with whom we do business to act in accordance with our Code of Conduct. The Code of Conduct is available on the Company’s website atwww.hanover.com under “About Us-CorporateUs–Corporate Governance—Company Policies.Policies—Code of Conduct.” For a printed copy of the Code of Conduct, shareholders should contact the Company’s Corporate Secretary. The Company will disclose any amendments to the Code of Conduct (other than technical, administrative or non-substantive amendments), or waivers of provisions of the Code of Conduct for its Chief Executive Officer, Chief Financial Officer or Corporate Controller, on its website within four business days following the date of such amendment or waiver. Shareholder Engagement In addition to regular discussions with investors and analysts, the Company engages in investor outreach throughout the year as an avenue to pursue a direct dialogue with interested shareholders in order to learn more about their perspectives, priorities and concerns. Engagement discussions with investors have traditionally included senior management and representatives from our investor relations department. Formal and informal communications with investors enable management and the Board to understand and consider the issues that matter most to our shareholders so that the Company can effectively address them. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 16
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy StatementESG, Sustainability and Corporate Responsibility Our long-term strategy is focused on meeting our commitments to our policyholders and agents, with a view toward delivering outstanding financial results for our shareholders. We recognize that working to make a difference in the world and in the communities where we do business furthers that strategy. We place importance on operating as a socially responsible organization that is committed to treating our policyholders, employees, agents and vendors fairly, protecting our environment, giving back and enriching our communities, and governing our actions with integrity. We fundamentally believe that these values and good corporate citizenship are essential to our success and that by monitoring ESG issues, we can capitalize on ESG opportunities and respond to material ESG risks. The Company sponsors, and our employees are engaged in, many volunteer activities. The Hanover Insurance Group Foundation is an active contributor to non-profit organizations in the communities where we work, with special emphasis on public education systems and youth. Our key corporate values are described as “CARE,” Collaboration, Accountability, Respect and Empowerment. In 2019, we continued our commitment to sustainability through our employee engagement, CARE values, Foundation and charitable activities, employee training and development and other initiatives. We seek to foster a physical, mental and financially healthy workplace through an array of benefit offerings, including health and dental insurance programs, employee counseling programs, 401(k) and stock purchase plans, business affinity groups and financial counseling. We also continued to advance on our I&D initiatives, as described below. We invite you to learn more about our commitment to be an involved corporate citizen and a responsible steward of the resources entrusted to us by visiting the Company’s Corporate Responsibility website, www.hanover.com – under “About Us – Corporate Responsibility.” Inclusion and Diversity We are committed to the development of all of our employees and to fostering an inclusive and diverse workplace. For our Company, embracing inclusion and diversity means that we appreciate our differences, reinforce inclusive behaviors at all levels and live our CARE values. We believe that when our employees feel accepted and engaged, and contributions from people with different backgrounds and experiences are valued, our business will thrive. In the third quarter of 2017, we recruited a Director of Inclusion and Diversity, whose responsibility is to lead enterprise-wide I&D efforts. Beginning in 2018, we formally launched company-wide initiatives to begin converting our I&D aspirations into reality. Some of the highlights of these efforts over the past two years include: Engaged Cook Ross, a certified women-owned, leading I&D consulting firm based outside of Washington, D.C., to conduct a “current state” cultural analysis (including I&D) of our entire organization and deliver findings to our I&D team and to executive leadership; Developed a short- and longer-term I&D strategy and communications plan through 2020; Initiated extensive diversity and bias-awareness training efforts, with assistance from Cook Ross, for our executive and senior leadership teams; Affirmatively incorporated oversight of I&D and corporate culture into the charter of the Compensation and Human Capital Committee; Incorporated an I&D element into incentive compensation metrics for our CEO and entire executive leadership team; Completed I&D workshops for approximately 90% of our employees at all levels, including full-day programs for leaders, and incorporated I&D as part of mandatory new employee training and orientation; and Our CEO, Jack Roche, signed the CEO Action for Diversity and Inclusion Pledge, the largest CEO-driven business commitment to advance diversity and inclusion in the workplace. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 17
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ITEM I ELECTION OF DIRECTORS The Board currently has eleventwelve members and consists of three classes whose terms end in successive years. There are four nominees for election at the Annual Meeting. In order to comply with our director retirement policy, Mr. Angelini is being nominated to serve for a one-year term expiring in 2018. Ms.Mses. Carlin Mr.and Lane, and Messrs. Henry and Mr. Knox are each being nominated to serve for a three-year term expiring in 2020. Ms. Francis informed2023. Citing personal reasons, on February 21, 2020, Mr. Price notified the Company in December 2016 that she would not be seeking re-electionBoard of his intention to resign from the Board, effective at the Annual Meeting, when her current term as a director is scheduled to expire, due to her increasing commitments to business activities in the automotive industry, including engagement on three boards of directors in the industry.Meeting. Directors serve until the expiration of their stated term and until their successor has been duly elected and qualified or until their earlier death, resignation, removal or disqualification. All of the nominees have indicated their willingness to serve and, unless otherwise directed, it is intended that proxies received in response to this solicitation will be voted in favor of the election of each of the nominees. The affirmative vote of a majority of the votes properly cast (in person or by proxy) is required to elect director nominees. For purposes of electing directors, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Broker non-votes and abstentions, because they are not votes cast, are not counted for this proposal and will have no effect on the outcome. If a nominee who is currently serving as a director is not re-elected at the Annual Meeting, then under Delaware law, the director would continue to serve on the Board as a “holdover director.” However, under our by-laws, any director who is nominated but fails to be re-elected is required to promptly tender his or her resignation to the Board, effective at the end of his or her current term. The NCGC will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. In making their determinations, the NCGC and the Board may consider any factors deemed relevant. The Board will act on the NCGC’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results. The director who tenders his or her resignation will not vote on the NCGC’s recommendation or the Board’s decision. In the event that any of the nominees should be unavailable to serve as a director, it is intended that the proxies will be voted for the election of such substitute nominees, if any, as shall be designated by the Board. The Board and Management hashave no reason to believe that any of the nominees will be unavailable to serve. Information as to each nominee and as to directors continuing in office can be found under the section of this Proxy Statement entitled “Corporate Governance.” 
The Board recommends a voteFOR each of the director nominees. The Board recommends a vote FOR each of the director nominees. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy StatementTHE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 18
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ITEM II ADVISORY APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION Each year since our annual meeting in 2011, we have provided our shareholders with the opportunity to cast an advisory vote regarding the compensation of our named executive officers. At each meeting, our shareholders overwhelmingly approved the proposal, with more than 95% of the votes cast voting in favor of each proposal. As required by Section 14A of the Exchange Act, we are again seeking advisory shareholder approval of the compensation of our named executive officers, as disclosed in the section of this Proxy Statement entitled “Executive Compensation.” Shareholders are being asked to vote on the following advisory vote: | Voted: | | Voted:
| | That the shareholders advise that theyTo approve the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and any related material)disclosure). |
A substantial percentage of our named executive officers’ compensation is directly tied to stock performance and the attainment of financial and other performance measures that the Board believes promote long-term shareholder value and position us for long-term success. As described more fully in the Compensation Discussion and Analysis, the mix of fixed and performance-based compensation, the terms of our short- and long-term incentive compensation programs, and the weighting of variable compensation more heavily toward equity awards, are all designed to enable us to attract and retain top talent and align the interests of our executive officers with those of our shareholders, while balancing risk and reward. The Compensation and Human Capital Committee and the Board believe that the design of the programs, and the compensation awarded to the named executive officers under the current programs, fulfills these objectives. Shareholders are urged to read the Compensation Discussion and Analysis section beginning on page 29,22, which discusses in detail how our compensation programs support our compensation philosophy. Although the vote is non-binding, the Board and the Compensation and Human Capital Committee will consider the voting results in connection with their ongoing evaluation of the Company’s compensation programs. Pending the Board’s review of the outcome of the non-binding shareholder vote on Item III, as described in more detail on the following page, weWe currently intend to hold advisory votes on executive compensation annually. Accordingly, we anticipate that the next such vote will be held at the Company’s 20182021 Annual Meeting of Shareholders. The affirmative vote of a majority of the votes properly cast (in person or by proxy) is required for approval of this proposal. Abstentions and broker non-votes, because they are not votes cast, are not counted for this proposal and will have no effect on the outcome. The Board recommends a voteFOR the approval of this proposal.
 | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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ITEM III
ADVISORY VOTE ON THE FREQUENCY OF HOLDING AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
In Item II, we are asking shareholders to cast an advisory vote approving the compensation disclosed in this Proxy Statement that we paid in 2016 to our named executive officers. Such advisory vote is referred to as a “say-on-pay” vote.
In this Item III, shareholders are being asked to submit a separate, non-binding, advisory vote on how frequently we should have say-on-pay votes in the future. As required by Section 14A of the Exchange Act, we submit this separate question to a shareholder vote at least once every six years. In voting on this resolution, you should mark your proxy for one, two or three years based on your preference as to whether say-on-pay votes should be held every one, two or three years. Alternatively, you may indicate that you are abstaining from voting.
Since our annual meeting in 2011, we have provided our shareholders with the opportunity to cast an advisory vote regarding the compensation of our named executive officers annually. Our 2011 annual meeting was the last time that our shareholders were asked to vote on how frequently we should hold say-on-pay votes, and at that meeting over 86% of the votes cast in favor of a frequency proposal supported an annual say-on-pay vote.
The Board continues to believe that an advisory vote on executive compensation that occurs every year, or annually, is the most appropriate alternative for the Company because (1) it allows for input from shareholders on the most frequent basis, helping to foster an ongoing dialogue between the Board of Directors and our shareholders; and (2) our shareholders overwhelmingly supported an annual say-on-pay vote the last time they were asked to vote on the frequency of the say-on-pay vote. Therefore, the Board recommends that you vote for an advisory vote on executive compensation every ONE year.
However, because this vote is advisory and not binding on the Board or the Company, the Board reserves the right to decide that it is in the best interests of our shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option recommended by our shareholders.
Approval of this proposal requires the affirmative vote of a majority of the votes cast on the proposal. If none of the three frequency options receives the vote of the holders of a majority of the votes cast, then we will consider the frequency option (one year, two years or three years) receiving the highest number of votes cast by shareholders to be the frequency that has been recommended by shareholders.
Abstentions and broker non-votes, because they are not votes cast, are not counted for this proposal and will have no effect on the outcome.
The Board recommends a vote for an advisoryFOR the approval of this proposal. The Board recommends a vote on executive compensation everyONE year. FOR the approval of this proposal. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy StatementTHE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 19
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ITEM IV III RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent, external audit firm retained to audit the Company’s financial statements. The firm of PricewaterhouseCoopers LLP (“PwC”) has been appointed by the Audit Committee of the Board to serve as the Company’s independent, registered public accounting firm for 2017.2020. PwC has been retained as the Company’s independent, external auditor since 1995 and, for a predecessor company, beginning in 1991. Representatives of PwC will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions from shareholders. In order to assure continuing auditor independence, the Audit Committee periodically considers whether the Company should change its independent, external audit firm. Additionally, in conjunction with the mandated rotation of PwC’s lead engagement partner, the Audit Committee and its chairperson are directly involved in the selection of PwC’s new lead engagement partner. The members of the Audit Committee and the Board believe the continued retention of PwC to serve as the Company’s independent external auditor is in the best interests of the Company and its investors. For a discussion of the factors that the Audit Committee considered in retaining PwC for 2020, see the “Audit Committee” section beginning on page 12. The Board is submitting the appointment of PwC as the Company’s independent, registered public accounting firm for 20172020 to the shareholders for their ratification. The Audit Committee bears the ultimate responsibility for selecting the firm and will make the selection it deems best for the Company and its shareholders. Should the shareholders fail to ratify the appointment of PwC, the Audit Committee will reconsider the appointment and may retain PwC or another accounting firm without resubmitting the matter to shareholders. Similarly, ratification of the selection of PwC as the independent, registered public accounting firm does not limit the Audit Committee’s ability to change this selection in the future. The affirmative vote of a majority of the votes properly cast (in person or by proxy) is required for approval of this proposal. Abstentions, because they are not votes cast, are not counted for this proposal and will have no effect on the outcome. 
The Board recommends a voteFOR the approval of this proposal. The Board recommends a vote FOR the approval of this proposal. Fees Incurred from PricewaterhouseCoopers LLP The following table below shows the fees paid or accrued for the audit and other services provided by PwC for 20162019 and 2015:2018. | | | | | | 2019 | | | 2018 | | | | | 2016 | | | 2015 | | | | | | | | | | Audit Fees (1) | | $ | 3,948,896 | | | $ | 3,670,368 | | | $ | 2,694,660 | | | $ | 4,460,048 | | Audit-Related Fees (2) | | | 212,284 | | | | 19,500 | | | | 134,428 | | | | 419,467 | | Tax Fees (3) | | | 288,973 | | | | 258,839 | | | | 150,044 | | | | 630,000 | | All Other Fees (4) | | | 19,604 | | | | 142,547 | | | | 5,400 | | | | 77,542 | |
(1) | Audit fees represent fees for professional services provided in connection with the audit of our financial statements, including the audit of the internal controls over financial reporting, the review of our quarterly financial statements, review of the sale of our Lloyd’s of London business, the Chaucer group in 2018, and audit services provided in connection with statutory or other regulatory filings. |
(2) | Audit-related fees consisted primarily of actuarial review related to the Chaucer sale (2018), attestation services, services provided in connection with reviews by state insurance departments, and other consulting services. Increase in audit-related fees in 2016 was primarily attributable to audit-related work on the Company’s 2016 $375 million senior, unsecured debt offering. |
(3) | Tax fees consisted of tax services and consulting related to the Chaucer sale (2018) and for legal entity restructuring undertaken by the Company. |
(4) | Other services included miscellaneous consulting services and purchased software and miscellaneous data analytics.software. |
Fees and Pre-Approval Policy The Audit Committee is responsible for overseeing and approving the audit fee negotiations associated with the Company’s retention of PwC. In addition, the Audit Committee is required to pre-approve all services performed by the independent auditor. At the beginning of each annual audit cycle, the Audit Committee pre-approves certain categories of audit, audit-related and other services, but such projects within these categories with fees greater thanexpected to be $250,000 or equal to $250,000greater must be specifically approved. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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The Chair of the Audit Committee (or, in his absence, any other member of the Audit Committee) has the authority to pre-approve other audit-related and non-audit services to be performed by the independent auditors and associated fees, provided that such services are not otherwise prohibited and any decisions to pre-approve such services and fees are reported to the full Audit Committee at its next regular meeting. During 2016,2019, the Audit Committee reviewed and pre-approved all services performed by the independent auditor, including non-audit services, in accordance with the policy set forth above. The Audit Committee reviews and considers aggregate fees and other factors for all audit-related and non-audit services compared to the overall audit fee in assessing the independence of PwC. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 20
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Audit CommitteeCommittee Report Review of Audited Financial Statements with Management The Audit Committee reviewed and discussed with management the audited financial statements of the Company. Review of Financial Statements and Other Matters with Independent Auditors An integral part of the audit process is to ensure that the Audit Committee receives information regarding the scope and results of the audit. Various communication requirements pertaining to the conduct of an audit exist to enhance the information flow and to assist the Audit Committee in discharging its oversight responsibility. In this regard, the Audit Committee discussed with the Company’s independent, registered public accounting firm, PricewaterhouseCoopers LLP, the matters required to be discussed by Auditing Standards No. 16, Communication with Audit Committees, issued by the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee also received written disclosures and a letter from PricewaterhouseCoopers LLP regarding its communications with the Audit Committee concerning independence from the Company, pursuant to applicable requirements of the PCAOB, and has discussed with PricewaterhouseCoopers LLP its independence from the Company. The Audit Committee has considered whetherand determined that the provision of the non-audit professional services toapproved by the CompanyAudit Committee in 20162019 is compatible with maintaining PricewaterhouseCoopers LLP’s maintaining its independence from the Company. Responsibility and Oversight Management is responsible for the Company’s financial statements, the overall reporting process and the system of internal control over financial reporting. PricewaterhouseCoopers LLP, as our independent, registered public accounting firm, is responsible for conducting annual audits and quarterly reviews of the Company’s financial statements and expressing an opinion as to the conformity, in all material respects, of the annual financial statements with generally accepted accounting principles in the United States and expressing an opinion on the effectiveness of our internal control over financial reporting as of the end of the fiscal year. In performing their oversight responsibility, the members of the Audit Committee rely, without independent verification of the information provided to them, on the representations made by management and PricewaterhouseCoopers LLP. Recommendation that Financial Statements be Included in the Annual Report Based on the reviews and discussions referred to above and relying thereon, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20162019 for filing with the SEC. Other Matters The Audit Committee satisfied its responsibilities under its Charter for the year 2016.2019. For additional information on the duties and responsibilities of the Audit Committee, see the sections of this Proxy Statement entitled “Related-Person Transactions” (page 9), “Board Committees – Audit Committee” (page 12), “Board’s Role in Risk Oversight” (page 16), and the Audit Committee charter, available on our website, www.hanover.com, under “About Us-Corporate Governance-Committee Charters-Audit Committee” or from our Corporate Secretary. In accordance with the rules of the SEC, this report is not to be deemed “soliciting material,” or deemed to be “filed” with the SEC or subject to the SEC’s Regulation 14A, other than as provided in Item 407 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent the Company specifically requests that the information be treated as soliciting material or specifically incorporates it by reference in documents otherwise filed. February 16, 201720, 2020 AUDIT COMMITTEE Joseph R. Ramrath,Michael D. Price, Chair
Richard H. BoothJane D. Carlin
Daniel T. HenryKathleen S. Lane
Harriett “Tee” Taggart The Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that THG specifically incorporates this information by reference, and it shall not otherwise be deemed filed under such Acts. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy StatementTHE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 21
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EXECUTIVE COMPENSATIONCOMPENSATION | Note Regarding Non-GAAP Financial Measures - The discussion of our results in this CD&A includes a discussion of our operating income (includingbefore interest expense and excluding the Fourth Quarter Reserve Adjustment, as defined below),income taxes (“operating income”) and ex-cat operating income (including and excluding the Fourth Quarter Reserve Adjustment), and net premium written excluding the impact from the sale of the U.K. motor division.income. Each of these financial measures is a non-GAAP financial measure. Reconciliations to the most directly comparable GAAP measure and/or explanations of how we calculate these measures are contained inAppendix B to this Proxy Statement, which is incorporated herein by reference. |
Compensation Discussion and Analysis (“CD&A”) The Compensation and Human Capital Committee (the “Committee”), in consultation with the Board’s Committee of Independent Directors (the “CID”), is responsible for reviewingestablishing and establishingmonitoring our executive compensation programs. More specifically, the Committee is responsible for approving the compensation for our executive officers, including those identified in the Summary Compensation Table on page 5740 (our “named executive officers,” or “NEOs”), subject, in the case of our CEO, to ratificationapproval by the CID. Although this discussion and analysis refers principally to compensation of our NEOs, the same general compensation principles and practices apply to all of our executive officers. Leadership Transition
During 2016, we announced the hiring of Mr. Zubretsky as our new CEO and Mr. Farber as our new CFO. Mr. Zubretsky succeeded Mr. Eppinger, who after 13 years as our CEO, announced in September of 2015 that he planned to retire effective immediately following the appointment of his successor. Mr. Farber succeeded Mr. Bullis, who was serving as CFO in an interim capacity while we sought a permanent replacement following the untimely death in 2015 of our previous CFO, David Greenfield. Because the compensation packages for each of the individuals serving in these roles during 2016 were established, in the case of our departing executives, with the understanding that there would be a mid-year transition, and in the case of Mr. Zubretsky and Mr. Farber, in an effort to recruit and entice these individuals to join the Company, the rationale and elements of compensation for each of these individuals was unique and not necessarily consistent with the annual pay decisions for our other NEOs or senior executives. Accordingly, the compensation for the individuals serving as our CEO and CFO will often be discussed separately.
Additionally, since at the time 2016 pay decisions were made, it was understood that both Mr. Eppinger and Mr. Bullis would be leaving the company mid-year, when we are otherwise discussing the compensation of our NEOs, as a group, for 2016 this discussion will generally exclude Messrs. Eppinger and Bullis, whose compensation will be discussed separately, as noted above. It will include the compensation for Messrs. Robinson and Slabbert, who were employed at the time such pay decisions were made, but who have also since separated from the Company in September 2016 and February 2017, respectively. We believe this approach will provide a more representative view of our pay programs with respect to our executive team.
Executive Summary and Overview Fiscal 20162019 Highlights While in part dampened by net unfavorable prior year loss and loss adjustment expense development from our domestic operations of $174.1 million during the fourth quarter of 2016 (the “Fourth Quarter ReserveAdjustment”)(see discussion in “2016 Executive STIP” below), our 2016Our 2019 performance remainedwas strong, with significant contributions from virtually every component of our business. Highlights include:
Net Income - – net income of $155.1$425.1 million; Operating Income - pre-tax– operating income of $322.8$453.6 million; Ex-Cat Operating Income - – ex-cat operating income of $447.9$622.9 million; | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Efficient Deployment of Excess Capital – repurchased approximately 4.2 million shares of our Common Stock at a cost of $563.6 million; returned $7.25 per share to shareholders in the form of special dividends at a cost of approximately $288.6 million; and repaid $125 million of our Federal Home Loan Bank advances at a cost of approximately $151 million; Execution of Other Strategic Objectives – executed on several major strategic priorities, as discussed under “Short-Term Incentive Compensation” below; Stock Price Appreciation – the price of our Common Stock increased by 17%; Dividend Yield – increased our ordinary quarterly dividend by 8.0% to $0.65 per share, or $2.60 annualized; TSR - – total shareholder return of 62.5%69.75% (assuming reinvestment of dividends) for the three-year period ending on December 31, 2016;2019; Net Premium Written - – approximately 1.6%4.5% increase in net premium written from 2015 (excluding impact from sale of U.K. motor division in 2015);written; Dividend Yield and Stock Repurchases - increased our quarterly dividend by 8.7% to $0.50 per share, and repurchased approximately 1.3 million shares of Common Stock for approximately $105.6 million;
Book Value - book value per share increased 1.8% from 2015;
| • | | • | IndustryCompany Recognition - – recognized byForbes as one of “America’s Best Mid-SizeMid-size Employers” for a fifth consecutive year; earned a perfect score on The Corporate Equality Index and was recognized as a best place to work for LGBTQ equality by the Human Rights Campaign Foundation; named “Top Charitable Contributor” by Boston Business Journal; recognized by Women’s Forum of New York for actively advancing women on corporate boards; joined the CEO Action for Diversity and Inclusion pledge; and recognized by Institutional Investor for our ESG and corporate governance practices.
|
Strategic Objectives - executed on several major strategic priorities, as discussed under “2016 Executive STIP” below.
THE HANOVER INSURANCE GROUP 20162020 PROXY STATEMENT 22
2019 Pay Decisions During 2016,2019, we maintained our commitment to “pay for performance”, continuingperformance,” and continued to emphasize variable compensation over fixed pay, and further aligning our compensation programs with evolving best practices.pay. To that end, during 2016:2019: 
 Variable Compensation Opportunity - As described in "2019 NEO Pay Mix" below: NEO Variable Compensation = over 74% of total target compensation package Approx. 65% of variable compensation is long-term equity tied to stock performance Approx. 35% of variable compensation is cash tied to performance Short-Term Incentive Plan – As described in “Short-Term Incentive Compensation” below, strong underlying performance and achievement of strategic objectives resulted in a funding level at 110% of target PBRSU Payout – Three-year total shareholder return of 69.75% (assuming reinvestment of dividends) resulted in performance at the 88th percentile as compared to a pre-identified set of peers, and accordingly, our performance-based restricted stock units (“PBRSUs”) for the 2017-2019 period were earned at 150% of target (0%) Threshold (25%) Target (100%) Maximum (150%) Payout (150%) | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Additionally, ourOur compensation decisions reflect, in part, the overwhelmingstrong support our shareholders have expressed by approving our “say on pay” proposals. In each year since we began holding an annual “say on pay” vote, more than 95% of the shares cast on these proposals have been voted in favor of our executive pay programs and practices.
THE HANOVER INSURANCE GROUP 20162020 PROXY STATEMENT 23
2019 NEO Pay Mix The following charts represent the 20162019 pay mix for Mr. Zubretsky,John C. Roche, our President and CEO, and our other NEOs as a group, (excluding Messrs. Eppinger and Bullis), expressed as a percentage of total target compensation opportunity for the year.  
CEO Target Compensation Average All Other NEO Target Compensation Annual Base Salary Short-Term Incentive Compensation Long-Term Incentive Compensation 20% 54% 26% 44% 30% 26% Variable Compensation 80% Variable Compensation 70% term incentive Relationship Between Pay and Performance One of the primary objectives in the design and implementation of our executive compensation programs is to ensure that a meaningful relationship exists between the compensation earned by our executives and the overall success of our organization. This objective, however, mustis also be weighed against other important considerations, such as the importance of rewarding individual achievement, recognizing the longer-term value of achieving strategic and operating objectives, attracting and retaining key executives, and maintaining stability in our organization. Theorganization, demonstrating leadership capabilities and promoting what we call our “CARE” values (Collaboration, Accountability, Respect, Empowerment), which includes supporting our inclusion and diversity objectives. To that end, when making compensation decisions, the Committee also gives consideration toconsiders events or circumstances that we have limited ability to manage, such as unusual weather-related losses and catastrophes. In an effort tocatastrophes, and other significant contributions and/or achievements of our executives. To achieve these objectives, we design our executive compensation programs to include what we believe is an appropriate mix of fixed versus variable compensation elements. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Over the past three years, variable compensation opportunities (long-and short-term incentive target awards) have comprised nearly three-quarters of our NEOs’ total target annual compensation opportunity, nearly two-thirds of which has been in the form of long-term equity awards tied to stock price performance. We believe tying such a large portion of our NEOs’ total target compensation opportunity to variable compensation, while providing competitive levels of base salary, strikes an appropriate balance between compensation that is fixed and that which may fluctuate based on company and individual performance, and has resulted in a meaningful relationship between both our short- and long-term performance over the period and pay actually earned and realized by our executives.NEOs. To demonstrate the relationship between pay and performance, compensation consultants and proxy advisory firms have promoted the use of various “realized,” “realizable” or “earned” pay formula analyses. We believe such an analysis isanalyses are useful and may serve as a valuable tooltools to measure the effectiveness of our compensation program design, but we recognize that no standard definition of “realized,” “realizable” or “earned” pay has emerged, and each variation utilized by consultants and proxy advisory firms has significant limitations. Accordingly, rather than devise and illustrate alternative formulaic measures, we believe an examination of variable compensation earnings over the past three years sufficiently demonstrates the connection between our overall performance and the amounts earned by our NEOs. By most measures, we have demonstrated very strong performance over the past three years. During this period, we achieved high levels of operating income, our stock price appreciated 52%50%, our ordinary annual dividends paid per share increased over 24%20% ($1.522.04 per share in 20142017 to $1.88$2.45 per share in 2016)2019), and we returned over $474.9 millionapproximately $1.2 billion to shareholders in the form of stock buy-backs and dividend payments. Moreover, we significantly strengthened our balance sheet and continued to diversify our business across product lines and geographies and managed throughgrew net written premium for our domestic operations by over 18%. In addition to our financial performance, during the transitionsperiod we executed on several key strategic priorities, including: the sale of our CEOLloyd’s of London business, the Chaucer group, and CFO.related capital deployment actions; THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 24
increased investments in technology with an emphasis on modernizing our platforms and advancing innovation and digitization initiatives; and continued progress on inclusion and diversity, cultural and human capital development. We believe that our executive compensation programs over this period appropriately rewarded our executives for the value generated for our shareholders. Short-Term Incentive Compensation Awards Year | | Performance Measure Targets* | | Actual Results/ Percent of Target* | | Payout Relative to Target Award | | | | | | | | 2017 | | Operating Income - $468M - $508M Ex-Cat Operating Income - $681M - $721M Pre-Established Strategic Priorities | | $336.3M - 53% $718.9M - 100% Achieved | | 95% | 2018 | | Operating Income - $425M - $459M Ex-Cat Operating Income - $619M - $653M Pre-Established Strategic Priorities | | $406.5M - 95% $625.7M - 100% Achieved | | 100% | 2019 | | Operating Income - $449M Ex-Cat Operating Income - $652M Pre-Established Strategic Priorities | | $453.6M - 103% $622.9M - 93% Achieved | | 110% |
| | | | | | | | Year | | Performance Measure Targets | | Actual Results /
Percent of Target | | Payout Relative
to Target Award | | 2014 | | Operating Income - $390M - $430M Ex-Cat Operating Income - $625M - $665M Pre-Established Strategic Priorities | | $406.2M - 100% $629.2M - 100% Achieved - 100% | | 100% | | 2015 | | Operating Income - $445M - $485M Ex-Cat Operating Income - $680M - $720M Pre-Established Strategic Priorities | | $465.6M - 100% $646.9M - 92% Achieved - 100% | | 100% | | 2016* | | Operating Income - $455M - $495M Ex-Cat Operating Income - $705M - $745M Pre-Established Strategic Priorities | | $322.8M - 52% $447.9M - 0% Achieved - 100% | | 51% |
* | Represents payout amountOperating and Ex-Cat Operating Income Targets and Actual Results/Percent of Target for participating NEOs. For additional details, please see “2016 Executive STIP” beginning2017 includes target measures and results of our former Chaucer segment. These figures have not been restated in accordance with GAAP to exclude the results of this segment. In contrast, targets and results for 2018 and 2019 consist solely of our domestic businesses, which explains the reductions in targets from 2017. Accordingly, targets and actual results for 2018 and 2019 are not comparable to 2017. In addition, in 2019 the Committee set the Operating Income and Ex-Cat Operating Income targets as single targets, rather than as ranges, as was the case in 2017 and 2018. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2019 Annual Report on page 39.Form 10-K for restated operating and ex-cat operating income excluding the former Chaucer segment, for 2017. |
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Long-Term Incentive Compensation: PBRSUs Vesting During 2014, 2015with Performance Periods Ending in 2017, 2018 and 20162019* Year Ended | | Target (100%) | | 3-Year Total Shareholder Return | | Relative Total Shareholder Return | | Payout | | | | | | | | | | 2017 | | Three-Year Relative Total Shareholder Return at the 50th Percentile | | 59.81% | | 64th Percentile | | 129% | 2018 | | | 43.55% | | 58th Percentile | | 115% | 2019 | | | 69.75% | | 88th Percentile | | 150% |
| | | | | | | | | | Year Ended | | Target (100%) | | 3-Year Total
Shareholder
Return | | Relative Total
Shareholder
Return | | Payout | | 2014 | | Relative Total Shareholder Return at the 50th Percentile | | 121.51% | | 87th Percentile | | 150% | | | | | | | | | | | 2015 | | | 133.81% | | 96th Percentile | | 150% | | | | | | | | | | | 2016 | | | 62.48% | | 79th Percentile | | 150% | | | | | | | | | |
* | Table does not reflect off-cycle awards made in connection with Mr. Farber’s hiring in 2016 or Mr. Salvatore’s hiring in 2017. |
Long-Term Compensation: Options Granted in 2014, 20152017, 2018 and 20162019* | | | | FY End 2017 | | FY End 2018 | | FY End 2019 | Year of Option Award | | Option Exercise Price** | | THG Closing Price | | Intrinsic Value† per Option | | THG Closing Price | | Intrinsic Value† per Option | | THG Closing Price | | Intrinsic Value† per Option | | | | | | | | | | | | | | | | 2017 | | $85.87 | | $108.08 | | $22.21 | | $116.77 | | $30.90 | | $136.67 | | $50.80 | 2018 | | $104.11 | | N/A | | $116.77 | | $12.66 | | $136.67 | | $32.56 | 2019 | | $117.22 | | N/A | | $136.67 | | $19.45 |
| | | | | | | | | | | | | | | | | | | | FY End 2014 | | FY End 2015 | | FY End 2016 | Year of
Option
Award | | Option Exercise Price | | THG Closing Price | | Intrinsic Value per Option | | THG Closing Price | | Intrinsic Value per Option | | THG Closing Price | | Intrinsic Value per Option | | 2014 | | $57.99 | | $71.32 | | $13.33 | | $81.34 | | $23.35 | | $91.01 | | $33.02 | | 2015 | | $70.24 | | N/A | | $81.34 | | $11.10 | | $91.01 | | $20.77 | | 2016* | | $82.74 | | N/A | | $91.01 | | $8.27 |
* | DoesTable does not reflect 2016off-cycle awards to Messrs. Zubretsky and Farber because each received off-cycle awardsmade in connection with their hiring.Mr. Salvatore’s hiring in 2017. |
** | As adjusted to reflect the payment of special dividends during 2019. |
† | Intrinsic Value is calculated as the difference between the applicable THG Closing Price and the Option Exercise Price. |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 25
Other Significant Compensation Practices | ✓ | Equity Awards – our long-term awards for NEOs have historically been granted exclusively in the form of equity-based awards, ensuring the value of such awards at exercise or settlement is tied to our stock price and aligned with shareholder interests; |
| ✓ | Vesting - – our long-term equity incentives, including performance-based incentives, generally vest over a period of three years to ensure that our executives maintain a longer-term view of shareholder value creation and to encourage retention; |
| ✓ | Maximum Payout Caps – our variable short- and long-term incentive plans are capped at a maximum payout level, and the Committee retains discretion to reduce or eliminate payments to NEOs under the annual short-term incentive compensation program; |
| ✓ | Clawback Policy - – we maintain a clawback policy that requires NEOs, in certain circumstances, to return cash and equity incentive compensation payments if our financial statements are restated as a result of their wrongdoing. Additionally, the terms of our equity award agreements requiresubject the executive to the potential return of the value received upon vesting or exercise of such awardawards in the event the executive breaches certain non-solicitation, non-interference or confidentiality provisions or otherwise violates our Code of Conduct; |
| ✓ | Limited Perquisites - – we limit theprovide limited perquisites provided to our executives; |
| ✓ | Prohibition on Pledging/Hedging - – pursuant to our insider trading policy, executives and directors are prohibited from pledging any of their THG shares orsecurities, and all officers, directors and employees are prohibited from hedging their exposure to ownership of, or interests in, our stock and from engaging in speculative transactions with respect to our stock;securities; |
| ✓ | Stock Ownership Guidelines - – we require our executives to maintain substantial levels of ownership of our stock to ensure that their interests are effectively aligned with those of our shareholders (see “Stock Ownership Guidelines for Named Executive Officers and Directors” beginning on page 6)4); |
| ✓ | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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| ✓ | Contractual Protections for the Company - – every executive is subject to non-solicitation, non-interference and confidentiality agreements that extend one year or more beyond termination of employment; |
| ✓ | No Dividend Equivalent Rights - time- and performance-based restricted stock units and options do not carry dividend equivalent rights;
|
| ✓ | No Re-pricing of Stock Option Grants - – we have never re-priced stock option grants; |
| ✓ | Limited Tax Gross-Ups - new participants – none of our NEOs (other than Mr. Huber whose terms of participation in the plan have not changed since the plan was adopted in 2008 and who is expected to retire from the Company on April 1, 2020) are entitled to receive a “280G tax gross-up” payment under our Employment Continuity Plan (the change in control or “CIC Plan”) are not entitled to receive any “280G tax gross-up” payments;; and |
| ✓ | “Double Trigger” for Change in Control Benefits - – our CIC Plan and, with a limited exception for “retirement-eligible employees,” our long-term incentive award agreements, each contain “double trigger” provisions that generally require an involuntary or constructive termination of employment in connection with a change in control as a condition to receiving change in control benefits. |
In summary, our NEO compensation has been significantly affected by our performance and, with respect to long-term incentive awards, our stock price.price, have a significant impact on our NEO compensation. The Committee continues to granttargetcompensation at levels that it believes are appropriate in light ofunder current circumstances, butactual compensation is, and is expected to continue to be, highly dependent on our financial performance and stock price appreciation. Executive Compensation Policy and Objectives The overall objectives of our executive compensation programs are to: attract and retain qualified, high-performing individuals who will contribute to our continued success; balance risk and reward and tie a significant portion of compensation to overall performance;
motivate executives to achieve our financial and business objectives;objectives, balancing risk and reward;
| • | incentivize executives to manage and invest in the long-term, sustained success of the Company; |
encourage our executives to promote our “CARE” values, including our commitments to inclusion and diversity and human capital development; and align the long-term interests of our executives with those of our shareholders. Each component of compensation is intended to achieve particular objectives, and the entire compensation package is designed to align with our business strategy and be reasonably competitive in the marketplace. Although we do not have a policy for a fixed allocation between either cash and non-cash or short-term and long-term incentive compensation, we design our NEO compensation packages with greater emphasis on variable compensation tied to performance rather than base salary, and a significant portion of total targetedtarget compensation is in the form of long-term, equity-based awards, which are subject to substantial vesting requirements and the value of which are dependent on our stock performance. This approach is intended to balance short- and long-term performance goals and promote shareholder value. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 26
Setting Executive Compensation Use of Compensation Consultants and Comparative Data In evaluating our executive compensation programs, the Committee is advised by its independent compensation consultant, F.W. Cook, as discussed in the Corporate Governance“Board Committees-Compensation and Human Capital Committee” section beginning on page 17.12. F.W. Cook provides information as to compensation levels for comparable positions at other companies that compete with us for executive talent. For 2016,2019, this data was prepared based upon the publicly disclosed proxy materialsstatements of the group of property and casualty insurance companies listed below (the“Comparative Proxy Data” and such companies, the “Comparative Proxy Data Companies”) and market pay data collected from the Mercer U.S. Property & Casualty Insurance Company Survey (size-adjusted data collected from 5554 property and casualty insurance companies) (the“Comparative Market Data”). The companies included in the group providing the Comparative Proxy Data Companies were determined by the Committee based upon the recommendation of F.W. Cook and remain unchangedCook. For 2019, the Committee removed from the group used in 2015. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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list of Comparative Proxy Data Companies: (i) The Progressive Corporation, due largely to its disparate size and differing business mix; (ii) White Mountains Insurance Group, Ltd after its divestiture of OneBeacon Insurance Group, Ltd, which significantly altered its ongoing business composition; and (iii) XL Group plc after its acquisition by AXA. Additionally, for 2019, the Committee added to the list of Comparative Proxy Data Companies each of Axis Capital Holdings Limited and Kemper Corporation due to their relative size, comparable business mix and overlap with peer groups established by certain proxy advisory firms. Comparative Proxy Data Companies | | | • Alleghany Corporation | • Mercury General Corporation | • American Financial Group, Inc. | • Old Republic International Corporation | • Axis Capital Holdings Limited | • Selective Insurance Group, Inc. | • AmericanCincinnati Financial Group, Inc.Corporation | | • State Auto Financial Corporation | • Cincinnati Financial Corporation | | • The Chubb Corporation*
| • CNA Financial Corporation
| | • The Hartford Financial Services Group, Inc. | • HCC Insurance Holdings, Inc.* | | • The ProgressiveKemper Corporation
| • Markel Corporation
| | • White Mountains Insurance Group, Ltd.
| • Mercury General Corporation
| | • W.R. Berkley Corporation | • Old Republic InternationalMarkel Corporation | | • XL Group plc
|
* Given that the merger of Chubb with ACE Limited and the acquisition of HCC were not announced until late 2015, pay practices set forth in their 2015 proxy statements were still deemed suitable for comparison purposes.
The Committee reviews the Comparative Proxy Data and the Comparative Market Data, including information on base paysalary levels, target and actual total cash levels, long-term incentive opportunities and target and actual total compensation levels, as well as comparative financial metrics, such as direct premiumpremiums written, market capitalization, and net income. While the Committee believes the Comparative Proxy Data and the Comparative Market Data are useful, such data is intended solely to serve as one of several reference points to assist the Committee in its compensation discussions and deliberations. Accordingly, rather than relying on or setting benchmarks for our executive compensation solely against such data, the Committee instead relies on the general knowledge, experience and judgment of its members, both with regard to competitive compensation levels and the relative success that we have achieved in recruiting and retaining personnel. Role of Executive Officers in Compensation Decisions and CEO Performance Review Committee meetings are regularly attended by our CEO, General Counsel, Chief Human Resources Officer and our ChairmanChair of the Board (who is an independent director, but not a Committee member), as well as a representative of F.W. Cook. Each individual generally participates in these meetings and provides counsel and advice at the Committee’s request. Other independent directors and members of management also attend meetings from time to time. In addition, the Committee regularly meets in executive sessionssession without members of management present. An executive is not permitted to be present while the Committee conducts its deliberations on that executive’s compensation. Following a process that was established by the Nominating and Corporate Governance Committee (the “NCGC”) and the Board, our independent ChairmanChair of the Board leads an annual performance review of the CEO. This review includes discussions with directors and officers, and a review of the CEO’s self-assessment and of our financial and operational performance. The Committee annually considers the CEO’s performance and other relevant external factors and makes a recommendation to the CID for the CEO’s annual compensation. The Committee’s recommendation and the results of thisthe performance evaluation are then reviewed and discussed by the CID. Preliminary or final resultsResults of this review process help form the basis for establishing the CEO’s annual compensation package, although the process was less formal at 2016 year-end in light of the transition to a new CEO.package. The CID has final authority to ratifyapprove the compensation of our CEO. For compensation decisions regarding NEOs (other than the CEO), the Committee primarily considers the recommendations of our CEO, its own observations regarding each executive, as well as information provided by F.W. Cook. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 27
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Principal Components of Executive Compensation 
Base Salary paid bi-weekly throughout 2019 Short-Term Incentive – based on 2019 Company and individual performance. Lump sum paid in March 2020. Long-Term Incentive – Time-Based and Performance-Based Restricted Stock Units. Cliff vest in 2022* Long-Term Incentive – Non-Qualified Stock Options. 1/3 of the award vests on the first three anniversaries of grant 2019 2020 2021 2022 Options have a 10-year term (2029) 
* | For Chaucer, amount is generally paid in two equal tranches during April 2017 and January 2018. |
** | For Mr. Slabbert, also consistsThe number of PBRSUsperformance-based restricted stock units that are earned only towill be based on the extent that Chaucer achieves predetermined levels ofCompany’s three-year relative total shareholder return and average operating return on allocated capitalequity (“ROE”) over the period.performance period (2019-2021). |
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Annual Base Salary Annual base salary is designed to provide a fixed level of compensation to our NEOs baseddepending on their roles, skills, qualifications and competitive pay levels (based upon the Comparative Proxy Data and Comparative Market Data), as well as to attract (in the case of our new CEO and CFO) and retain employees. Base salary, however, is only one of several different components of an executive’s total compensation package and makes up a significantly smaller portion of total target compensation than the combined short- and long-term incentive opportunities described below. 20162019 Base Salary Rate
NEO | | 2019 Base Salary Rate ($) | | % Change* | | | | | | John C. Roche | | 950,000 | | 6 | President and CEO | | | | | Jeffrey M. Farber | | 685,000 | | 5 | EVP and CFO | | | | | J. Kendall Huber | | 575,000 | | — | EVP and General Counsel | | | | | Richard W. Lavey | | 525,000 | | 2 | EVP and President, Hanover Agency Markets | | | | | Bryan J. Salvatore | | 520,000 | | 2 | EVP and President, Specialty | | | | |
| | | | | | | NEO | | 2016 Base Salary ($) | | | % Change | Joseph M. Zubretsky President and CEO | | | 1,000,000 | | | N/A | Jeffrey M. Farber EVP and CFO | | | 650,000 | | | N/A | J. Kendall Huber EVP and General Counsel | | | 510,000 | | | 2.0 | John C. Roche EVP, President, Commercial Lines* | | | 485,000 | | | 5.4 | Former Officers | | | | | | | Frederick H. Eppinger Former President and CEO | | | 1,000,000 | | | — | Eugene M. Bullis Former EVP and Interim CFO | | | 1,200,000 | | | — | Andrew S. Robinson Former EVP, Corporate Development and President, Specialty | | | 465,000 | | | 1.1 | Johan G. Slabbert Former CEO, Chaucer | | | 418,500 | | | 21.6 |
* As previously announced byPercentage change measured against base salary rate in effect as of the Company, on April 1, 2017 Mr.end of 2018. With respect to Messrs. Roche, will assume the role of EVP, President, Agency Markets. In each case, the 2016Farber, Lavey and Salvatore, their annual base salary adjustments were each deemed warranted by the Committee in light of the NEO’s expertise, and experience of the NEO, theand breadth of his responsibilities, and competitive compensation trends. For Mr. Zubretskyafter a review of Comparative Proxy Data and Mr. Farber, base salary levels were established by the Committee and the CID, in part, to attract these individuals to join the Company (see “Management Transition Arrangements” below for additional details). Given his interim role, substantially all of Mr. Bullis’s total annual compensation was in the form of base salary. Mr. Slabbert’s increase reflected his promotion to CEO of Chaucer in September 2015.Comparative Market Data.
Short-Term Incentive Compensation Our short-term incentive compensation programs areprogram is an annual performance-based bonus programs intended to provideprogram that provides cash compensation opportunities for our NEOs. Opportunities are generally targeted at a percentage of | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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annual base salary, baseddepending on each NEO’sparticipant’s role, competitive pay levels (based upon the Comparative Proxy Data and Comparative Market Data) and overall pay package. Actual payouts under the program’s terms could range from 0% to approximately 195% of the target award based upon Company and individual performance, as discussed below. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 28
Specifically, these programs arethis program is designed to motivate and reward: achievement of annual targeted financial goals; overall contribution to the Company; achievement of annual operating business goals and strategic priorities that are linked to overall corporate financial results and other business priorities; and demonstration of core leadership competencies.competencies and “CARE” values. As in past years, at the beginning of 2016, we implemented two separate short-term incentive plans for our NEOs: the 2016 Executive2019 Short-Term Incentive Compensation Program (“2016 Executive STIP”)Target Awards
NEO | | Target Award as a % of Base Salary Rate | | | | | | John C. Roche | | 130% | | Jeffrey M. Farber | | 100% | | J. Kendall Huber | | 85% | | Richard W. Lavey | | 80% | | Bryan J. Salvatore | | 80% | |
In 2019, the target award was increased for our domestic NEOs; and the 2016 Chaucer Annual Bonus Scheme (the “2016 Chaucer STIP”) for(i) Mr. Slabbert, our then President and CEORoche from 110% to 130% of Chaucer. This year, however, due to the mid-year appointments of a new CEO and CFO, we also implemented customized short-term incentive plans (“STIPs”) for the individuals serving in these roles. Each of these programs is discussed below. Since Mr. Robinson terminated employment mid-year and received severance compensation upon such termination (see “Robinson Separation Agreement” below), he was not entitled to a payment of a 2016 Executive STIP award. Chief Executive Officer Programs
In June, Mr. Zubretsky succeeded Mr. Eppinger as our President and CEO. This was expected, since Mr. Eppinger announced during the previous year his desire to retire. Accordingly, given the unique circumstances associated with the planned transition, the Company established separate STIPs for each executive.
Joseph Zubretsky
With respect to Mr. Zubretsky, his 2016 STIP award provided for a payment equal to the lesser of (i) 1% of our pre-tax operating income (adjusted to exclude interest expense and the impact of catastrophes) (“ex-Cat Operating Income”) measured over the six-month period ending December 31, 2016, or (ii) $1,400,000, which is 140% of his 2016 annualized base salary, (see “Zubretsky Offer Letter” below). When choosing this metric and performance period, the Committee took into account that Mr. Zubretsky would have limited influence on the Company’s underlying financial performance during the last six months of 2016(ii) Messrs. Lavey and that his primary responsibility during this time wasSalvatore from 75% to manage the transition and develop a long-term strategy for the organization.
Additionally, the bonus formula was selected in part to recruit Mr. Zubretsky and to also enhance deductibility of his award under Section 162(m) of the Internal Revenue Code (“Section 162(m)”). One percent of our ex-Cat Operating Income for the six-month period ending December 31, 2016 was $1.506 million. Accordingly, Mr. Zubretsky’s 2016 STIP award was $1,400,000.
For 2017, Mr. Zubretsky’s STIP award is on substantially the same terms and conditions as our other domestic NEOs.
Frederick Eppinger
During September 2015, Mr. Eppinger announced his intention to retire effective upon the appointment of his successor. At that time, it was expected that his successor would soon be appointed and that he would
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terminate his employment with the Company during the early part of 2016. Accordingly, when the 2016 Executive STIP was approved in early 2016, Mr. Eppinger was not granted an award opportunity under the plan. Instead, the Committee agreed that Mr. Eppinger would be eligible for a short-term award targeted at 140% of his annualized base salary (similar to his 2015 target STIP award), but pro-rated to reflect the number of days he served as our CEO during 2016 (see “Eppinger Transition Arrangements” below). The actual amount to be paid, however, was to be based upon the Committee’s evaluation of both the Company’s and his performance during his tenure as CEO during 2016. It was intended, generally, that his payout would be reasonably commensurate with the funding levels for short-term awards for other executive officers.
Based upon (i) Mr. Eppinger’s continued leadership, focus, and commitment during the transition to a new CEO; (ii) the Company’s overall performance (as discussed above in “Fiscal 2016 Highlights”); and (iii) the funding level achieved under the Leadership Short-Term Incentive Compensation Program (the “Annual Bonus Plan”) (discussed below), Mr. Eppinger’s 2016 pro-rated STIP award was $357,000 (i.e., 51% of target, pro-rated based on time of service as CEO).
Chief Financial Officer Programs
In October, Mr. Farber joined the Company, and he succeeded Mr. Bullis as our CFO in November. Mr. Bullis had been appointed interim CFO following the passing of David Greenfield in late 2015. Given the unique circumstances associated with the planned transition, the Company established separate STIPs for each executive.
Jeffrey Farber
With respect to Mr. Farber, his 2016 STIP award provided for a payment equal to the lesser of (i) 1% of our ex-Cat Operating Income measured over the three-month period ending December 31, 2016, or (ii) 50% of his 2016 annualized base salary ($325,000) (see “Farber Offer Letter” below). When choosing this metric and performance period, the Committee considered the level of payment that would be required to recruit Mr. Farber and that Mr. Farber would have limited influence on the Company’s underlying financial performance during the last few months of 2016. Due to the Fourth Quarter Reserve Adjustment (discussed below), we did not record any ex-Cat Operating Income during the three-month period ending December 31, 2016. Accordingly, Mr. Farber did not receive a 2016 STIP Award.
For 2017, Mr. Farber’s STIP award is on substantially the same terms and conditions as our other domestic NEOs.
Eugene Bullis
Because Mr. Bullis served in an interim capacity, substantially all of his compensation was in the form80% of base salary. However,These increases were made in lieurecognition of any short or long-term compensation for 2016, he was given a $100,000 retention award (See “Bullis Interim CFO Arrangements” below).
Programs for Other NEOs
2016 Executive STIP
The 2016 Executive STIP is intended to comply with the “qualified performance-based compensation” requirements of Section 162(m) and thereby, to the extent it so qualifies, enable bonuses paid to our NEOs under
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it to be treated as tax deductible by the Company. The 2016 Executive STIP was established by the Committee pursuant to the shareholder-approved 2014 Executive Short-Term Incentive Compensation Plan. Under the 2016 Executive STIP, a maximum funding pool for annual awards (“Maximum Funding Pool”) is determined in accordance with the level of achievement of a pre-determined performance metric. For 2016, the Maximum Funding Pool for awards to our NEOs was set at 2% of 2016ex-Cat Operating Income,each NEO’s increased expertise, experience and the maximum award payable under the 2016 Executive STIP to each NEO was equal to thelesserbreadth of (i) 17.5%their respective responsibilities, and after a review of the Maximum Funding Pool, or (ii) 200% of the NEO’s target award. For 2016, the target STIP award for Messrs. HuberComparative Proxy Data and Roche was 75% and 65% of base salary, respectively.Comparative Market Data.
The Committee hasretains discretion subject to the maximum amounts described above, to determine the individual bonus amount to be paid to each NEO. The Committee does not intend for the Maximum Funding Pool to represent an expectation as to the amounts to be paid to the NEO. Rather, an individual NEO’s actual award under the 2016 Executive STIP is determined after considering: | • | | the funding level achieved under theAnnual Bonus Plan, as discussed below;
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our financial performance and success in achieving other financial, operating and strategic goals;
historical compensation awards; and
the executive’s overall performance and contribution.
For 2016, the maximum funding available for Messrs. Huber and Roche under the plan was $1.4 million. Because the maximum funding level under the plan produced a larger funding pool than the Committee determined was necessary for awarding bonuses consistent with its objectives, the Committee awarded less than the maximum amount available to be awarded under the plan.
In determining the individual awards for our NEOs, for 2016,2019, the Committee primarily considered: the funding level achieved under the Annual Bonus Plan;our Short-Term Incentive Compensation Plan (“STIP”); and each NEO’s overall individual performance. Each of these is described below. The funding level achieved under the Annual Bonus Plan.STIP. The Annual Bonus PlanSTIP is a performance-based bonus program that provides incentive cash compensation opportunities to key domestic officersapproximately one-half of our workforce, including our NEOs and employees, excludingeach of our NEOs.executive officers. For 2016,2019, potential funding under the Annual Bonus PlanSTIP ranged from 0% to a maximum of 200%approximately 195% of target based on the following three equally weighted performance components:metrics: (i) as-reported operating income (pre-tax and excluding interest on debt) (“Operating Income”)(25% weighting); (ii) ex-Cat Operating Income;ex-cat operating income (50% weighting); and (iii) the strategic objectives discussed below.below (25% weighting). The Committee chose this combination of performance metrics because thesethey are the primary measures by which the Board evaluates our financial and operating performance. Achievement of these performance metrics is expected to enhance our stock value and shareholder returns in both the short- and long-term. However,While the mix of metrics and basic overall design of the program remained unchanged for 2019, the Committee expresslymade the following adjustments to the program: modified the weighting of the three metrics to enhance focus on ex-cat operating income; eliminated the use of a target performance “range,” establishing instead a single, dollar-based target; and adjusted the payout slopes associated with the operating and ex-cat operating income metrics. These changes were implemented to: better align the program with our operating plan goals; and place additional emphasis on performance factors within management’s near-term control, including achievement of key near-term strategic priorities that we believe will enhance our long-term success and sustainability. Actual funding is not intended to be formulaically obtained by strict application of these items, and the Committee retains the discretion to increase or decrease the funding pool and individual awards based upon any factorfactors it deems appropriate.appropriate and in the best interests of the Company. Set forth below are the Operating Incomeoperating income and ex-Cat Operating Incomeex-cat operating income levels required to obtain threshold, target and maximum funding levels for the plan: Funding Level | | Operating Income (in millions) | | Ex-Cat Operating Income (in millions) | | | | | | Threshold (25% and 50% Funding, respectively) | | $180 | | $456 | Target (100% Funding) | | $449 | | $652 | Maximum (175% and 200% Funding, respectively) | | $561 | | $782 |
| | | | | Funding Level | | Operating
Income (in millions) | | Ex-Cat Operating
Income (in millions) | Threshold (50% Funding) | | $315 | | $490 | Target | | $455 - $495 | | $705 - $745 | Maximum | | $645 | | $970 |
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The minimum levelslevel of Operating Incomeoperating income and ex-Cat Operating Incomeex-cat operating income required to achieve target funding levels werewas increased by $10.0$24 million (2.2%(5.6%) and $25.0$33 million (3.7%(5.3%), respectively, overabove 2018 targets, and were $42.5 million (10.0%) and $26.3 million (4.2%), respectively, above the prior year to reflectactual levels achieved in 2018. Targets established for 2019 were set at levels reflecting the THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 29
Company’s anticipated increased earnings power and planned strategic investments, as well as our desire to set goals that, while reasonably obtainable, represent a legitimate and meaningful challenge to the organization. During 2016, and after applying the Fourth Quarter Reserve Adjustment, Operating Income2019, operating income was $322.8$453.6 million and ex-Cat Operating Incomeex-cat operating income was $447.9$622.9 million. Accordingly, under the formula set forth in the Annual Bonus Plan,STIP, these two funding components of the program were achieved at 52%103% and 0%93% of target, respectively. In addition to the financial metrics discussed above, for 2016,2019, the following strategic objectives were considered: | | | | | Strategic Objective | | Measure of Achievement | | | • continued improvement for financial prospectsResponsibly Grow Business | | • see “Fiscal 2016 Highlights” above4.5% growth in net premium written • improved core earningsContinued shift to higher margin business • Continued rigor associated with monitoring catastrophe risk and appetite | • succession planning and talent developmentEffectively Manage Capital | | • improved internal mobilitySuccessfully completed two accelerated stock repurchase agreements utilizing $400 million of deployable equity from the sale of Chaucer to buy back approximately 3.2 million shares • initiated talent development programs for select key senior leadersFinalized sale of the remaining portion (Irish and Australian entities) of the Chaucer group of companies • AM Best upgraded THG’s group issuer credit rating to “bbb+” • Managed return on equity levels to target • Entered into five-year $200 million unsecured revolving credit facility | • Build the organization of the future by creating and investing in a sustainable organization tied to our business strategy | • Continued expansion in agency appointments • Finalized rollout of our “TAP” agent sales platform across entire Personal Lines geographic footprint • Successfully launched Personal Lines business in the State of Vermont • Established Data Analytics & Governing Council and hired Chief Data Officer • Maintained financial expense rigor, as evidenced by year-over-year expense ratio improvement | • effective selection, transitionBuild the organization of the future by creating and onboarding/assimilation of leadershipinvesting in a culture tied to our business strategy | | • successfully recruited ��Approximately 90% of our entire workforce completed inclusion and onboarded a new CEO, CFO and EVP, Corporate Development and Strategydiversity workshops • developed an assimilation strategy for new leaders | • continueContinued to enhance technology platforms
| | • improved capacity management, financial governanceflexible work arrangements with over 50% of our workforce now benefiting from such arrangements, enhancing our employee recruitment and workforce strategyretention
• completed six major technology releasesContinued progress in attracting and retaining women and people of color within our workforce • implemented an enterprise-wide vulnerability management platformOur CEO signed the CEO Action for Diversity and Inclusion Pledge, the largest CEO-driven business commitment to advance diversity and inclusion within the workplace • Continued to reinforce CARE values, explicitly including them in all employee performance evaluations • Increased emphasis on leadership and development of employees in performance evaluations for all managers |
After reviewing the Company’s overall financial performance during 2019 (measured in 2016,part by our operating and ex-cat operating income results), the Committee determined thatsignificant progress achieved with respect to the strategic objectives described above, had been achieved in full. Applying the formula set forth in the Annual Bonus Plan, the Company’s performance measured against the pre-determined metrics produced a funding level at 51% of target. While the Committee is reluctant to fund its bonus plans materially above the levels determined in accordance with its pre-established metrics, the Annual Bonus Plan, by its terms, expressly grants the Committee the discretion to increase or decrease funding levels, to the extent it believesand other factors, such levels are not commensurate with actual Company performance during the relevant year, or are otherwise unreasonable, or not in the Company’s best interest, or unfair. The reservation of this discretion is critical to mitigate risk and provide the needed flexibility to avoid unintended consequences and address unforeseen circumstances that could lead to inappropriately low or high funding levels. In determining the funding level for the Annual Bonus Plan, the Committee made the determination to consider, but to reduce the impact of, the Fourth Quarter Reserve Adjustment. The Committee established the Company funding level at approximately 75% of target. However, as discussed below, the Committee made a different determination with respect to the level of adjustmentdifficulty associated with achieving these pre-set goals and our strong performance relative to the industry, the Committee determined to fund the STIP at 110% of target. This funding level was the primary reference point for determining individual NEO awards underbecause the 2016 Executive STIP.
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The primary considerations for adjusting the funding level under the Annual Bonus Plan were as follows:
excluding the impact of the Fourth Quarter Reserve Adjustment, Operating Income and ex-Cat Operating Income were achieved at 100.8% ($496.9 million) and 80.7% ($622.0 million) of target, respectively, and produced an Annual Bonus Plan funding level at 94%, reflecting strong performance during the performance period;
recognizing a portion of the impact of the Fourth Quarter Reserve Adjustment on 2016 STIP payments holds leadership accountable, while acknowledging that reserving actions are primarily attributable to business written in prior years;
had the amount of the Fourth Quarter Reserve Adjustment been recognized during the applicable prior accident year periods, the estimated impact on previous year STIP funding would not have been significant;
a disproportionate amount of the Fourth Quarter Reserve Adjustment was due to performance in discreet business units;
progress the Company had made on other financial, operating, organizational and strategic objectives; and
a desire to maintain morale and retention during a period of senior management transition.
The Committee ordinarily intends that the percentage of target paid to NEOs be comparable, generally, to the percentage paid to all participants under the Annual Bonus Plan and, as a result, the funding level for this plan typically serves as the primary reference point for determiningSTIP.
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 30
NEO individual NEO awards under the 2016 Executive STIP. This year, however, with respect to the NEOs, the Committee thought it advisable to pay NEOs consistent with the unadjusted formulaic result. Accordingly, while other employees of the Company may benefit from the adjustments approved by the Committee, the primary reference point for NEOs’ bonuses under the 2016 Executive STIP was the 51% unadjusted formulaic funding level. performanceNEO’s overall individual performance. An important factor in determining the level of payment to our NEOs is the Committee’s evaluation of each NEO’s overall performance within his area of responsibility. Set forth below are various contributions and accomplishments considered by the Committee in its evaluation of the overall individual performance of Messrs. Huberour NEOs. John C. Roche Financial metrics, including net income of $421.5 million; operating income of $453.6 million; and Roche.4.5% increase in net premium written; Successful deployment of the proceeds from the sale of Chaucer; Further refined and enhanced our business strategy, including development of financial institution and cyber products, and reductions of exposure to product lines challenged from a profitability standpoint; Oversight of “agile” investment process, leading to investments to modernize operating platforms and enhanced digitization of operations; Enhanced human capital strategy with an emphasis on talent development and succession planning, including organizational awareness and commitment to inclusion and diversity, and enhanced leadership accountability; and Focused Environmental, Social & Governance improvements to enhance sustainability. Jeffrey M. Farber | • | Led effective corporate finance, investments, actuarial, risk management, corporate development and financial reporting group; |
Led capital management actions, including the deployment of the proceeds from the sale of Chaucer; and Led efforts to improve expense management and business investment performance producing expenses below budget and improvements in agile investment review and decision-making. J. Kendall Huber managed ourManaged legal and compliance organization within budget and headcount expectations,internal expense metrics, and supported various regulatory, compliance, legal and related matters, including settlement of significant litigation matters;
providedServed as interim head of human resources;
Provided counsel and advice to the Board and management in connection with leadership transition and other issues; supported various Government Affairs activities and strengthened our overall compliance function; and
assisted management and the Board with respect to leadership transitions and various human resources, corporate, investor relations and corporate finance issues.
John C. Roche
successfully led the business insurance lines and field operations;
assumed management responsibility for the domestic specialty businesses formerly managed by Mr. Robinson;matters; and
provided advice toAdvised the Board and management with respect to corporate governance matters.
Richard W. Lavey | • | Led Personal Lines and Core Commercial businesses, resulting in solid growth and improved combined ratio for the portfolio; |
Improved agency penetration and expanded agency distribution, particularly in targeted geographies for Personal Lines and Small Commercial; Provided leadership support in connection with leadership transitioninnovation initiatives; and other issues. Assisted in the design and construction of a digital strategy and roadmap. Bryan J. Salvatore Led Specialty portfolio and delivered solid results, despite elevated losses in certain property lines and adverse prior year development in Hanover Programs; | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement•
| | 42 | | Led and executed numerous underwriting and portfolio mix actions in Marine, Excess and Surplus, Professional Lines and Healthcare, Programs and Specialty Industrial; |
Created critical new capabilities in Retail Excess and Surplus, Cyber and Financial Institutions;Continued to execute a multi-year focus on expense management, with continued reduction in expense ratio; and Implemented organizational restructuring to better position Specialty for the future. The 2016 Executive2019 STIP awards were as follows: NEO | | Award ($) | | | | | | | | | | NEO | | Award ($) | | | Percent of Target | | J. Kendall Huber | | | 195,000 | | | | 51% | | John C. Roche | | | 161,000 | | | | 51% | |
2016 Chaucer STIP
The 2016 Chaucer STIP is an annual performance-based bonus program that provides incentive cash compensation opportunities to key officers and employees of Chaucer, including Mr. Slabbert. The Committee elected to adopt a separate plan for Chaucer employees because Chaucer is, for the most part, operated and evaluated as a separate entity. In addition, in order to attract and retain talent, we must offer pay and incentive programs competitive with the London and Lloyd’s markets.
For 2016, potential funding under the 2016 Chaucer STIP ranged from 0% to a maximum of 200% of target based on Chaucer’s post-tax return on allocated capital (a return on allocated capital calculation obtained by dividing Chaucer’s adjusted after-tax operating income by Chaucer’s allocated capital, as determined by the Company) (“Chaucer ROAC”). The Committee chose the Chaucer ROAC performance metric with the view that it is a reasonable measure for evaluating relative performance, is consistent with our strategic goals and philosophy, and is generally consistent with Chaucer’s historical pay practices. Set forth below are the performance levels generally required to obtain threshold, target and maximum funding levels for this plan.
| | | Funding Level
| | 2016 Chaucer ROAC | | Threshold (25% Funding)John C. Roche
| | 6.5%1,358,500 | | TargetJeffrey M. Farber
| | 14.0%753,500 | | MaximumJ. Kendall Huber
| | 24.0%537,625 | | Richard W. Lavey | | 485,000 | | Bryan J. Salvatore | | 470,000 | |
Once the overall plan funding level has been determined, each participant’s actual payment under the plan is determined according to the following formula: 25% of the funding pool is distributed pro rata to participants based upon their pre-determined individual target awards, and the remaining 75% of the funding pool is distributed to participants based upon individual performance. Each participant’s total award is paid in two equal tranches: the first tranche to be paid in April 2017 and, provided the participant remains employed by Chaucer through such date, the second tranche is to be paid in January 2018. This tiered payment plan is consistent with Chaucer’s historical pay practices and is designed to serve as a retention tool. However, the Committee retains the discretion to increase or decrease the funding pool and/or Mr. Slabbert’s individual award, based upon any factors it deems appropriate. Mr. Slabbert’s target award for 2016 was fixed at 110% of his base salary.THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 31
For 2016, Chaucer ROAC was achieved at a level that permitted plan funding at approximately 112% of target. Mr. Slabbert’s total award under the program was $515,592 (£381,920). The Company agreed to pay Mr. Slabbert at the formulaic funding level in connection with his separation from the Company (see “Slabbert Separation Agreement” below).
Long-Term Incentive Compensation Our long-term incentives are designed to: encourage management to achieve long, as well aslong- and short-term goals, invest in our future and sustained success, and avoid short-term excessive risk taking; align management’s financial incentives with our stock price and the longer-term financial interests of shareholders; and recruit and retain key leaders. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Factors considered in determining our NEOs’ award opportunities under the long-term program include: the importance of the NEO’s responsibilities within the organization; the expected contributions of each NEO to our long-term performance; the expense attributable to the award; the dilutive impact to shareholders; recruitment and retention considerations; awards made to other executive officers; the value of prior compensatory awards; historical compensation; and the projected value of prior grants and existing vesting schedules. As a condition to each long-term incentive compensation award, each participant must agree to certain non-solicitation, non-interference and confidentiality provisions in our favor. 20162019 Long-Term Awards
For 2016, depending on the NEO, the Committee usedThe 2019 long-term awards for our NEOs were comprised of a combination of (i) performance-based (return on equity) restricted stock units (“ROE PBRSUs”), (ii) performance-based (relative total shareholder return) restricted stock units (“RTSR PBRSUs”); (iii) time-based restricted stock units (“TBRSUs”); and (iv) stock options. Each component represented approximately 25% of the total value of the award based upon its grant date fair value. For each of our domestic executive officers who received grants, other than Mr. Zubretsky2019, we added ROE PBRSUs and Mr. Farber,TBRSUs to the Committee granted a mix of all three awards. To reinforceawards to include an absolute performance metric and improve the connection betweenretentive nature of the long-term award and THG’s overall performance, neither Mr. Zubretsky nor Mr. Farber received any TBRSUs. Instead, each was awarded stock options and PBRSUs. With respect to Mr. Slabbert, consistent with prior practice for Chaucer’s CEO, he was awarded a combination of PBRSUs and TBRSUs. Because it was anticipated that both would retire from the Company during 2016, neither Mr. Eppinger nor Mr. Bullis were granted 2016 long-term awards.
award. The mix of awards for our NEOs iswas intended to provide a balanced portfolio of equity awards and was chosen to motivatetie the value able to be realized with respect to an award to long-term stock appreciation, throughwhile encouraging retention and, in some cases, the achievement of operating goals, while encouraging retention.absolute or relative performance goals. Long-term awards serve to align management’s financial incentives with longer-term, sustained growth in our stock price, and are subject to multi-year vesting periods to encourage both retention and a longer-term stake in ourthe well-being and prosperity.prosperity of all of our stakeholders. In order2019, the grant date fair value of the awards for Messrs. Roche, Lavey and Salvatore were increased to attractrecognize their increased experience and recruit Mr. Zubretsky, in additionsignificance to an annual award, he was given a one-time sign-on awardthe long-term success of equal value to his 2016 long-term award, consisting of both PBRSUsthe Company and stock options. Accordingly, his aggregate 2016 award is not indicative of future annual awards. Additionally, with respect to | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Mr. Farber, his 2016 award was adjusted, in part, to reflect his hire date. Accordingly, his 2016 award is also not indicativecompetitive pay levels after a review of future annual awards (see “Management Transition Arrangements” below for additional details).Comparative Proxy Data and Comparative Market Data.
20162019 Long-Term Awards (Number of Shares Underlying Awards) *
NEO | ROE PBRSUs (target) | RTSR PBRSUs (target) | TBRSUs | Stock Options | | | | | | John C. Roche | 5,446 | 4,872 | 5,446 | 35,883 | Jeffrey M. Farber | 3,038 | 2,717 | 3,038 | 20,013 | J. Kendall Huber | 1,676 | 1,499 | 1,676 | 11,043 | Richard W. Lavey | 1,362 | 1,218 | 1,362 | 8,973 | Bryan J. Salvatore | 1,152 | 1,031 | 1,152 | 7,593 |
| | | | | | | | | | | | | NEO | | PBRSUs
(target) | | | TBRSUs | | | Options | | Joseph M. Zubretsky | | | 36,300 | | | | — | | | | 277,100 | | Jeffrey M. Farber | | | 6,010 | | | | — | | | | 47,500 | | J. Kendall Huber | | | 2,000 | | | | 2,000 | | | | 19,980 | | John C. Roche | | | 2,015 | | | | 2,015 | | | | 20,160 | | | | | | Former Officers | | | | | | | | | | Andrew S. Robinson* | | | 2,015 | | | | 2,015 | | | | 20,160 | | Johan G. Slabbert* | | | 2,180 | | | | 940 | | | | — | |
* | All awards were forfeited in connection with the NEO’s separation from the Company.Reflects initial issuance and is not adjusted for accrued dividend equivalents. |
Description of 2016 Performance-Based Restricted Stock UnitsRTSR PBRSUs Except with respectThe RTSR PBRSUs:
are earned only to Mr. Slabbert’s award (discussed in greater detail below), the PBRSUs:extent that our three-year (2019-2021) total shareholder return as compared to the companies that comprise the PBRSU Comparison Group set forth below (“Relative Total Shareholder Return” or “RTSR”) places our performance above a certain percentile; | • | | are earned only to the extent that our three-year (2016-2018) total shareholder return as compared to the companies that comprise the PBRSU Comparison Group set forth below (“Relative Total Shareholder Return” or “RTSR”) places our performance above a certain percentile (for Mr. Zubretsky and Mr. Farber, RTSR is measured from the grant date of their awards through December 31, 2018);
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may be achievedearned between 0% and 150% of the target award, based upon the level of RTSR achieved; and are subject to a three-year time-based “cliff” vesting requirement (assuming achievement of performance goals, and continued employment through the vesting date, the RTSR PBRSUs vest on the third anniversary of the grant date). THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 32
The table below sets forth the level of RTSR required to achieve various payouts under the program: RTSR | | | | RTSR
| | Percentage of Target Award Achieved† | ³ 75.0th %tile
| | 150% | 62.5≥75.0th %tile
| | 125%150% | 50.062.5th %tile
| | 100%125% | 37.550.0th %tile
| | 75%100% | 25.037.5th %tile
| | 50%75% | <25.0th %tile
| | 50% | <25.0th %tile | | 0% |
† | In the event that our total shareholder return is negative for the three-year period, payout is capped at 100% of the target award even if our RTSR is above the 50th percentile. If RTSR falls below the 25th percentile, but our total shareholder return exceeds our three-year compounded dividend yield during the period, payout will equal 25% of target. |
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RTSR PBRSU Comparison Group | | | • Allied World Assurance Company Holdings, AGAmerican Financial Group, Inc. | | • Old Republic International Corporation | • American Financial Group, Inc. | | • OneBeacon Insurance Group Ltd.
| • American International Group Inc.
| | • ProAssurance Corporation | • Argo Group International Holdings Ltd. | | • RLI Corp. | • Chubb Limited (formerly ACE Limited) | | • Safety Insurance Group, Inc. | • Cincinnati Financial Corporation | | • Selective Insurance Group, Inc. | • CNA Financial Corporation | | • State Auto Financial Corporation | • Donegal Group Inc. | | • The Allstate Corporation | • EMC Insurance Group Inc. | | • The Hartford Financial Services Group, Inc. | • Employers Holdings, Inc. | | • The Navigators Group, Inc. | • Horace Mann Educators Corporation | | • The Progressive Corporation | • Infinity Property and CasualtyKemper Corporation | | • The Travelers Companies, Inc. | • KemperMarkel Corporation | | • United Fire Group Inc. | • MarkelMercury General Corporation | | • W.R. Berkley Corporation | • Mercury General Corporation
| | • XL Group plc
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We chose the 3026 companies listed above because we believe these companies are most representative of the companies against which we compete for business. This list is the same as the one used for the 2015 PBRSU award2018 PBRSUs, except that three companies (HCC Insurance Holdings, Inc., Meadowbrook InsuranceInfinity Property and Casualty Corporation and XL Group Inc. and The Chubb Corporation)plc were removed as a result of being acquired by or merged with other companies in 2015.due to the fact they were acquired. Although most of the companies that comprise our Comparative Proxy Data Companies are also included in this list, that group of companies wasthe Comparative Proxy Data Companies were specifically chosen because it isthey are representative of the public companies against which we compete for executive talent. The Committee chose RTSR as the performance metric with respect to PBRSUs to further align our NEOs’ interests with those of our shareholders, to encourage a focus on long-term share price performance and to include a metric whichthat explicitly measures our performance against other public companies in our industry. Description of ROE PBRSUs do not carry dividend or dividend equivalency rights. BecauseThe ROE PBRSUs:
are earned only to the extent targeted levels of his role at Chaucerthree-year (2019-2021) average operating ROE (“Operating ROE”) are achieved; may be earned between 0% and to further align his interests with150% of the interests of both the Companytarget award, based upon average Operating ROE achieved; and the Chaucer business, Mr. Slabbert’s PBRSU award was divided equally into two components, each of which was are subject to a three-year time-based “cliff” vesting. One halfvesting requirement (assuming achievement of his award wasperformance goals, and continued employment through the vesting date, the ROE PBRSUs vest on the same terms as thatthird anniversary of the other NEOs described above, andgrant date). The table below sets forth the second halflevel of his award was onaverage Operating ROE required to achieve various payouts under the following terms:program: Average Operating ROE (2019-2021) (%) | | Percentage of Target Award Achieved | | | | ≥13.0 | | 150.0 | 12.5 | | 140.9 | 12.0 | | 131.8 | 11.5 | | 122.7 | 11.0 | | 113.6 | 10.5 | | 104.5 | 9.25 – 10.25 | | 100.0 | 9.0 | | 96.2 | 8.5 | | 88.5 | 8.0 | | 80.8 |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 33
Average Operating ROE (2019-2021) (%) | | Percentage of Target Award Achieved | | | | 7.5 | | 73.1 | 7.0 | | 65.4 | 6.5 | | 57.7 | 6.0 | | 50.0 | <6.0 | | 0.0 |
could beAverage Operating ROE is calculated by adding the annual Operating ROE for each year of the performance period and dividing the resulting sum by three. Subject to certain adjustments set forth below, annual Operating ROE is calculated by dividing our annual operating income (post-tax and including interest on debt) by our average shareholders’ equity (excluding accumulated other comprehensive income) during the year. For purposes of the foregoing calculations, annual operating income excludes:
catastrophe losses (net of reinsurance) in excess of 6.0% of net earned onlypremium; provided, however, during each year of the performance period operating income shall include catastrophe losses (net of reinsurance) of no less than 3.0% of net earned premium; impact of reserve development (favorable or unfavorable) attributable to (i) certain discontinued legacy reinsurance pools business, (ii) accident years ten or more years prior to the extent Chaucer achieved a certain levelyear recorded, or (iii) the disposal of Chaucer ROAC foran insurance portfolio through either sale or reinsurance of prior accident year reserves; expenses or liabilities associated with corporate lawsuits arising from actions, events or omissions that occurred more than 10 years prior to the years 2016-2018;year recorded; and | • | | may have been achieved between 0% to 200% of target, based upon the level of Chaucer ROAC achieved (threshold, target, and maximum payouts achieved at> 6.5%, 14%,> 24%, respectively).
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Mr. Slabbert’s 2016 equity awards were forfeited in connection with his separationthe impact of federal income tax changes from the Companycurrent statutory rate of 21%.
The foregoing adjustments to operating income are designed to mitigate the impact (positive or negative) (i) related to catastrophe losses significantly in 2017.excess of or below planned levels, and (ii) of events and strategic decisions that generally occurred prior to the tenure of our current executive leadership team. The Committee chose the Operating ROE metric because it believes it is an appropriate measure for evaluating operating performance and is consistent with our strategic goals and philosophy. Accordingly, the Committee believes the achievement of the Operating ROE targets should increase share value and shareholder return. Description of Time-Based Restricted Stock UnitsTBRSUs The TBRSUs will vest on the third anniversary of the grant date and convert into an equivalent number of shares of Common Stock, in each case, generally subject to the executive remaining employed by usthe Company through the applicable vesting date. The principal purpose of the awards is to encourage executive retention. Dividend Equivalents | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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To the extent a cash dividend is paid with respect to our outstanding Common Stock prior to the vesting date for the applicable award, holders of PBRSUs and TBRSUs do not carryaccrue dividend equivalents in the form of additional PBRSUs or dividend equivalency rights.TBRSUs, as applicable. Such additional accrued restricted stock units vest only to the extent the underlying award vests in accordance with its terms. Description of Stock Options The exercise price for all stock option awards is the fair market value at closing on the NYSE on the date of grant. Each stock option has a ten-year term and, provided the NEO remains employed by us through suchthe applicable vesting dates, vests as to one-third of the underlying shares on each of the first three anniversaries of the grant date. Stock options directly align a portion of total compensation with our stock performance since they become valuable only if and to the extent the NEO vests in the award and our share price increases over a longerthe period of time aftermeasured from the date of grant. Additionally, because stock options do not fully vest for three years, they encourage executive retention. Prior Plan Year Long-Term Award Pay-Outs As previously reported in our 2016 Proxy Statement, during 2016,During 2019, the final 50%PBRSUs (earned at 115% of the stock options, PBRSUstarget) and TBRSUs granted in 2012 vested; the PBRSUs and TBRSUs granted in 2013 vested;February 2016, and one-third of the stock options granted in 2013, 2014,each of 2016, 2017, and 20152018 (with the exception of Mr. Salvatore’s option award granted on June 12, 2017 that provided for a two-year cliff vesting), vested. In addition, (i) one-third of Mr. Roche’s TBRSUs granted on May 15, 2017, (ii) Mr. Farber’s PBRSUs granted on October 3, 2016 (earned at 150% of target), and (iii) Mr. Salvatore’s PBRSUs granted on June 12, 2017 (earned at 150% of target), each vested. For additional information regarding vesting of awards in 2016,2019, please see “Option Exercises and Stock Vested in 2016”2019” on page 65.46.
DuringIn the first halfquarter of 2017:
2020, the PBRSUs (earnedgranted in February 2017, which were subject to a three-year (2017-2019) RTSR performance metric, were earned at 150% of target award level based on a 62.5% total shareholder return overRTSR performance in the 2014-2016 period, as described above)88th percentile relative to our peer group, and TBRSUs granted in 2014 vested; one-third of the stock options granted in each of 2014, 2015 and 2016 vested; and Mr. Slabbert’s 2014 long-term cash award granted under Chaucer’s 2014 Long-Term Cash Incentive Plan vested at 112% of target ($252,214 (£186,825)).
Management Transition Arrangements
Zubretsky Offer Letter
In connection with Mr. Zubretsky’s hire, the Company and Mr. Zubretsky entered into an offer letter, the material terms of which are as follows:
fixed Mr. Zubretsky’s annual base salary at $1,000,000;
established the terms of Mr. Zubretsky’s 2016 STIP (see “Short-Term Incentive Compensation” above for additional details); and fixed his target 2017, STIP award at 140% of base salary;
set the target value of Mr. Zubretsky’s 2016 long-term equity award at approximately $3,000,000, to be comprised of approximately equally weighted grants of PBRSUs and stock options and provided for a sign-on long-term equity award identical to the 2016 long-term equity award (see “Long-Term Incentive Compensation” above for additional details);
provided that Mr. Zubretsky will participate in the Company’s CIC Plan as an “Executive Tier Participant” with a 2x “Multiplier” (without a Section 280G tax gross-up)(see “Potential Payments Upon Termination or Change in Control” beginning on page 69);
provided that in the event Mr. Zubretsky’s employment is involuntarily terminated, other than for cause or in connection with a change in control, or he terminates his employment with the Company for “good reason,” he will be eligible to receive severance compensation equal to 2.4 times his base salary paid in a lump sum and one year’s continued vesting of his then outstanding equity awards (see “Potential Payments Upon Termination or Change in Control” beginning on page 69);
provided that Mr. Zubretsky will be entitled to reimbursement for certain relocation expenses and will be eligible to participate in the Company’s benefit plans applicable to other senior executives of the Company; and
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required Mr. Zubretsky to agree to certain non-solicitation, non-interference and confidentiality provisions in favor of the Company that will survive for at least one year following his termination of employment.
The terms of Mr. Zubretsky’s offer letter were agreed upon in order to recruit Mr. Zubretsky to join the Company. The compensation package was established by the Committee and the CID based upon consultation with F.W. Cook on the overall package and the competitive data provided by F.W. Cook from the Comparative Proxy Data Companies, taking into consideration the compensation he received from his prior employer, the projected compensation package that would be necessary to attract other potential qualified applicants in the market at that time, as well as the compensation paid to other Company executives.
Farber Offer Letter
In connection with Mr. Farber’s hire, the Company and Mr. Farber entered into an offer letter, the material terms of which are as follows:
fixed Mr. Farber’s annual base salary at $650,000;
established the terms of Mr. Farber’s 2016 STIP (see “Short-Term Incentive Compensation” above for additional details); and fixed his 2017 target STIP award at 100% of base salary;
set the target value of Mr. Farber’s 2016 long-term equity award at approximately $900,000, to be comprised of approximately equally weighted grants of PBRSUs and stock options (see “Long-Term Incentive Compensation” above for additional details);
provided that Mr. Farber will participate in the CIC Plan as an “Executive Tier Participant” with a 2x “Multiplier” (without a Section 280G tax gross-up) (see “Potential Payments Upon Termination or Change in Control” beginning on page 69);
provided that in the event Mr. Farber’s employment is involuntarily terminated, other than for cause or in connection with a change in control, or he terminates his employment with the Company for “good reason,” he will be eligible to receive severance compensation equal to 2.0 times his base salary paid in a lump sum and one year’s continued vesting of his then-outstanding equity awards (see “Potential Payments Upon Termination or Change in Control” beginning on page 69);
provided that Mr. Farber will be entitled to reimbursement for certain relocation expenses and will be eligible to participate in the Company’s benefit plans applicable to other senior executives of the Company; and
required Mr. Farber to agree to certain non-solicitation, non-interference and confidentiality provisions in favor of the Company that will survive for at least one year following his termination of employment.
The terms of Mr. Farber’s offer letter were agreed upon in order to recruit Mr. Farber to join the Company. The compensation package was established by the Committee based upon consultation with F.W. Cook on the overall package and the competitive data provided by F.W. Cook from the Comparative Proxy Data Companies, taking into consideration the compensation he received from his prior employer, the projected compensation package that would be necessary to attract other potential qualified applicants in the market at that time, as well as the compensation paid to other Company executives.
Eppinger Transition Arrangements
In September 2015, Mr. Eppinger announced his plans to retire from the Company and resign effective upon the appointment of his successor. In connection with the Board’s acceptance of Mr. Eppinger’s resignation, as well as his willingness to provide transition services as an employee of the Company, it was agreed that he
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(i) would continue to be paid at his then-current level of compensation through December 31, 2015; (ii) would be entitled to receive a base salary of $500,000 for his services to the Company from the period January 1, 2016 through June 30, 2016; (iii) remained eligible to earn his 2015 annual bonus in the ordinary course consistent with past practices; and (iv) would remain entitled to vest in the ordinary course in any equity-based awards held by him in accordance with the terms of such awards.
At its February 2016 meeting, in light of his continued services, the Committee agreed that Mr. Eppinger would also be eligible to receive a pro-rated short-term incentive award for his service as CEO during 2016. The amount, if any, and timing of such award, would be determined by the Committee, in its sole discretion, based upon both his and the Company’s performance during his remaining tenure as our CEO (see “Short-Term Incentive Compensation” above for additional details).
On May 24, 2016, Mr. Eppinger entered into a transition services letter agreement with the Company following Mr. Zubretsky’s appointment, the material terms of which are as follows:
Mr. Eppinger would terminate employment on June 19, 2016 and would be available to provide advice and assistance in an advisory role through December 31, 2016;
Mr. Eppinger would receive a consulting fee of $30,000 per month from July 1 through December 31, 2016;
in recognition that he would have substantially fulfilled the service requirement associated with certain equity awards scheduled to vest in February 2017, at such date Mr. Eppinger would be paid an amount, in cash, equal to 50% of the value of such awards, based upon the Company’s Common Stock value as of the date such awards otherwise would have vested;
we would continue to provide Mr. Eppinger financial planning services through our current provider through December 31, 2016; and
Mr. Eppinger provided a full waiver and release of all claims, agreed not to compete with the Company through December 31, 2016, and reaffirmed certain post-termination covenants (i.e., confidentiality and non-disparagement provisions, each having an indefinite term, and non-solicitation of employees and non-interference with customers and agents, each remaining in effect for two years following termination).
Each of the foregoing arrangements were made in light of Mr. Eppinger’s continued cooperation, focus, dedication and commitment during the management transition.
Bullis Interim CFO Arrangements
In connection with his appointment as Interim Chief Financial Officer and his agreement to remain with the Company through May 13, 2016 (the “Initial Term Date”), the Company and Mr. Bullis entered into an offer letter, the material terms of which were as follows:
his annualized base salary was fixed at $1,200,000. If the Company terminated Mr. Bullis without cause prior to the Initial Term Date, then he would be entitled to his full base salary through the Initial Term Date;
he was paid a one-time, sign-on bonus in the amount of $75,000. The unearned, pro-rated portion of such bonus was refundable under certain situations if Mr. Bullis’s employment was terminated prior to the Initial Term Date;
he was granted 1,222 restricted shares with a grant date value of approximately $100,000. Such restricted shares would vest on the Initial Term Date, provided he was employed by the Company on
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| that date, unless the reason he was not employed was because the Company terminated Mr. Bullis without cause. However, in any case, he was prohibited from transferring the shares until January 1, 2017; and
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he was eligible to participate in the Company’s benefit programs in accordance with their respective terms.
On May 5, 2016, the Company entered into an extension letter agreement with Mr. Bullis to extend his tenure as Executive Vice President – Interim Chief Financial Officer. It provided that he would continue to serve in this role through September 16, 2016 (the “Initial Extension Term”) with a Company option, which was exercised, to extend his services for up to two additional months. His base salary and benefits were unchanged. Additionally, assuming he completed the Initial Extension Term and any extended term as provided above, which he did, he would receive a $100,000 cash bonus.
The amount and mix of compensation for Mr. Bullis was designed to incentivize Mr. Bullis to come out of retirement for a limited period of time to devote his services to the Company in a time of transition and to retain him while we recruited and transitioned to a permanent CFO.
Slabbert Separation Agreement
In connection with Mr. Slabbert’s separation from the Company on February 20, 2017, Chaucer and Mr. Slabbert entered into a separation agreement, the material terms of which are as follows:
Mr. Slabbert was paid one year’s base salary plus the value of certain benefits ($497,610);
Mr. Slabbert received his 2016 STIP award ($515,592) payable in two equal installments during April 2017 and January 2018 and his 2014 LTIP award ($252,214) payable in April 2017;
Mr. Slabbert will receive a pro-rated portion of his 2015 LTIP, the actual amount to be determined at the time such award would otherwise vest and payable at that time; and
Mr. Slabbert provided a full waiver and release of all claims, and agreed to certain post-termination covenants (i.e., confidentiality and non-disparagement, each having an indefinite term, and non-solicitation of employees, non-interference with customers and agents and a limited non-competition provision, each remaining in effect for one year following termination).
Robinson Separation Agreement2019, vested.
In connection with Mr. Robinson’s separation from the Company on September 1, 2016, the Company and Mr. Robinson entered into a separation agreement, the material terms of which are as follows:THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 34
pursuant to the terms of his Leadership Transition Severance Agreement (see below under “Leadership Transition Severance Arrangement”), Mr. Robinson was paid $767,250 (1.65x base salary);
in lieu of a portion of the value that would have been realized upon the vesting of certain outstanding equity awards in February 2017, at such date Mr. Robinson received a $375,000 lump sum cash payment;
Mr. Robinson received a pro-rated portion of his annual Chaucer board fee;
we agreed to continue to provide financial planning services through April 30, 2017, and to provide up to 12 months outplacement services; and
Mr. Robinson provided a full waiver and release of all claims, and reaffirmed certain post-termination covenants (i.e., confidentiality and non-disparagement provisions, each having an indefinite term, and non-solicitation of employees and non-interference with customers and agents, each remaining in effect for two years following termination).
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Other Compensation and Benefits Our NEOs are eligible to participate in all of our employee benefit plans, such as medical, dental, group life, disability and accidental death and dismemberment insurance, our tax-qualified retirement plans, and our employee stock purchase plan, and the Chaucer Share Incentive Plan, in each case on the same basis as other employees in their applicable jurisdiction.employees. In addition, certain of our senior employees, including the NEOs, participate in the following programs: Non-Qualified Retirement Savings Plan Our Non-Qualified Retirement Savings Plan provides additional Company contributions comparable to the benefits whichthat are available to U.S. employees generally under our 401(k) Plan (see page 6747 for additional information), but without regard to the maximum contribution limits under federal tax laws. For the 20162019 plan year, the plan provided eligible employees, including each of our NEOs, other than Messrs. Eppinger, Robinson and Slabbert (who were ineligible to participate in 2016), a 6% employer contribution on total eligible compensation (generally, salary(salary and actual annual short-term incentive compensation, up to target) in excess of federalInternal Revenue Code limits. Such contributions are deferred and credited with interest based on the GATT rate. The amount of total compensation eligible for an employer contribution cannot, however, exceed $1 million minus the limit in effect for our 401(k) Plan under Section 401(a)(17) of the Internal Revenue Code ($265,000280,000 for 2016)2019). We adopted this plan to provideso that U.S.all employees eligible to participate in the plan arewill be entitled to employer contributions equal to the same percentage of total eligible compensation, without regard to the limits under federal tax lawsthe Internal Revenue Code applicable to the 401(k) Plan (subject to the limitations described in the paragraph above), and to be consistent with common market practices. This plan applies equally to all eligible employees who have eligible compensation in excess of federal limits. The plan does not currently provide for additional employee contributions. Though the annual employer contributions to the Non-Qualified Retirement Savings Plan were made during the first quarter of 2017,2020, since such contributions were made with respect to compensation paid in 2016,2019, the Summary Compensation Table (see page 57)40), and Non-Qualified Retirement Savings Plan Table (see page 67)47) reflect such 2017 payments.2020 contributions. Such amounts are similarly included with respect to prior years. Perquisites The Committee reviews, at least annually, the corporate perquisites made available to our NEOs. The Committee believes corporate perquisites should represent a relatively small component of aan NEO’s compensation package. In 2016,2019, perquisites offered to our NEOs were comprised primarily of (i) financial planning services, and (ii) matching contributions (up to $5,000) to eligible tax-qualified charitable organizations. We also provided relocation assistance to Mr. Farber during 2016 pursuant to his offer letter described above. We provide financial planning services to each of our NEOs to minimize distractions and help ensure appropriate focus on his Company responsibilities. The cost for such services is treated as taxable income to the participating executives. Our matching charitable contributions program is designed to encourage participation in charitable organizations and is consistent with our general philosophy of good corporate citizenship. Separately, we encourage ourOur executives and other Company officers and employees are encouraged to actively participate on boards of directors or in other capacities with local non-profit organizations. Additionally, and in lieu of certain relocation benefits provided to Mr. Zubretsky under his offer letter (see “Zubretsky Offer Letter” above), we provided Mr. Zubretsky with the use of a company-provided car and driver to commute to and from his residence. This enables Mr. Zubretsky to devote his commuting time to the business
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of the Company, provide him with additional security and is at an expense that is significantly lower than the relocation expenses provided for in his offer letter.
For more information regarding perquisites, please see the Summary Compensation Table on page 57.40. Amended and Restated Employment Continuity Plan (“CIC Plan”) The purposes of the CIC Plan are to: keep key management employees focused on the interests of our shareholders and to secure their continued services and their undivided attention, dedication and objectivity in the event of a possible change in control; provide job loss protection comparable to the protection provided by competing organizations; and ensure that participants do not solicit or assist in the solicitation of our employees, agents and/or policyholders for a specified period, or disclose any of our confidential or proprietary information prior to or after a change in control. Additionally, the CIC Plan is designed to protect us and our shareholders, who might be affected adversely if management were to be distracted, or were to depart, in the event a change in control transaction were to be rumored or considered. The CIC Plan provides benefits, including cash payments and continuation of health and other benefits, in the event of a termination of employment following a change in control. These benefits are intended to reinforce and encourage the continued attention and commitment of executives under potentially disruptive business circumstances. The Committee determines eligibility for, and level of participation in, the CIC Plan based on the roles, responsibilities and individual circumstances of each executive officer. In assessing participation, the Committee considers, among other things, the critical nature of the individual’s role to the business and the importance of retention of the individual. The determination of participation and level of participation in the CIC Plan is made independent of other compensation considerations. The CIC Plan requires a double-trigger (a change in controland a termination of employment without cause or resignation for good reason) before benefits are payable, and new participants, including Messrs. Zubretskynone of our NEOs (other than Mr. Huber whose terms of participation in the plan have not changed THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 35
since its adoption in 2008 and Farber,who has announced his retirement from the Company, effective April 1, 2020) are not eligible for tax gross-ups related to the special excise tax that may be imposed on such payments. Severance/RetentionSeverance Agreements
Zubretsky and Farber Offer LettersLetter
Pursuant to the terms of Messrs. Zubretsky’s andMr. Farber’s offer letters, each is entitled to certain severance benefitsletter, in the event of(i) his employment is involuntarily terminated, other than in connection with his death, disability, a termination without cause“change in control,” or for “cause,” or (ii) he voluntarily terminates his employment for “good reason.” Please see “Management Transition Arrangements” above for more detailed information regarding these benefits. These benefitsreason” (defined generally to mean a decrease in his base salary or target short-term incentive compensation opportunity, a material and adverse change to his role and responsibility, or a requirement that he relocate), he will be entitled to a lump sum cash severance payment equal to two times his then current base salary and one year’s continued vesting of his then-outstanding equity awards. As a condition to receiving such severance, Mr. Farber would be required to enter into a separation agreement upon terms and conditions acceptable to the Company, including a full release and non-disparagement provision. The terms of Mr. Farber’s offer letter were providedagreed upon in order to Messrs. Zubretsky andrecruit Mr. Farber to entice them to join the Company. Leadership Transition Severance Arrangements In orderEach of our executive officers, including our NEOs (other than Mr. Farber, who has a similar severance arrangement in his offer letter – see above), are parties to ensure the continued focus, undivided attention and service to the Company during our transition to new leadership, the Committee approved severance arrangements, for each domestic executive officer of the Company (excluding Messrs. Eppinger and Bullis, but including Messrs. Huber, Robinson and Roche), the material terms and conditions of which are set forthsummarized below.
In the event the executive (i) the executive’s employment is involuntarily terminated, other than in connection with his or her death, disability, a “change in control,” or for “cause,” or (ii) the executive voluntarily terminates his or her employment for “good reason” (defined generally to mean a decrease in the executive’s base salary or target short-term incentive compensation opportunity, a material and adverse change to the | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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executive’s role and responsibility, or, in certain cases a requirement that the executive relocate), in either case prior to September 1, 2017, the executive will be entitled to a lump sum cash severance payment equal to a pre-established multiple of his or her annual base salary. The amount of the severance award is designed to approximate one year’s cash compensation. For Messrs. Hubercompensation (base salary and Roche, their multiples are 1.75x and 1.65x base salary, respectively. Mr. Robinson’s agreement, which was triggered in September 2016, provided for a multiple of 1.65x base salary.target bonus opportunity). In February 2017, in light of recent additional changes to the executive leadership team, the Committee elected to extend the term of each of the agreements to September 1, 2018.
As a condition to receiving such severance, the executive willwould be required to affirm their confidentiality, non-solicitation, non-interference and other covenants and to enter into a separation agreement upon terms and conditions acceptable to the Company.Company, including a full release and non-disparagement provision. The Committee elected to provide these benefits after considering competitive trends in severance-related benefits. For additional information about our CIC Plan and the various benefits available to our NEOs in the event of termination or a change in control, please see the section entitled “Potential Payments upon Termination or Change in Control” beginning on page 69.48. ChaucerHuber Transition Services Agreement
After twenty years of service to THG, and as previously disclosed, Mr. Huber has indicated his intention to retire from the Company, effective April 1, 2020. Dennis F. Kerrigan, Executive Vice President and Deputy General Counsel, has agreed to assume the role of General Counsel effective upon Mr. Huber’s retirement. To ensure a smooth transition, Mr. Huber agreed, pursuant to a Transition Services Agreement dated March 26, 2020, to be available to the Company as an independent contractor, on a limited, part-time basis, in an advisory role as needed. In this capacity, Mr. Huber will provide advice and assistance to the senior leadership team and will render such other services as may be requested from time to time by the Board Feeof Directors, for a period of four months ending on July 31, 2020. For his services, Mr. Huber will be paid $37,500 per month during the term of the agreement. Mr. Farber and Mr. Robinson received payments of $5,400 and $20,250, respectively, from Chaucer as compensation for service on Chaucer’s board of directors. These payments compensated Messrs. Farber and Robinson for the increased responsibilities associated with service on Chaucer’s board.
Risk Management and Compensation The Committee endeavors to ensure that our compensation programs and practices balance risk and reward, both on an individual and Company-wide basis. To that end, each year a committee led by our Chief Risk Officer and comprised of a cross-section of ourother officers, conducts a review and risk assessment of our material incentive compensation plans. This assessment is reviewed by the Committee in conjunction with its review and approval of the compensation programs for the upcoming year, and by the Committee’s independent compensation consultant. Based upon this analysis, a number of features were identified that mitigate the inherent risks associated with our incentive programs. Factors mitigating risk include: performance goals are believed to be reasonably challenging, but obtainable without sacrificing underwriting discipline;discipline or longer-term objectives; investment income projections included in our operating income financial plans are based upon a prudent investment strategy; a significant portion of each executive’s compensation is based on overlapping long-term incentive awards subject to extended vesting periods;periods, thus encouraging and rewarding a longer-term view of the Company’s success; | • | | • | the funding formula and metrics for our short-term incentive programs establish only theformulaicfunding level.Actualawards to participants are at the discretion of their managers, or in the case of our executive officers, the Committee (and the CID, with respect to the CEO). Accordingly, notwithstanding funding levels, in the event an individual does not |
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| | make valuable contributions to the Company during the year, the participant’s manager, or in the case of our executive officers, the Committee (and the CID, with respect to the CEO), has the discretion to reduce or eliminate the participant’s award; |
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we have a history of exercising reasonable judgment in establishing our reinsurance programs that is transparent to investors through the Business section of our Form 10-K and to the Board of Directors through its regular review of reinsurance programs; executives’ individual goals are reviewed by the Committee each year and are directed at longer-term priorities;
our policy prohibiting directors and executive officers from pledging their shares or entering into hedging transactions involving our stock; we maintain a clawback policy that requires our NEOs, in certain circumstances, to return incentive compensation payments if our financial statements are restated as a result of their wrongdoing;wrongdoing. Additionally, the terms of our equity award agreements require the executive to return the value received upon vesting of such awards in the event the executive breaches certain non-solicitation, non-interference or confidentiality provisions or otherwise violates our Code of Conduct; and our most senior executives, including our NEOs,long-term incentive awards are subject to ourmade exclusively in equity-based grants that, together with robust executive stock ownership guidelines.guidelines, are intended to focus our NEOs on achieving sustainable financial results that are in the long-term interests of our shareholders.
The report issued by our Chief Risk Officer assesses non-management as well as management plans, including sales plans. Sales plans are reviewed to assess realistic achievability of performance targets and incentivization of behavior that is beneficial to the Company and our policyholders. The risk assessment is focused on the reasonableness of metrics, governance and oversight, payment schedules and targets, and the appropriateness of employee training and communication materials. In addition to the various factors mitigating risk discussed above, it is also important to emphasize that each of our compensation programs is developed in the context of our overall financial plan. The detailed financial plan, which includes our short- and long-term financial goals and operating priorities, is reviewed and approved by the full Board of Directors. Accordingly, the independent Board is provided the opportunity to make its own assessment of the risks presented by the financial plan and to require that management implement appropriate changes to ensure that we are not taking imprudent risks that may have a material adverse impact on financial performance. Based on these factors and the analysis presented by management, the Committee determined that our compensation programs for our executive officers and all other employees do not give rise to risks that are reasonably likely to have a material adverse effect on the Company. Equity Grant Procedures Most of our equity awards are made annually during the first quarter at the time the Committee makes its annual executive compensation decisions. The date of this meeting usually is set well in advance and is not chosen to coincide with the release of material, non-public information. Beginning in 2017, for year-to-year consistency and administrative convenience, the Committee elected to make annual equity grants on the last Friday during the month of February. Equity awards made to executive officers, including each of our NEOs, must be specifically approved by the Committee, subject, with respect to the CEO, to ratificationapproval by the CID. For annual equity awards made to other employees, the Committee approves an aggregate number and type of award available for issuance. These awards are then distributed as determined by our CEO based on recommendations from other members of management pursuant to the Company’s long-term awards program.management. Off-cycle awards are generally made only in connection with new hires, promotions, or as needed to retain or reward an employee and must be approved by the Committee for any executive officer. No NEO (other than Messrs. Zubretsky and Farber who joined the Company in 2016)None of our NEOs received an off-cycle award during 2016.2019. The Committee does not have any programs, plans or practices of timing awards in coordination with the release of material, non-public information. The Committee reserves the right, however, to consider such information in determining the date of any award. The exercise price of all options equals the closing price per share of our Common Stock, as reported on the NYSE on the date of grant. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Stock Ownership Guidelines and Policies Against Hedging or Pledging Shares In order to further align the interests of our NEOs with those of our shareholders and to encourage such officers to operate in the best long–term interests of the Company, each NEO is subject to the stock ownership guidelines set forth on page 6.4. As of the date of this Proxy Statement, each of our currently employed NEOs is in compliance with such guidelines. We have adopted aPursuant to our insider trading policy, that prohibitsexecutives and directors are prohibited from pledging any of their THG securities, and all officers, directors and executive officersemployees are strictly prohibited from pledging their shares or entering into hedging transactions involvingany transaction to hedge their economic exposure to ownership of, or interests in, our stock.securities.
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Tax Implications Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for taxable compensation over $1 million paid to certain executives. However, compensation that qualifies as “performance-based compensation”Effective in 2018, there is not subjectno longer any exception to this limitation on deductibility. Performance-baseddeductibility for certain compensation generally includes onlyarrangements qualifying as “performance-based compensation” (e.g., payments that are contingent upon the achievement of pre-established performance objectives, and excludes any fixed or guaranteed payments. Optionoption grants, generally also qualify as performance-based compensation.etc.). The Committee considershistorically considered the impact of the deductibility rules in developing and administering our compensation programs. However,programs and endeavored to design programs and policies to optimize the deductibility of compensation payable to our NEOs, but this consideration iswas always balanced with our primary goal of structuring compensation programs to attract, reward, motivate and retain highly talented executives. Accordingly, since our compensation objectives are not always consistent withIn light of the requirements for full deductibility, we have entered, and maychanges to Section 162(m) included in the future enter, into2017 U.S. tax reform legislation, we expect that compensation arrangements under which payments are not deductible under Section 162(m). to our NEOs and former NEOs in excess of $1 million will be non-deductible to the Company. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy StatementTHE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 38
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Compensation CommitteeCommittee Report Review of Compensation Discussion and Analysis with Management The Compensation and Human Capital Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Recommendation that the Compensation Discussion and Analysis be Included in the 20172020 Proxy Statement Based on the review and discussion referred to above, the Compensation and Human Capital Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s 20172020 Proxy Statement for filing with the SEC. In accordance with the rules of the SEC, this report is not to be deemed “soliciting material,” or deemed to be “filed” with the SEC or subject to the SEC’s Regulation 14A, other than as provided in Item 407 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, except to the extent the Company specifically requests that the information be treated as soliciting material or specifically incorporates it by reference in documents otherwise filed. March 17, 201710, 2020 Members of the Compensation and Human Capital Committee: P. Kevin Condron,Cynthia L. Egan, Chair
Karen C. FrancisDaniel T. Henry
Wendell J. Knox The Compensation Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that THG specifically incorporates this information by reference, and it shall not otherwise be deemed filed under such Acts.Acts. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 39
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 56 | | |
| Note Regarding Currency – Unless otherwise indicated, any amounts set forth in the tables below, or otherwise disclosed herein, that are paid or accrued in U.K. Pounds Sterling (“GBP”), have been converted into U.S. Dollars (“USD”) using the average exchange rate in effect for the period disclosed (1.35 USD/GBP for 2016; 1.53 USD/GBP for 2015; and 1.65 USD/GBP for 2014). |
Summary Compensation Table The following table sets forth the total compensation for our NEOs for 2016, 20152019, 2018 and 2014.2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | | Salary
($) | | | Bonus
($) | | | Stock
Awards
($)
(1)(2)(3) | | | Option
Awards
($) (1) | | | Non-Equity
Incentive Plan
Compensation
($) | | | Change in
Pension Value
and Nonquali-
fied Deferred
Compensation
Earnings
($) (4) | | | All
Other
Compen-
sation
($) (5) | | | Total
($) | | Joseph M. Zubretsky | | | 2016 | | | | 538,462 | | | | — | | | | 2,611,422 | | | | 3,000,232 | | | | 1,400,000 | | | | — | | | | 48,399 | | | | 7,598,515 | | President and CEO (6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Jeffrey M. Farber | | | 2016 | | | | 150,000 | | | | — | | | | 406,156 | | | | 450,163 | | | | — | | | | — | | | | 64,782 | | | | 1,071,101 | | EVP and CFO (6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | J. Kendall Huber | | | 2016 | | | | 498,077 | | | | — | | | | 327,000 | | | | 220,072 | | | | 195,000 | | | | 5,742 | | | | 68,585 | | | | 1,314,476 | | EVP and General Counsel | | | 2015 | | | | 494,231 | | | | — | | | | 298,632 | | | | 216,472 | | | | 395,000 | | | | 1,803 | | | | 66,844 | | | | 1,472,982 | | | | | 2014 | | | | 468,077 | | | | — | | | | 319,788 | | | | 214,975 | | | | 375,000 | | | | 7,463 | | | | 64,010 | | | | 1,449,313 | | | | | | | | | | | | John C. Roche | | | 2016 | | | | 470,385 | | | | — | | | | 329,453 | | | | 222,054 | | | | 161,000 | | | | — | | | | 67,304 | | | | 1,250,196 | | EVP, President, Commercial Lines* | | | 2015 | | | | 455,385 | | | | — | | | | 292,140 | | | | 209,675 | | | | 340,000 | | | | — | | | | 64,807 | | | | 1,362,007 | | | | | | | | | | | | Former Officers (7) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Frederick H. Eppinger | | | 2016 | | | | 461,511 | | | | 357,000 | (8) | | | — | | | | — | | | | — | | | | 1,386 | | | | 3,515,674 | | | | 4,335,571 | | Former President and CEO | | | 2015 | | | | 1,000,000 | | | | — | | | | 1,519,800 | (9) | | | 1,213,399 | (9) | | | 1,400,000 | | | | — | | | | 87,556 | | | | 5,220,755 | | | | | 2014 | | | | 1,000,000 | | | | — | | | | 1,742,820 | (9) | | | 1,209,236 | (9) | | | 1,200,000 | | | | 1,562 | | | | 79,955 | | | | 5,233,573 | | | | | | | | | | | | Eugene M. Bullis | | | 2016 | | | | 1,075,000 | | | | 100,000 | (8) | | | — | | | | — | | | | — | | | | — | | | | 68,000 | | | | 1,243,000 | | Former EVP and Interim CFO | | | 2015 | | | | 245,000 | | | | 75,000 | (8) | | | 100,008 | | | | — | | | | — | | | | — | | | | 5,000 | | | | 425,008 | | | | | | | | | | | | Andrew S. Robinson | | | 2016 | | | | 310,135 | | | | — | | | | 329,453 | (9) | | | 222,054 | (9) | | | — | | | | — | | | | 1,227,517 | | | | 2,089,159 | | Former EVP, Corporate | | | 2015 | | | | 458,846 | | | | — | | | | 308,370 | (9) | | | 220,840 | (9) | | | 280,000 | | | | — | | | | 92,875 | | | | 1,360,931 | | Development and President, Specialty | | | 2014 | | | | 451,538 | | | | — | | | | 325,499 | (9) | | | 223,935 | (9) | | | 300,000 | | | | — | | | | 92,044 | | | | 1,393,016 | | | | | | | | | | | | Johan G. Slabbert | | | 2016 | | | | 418,500 | | | | — | | | | 296,591 | (9) | | | — | | | | 515,592 | (10) | | | — | | | | 808,414 | | | | 2,039,097 | | Former CEO, Chaucer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | | Stock Awards ($) (1)(2) | | | Option Awards ($) (1) | | | Non-Equity Incentive Plan Compensation ($) | | | Change in Pension Value and Nonquali- fied Deferred Compensation Earnings ($) | | All Other Compen- sation ($) (3) | | Total ($) | | | | | | | | | | | | | | | | | | | | | | | | John C. Roche | | 2019 | | 936,538 | | — | | | 1,950,189 | | | 650,024 | | | 1,358,500 | | | — | | 84,526 | | 4,979,777 | President and CEO | | 2018 | | 899,038 | | — | | | 1,100,430 | | | 1,099,972 | | | 990,000 | | | — | | 78,831 | | 4,168,271 | | | 2017 | | 560,962 | | — | | | 583,878 | | | 337,603 | | | 465,000 | | | — | | 63,900 | | 2,011,343 | | | | | | | | | | | | | | | | | | | | | | | | Jeffrey M. Farber | | 2019 | | 675,577 | | — | | | 1,087,788 | | | 362,537 | | | 753,500 | | | — | | 78,194 | | 2,957,596 | EVP and CFO | | 2018 | | 650,000 | | — | | | 725,061 | | | 725,048 | | | 750,000 | | | — | | 103,154 | (4) | 2,953,263 | | | 2017 | | 650,000 | | — | | | 594,325 | | | 675,009 | | | 617,500 | | | — | | 80,554 | (4) | 2,617,388 | | | | | | | | | | | | | | | | | | | | | | | | J. Kendall Huber (5) | | 2019 | | 575,000 | | — | | | 600,121 | | | 200,045 | | | 537,625 | | | 4,614 | | 77,455 | | 1,994,860 | EVP and General Counsel | | 2018 | | 568,269 | | — | | | 400,434 | | | 400,211 | | | 588,750 | | | 2,741 | | 73,894 | | 2,034,299 | | | 2017 | | 539,231 | | — | | | 330,270 | | | 375,049 | | | 400,000 | | | 4,359 | | 60,574 | | 1,709,483 | | | | | | | | | | | | | | | | | | | | | | | | Richard W. Lavey | | 2019 | | 522,308 | | — | | | 487,667 | | | 162,547 | | | 485,000 | | | — | | 63,834 | | 1,721,356 | EVP and President, Hanover | | 2018 | | 515,000 | | — | | | 313,011 | | | 312,680 | | | 386,250 | | | — | | 59,528 | | 1,586,469 | Agency Markets | | 2017 | | 452,019 | | — | | | 231,149 | | | 262,515 | | | 328,500 | | | — | | 48,436 | | 1,322,619 | | | | | | | | | | | | | | | | | | | | | | | | Bryan J. Salvatore | | 2019 | | 517,308 | | — | | | 412,582 | | | 137,548 | | | 470,000 | | | — | | 62,714 | | 1,600,152 | EVP and President, Specialty | | 2018 | | 510,000 | | — | | | 250,042 | | | 250,193 | | | 382,500 | | | — | | 60,266 | | 1,453,001 | | | 2017 | | 274,615 | | 357,000 | | | 745,427 | | | 450,098 | | | — | | | — | | 4,119 | | 1,831,259 |
* | As previously announced by the Company, on April 1, 2017 Mr. Roche will assume the role of EVP, President, Agency Markets. |
(1) | The amountsAmounts in these columns reflect the grant date fair value of the award calculated in accordance with FASB ASC Topic No. 718, disregarding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are set forth in Note 1110 to the Company’s audited financial statements for the fiscal year ended December 31, 20162019 included in the Company’s Annual Report. The amounts set forth may be more or less than the value ultimately realized by the NEO based upon, among other things, the
|
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 57 | | |
| value of the Company’sour Common Stock at the time of vesting and/or exercise of the stock awards, whether the Company achieves the performance goals associated with certain stock awards and whether such awards actually vest. |
(2) | Amounts in this column includeconsist of the grant date fair value of awards of restricted stock units (TBRSUs and PBRSUs) granted during the applicable year, disregarding the effect of estimated forfeitures. PBRSUs are reported at target. Set forth in the table below is the grant date fair value for the PBRSUs at target and both the grant date fair value assuming the threshold and the maximum payment levels are achieved for the PBRSUs.achieved. No shares will be earned pursuant to the PBRSUs if the Company does not achieve specified levels of performance or if the award is forfeited prior to vesting. |
| | | | | | | | | | | | | | | | | Name | | Year | | | Grant Date Fair
Value of PBRSUs
Assuming Threshold
Payment Level ($) | | | Grant Date Fair
Value of PBRSUs
(as included in
table above)($) | | | Grant Date Fair
Value of PBRSUs
Assuming Maximum
Payment Level ($) | | Joseph M. Zubretsky | | | 2016 | | | | 652,856 | | | | 2,611,422 | | | | 3,917,133 | | | | | | | Jeffrey M. Farber | | | 2016 | | | | 101,539 | | | | 406,156 | | | | 609,234 | | | | | | | J. Kendall Huber | | | 2016 | | | | 41,315 | | | | 165,260 | | | | 247,890 | | | | | 2015 | | | | 34,270 | | | | 137,080 | | | | 205,620 | | | | | 2014 | | | | 39,354 | | | | 157,416 | | | | 236,124 | | | | | | | John C. Roche | | | 2016 | | | | 41,625 | | | | 166,499 | | | | 249,749 | | | | | 2015 | | | | 33,525 | | | | 134,100 | | | | 201,150 | | | | | | | Former Officers | | | | | | | | | | | | | Frederick H. Eppinger* | | | 2016 | | | | — | | | | — | | | | — | | | | | 2015 | | | | 379,950 | | | | 1,519,800 | | | | 2,279,700 | | | | | 2014 | | | | 435,705 | | | | 1,742,820 | | | | 2,614,230 | | | | | | | Andrew S. Robinson* | | | 2016 | | | | 41,625 | | | | 166,499 | | | | 249,749 | | | | | 2015 | | | | 35,388 | | | | 141,550 | | | | 212,325 | | | | | 2014 | | | | 40,057 | | | | 160,227 | | | | 240,341 | | | | | | | Johan G. Slabbert* | | | 2016 | | | | 51,968 | | | | 207,874 | | | | 361,488 | |
Name | | Year | | Grant Date Fair Value of PBRSUs Assuming Threshold Payment Level ($) | | Grant Date Fair Value of PBRSUs (as included in table above) ($) | | Grant Date Fair Value of PBRSUs Assuming Maximum Payment Level ($) | | | | | | | | | | John C. Roche | | 2019 | | 487,547 | | 1,300,154 | | 1,950,231 | | | 2018 | | 275,108 | | 1,100,430 | | 1,650,645 | | | 2017 | | 74,341 | | 297,363 | | 446,045 | | | | | | | | | | Jeffrey M. Farber | | 2019 | | 271,947 | | 725,172 | | 1,087,758 | | | 2018 | | 181,265 | | 725,061 | | 1,087,592 | | | 2017 | | 148,581 | | 594,325 | | 891,488 | | | | | | | | | | J. Kendall Huber | | 2019 | | 150,030 | | 400,074 | | 600,111 | | | 2018 | | 100,109 | | 400,434 | | 600,651 | | | 2017 | | 82,568 | | 330,270 | | 495,405 | | | | | | | | | | Richard W. Lavey | | 2019 | | 121,917 | | 325,098 | | 487,647 | | | 2018 | | 78,253 | | 313,011 | | 469,517 | | | 2017 | | 57,787 | | 231,149 | | 346,723 | | | | | | | | | | Bryan J. Salvatore | | 2019 | | 103,146 | | 275,079 | | 412,619 | | | 2018 | | 62,511 | | 250,042 | | 375,063 | | | 2017 | | 113,023 | | 452,093 | | 678,139 |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 40
| * | According to the terms of Messrs. Eppinger’s, Robinson’s and Slabbert’s outstanding but unvested PBRSU awards, and subject to any adjustments made in their respective separation agreements, these awards were forfeited upon their resignation. |
(3) | With respect to Mr. Slabbert, amounts also include the grant date fair value of matching shares awarded under the Chaucer Share Incentive Plan (the “Chaucer SIP”). The Chaucer SIP permits qualifying employees of Chaucer and its subsidiaries to purchase shares of our Common Stock on a tax-advantaged basis. The Chaucer SIP is only available to U.K. resident taxpayers. |
(4) | For 2015, change reflects an increase in the discount rate and, therefore, Mr. Eppinger’s present value of accumulated benefits in the pension plan decreased by $10. |
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 58
| | |
(5) | For 2016, theall NEOs, 2019 amounts shown in this column consist of the following: |
Company Contributions to Defined Contribution and Non-Qualified Retirement Savings Plans Chaucer Board Stipend, and Relocation / Temporary Living Expenses | | All Other Compensation (Excluding Perquisites) | Name | | Company Contributions to Defined Contribution Plan ($) | | Company Contributions to Non-Qualified Retirement Savings Plan ($) | | | | | | | | John C. Roche | | 16,800 | | 43,200 | | Jeffrey M. Farber | | 16,800 | | 43,200 | | J. Kendall Huber | | 16,800 | | 43,200 | | Richard W. Lavey | | 16,800 | | 37,713 | | Bryan J. Salvatore | | 16,800 | | 37,188 | | | | | | | |
Perquisites | | Perquisites | Name | | Financial Planning Services ($) | | Matching Contributions to Qualified Charities ($) | | Spousal Travel ($)* | | Tax Reimbursement ($)* | | | | | | | | | | | | John C. Roche | | 17,350 | | 5,000 | | 2,176 | | — | | Jeffrey M. Farber | | 11,230 | | 5,000 | | 1,964 | | — | | J. Kendall Huber | | 12,455 | | 5,000 | | — | | — | | Richard W. Lavey | | — | | 5,000 | | 3,341 | | 980 | | Bryan J. Salvatore | | 4,726 | | — | | 3,511 | | 489 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | All Other Compensation (Excluding Perquisites and Other Payments) | | Name | | Company
Contributions
to Defined Contribution
Plan($) | | | Company
Contributions
to Non-Qualified Retirement
Savings Plan($) | | | Stipend for Service on the
Chaucer
Board of Directors($) | | | Relocation /
Temporary Living
Expenses($)* | | Joseph M. Zubretsky | | | — | | | | 16,408 | | | | — | | | | 9,959 | | Jeffrey M. Farber | | | — | | | | — | | | | 5,400 | | | | 53,746 | | J. Kendall Huber | | | 15,900 | | | | 36,485 | | | | — | | | | — | | John C. Roche | | | 15,900 | | | | 30,263 | | | | — | | | | — | | | | | | | Former Officers | | | | | | | | | | | | | Frederick H. Eppinger | | | 15,900 | | | | — | | | | — | | | | — | | Eugene M. Bullis | | | 15,900 | | | | 44,100 | | | | — | | | | — | | Andrew S. Robinson | | | 15,900 | | | | — | | | | 20,250 | | | | — | | Johan G. Slabbert | | | 58,590 | | | | — | | | | — | | | | — | |
| * | Pursuant to their offer letters, each of Mr. Zubretsky and Mr. Farber are entitled to reimbursement for certain relocation expenses. Mr. Zubretsky’s relocation amount includes tax reimbursement payments of $3,347 related to relocation and temporary living expenses. Mr. Farber’s relocation amount includes tax reimbursement payments of $20,095 related to relocation and the “Buy Worcester” program, a Company-sponsored home buyer incentive available to all Worcester-based employees who purchase homes in Worcester, MA. |
Perquisites
| | | | | | | | | | | | | | | | | | | | | Name | | Perquisites | | | | Financial
Planning
Services
($) | | | Matching
Contributions to
Qualified
Charities ($) | | | Spousal
Travel ($)* | | | Tax
Reimbursement
($)* | | | Personal Use of
Company Vehicles ($)† | | Joseph M. Zubretsky | | | — | | | | — | | | | — | | | | — | | | | 22,032 | | Jeffrey M. Farber | | | 636 | | | | 5,000 | | | | — | | | | — | | | | — | | J. Kendall Huber | | | 11,200 | | | | 5,000 | | | | — | | | | — | | | | — | | John C. Roche | | | 11,200 | | | | 5,000 | | | | 4,508 | | | | 433 | | | | — | | | | | | | | Former Officers | | | | | | | | | | | | | | | | Frederick H. Eppinger | | | 15,600 | | | | 5,000 | | | | — | | | | — | | | | — | | Eugene M. Bullis | | | 3,000 | | | | 5,000 | | | | — | | | | — | | | | — | | Andrew S. Robinson | | | 20,700 | | | | — | | | | 2,944 | | | | 473 | | | | — | | Johan G. Slabbert | | | — | | | | — | | | | — | | | | — | | | | — | |
| * | Reimbursements for spousal travel and associated taxes relate solely to certain agent conferences and company events where spousal attendance was expected. |
(4) | | | | Includes amounts related to Chaucer board fees that were paid or accrued in U.K. Pounds Sterling (“GBP”) that have been converted into U.S. Dollars (“USD”) using the average exchange rate in effect for the period disclosed (1.34 USD/GBP for 2018 and 1.29 USD/GBP for 2017). |
The Hanover Insurance Group, Inc. 2017 Proxy Statement(5)
| | 59 | | |
| † | Represents the personal benefit associated with the personal use of a Company driver and vehicle for commuting purposes, determined as the sum of the fair value of the vehicle, cost of fuel, and driver compensation costs allocable to personal usage. This benefit is afforded to Mr. Zubretsky in lieu of permanent relocation to enable him to devoteHuber has announced his commuting time to the business ofretirement from the Company, and provide him with additional security. Such expense is substantially less than the anticipated cost of permanent relocation.effective April 1, 2020. |
THE HANOVER INSURANCE GROUP Other Payments – Frederick H. Eppinger2020 PROXY STATEMENT 41 | | | | | | | | | Former Officer | | Payment in lieu of Options and RSUs Scheduled to Vest
in the First Quarter of 2017 ($) | | | Total Monthly
Consulting Fees ($) | | Frederick H. Eppinger | | | 3,264,559 | * | | | 214,615 | † |
| * | Amount represents 50% of the in-the-money value of the stock options and RSUs that were scheduled to vest during the first quarter of 2017, based upon the Company’s stock price as reported at the close of trading on the NYSE on the dates each award was scheduled to vest. A cash payment representing such amount was made in March 2017. This payment was made in connection with Mr. Eppinger’s Transition Services Agreement. |
| † | Includes $30,000 monthly consulting fees for the months of July-December 2016 and $34,615, representing the amount of base salary Mr. Eppinger would have earned from his separation date through June 30, 2016. |
Other Payments – Andrew S. Robinson
| | | | | | | | | | | | | Former Officer | | Payment in lieu of Options and RSUs
Scheduled to Vest
in the First Quarter of 2017 ($) | | | Leadership Transition
Severance
Payment ($)* | | | Twelve Months
Outplacement
Assistance ($) | | Andrew S. Robinson | | | 375,000 | | | | 767,250 | | | | 25,000 | |
| * | Lump sum payment made on October 31, 2016 pursuant to the terms of the Leadership Transition Severance Arrangement between Andrew S. Robinson and the Company dated February 23, 2016. |
Other Payments – Johan G. Slabbert
| | | | | | | | | | | | | Former Officer | | One Year Base Salary plus Certain Benefits and
Reimbursement of Expenses ($) | | | 2014 LTIP
Award ($) | | | 2015 LTIP
Award ($) | | Johan G. Slabbert | | | 497,610 | | | | 252,214 | | | | TBD | * |
| * | Mr. Slabbert will receive a cash payment representing a pro-rated portion of his 2015 LTIP. The actual amount of the award will be determined at the time such award would otherwise vest. |
(6) | Mr. Zubretsky assumed the role of President and Chief Executive Officer on June 20, 2016. Mr. Farber joined the Company on October 1, 2016, initially as Executive Vice President – Senior Finance Officer before assuming the role of Chief Financial Officer on November 4, 2016. |
(7) | Mr. Eppinger served as the Company’s President and Chief Executive Officer until his retirement on June 19, 2016. Mr. Bullis served as the Company’s Executive Vice President and Interim Chief Financial Officer until his retirement on November 11, 2016. Mr. Robinson served as the Company’s Executive Vice President, Corporate Development, and President, Specialty, until his resignation on September 1, 2016. Mr. Slabbert served as CEO, Chaucer, until his resignation on February 20, 2017. |
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 60 | | |
(8) | Represents a one-time cash bonus. For Mr. Eppinger, such amount represents an award paid in March 2017 for his service as CEO during 2016, as determined by the Compensation Committee, in its sole discretion. Such amount represents 51% of his prior-year incentive compensation target award, pro-rated for his term of service. Mr. Bullis’s 2016 bonus was paid on November 10, 2016, and his 2015 bonus was paid on October 27, 2015. Such amounts were fixed in accordance with arrangements to incentivize him to serve as Interim Chief Financial Officer. |
(9) | According to the terms of Messrs. Eppinger’s, Robinson’s and Slabbert’s outstanding, but unvested Company stock option and restricted stock awards (as applicable), upon the executive’s resignation each such unvested option and restricted stock award was automatically forfeited and returned to the Company. See Note 5 above. |
(10) | One-half of the award will be paid in April of 2017, and the other half will be paid in January of 2018. The full amount of the annual bonus is reported in this column. |
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 61 | | |
Grants of Plan-BasedPlan-Based Awards in Last Fiscal Year The following table contains information concerning plan-based awards granted to the NEOs in 2016. Except as otherwise indicated, all2019. All equity awards were granted pursuant to the 2014 Long-Term Incentive Plan (the “2014 Plan”). Where the footnotes indicate a vesting date, except as otherwise indicated, inPlan. In order for such awards to vest, in addition to satisfying the applicable performance metrics, if any, the NEO generally must remain continuously employed by the Company through suchthe applicable vesting date (for a description of termination benefits associated with these awards, please see the “Potential Payments upon Termination or Change in Control” section beginning on page 69)48). Neither Mr. Eppinger nor Mr. Bullis received any plan-based awards in 2016. Grants of Plan-Based Awards in 20162019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock | | All Other | | | | Grant Date Fair | Name | | Grant
Date | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards | | Estimated Future Payouts
Under Equity Incentive
Plan Awards | | All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#) | | | All
Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | | | Exercise
or Base
Price of
Option
Awards
($/Sh) | | | Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($) (2) | | | Grant Date | | Threshold ($) (1) | | Target ($) | | Maximum ($) | | Threshold (#) (1) | | Target (#) | | Maximum (#) | | Awards: Number of Shares of Stock or Units (#) | | Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Value of Stock and Option Awards ($) (2) | | | |
Threshold
($) (1) | | Target
($) | | Maximum
($) | | Threshold
(#) (1) | | Target
(#) | | Maximum
(#) | | | Joseph M. Zubretsky | | 6/20/16(3) | | | — | | | | 1,400,000 | | | | 1,400,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | John C. Roche | | | 3/05/19 (3) | | — | | 1,235,000 | | 2,392,813 | | | | | | | | | | | | | | | | | | 3/05/19 (4) | | | | | | | | 1,218 | | 4,872 | | 7,308 | | | | | | | | 650,120 | | | | 3/05/19 (5) | | | | | | | | 2,723 | | 5,446 | | 8,169 | | | | | | | | 650,035 | | | 6/20/16(4) | | | | | | | | | 9,075 | | | | 36,300 | | | | 54,450 | | | | | | | | | | 2,611,422 | | | 3/05/19 (6) | | | | | | | | | | | | | | 5,446 | | | | | | 650,035 | | | 6/20/16(5) | | | | | | | | | | | | | | | | | 277,100 | | | | 82.65 | | | | 3,000,232 | | | 3/05/19 (7) | | | | | | | | | | | | | | | | 35,883 | | 119.36 | | 650,024 | Jeffrey M. Farber | | 10/3/16(3) | | | — | | | | 325,000 | | | | 325,000 | | | | | | | | | | | | | | | | | 3/05/19 (3) | | — | | 685,000 | | 1,327,188 | | | | | | | | | | | | | | | | | | 3/05/19 (4) | | | | | | | | 680 | | 2,717 | | 4,076 | | | | | | | | 362,556 | | | | 3/05/19 (5) | | | | | | | | 1,519 | | 3,038 | | 4,557 | | | | | | | | 362,616 | | | 10/3/16(4) | | | | | | | | | 1,502 | | | | 6,010 | | | | 9,015 | | | | | | | | | | 406,156 | | | 3/05/19 (6) | | | | | | | | | | | | | | 3,038 | | | | | | 362,616 | | | 10/3/16(5) | | | | | | | | | | | | | | | | | 47,500 | | | | 74.88 | | | | 450,163 | | | 3/05/19 (7) | | | | | | | | | | | | | | | | 20,013 | | 119.36 | | 362,537 | J. Kendall Huber | | 2/23/16(6) | | | — | | | | 382,500 | | | | 765,000 | | | | | | | | | | | | | | | | | 3/05/19 (3) | | — | | 488,750 | | 946,953 | | | | | | | | | | | | | | | | | 2/23/16(4) | | | | | | | | | 500 | | | | 2,000 | | | | 3,000 | | | | | | | | | | 165,260 | | | 3/05/19 (4) | | | | | | | | 375 | | 1,499 | | 2,249 | | | | | | | | 200,027 | | | 2/23/16(7) | | | | | | | | | | | | | | | 2,000 | | | | | | | | 161,740 | | | 3/05/19 (5) | | | | | | | | 838 | | 1,676 | | 2,514 | | | | | | | | 200,047 | | | 2/23/16(5) | | | | | | | | | | | | | | | | | 19,980 | | | | 82.74 | | | | 220,072 | | | 3/05/19 (6) | | | | | | | | | | | | | | 1,676 | | | | | | 200,047 | John C. Roche | | 2/23/16(6) | | | — | | | | 315,250 | | | | 630,500 | | | | | | | | | | | | | | | | | | | | 3/05/19 (7) | | | | | | | | | | | | | | | | 11,043 | | 119.36 | | 200,045 | Richard W. Lavey | | | 3/05/19 (3) | | — | | 420,000 | | 813,750 | | | | | | | | | | | | | | | | | 2/23/16(4) | | | | | | | | | 503 | | | | 2,015 | | | | 3,022 | | | | | | | | | | 166,499 | | | 3/05/19 (4) | | | | | | | | 305 | | 1,218 | | 1,827 | | | | | | | | 162,530 | | | 2/23/16(7) | | | | | | | | | | | | | | | 2,015 | | | | | | | | 162,953 | | | 3/05/19 (5) | | | | | | | | 681 | | 1,362 | | 2,043 | | | | | | | | 162,568 | | | 2/23/16(5) | | | | | | | | | | | | | | | | | 20,160 | | | | 82.74 | | | | 222,054 | | | 3/05/19 (6) | | | | | | | | | | | | | | 1,362 | | | | | | 162,568 | | | | | 3/05/19 (7) | | | | | | | | | | | | | | | | 8,973 | | 119.36 | | 162,547 | Former Officers | | | | | | | | | | | | | | | | | | | | | | | Andrew S. Robinson | | 2/23/16(6) | | | — | | | | 302,250 | | | | 604,500 | | | | | | | | | | | | | | | | | | | 2/23/16(4)(8) | | | | | | | | | 503 | | | | 2,015 | | | | 3,022 | | | | | | | | | | 166,499 | | | | | 2/23/16(7)(8) | | | | | | | | | | | | | | | 2,015 | | | | | | | | 162,953 | | | | | 2/23/16(5)(8) | | | | | | | | | | | | | | | | | 20,160 | | | | 82.74 | | | | 222,054 | | | Johan G. Slabbert | | 4/1/16(9)(10) | | | 115,088 | | | | 460,350 | | | | 920,700 | | | | | | | | | | | | | | | | | Bryan J. Salvatore | | | 3/05/19 (3) | | — | | 416,000 | | 806,000 | | | | | | | | | | | | | | | | | 4/1/16(4)(8)(10) | | | | | | | | | 272 | | | | 1,090 | | | | 1,635 | | | | | | | | | | 108,520 | | | 3/05/19 (4) | | | | | | | | 258 | | 1,031 | | 1,547 | | | | | | | | 137,577 | | | 4/1/16(8)(10)(11) | | | | | | | | | — | | | | 1,090 | | | | 2,180 | | | | | | | | | | 99,354 | | | 3/05/19 (5) | | | | | | | | 576 | | 1,152 | | 1,728 | | | | | | | | 137,503 | | | 4/1/16(7)(8)(10) | | | | | | | | | | | | | | | 940 | | | | | | | | 83,923 | | | 3/05/19 (6) | | | | | | | | | | | | | | 1,152 | | | | | | 137,503 | | | Various(12) | | | | | | | | | | | | | | | 58 | | | | | | | | 4,794 | | | 3/05/19 (7) | | | | | | | | | | | | | | | | 7,593 | | 119.36 | | 137,548 |
(1) | Threshold amounts indicate the amount of payout in the event certain minimum levels of performance are achieved. If the level of actual performance falls below the minimum payout threshold, no amounts will be paid, subject to the Compensation Committee’s discretion.paid. |
(2) | The amounts in this column reflect the grant date fair value of the award (at target with respect to PBRSUs) calculated in accordance with FASB ASC Topic No. 718, disregarding the effect of estimated forfeitures. |
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| | 62 | | |
| Assumptions used in the calculation of these amounts are set forth in Note 1110 to the Company’s audited financial statements for the fiscal year ended December 31, 20162019 included in the Company’s Annual Report. The amounts set forth may be more or less than the value ultimately realized based upon, among other things, the value of the Company’sour Common Stock at the time of vesting of the stock awards or exercise of options, whether the Company achieves certain performance goals and whether such awards actually vest. See Notes 1 and 2 to the Summary Compensation Table. |
(3) | Represents short-term incentive awards to Mr. Zubretsky and Mr. Farber pursuant toan award under the terms of their offer letters2019 STIP (see section entitled “Management Transition Arrangements”“Short-Term Incentive Compensation” in the CD&A beginning on page 4728 for more information). On March 10, 2017,13, 2020, these awards were paid to the NEOs in the following amounts: Mr. Zubretsky, $1,400,000;Roche, $1,358,500; Mr. Farber, $753,500; Mr. Huber, $537,625; Mr. Lavey, $485,000; and Mr. Farber, $0.Salvatore, $470,000. |
(4) | Represents a grant of RTSR PBRSUs (see the section entitled “Long-Term Incentive Compensation” in the CD&A beginning on page 4332 for more information). These RTSR PBRSUs vest on the third anniversary of the date of grant only if and to the extent the Company achieves a specified relative total shareholder return for the years 2016-2018. For Mr. Zubretsky and Mr. Farber, relative total shareholder return is measured from2019-2021. The PBRSUs automatically adjust to reflect the grant dateaccrual of their awards through December 31, 2018. |
(5) | The securities underlyingdividend equivalent rights, to the options grantedextent dividends are shares ofpaid with respect to our Common Stock. The options grantedadjustment results in the issuance of additional PBRSUs that are subject to the same terms and conditions (including the applicable performance and time-based vesting requirements) as the underlying PBRSU. All figures in the table above reflect the number of PBRSUs issued upon date of grant and have not been updated to reflect subsequent adjustments for accrued dividend equivalents. |
(5) | Represents a grant of ROE PBRSUs (see the section entitled “Long-Term Incentive Compensation” in the CD&A beginning on page 32 for more information). These PBRSUs vest on the third anniversary of the date of grant only if and to the extent the |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 42
| Company achieves a specified three-year average operating return on equity for the years 2019-2021. The ROE PBRSUs automatically adjust to reflect the accrual of dividend equivalent rights, to the extent dividends are paid with respect to our Common Stock. The adjustment results in the issuance of additional PBRSUs that are subject to the same terms and conditions (including the applicable performance and time-based vesting requirements) as the underlying PBRSU. All figures in the table above reflect the number of PBRSUs issued upon date of grant and have not been updated to reflect subsequent adjustments for accrued dividend equivalents. |
(6) | Grant of TBRSUs (see section entitled “Long-Term Incentive Compensation” in the CD&A beginning on page 32 for more information). The TBRSUs vest in full on the third anniversary of the date of grant. The TBRSUs automatically adjust to reflect the accrual of dividend equivalent rights, to the extent dividends are paid with respect to our Common Stock. The adjustment results in the issuance of additional TBRSUs that are subject to the same terms and conditions (including the applicable time-based vesting requirements) as the underlying TBRSU. All figures in the table above reflect the number of TBRSUs issued upon date of grant and have not been updated to reflect subsequent adjustments for accrued dividend equivalents. |
(7) | Options to purchase Common Stock that vest in three substantially equal annual installments commencing on the first anniversary of the grant date. All options have a ten-year term. The exercise price of the options equals the closing price per share of Common Stock on the NYSE as of the date of grant. See section entitled “Long-Term Incentive Compensation” in the CD&A beginning on page 4332 for more information. |
(6) | Represents an award under the 2016 Executive STIP (see section entitled “Short-Term Incentive Compensation” in the CD&A beginning on page 37 for more information). On March 10, 2017, these awards were paid to the NEOs in the following amounts: Mr. Huber, $195,000; and Mr. Roche, $161,000. Mr. Robinson resigned on September 1, 2016 and did not receive an award under the 2016 Executive STIP. |
(7) | Represents a grant The information provided is as of TBRSUs (see section entitled “Long-Term Incentive Compensation” in the CD&A beginning on page 43 for more information). For each NEO who received an award, the TBRSUs vest in full on the third anniversary of the date of grant. |
(8) | According to the terms of Messrs. Robinson’s and Slabbert’s outstanding but unvested PBRSU, TBRSU and stock option awards (as applicable), these awards were forfeited upon resignation. See Note 5 to the Summary Compensation Table. |
(9) | Represents an award under the 2016 Chaucer Annual Bonus Plan (see section entitled “Short-Term Incentive Compensation—2016 Chaucer STIP” in the CD&A on page 43 for more information). Mr. Slabbert was awarded $515,592 pursuant to this program. |
(10) | Award approved by the Committee on March 14, 2016. For consistency with other Chaucer awards and administrative convenience, the grant date was April 1, 2016. |
(11) | Representsand does not reflect subsequent adjustments to the number of options and the exercise price as a grantresult of PBRSUs (see section entitled “Long-Term Incentive Compensation” in the CD&A beginning on page 43December Special Dividend (as defined below). See the introductory note to the “Outstanding Equity Awards at Fiscal Year-End 2019” table below for more information). These PBRSUs were scheduled to vest on the third anniversary of the date of grant if Chaucer achieved a specified three-year average post-tax return on allocated capital for the years 2016-2018.information. |
(12) | Represents grants of matching shares under the Chaucer SIP. Subject to certain exceptions, such shares are subject to a three-year vesting requirement. |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 43
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| | 63 | | |
Outstanding Equity AwardsAwards at Fiscal Year-End The following table sets forth information for our NEOs regarding outstanding equity awards held as of December 31, 2016.2019. All awards granted prior to May 20, 20142015 were issued pursuant to the Company’s 2006 Long-Term Incentive Plan (the “2006 Plan”), and except as otherwise indicated, all other awards granted after May 19, 2014 were issued pursuant to the 2014 Plan. Where the footnotes indicate a vesting date, except as otherwise indicated, inIn order for such awards to vest, and be paid to the NEO, in addition to satisfying the applicable performance metrics, if any, the NEO generally must remain continuously employed by the Company through suchthe applicable vesting date (for a description of termination benefits associated with these awards, please see the “Potential Payments upon Termination or Change in Control” section beginning on page 69)48). Outstanding Equity Awards at Fiscal Year-End 20162019* | | | | Option Awards | | | | | | | | Stock Awards | | | Option Awards | | | Stock Awards | Name | | Grant
Date (1) | | Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) | | Option
Exercise
Price
($) | | Option
Expiration
Date | | | | | | | Grant
Date | | Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#) | | Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($) (2) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#) | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($) (2) | | | Grant Date (1) | | Number of Securities Underlying Unexercised Options Exercisable (#) | | Number of Securities Underlying Unexercised Options Unexercisable (#) | | Option Exercise Price ($) | | Option Expiration Date | | | Grant Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) (2) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) | Joseph M. Zubretsky | | | 6/20/16 | | | | — | | | | 277,100 | | | | 82.65 | | | | 6/20/26 | | | | | | | | | 6/20/16 | | | | | | | | 36,300 | (3) | | | 3,303,663 | | | | | | | | Jeffrey M. Farber | | | 10/03/16 | | | | — | | | | 47,500 | | | | 74.88 | | | | 10/03/26 | | | | | | | | | 10/03/16 | | | | | | | | 6,010 | (3) | | | 546,970 | | | | | | | | J. Kendall Huber | | | 2/26/13 | | | | 13,000 | | | | — | | | | 42.49 | | | | 2/26/23 | | | | | | | | | 2/19/14 | | | | 2,800 | (4) | | | 254,828 | | | | 4,200 | (5) | | | 382,242 | | | | | | 2/19/14 | | | | 16,000 | | | | 8,000 | | | | 57.99 | | | | 2/19/24 | | | | | | | | | 2/27/15 | | | | 2,300 | (4) | | | 209,323 | | | | 2,300 | (6) | | | 209,323 | | | | | | 2/27/15 | | | | 7,433 | | | | 14,867 | | | | 70.24 | | | | 2/27/25 | | | | | | | | | 2/23/16 | | | | 2,000 | (4) | | | 182,020 | | | | 2,000 | (3) | | | 182,020 | | | | | | 2/23/16 | | | | — | | | | 19,980 | | | | 82.74 | | | | 2/23/26 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | John C. Roche | | | 2/26/10 | | | | 12,500 | | | | — | | | | 42.15 | | | | 2/26/20 | | | | | | | | | 2/19/14 | | | | 2,400 | (4) | | | 218,424 | | | | 3,600 | (5) | | | 327,636 | | | 1/20/12 | | 11,684 | | — | | 34.66 | | 1/20/22 | | | 2/24/17 | | 5,904 | (3) | 806,900 | | | | | | | | 2/28/11 | | | | 12,500 | | | | — | | | | 46.47 | | | | 2/28/21 | | | | | | | | | 2/27/15 | | | | 2,250 | (4) | | | 204,773 | | | | 2,250 | (6) | | | 204,773 | | | 2/26/13 | | 21,774 | | — | | 40.01 | | 2/26/23 | | | 5/15/17 | | 1,301 | (4) | 177,808 | | | | | | | | 1/20/12 | | | | 16,000 | | | | — | | | | 36.81 | | | | 1/20/22 | | | | | | | | | 2/23/16 | | | | 2,015 | (4) | | | 183,385 | | | | 2,015 | (3) | | | 183,385 | | | 2/19/14 | | 22,305 | | — | | 54.61 | | 2/19/24 | | | 2/27/18 | | | | | | 9,920 | (5) | 1,355,766 | | | | 2/26/13 | | | | 20,500 | | | | — | | | | 42.49 | | | | 2/26/23 | | | | | | | | | | | | | | | | | | 2/27/15 | | 22,943 | | — | | 66.14 | | 2/27/25 | | | 3/05/19 | | 5,653 | (6) | 772,596 | | 5,653 | (7) | 772,596 | | | | 2/19/14 | | | | 14,000 | | | | 7,000 | | | | 57.99 | | | | 2/19/24 | | | | | | | | | | | | | | | | | | 2/23/16 | | 21,413 | | — | | 77.91 | | 2/23/26 | | | 3/05/19 | | | | | | 5,057 | (8) | 691,140 | | | | 2/27/15 | | | | 7,200 | | | | 14,400 | | | | 70.24 | | | | 2/27/25 | | | | | | | | | | | | | | | | | | 2/24/17 | | 18,194 | | 9,098 | | 85.87 | | 2/24/27 | | | | | | | | | | | | | | | 2/23/16 | | | | — | | | | 20,160 | | | | 82.74 | | | | 2/23/26 | | | | | | | | | | | | | | | | | | 2/27/18 | | 24,026 | | 48,052 | | 104.11 | | 2/27/28 | | | | | | | | | | | | | | | | | 3/05/19 | | — | | 36,539 | | 117.22 | | 3/05/29 | | | | | | | | | | | | Johan G. Slabbert (7) | | | | | | | | | | | | | | | | | | 4/01/15 | | | | 800 | (4) | | | 72,808 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Jeffrey M. Farber | | | 10/03/16 | | 50,453 | | — | | 70.51 | | 10/03/26 | | | 2/24/17 | | 11,797 | (3) | 1,612,296 | | | | | | | | | | | | | | | | | | | | | | | 4/01/16 | | | | 940 | (4) | | | 85,549 | | | | 1,090 | (3) | | | 99,201 | | | 2/24/17 | | 36,380 | | 18,189 | | 85.87 | | 2/24/27 | | | 2/27/18 | | | | | | 6,537 | (5) | 893,412 | | | | | | | | | | | | | | | | | | | 4/01/16 | | | | | | | | 1,090 | (8) | | | 99,201 | | | 2/27/18 | | 15,836 | | 31,674 | | 104.11 | | 2/27/28 | | | 3/05/19 | | 3,154 | (6) | 431,057 | | 3,154 | (7) | 431,057 | | | | | | | | | | | | | | | | | | | Various | | | | 206 | (9) | | | 18,748 | | | | | | | 3/05/19 | | — | | 20,379 | | 117.22 | | 3/05/29 | | | 3/05/19 | | | | | | 2,820 | (8) | 385,409 | | | | | | | | | | | | | | | | | | | | | | | | J. Kendall Huber | | | 2/23/16 | | 21,222 | | — | | 77.91 | | 2/23/26 | | | 2/24/17 | | 6,555 | (3) | 895,872 | | | | | | | | 2/24/17 | | 20,212 | | 10,107 | | 85.87 | | 2/24/27 | | | 2/27/18 | | | | | | 3,610 | (5) | 493,379 | | | | 2/27/18 | | 8,742 | | 17,483 | | 104.11 | | 2/27/28 | | | 3/05/19 | | 1,740 | (6) | 237,806 | | 1,740 | (7) | 237,806 | | | | 3/05/19 | | — | | 11,245 | | 117.22 | | 3/05/29 | | | 3/05/19 | | | | | | 1,556 | (8) | 212,659 | | | | | | | | | | | | | | | | | | | | | | | | Richard W. Lavey | | | 2/19/14 | | 10,841 | | — | | 54.61 | | 2/19/24 | | | 2/24/17 | | 4,588 | (3) | 627,042 | | | | | | | | 2/27/15 | | 17,738 | | — | | 66.14 | | 2/27/25 | | | 2/27/18 | | | | | | 2,822 | (5) | 385,683 | | | | 2/23/16 | | 17,420 | | — | | 77.91 | | 2/23/26 | | | 3/05/19 | | 1,414 | (6) | 193,251 | | 1,414 | (7) | 193,251 | | | | 2/24/17 | | 14,148 | | 7,074 | | 85.87 | | 2/24/27 | | | 3/05/19 | | | | | | 1,265 | (8) | 172,888 | | | | 2/27/18 | | 6,830 | | 13,659 | | 104.11 | | 2/27/28 | | | | | | | | | | | | | | | 3/05/19 | | — | | 9,137 | | 117.22 | | 3/05/29 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bryan J. Salvatore | | | 6/12/17 | | 31,262 | | 6,564 | | 82.39 | | 6/12/27 | | | 6/12/17 | | 4,102 | (3) | 560,620 | | | | | | | | 2/27/18 | | 5,465 | | 10,929 | | 104.11 | | 2/27/28 | | | 2/27/18 | | | | | | 2,255 | (5) | 308,191 | | | | 3/05/19 | | — | | 7,732 | | 117.22 | | 3/05/29 | | | 3/05/19 | | 1,196 | (6) | 163,457 | | 1,196 | (7) | 163,457 | | | | | | | | | | | | | | | 3/05/19 | | | | | | 1,071 | (8) | 146,374 |
(1)* | OptionsNote Regarding Special Dividends: On December 30, 2018, the Company announced a special dividend (the “January Special Dividend”) of $4.75 per share payable on January 25, 2019 to all shareholders of record on January 10, 2019, and on December 5, 2019, the Company announced a special dividend (the “December Special Dividend” and together with the January Special Dividend, the “Special Dividends”) of $2.50 per share payable on December 27, 2019 to all shareholders of record on December 16, 2019. Pursuant to the terms of the applicable equity agreements, to prevent the dilutive impact of the Special Dividends, the number of outstanding options and RSUs, and the exercise price of the options, were automatically adjusted. The information in this table reflects the adjustments made in connection with the Special Dividends. |
(1) | Except as noted below, options granted from 2013-20162013-2019 vest over three years in three substantially equal annual installments, in each case on the anniversary of the grant date. Options granted from 2011-2012in 2012 vested over four years, with 50% vesting on each of the third and fourth anniversaries of the grant date. With respect to Mr. Salvatore’s 2017 options received in connection with his hiring in 2017, 21,052 of the options (all included as exercisable) vested in full on the second anniversary of the grant date, and the remaining portion (10,210 included as exercisable and all 6,564 unexercisable) vest over three years in three substantially equal annual installments on the anniversary of the grant date. |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 44
(2) | Based on a value of $91.01$136.67 per share, which was the closing price per share of our Common Stock on the NYSE on December 30, 2016,31, 2019. |
(3) | PBRSUs that vest on the last trading daythird anniversary of 2016.the grant date based on the Company’s achievement of relative total shareholder return for the years 2017-2019, which was at the 88th percentile against its pre-determined peer group. Accordingly, the award shown in the table reflects 150% of the target award value. The award granted on February 24, 2017 was settled and shares were delivered to the holders on February 24, 2020. For Mr. Salvatore’s award received in connection with his hiring in 2017, relative total shareholder return was measured from the grant date (his date of hire) through December 31, 2019, and during that period, the Company’s relative total shareholder return ranked it in the 96th percentile against its pre-determined peer group. Accordingly, the award shown in the table for Mr. Salvatore also reflects 150% of the target award value. |
(3)(4) | TBRSUs that vest over three years in three substantially equal annual installments on the anniversary of the grant date. |
(5) | PBRSUs that vest on the third anniversary of the grant date if the Company achieves a specified relative total shareholder return for the years 2016-2018. The actual award that is delivered may be2018-2020. Performance of these awards as low as 0% and as high asof December 31, 2019 would have resulted in payout at 150% of the target awardnumber of shares and amounts shown in the table above based upon the actual level of |
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 64 | | |
| shareholder return achieved. For Mr. Zubretsky and Mr. Farber, relative total shareholder return is measured from the grant date through December 31, 2018.
|
(4) | TBRSUs that vest in full on the third anniversary of the date of grant. TBRSUs granted on February 19, 2014 settled and shares were delivered on February 21, 2017. |
(5) | PBRSUs that vest on the third anniversary of the grant date if the Company achieves a specified relative total shareholder return for the years 2014-2016. The actual award that is delivered may be as low as 0% and as high as 150% of the target award based upon the actual level of shareholder return achieved. For the 2014-2016 period, the Company’s relative total shareholder return ranked it in the 79th percentile against its pre-determined peer group. Accordingly, the award shown in the table reflects the maximum of 150% of the target award value. The award was settled and shares were delivered to the holders on February 21, 2017.
|
(6) | PBRSUs that vest on the third anniversary of the grant date if the Company achieves a specified relative total shareholder return for the years 2015-2017.table. The actual award that is delivered may be as low as 0% and as high as 150% of the target award shown in the table above based upon the actual level of shareholder return achieved. |
(7) | Accordingachieved during the performance period. The 2018 PBRSU awards include dividend equivalent rights to the termsextent dividends are paid with respect to our Common Stock and the awards actually vest. Amounts reported include PBRSUs credited as a result of Mr. Slabbert’s outstanding but unvested PBRSU andthis dividend equivalent right. |
(6) | TBRSUs that vest on the third anniversary of the grant date. The 2019 TBRSU awards include dividend equivalent rights to the extent dividends are paid with respect to our Common Stock and the awards listed in the table were forfeited upon his resignation.actually vest. Amounts reported include TBRSUs credited as a result of this dividend equivalent right. |
(8)(7) | PBRSUs that vest on the third anniversary of the grant date if Chaucerthe Company achieves a specified three-year average post-taxoperating return on allocated capital (ROAC)equity for the years 2016-2018.2019-2021. The actual award that was tois delivered may be delivered could have been as low as 0% and as high as 200%150% of the target award shown in the table above based onupon the actual level of ROAC achieved. |
(9) | Grants of matching shares underoperating return on equity achieved during the Chaucer SIP. Shares issued prior to May 19, 2014 were issued pursuantperformance period. The 2019 PBRSU awards include dividend equivalent rights to the 2006 Plan. Subjectextent dividends are paid with respect to certain exceptions, suchour Common Stock and the awards actually vest. Amounts reported include PBRSUs credited as a result of this dividend equivalent right. |
(8) | PBRSUs that vest on the third anniversary of the grant date if the Company achieves a specified relative total shareholder return for the years 2019-2021. Performance of these awards as of December 31, 2019 would have resulted in payout at 150% of the target number of shares were subjectand amounts shown in the table. The actual award that is delivered may be as low as 0% and as high as 150% of the target award shown in the table above based upon the actual level of shareholder return achieved during the performance period. The 2019 PBRSU awards include dividend equivalent rights to the extent dividends are paid with respect to our Common Stock and the awards actually vest. Amounts reported include PBRSUs credited as a three-year vesting requirement.result of this dividend equivalent right. |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 45
Option Exercises and StockStock Vested in 20162019 The following table sets forth information for our NEOs regarding the value realized during 20162019 pursuant to (i) option exercises, and/or (ii) shares acquired upon vesting of previously granted stock awards. | | Option Awards | | Stock Awards | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) (1) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) (1) | | | | | | | | | | John C. Roche | | 13,039 | (2) | 1,125,266 | (2) | 5,805 | | 689,784 | Jeffrey M. Farber | | — | | — | | 9,403 | | 1,253,326 | J. Kendall Huber | | 23,261 | | 1,260,156 | | 4,492 | | 530,146 | Richard W. Lavey | | 5,000 | | 327,732 | | 3,661 | | 423,071 | Bryan J. Salvatore | | 2,877 | | 123,477 | | 4,029 | | 502,295 |
| | | | | | | | | | | | | | | | | Name | | Option Awards | | | Stock Awards | | | | Number of
Shares
Acquired
on Exercise
(#) | | | Value
Realized
on
Exercise
($) (1) | | | Number of
Shares
Acquired
on Vesting
(#) | | | Value
Realized
on Vesting
($) (1) | | Joseph M. Zubretsky | | | — | | | | — | | | | — | | | | — | | Jeffrey M. Farber | | | — | | | | — | | | | — | | | | — | | J. Kendall Huber | | | 35,750 | | | | 1,695,635 | | | | 15,000 | | | | 1,217,813 | | John C. Roche | | | — | | | | — | | | | 9,250 | | | | 761,918 | | | | | Former Officers | | Option Awards | | | Stock Awards | | Frederick H. Eppinger | | | 193,333 | | | | 6,844,854 | | | | 90,750 | | | | 7,369,695 | | Eugene M. Bullis | | | — | | | | — | | | | 1,222 | | | | 105,789 | | Andrew S. Robinson | | | 52,999 | | | | 1,534,421 | | | | 15,000 | | | | 1,217,813 | | Johan G. Slabbert | | | — | | | | — | | | | 6,921 | | | | 563,508 | |
(1) | For stock options, represents the difference between the fair market value of THG’sour Common Stock on the date of exercise and the exercise price of the option multiplied by the number of shares acquired upon |
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| exercise. For stock awards, represents the number of shares acquired upon vesting multiplied by the closing price of THG’sour Common Stock on the vesting date. |
(2) | Mr. Roche “net exercised” the 13,039 options set to expire in February 2021 and therefore received no cash in the transaction. A total of 8,258 shares were withheld by the Company to satisfy the exercise price and taxes associated with the exercise, resulting in a net issuance of 4,781 shares to, and still beneficially owned by, Mr. Roche. |
Pension and Retirement Benefits Cash Balance and Excess Benefit Plan Effective December 31, 2004, benefits underMr. Huber is the only NEO who participates in the Company’s funded, tax-qualified, noncontributorynon-contributory defined benefit pension plan (the “Cash Balance Plan”) and associated non-qualified excess benefit plan (the “Excess Benefit Plan”). Effective December 31, 2004, benefits under both these plans were frozen and annual allocations to participant bookkeeping accounts were discontinued. Although future annual allocations were discontinued, interest based on the GATT rate continues to be credited to participant bookkeeping accounts.
Each year while the Cash Balance Plan was in effect, the Company allocated an amount equal to a percentage of each participant’s eligible compensation (generally, salary and short-term incentive compensation, up to the federalInternal Revenue Code limits) to a separate bookkeeping account established for each participant. Similarly, each year the Excess Benefit Plan was in effect, the Company provided eligible individuals with the difference between the benefits calculated under the Cash Balance Plan, without regard to federalInternal Revenue Code limitations, and the maximum amount that may be allocated to the participant’s Cash Balance Plan bookkeeping account under federal tax laws. Messrs. Eppinger andMr. Huber areis fully vested in his benefits under the Cash Balance Plan and Excess Benefit Plan and may elect to receive benefits under the plans at any time following a termination of his employment, either as either a one-time lump sum payment or as an annuity. Mr. Huber has announced his retirement from the Company, effective April 1, 2020. Because they joined the Company after the plans were frozen, Messrs. Zubretsky,Roche, Farber, Roche, Slabbert, Bullis,Lavey, and RobinsonSalvatore receive no benefits under the Cash Balance Plan or Excess Benefit Plan.
Pension Benefits Table Name | | | | | | | | | | | | | | | | Plan Name | | Plan Name | | Number of Years of
Credited Service (#) | | | Present
Value of
Accumulated
Benefit ($) (1) | | | Payments
During Last
Fiscal Year ($) | | | | | | | | | | | J. Kendall Huber | | Cash Balance Plan | | N/A | N/A | 67,871 | | | 60,806 | | | | — | | | | Excess Benefit Plan | | N/A | N/A | 44,665 | | | 40,016 | | | | — | | | | |
Former Officer(1)
| | | | | | | Frederick H. Eppinger
| | Cash Balance Plan | | | N/A | | | | 16,845 | | | | — | |
(1) | The resultsamounts shown are estimates only and actual benefits will be based upon data, form of benefit elected and age at the time of retirement. The primary assumptions used in the calculations are based on US GAAP assumptions as disclosed in Note 8 to the Company’s audited financial statements for the fiscal year ended December 31, 20162019 included in the Annual Report. Other assumptions used in the calculations are based on applicable SEC regulations. In particular, these participants arethe participant is assumed to elect a lump sum payment when they commencehe commences benefits, which is assumed to be at age 65, the normal retirement age defined in both the Cash Balance Plan and the Excess Benefit Plan. Also, no turnover (e.g. death, disability, termination, retirement) is assumed prior to age 65. |
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401(k) Plan The Company maintains a 401(k) retirement savings plan (the “401(k) Plan”). For 2016,2019, the 401(k) Plan provided a 100% match on the first 6% of eligible compensation deferred tounder the 401(k) Plan. Eligible compensation generally consists of salary and cash bonus, up to the federalInternal Revenue Code limits for qualified 401(k) plans, which was $265,000$280,000 for 2016.2019. Non-Qualified Retirement Savings Plan In connection with the 401(k) Plan, the Company also maintains the Non-Qualified Retirement Savings Plan. This plan provides eligible employees of the Company, including each of the NEOs, listed below, a 6% employer contribution on total eligible compensation in excess of federalInternal Revenue Code limits applied to the 401(k) Plan (subject to certain limits and contingent upon satisfaction of maximum employee contributions to the 401(k) Plan or receipt of evidence that the employee has made maximum contributions to a former employer’s 401(k) plan for the year in question). Amounts deferred are credited with interest based on the GATT rate. This plan is unfunded and non-qualified. A participant’s benefits are generally payable upon the earlier to occur of death or six months following termination fromof employment with the Company. Mr. Slabbert, as an employee of Chaucer, was not eligible to participate in this plan. The table below sets forth certain information regarding NEO participation in the Non-Qualified Retirement Savings Plan during 2016:2019: Name | | Executive Contributions in 2019 ($) (1) | | Company Contributions in 2019 ($) (2) | | Aggregate Earnings in 2019 ($) (3) | | Aggregate Withdrawals/ Distributions in 2019 ($) | | | Aggregate Balance at December 31, 2019 ($) (4) | | | | | | | | | | | | | John C. Roche | | — | | 43,200 | | 9,369 | | — | | | 334,669 | Jeffrey M. Farber | | — | | 43,200 | | 2,025 | | — | | | 112,064 | J. Kendall Huber | | — | | 43,200 | | 25,155 | | — | | | 812,773 | Richard W. Lavey | | — | | 37,713 | | 9,724 | | — | | | 338,312 | Bryan J. Salvatore | | — | | 37,188 | | 1,004 | | — | | | 73,712 |
| | | | | | | | | | | | | | | | | | | | | Name | | Executive
Contributions
in 2016 ($) (1) | | | Registrant
Contributions
in 2016 ($) (2) | | | Aggregate
Earnings in
2016 ($) (3) | | | Aggregate
Withdrawals/
Distributions
in 2016 ($) | | | Aggregate
Balance at
December 31,
2016 ($) (4) | | Joseph M. Zubretsky | | | — | | | | 16,408 | | | | — | | | | — | | | | 16,408 | | Jeffrey M. Farber | | | — | | | | — | | | | — | | | | — | | | | — | | J. Kendall Huber | | | — | | | | 36,485 | | | | 17,734 | | | | — | | | | 637,421 | | John C. Roche | | | — | | | | 30,263 | | | | 4,897 | | | | — | | | | 199,395 | | | | | | | | Former Officers | | | | | | | | | | | | | | | | Frederick H. Eppinger | | | — | | | | — | | | | 30,809 | | | | 1,072,894 | (5) | | | — | | Eugene M. Bullis | | | — | | | | 44,100 | | | | — | | | | — | | | | 44,100 | | Andrew S. Robinson | | | — | | | | — | | | | 7,728 | | | | — | | | | 264,239 | |
(1) | The plan does not currently allow for executive contributions. |
(2) | Represents contributions made by the Company in 20172020 with respect to eligible 20162019 compensation. Such amountscontributions are included in the All Other Compensation Column of the Summary Compensation Table. As previously reported in our 2016 Proxy Statement, inIn March 20162019, contributions with respect to eligible 20152018 compensation were made to the following NEOs in the following amounts: $44,100$43,500 for Mr. Eppinger; $35,129Roche; $43,500 for Mr. Farber; $41,596 for Mr. Huber; $28,583$34,110 for Mr. Roche;Lavey; and $29,376$35,520 for Mr. Robinson.Salvatore. |
(3) | Represents interest accrued on the aggregate amount in the plan attributable to the NEO. Amounts set forth in this column are not included in the Summary Compensation Table because no portion of the interest is “above market,” as determined under SEC rules. |
(4) | Includes Company contributions made in 20172020 as if such contributions were made on December 31, 2016.2019. Balances attributable to Company contributions have been reported as compensation for the NEO in the Summary Compensation Table for the applicable years. |
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(5) | In connection with Mr. Eppinger’s termination of employment in 2016, his account balance was distributed to him in accordance with the terms of the plan. |
Company Mandated Section 162(m) Deferrals Section 162(m) generally disallows a tax deductionFrom time to public companies for taxable compensation over $1 million that is paid to certain executives. The Compensation Committee generally has structured the Company’s annual and certain of its long-term incentive compensation arrangements in a manner intended to qualify awards under such arrangements as performance-based compensation that is not subject to the deduction limitation of Section 162(m). Certain types of awards, however, such as TBRSUs, do not qualify under the performance-based exception. Historically,time, the Company has required that compensation earned by our NEOs that was not deductible pursuant to Section 162(m) be deferred until such time as the payment to the NEO could be made without limits on deductibility under Section 162(m). The Company takes Section 162(m) into account in making its executive compensation decisions, but believes that its primary responsibility is to provide a compensation program that achieves the various goals described in the CD&A, and therefore has paid, and expects in the future to pay, amounts that are not deductible. The table below sets forth certain information regarding the value of earned and vested stock-based compensation that the Company required Mr. Huber Mr. Eppinger and Mr. Robinson to defer in order to preserve its ability to deduct the paymentspayment of such compensation under Section 162(m).
| | | | | | | | | | | | | | | | | | | | | Name | | Executive
Contributions
in 2016 ($) (1) | | | Registrant
Contributions
in 2016 ($) (2) | | | Aggregate
Earnings
in 2016 ($) (3) | | | Aggregate
Withdrawals/
Distributions
in 2016 ($) | | | Aggregate
Balance at
December 31,
2016 ($) (4) | | J. Kendall Huber | | | 247,842 | | | | 60 | | | | — | | | | — | | | | 292,292 | | | | | | | | Former Officers | | | | | | | | | | | | | | | | Frederick H. Eppinger | | | 377,151 | | | | 51,462 | | | | — | | | | 20,301,184 | (5) | | | 100,306 | | Andrew S. Robinson | | | 245,400 | | | | 59 | | | | — | | | | — | | | | 289,411 | |
Name | Executive Contributions in 2019 ($) (1) | Registrant Contributions in 2019 ($) (2) | Aggregate Earnings in 2019 ($) (3) | Aggregate Withdrawals/ Distributions in 2019 ($) | Aggregate Balance at December 31, 2019 ($) (4) | | | | | | | J. Kendall Huber | 12,804 | 527 | — | — | 202,156 |
(1) | For Messrs. Huber and Robinson, amounts for each include: (i) the shares he was required to defer, valued by multiplying the number of shares deferred by the closing price of our Common Stock on the NYSE on the date of deferral; and (ii)Represents dividends earned in 20162019 on accumulated deferred shares which were previously required to be deferred. For Mr. Eppinger, the amount presented represents dividends earned in 2016 on accumulated deferred shares whichthat were required to be deferred.deferred as described above. The stock awardsaward underlying the deferred shares werewas reported in the Summary Compensation Table during the year granted. Dividends on such shares are not reported in the Summary Compensation Table. |
(2) | Represents interest on deferred dividends. Such deferred dividends accrue interest at the GATT rate. Such interest is not reported in the Summary Compensation Table because no portion of the interest is “above market,” as determined under SEC rules. |
(3) | The value of deferred shares fluctuates with the market value of THGour Common Stock. Aggregate earnings (loss) based upon stock price fluctuation are not reported in this column or in the Summary Compensation Table but are reflected in the aggregate balancesbalance as of December 31, 2016, or with respect to Mr. Eppinger, also reflected in the aggregate distribution in 2016.2019. See Note 4 below. |
(4) | Represents the fair market value of the aggregate number of shares previously earned and reported but required to be deferred as of December 31, 2016,2019, plus all accrued but unpaid dividends and accrued but unpaid interest thereon, which are also required to be deferred. The stock awards underlying the deferred |
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| | 68 | | |
| shares were reported in the Summary Compensation |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 47
| Table during the applicable grant year. Accrued but unpaid dividends and interest were not reported in the Summary Compensation Table. Amounts reflected in the table will be paid to Mr. Huber following his retirement at such time and to the extent they become deductible to the Company under Internal Revenue Code regulations. |
(5) | In connection with Mr. Eppinger’s termination of employment in 2016, certain deferred shares were distributed to him in accordance with the terms of the deferral program. |
Chaucer DC Plan
All Chaucer employees are eligible to join the Flexible Retirement Account, a defined contribution pension plan. For 2016, the Company had an age-related contribution scheme. All participants were required to contribute 3% of their salary, and the Company contributed between 8% and 16% of salary depending on which age bracket an employee fell into. Participants could contribute up to $54,000, reduced down on a tapered basis for members earning more than $202,500 to a maximum of $13,500 for members earning more than $283,500.
Potential Payments upon Termination or Change in Control Overview The information provided in the following tables reflects the amount of incremental compensation required to be paid to each applicable NEO in the event of a change in control of the Company, or a termination of the NEO’s employment. For purposes of the disclosure, we have assumed that all triggering event(s) took place on December 31, 2016,2019, and we used the closing price per share on the NYSE of our Common Stock on December 30, 201631, 2019 ($91.01), the last trading day in 2016.136.67). Due to the number of factors that affect the nature and amount of benefits provided upon the occurrence of such events, actual amounts paid or distributed may be different from the amounts disclosed below. Factors that could affect the actual amounts paid include: when the event actually occurs; the number of outstanding but unvested stock awards then held by the NEO; awards granted after December 31, 2016;2019; the amount of prior years’ compensation the NEO was required or elected to defer;
the Company’s relative total shareholder return and return on equity over a specified period and its performance against certain financial and/or business objectives established for determining the level of payment and/or vesting of outstanding, but unvested, stock awards; and the Company’s stock price as of the date of such event. Specifically excluded from the information and tables below are any amounts which are not contingent upon the occurrence of the triggering event(s) or payments pursuant to Company benefit plans that are generally available to all salaried employees of THG and do not discriminate in scope or terms of operation in favor of our NEOs (e.g., term life insurance, long-term disability insurance, etc.). Benefits to our NEOs under the CIC Plan are triggered only in the event of a Change in Control (defined below)and the a subsequent occurrence of an involuntary termination of employment by the Company or constructive termination of employment by the NEO. The change in control column in the tables below assumeassumes both a Change in Controland the occurrence of a termination event effective as of December 31, 2016.2019. The payments and benefits Messrs. Eppinger, Robinson and Slabbert actually received in connection with their separationAs previously disclosed, Mr. Huber has announced his retirement from the Company, are set forth in the Summary Compensation Table on page 57 and are described in the CD&A beginning on page 48. Amounts for Messrs. Eppinger and Robinson are not included in the tables below since they lefteffective April 1, 2020. Mr. Huber agreed, pursuant to a Transition Services Agreement dated March 26, 2020, to be available to the Company prioras an independent contractor, on a limited, part-time basis, in an advisory role as needed. In this capacity, Mr. Huber will provide advice and assistance to the endsenior leadership team and will render such other services as may be requested from time to time by the Board of 2016.Directors, for a period of four months ending on July 31, 2020. For his services, Mr. Bullis did not receive any payments or benefits in connection with his separation fromHuber will be paid $37,500 per month during the Company during 2016.
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| | 69 | | |
Termination Other Than in Connection with a Change in Control Except as otherwise described below, the Company has no obligations to provide severance benefits (except as may otherwise be required by law) to any NEO in the event such NEO is terminated other than in connection with a change in control.
Zubretsky Offer Letter
Pursuant to Mr. Zubretsky’s offer letter, in the event his employment is involuntarily terminated, other than for cause or in connection with a change in control, or he terminates his employment for “good reason” (generally, a material and adverse change in duties, reduction in base salary or short-term incentive compensation target opportunity, a material reduction in benefits, a requirement that the executive relocate his principal place of business, failure to nominate Mr. Zubretsky to the Board at the end of his current term, or his removal from the Board), Mr. Zubretsky will receive a lump sum payment equal to 2.4x his current base salary. Additionally, to the extent unvested, Mr. Zubretsky will continue to vest in any long-term incentive awards for one year following such termination. As a condition to receiving severance, Mr. Zubretsky must enter into a separation agreement upon terms and conditions acceptable to the Company, which will include a full release and non-disparagement provision.
Farber Offer Letter Pursuant to Mr. Farber’s offer letter, in the event his employment is involuntarily terminated other(other than for cause or in connection with a change in control, or due to death or disability), or he terminates his employment for “good reason” (generally, a material and adverse change in duties, reduction in base salary or short-term incentive compensation target opportunity or a requirement that the executivehe relocate his principal place of business), Mr. Farber will receive a lump sum payment equal to 2.0xtwo times his current base salary. Additionally, to the extent unvested, Mr. Farber will continue to vest in any long-term incentive awards for one year following such termination. As a condition to receiving severance, Mr. Farber must enter into a separation agreement upon terms and conditions acceptable to the Company, which will includeincluding a full release and non-disparagement provision. Slabbert Service AgreementLeadership Severance Agreements
Pursuant to theThe material terms of his Service Agreement, in the event Mr. Slabbert’s employment was terminated by the Company, other than under certain enumerated circumstances (generally, acts of misconduct or disability), Mr. Slabbert was entitled to one year’s base salary plus benefits. As a condition to these post-termination benefits, Mr. Slabbert agreed to certain non-solicitation, cooperation, non-competition and confidentiality provisions that extend beyond his termination of employment for up to one year. For a descriptionconditions of the payments and benefits Mr. Slabbert actually received in connection with his separation from the Company, see page 50 of the CD&A.
Long-Term Equity Incentive Plans
Pursuant to the 2014 Plan and the 2006 Plan and certain stock awardseverance agreements issued thereunder, holders of stock awards, including the NEOs, may be entitled to pro-rated vesting of their awards in the event the holder dies or is disabled prior to the vesting date. Disability, for these purposes, is as defined in the Company’s long-term disability plan.
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Leadership Transition Severance Arrangements
In order to ensure the continued focus, undivided attention and service to the Company during the transition to a new Chief Executive Officer, the Compensation Committee approved severance arrangements for each domestic executive officer of the Company (excluding Messrs. Eppinger and Bullis). (other than Mr. Farber whose arrangements are set forth in his offer letter described above) are summarized below:
In the event the (i) the executive’s employment is involuntarily terminated, other than in connection with his or her death, disability, a “change in control,” or for “cause,” or (ii) the executive voluntarily terminates his or her employment for “good reason” (defined generally to mean a decrease in the executive’s base salary or target short-term incentive compensation opportunity, a material and adverse change to the executive’s role and responsibility, or, in certain cases a requirement that the executive relocate), in either case prior to September 1, 2018, the executive will be entitled to a lump sum cash severance payment equal to a pre-established multiple of his or her annual base salary. The amount of the severance award is designed to approximate one year’s cash compensation. For Mr. Huber, his multiple is 1.75x basecompensation (base salary and for Mr. Roche, his multiple is 1.65x base salary. target bonus opportunity). As a condition to receiving such severance, the executive mustwould be required to enter into a separation agreement upon terms and conditions acceptable to the Company, which will includeincluding a full release and non-disparagement provision. Neither THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 48
Long-Term Equity Incentive Plans Pursuant to the 2014 Plan and certain stock award agreements evidencing awards issued thereunder, holders of stock awards, including the NEOs, may be entitled to pro-rated or full acceleration of vesting of their awards in the event the holder dies or is disabled prior to the vesting date. In general, for these purposes, disability is as defined in the Company’s long-term disability plan. Under the terms of the 2018 and 2019 restricted stock unit and option awards, a participant is entitled to pro-rated vesting upon retirement, which is defined as either termination at age 65 or older or age 60 or older if the participant has had five or more years of continuous service, provided that the participant has given the Company at least six months advanced written notice of retirement. As of December 31, 2019, Mr. Zubretsky nor Mr. Farber is a party to these agreements.Huber was the only NEO who was retirement eligible under the terms of his 2018 and 2019 restricted stock unit and option awards. Change in Control THG’s CIC Plan outlines the potential benefits certain key executives could receive upon a Change in Control (defined below) of the Company. Mr. Slabbert was not a participant in this plan. In the event of a Change in Control (defined below) of the Company and subsequent involuntary termination of a participant’s employment by the Company or constructive termination of a participant’s employment by the participant within a two-year period following the Change in Control, the CIC Plan authorizes the payment of specified benefits to eligible participants. These include a lump-sum cash payment equal to a multiplier (the “Multiplier”) (2x for Messrs. ZubretskyMr. Roche and Mr. Farber, 3x for Mr. Huber, and 1x1.5x for Mr. Roche)Lavey and Mr. Salvatore) times the sum of a participant’s applicable base salary and target short-term incentive compensation award opportunity. Additionally, a participant is entitled to a cash payment of an amount equal to the amount that otherwise would have been credited under the Company’s 401(k) Plan and Non-Qualified Retirement Savings Plan for the year in which the employee’s employment was terminated. The CIC Plan also provides for continued coverage for up to one year under the Company’s health plans, payment of an amount equal to the participant’s target short-term incentive compensation award opportunity, pro-rated for service performed in the year of termination, and outplacement services. Certain participants who were covered byMr. Huber, whose benefit has not been changed since the adoption of the CIC Plan when it was adopted in 2008, maywould also be entitled to a gross-up payment (“280G Gross-Up”) if theirhis change in control payments/payments and benefits become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, subject to a requirement that the amounts subject to the excise tax exceed a certain amount (the excise taxCode. None of our other NEOs is a special additional tax applicable to change-in-control payments; the 280G Gross-Up does not apply to federal and state ordinary income taxes that would be payable without regard to the impact of such excise tax and the gross-ups). Notwithstanding the foregoing, it is the Company’s policy that no new participant to the CIC Plan becurrently entitled to a 280G Gross-Up benefit. Accordingly, Messrs. Zubretsky and Farber are not entitled to a 280G Gross-Up. New participants are entitled to receive the full amount of payments due to them or a lesser amount, whichever results in the greater after-tax amount payable to them. Based on a hypothetical termination as of December 31, 2016, neither2019, Mr. Huber nor Mr. Roche would not have been entitled to a 280G Gross-Up benefit. Pursuant to the 2006 Plan, the 2014 Plan the Chaucer SIP and the various agreements evidencing awards issued thereunder, in the event of a change in control (defined below), the participant may be entitled to certain accelerated vesting of equity awards if such awards are not assumed by the successor company, or if such participantparticipant’s employment is involuntarily or constructively terminated after the change in control. The tables below present the hypothetical values as if such | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 71 | | |
awards are assumed by a successor company and such participant is involuntarily or constructively terminated thereafter. Such hypothetical values would be identical in the event the successor company did not assume the equity grants and instead they were accelerated. With respect to all equity awards granted to Mr. Zubretsky during his first year of employment, such awards are not subject to acceleration in connection with a change in control unless specifically approved by the Committee of Independent Directors. As further described in the footnotes and because the tables assume a hypothetical triggering event on December 31, 2016,2019, the values in the tables below include amounts for short-term and long-term incentive compensation awards that vested and were earned by the executives in the first quarter of 2017.2020. Potential Payments Upon Termination or Change in Control* Tables | | John C. Roche | | Benefit | | Death | | | Disability | | | For Cause | | | Retirement | | | Without Cause | | | For Good Reason | | | Change in Control | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance (1) (2) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,185,000 | | | $ | 2,185,000 | | | $ | 4,370,000 | | Cash Incentives (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,235,000 | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested Restricted Stock Units (PBRSUs and TBRSUs) (4) | | | 3,438,207 | | | | 3,932,406 | | | | — | | | | — | | | | — | | | | — | | �� | | 5,600,327 | | Unexercisable Stock Options (5) | | | 2,666,569 | | | | 2,737,435 | | | | — | | | | — | | | | — | | | | — | | | | 2,737,435 | | Other Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Health & Welfare (6) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 23,566 | | Outplacement (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,000 | | Cash Severance Related to Company’s 401(k) and NQ Retirement Savings Plan (8) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 60,000 | | TOTAL | | $ | 6,104,776 | | | $ | 6,669,841 | | | $ | — | | | $ | — | | | $ | 2,185,000 | | | $ | 2,185,000 | | | $ | 14,056,328 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Joseph M. Zubretsky | | Benefit | | Death | | | Disability | | | For
Cause | | | Voluntary | | �� | Without
Cause | | | For Good
Reason | | | Change in
Control | | Cash Severance (1) (2) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,400,000 | | | $ | 2,400,000 | | | $ | 4,800,000 | | Cash Incentives (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,400,000 | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested Restricted Stock Units (4) (5) | | | 146,162 | | | | 1,684,959 | | | | — | | | | — | | | | — | | | | — | | | | — | | Unexercisable Stock Options (5)(6) | | | 410,041 | | | | 1,181,527 | | | | — | | | | — | | | | 772,180 | | | | 772,180 | | | | — | | Other Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Health & Welfare (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 14,313 | | Outplacement (8) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,000 | | Cash Severance Related to Company’s 401(k) and NQ Retirement Savings
Plan (9) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 32,308 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | $ | 556,203 | | | $ | 2,866,486 | | | $ | — | | | $ | — | | | $ | 3,172,180 | | | $ | 3,172,180 | | | $ | 6,276,621 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See pages 74-7851-53 for footnotes THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 49
| | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 72 | | |
| | | | | | Jeffrey M. Farber | | | Jeffrey M. Farber | | Benefit | | Death | | Disability | | For
Cause | | Voluntary | | Without
Cause | | For Good
Reason | | Change in
Control | | | Death | | | Disability | | | For Cause | | | Retirement | | | Without Cause | | | For Good Reason | | | Change in Control | | Cash Severance (2) (10) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,300,000 | | | $ | 1,300,000 | | | $ | 1,950,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance (1) (2) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,370,000 | | | $ | 1,370,000 | | | $ | 2,740,000 | | Cash Incentives (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 325,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 685,000 | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested Restricted Stock Units (4) | | | 66,619 | | | | 226,524 | | | | — | | | | — | | | | — | | | | — | | | | 820,455 | | | Unvested Restricted Stock Units (PBRSUs and TBRSUs) (4) | | | | 3,060,178 | | | | 3,386,683 | | | | — | | | | — | | | | 1,612,296 | | | | 1,612,296 | | | | 4,392,847 | | Unexercisable Stock Options (6)(5) | | | 62,213 | | | | 317,374 | | | | — | | | | — | | | | 225,386 | | | | 225,386 | | | | 766,175 | | | | 2,209,997 | | | | 2,351,678 | | | | — | | | | — | | | | 1,571,778 | | | | 1,571,778 | | | | 2,351,678 | | Other Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Health & Welfare (7)(6) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 21,071 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 23,566 | | Outplacement (8)(7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,000 | | Cash Severance Related to Company’s 401(k) and NQ Retirement Savings Plan (9) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9,000 | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance Related to Company’s 401(k) and NQ Retirement Savings Plan (8) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 60,000 | | TOTAL | | $ | 128,832 | | | $ | 543,898 | | | $ | — | | | $ | — | | | $ | 1,555,386 | | | $ | 1,555,386 | | | $ | 3,921,701 | | | $ | 5,270,175 | | | $ | 5,738,361 | | | $ | — | | | $ | — | | | $ | 4,554,074 | | | $ | 4,554,074 | | | $ | 10,283,091 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | J. Kendall Huber | | | J. Kendall Huber | | Benefit | | Death | | Disability | | For
Cause | | Voluntary | | Without
Cause | | For Good
Reason | | Change in
Control | | | Death | | | Disability | | | For Cause | | | Retirement | | | Without Cause | | | For Good Reason | | | Change in Control | | Cash Severance (2) (11) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 892,500 | | | $ | 892,500 | | | $ | 2,677,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance (1) (2) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,063,750 | | | $ | 1,063,750 | | | $ | 3,191,250 | | Cash Incentives (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 382,500 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 488,750 | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested Restricted Stock Units (4) | | | 944,411 | | | | 1,258,395 | | | | — | | | | — | | | | — | | | | — | | | | 1,348,859 | | | Unvested Restricted Stock Units (PBRSUs and TBRSUs) (4) | | | | 1,695,118 | | | | 1,875,386 | | | | — | | | | 492,149 | | | | — | | | | — | | | | 2,430,813 | | Unexercisable Stock Options (6)(5) | | | 405,055 | | | | 650,478 | | | | — | | | | — | | | | — | | | | — | | | | 738,182 | | | | 1,222,657 | | | | 1,301,397 | | | | — | | | | 299,006 | | | | — | | | | — | | | | 1,301,397 | | Other Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Health & Welfare (7)(6) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 21,071 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 17,068 | | Outplacement (8)(7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,000 | | Cash Severance Related to Company’s 401(k) and NQ Retirement Savings Plan (9) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 52,385 | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance Related to Company’s 401(k) and NQ Retirement Savings Plan (8) | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 60,000 | | TOTAL | | $ | 1,349,466 | | | $ | 1,908,873 | | | $ | — | | | $ | — | | | $ | 892,500 | | | $ | 892,500 | | | $ | 5,250,497 | | | $ | 2,917,775 | | | $ | 3,176,783 | | | $ | — | | | $ | 791,155 | | | $ | 1,063,750 | | | $ | 1,063,750 | | | $ | 7,519,278 | | | | | | | | | | | | | | | | | | | | | | | | |
| | Richard W. Lavey | | Benefit | | Death | | | Disability | | | For Cause | | | Retirement | | | Without Cause | | | For Good Reason | | | Change in Control | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance (1) (2) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 945,000 | | | $ | 945,000 | | | $ | 1,417,500 | | Cash Incentives (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 420,000 | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested Restricted Stock Units (PBRSUs and TBRSUs) (4) | | | 1,267,751 | | | | 1,408,794 | | | | — | | | | — | | | | — | | | | — | | | | 1,851,468 | | Unexercisable Stock Options (5) | | | 926,693 | | | | 981,811 | | | | — | | | | — | | | | — | | | | — | | | | 981,811 | | Other Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Health & Welfare (6) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,966 | | Outplacement (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,000 | | Cash Severance Related to Company’s 401(k) and NQ Retirement Savings Plan (8) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 54,513 | | TOTAL | | $ | 2,194,444 | | | $ | 2,390,605 | | | $ | — | | | $ | — | | | $ | 945,000 | | | $ | 945,000 | | | $ | 4,757,258 | |
See pages 74-7851-53 for footnotes THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 50 | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
| | 73 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | John C. Roche | | Benefit | | Death | | | Disability | | | For
Cause | | | Voluntary | | | Without
Cause | | | For Good
Reason | | | Change in
Control | | Cash Severance (2) (11) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 800,250 | | | $ | 800,250 | | | | $800,250 | | Cash Incentives (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 315,250 | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested Restricted Stock Units (4) | | | 852,491 | | | | 1,160,286 | | | | — | | | | — | | | | — | | | | — | | | | 1,250,386 | | Unexercisable Stock Options (6) | | | 372,856 | | | | 609,445 | | | | — | | | | — | | | | — | | | | — | | | | 696,951 | | Other Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Health & Welfare (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 21,071 | | Outplacement (8) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,000 | | Cash Severance Related to Company’s 401(k) and NQ Retirement Savings Plan (9) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 46,163 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | $ | 1,225,347 | | | $ | 1,769,731 | | | $ | — | | | $ | — | | | $ | 800,250 | | | $ | 800,250 | | | $ | 3,160,071 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Johan G. Slabbert | | Benefit | | Death | | | Disability | | | For
Cause | | | Voluntary | | | Without
Cause (17) | | | Change in
Control | | Cash Severance (12) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 418,500 | | | | $418,500 | | Unvested Cash Awards (13) | | | 297,027 | | | | 297,027 | | | | — | | | | — | | | | — | | | | 401,664 | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | Unvested Restricted Stock Units (4)(14) | | | 101,840 | | | | 232,258 | | | | — | | | | — | | | | — | | | | 310,071 | | Unvested Shares in The Chaucer Share Incentive Plan (15) | | | 18,748 | | | | 18,748 | | | | — | | | | — | | | | — | | | | 18,748 | | Other Benefits | | | | | | | | | | | | | | | | | | | | | | | | | Health & Welfare (16) | | | — | | | | — | | | | — | | | | — | | | | 14,028 | | | | 14,028 | | | | | | | | | | | | | | | | | | | | | | | | | | | TOTAL | | $ | 417,615 | | | $ | 548,033 | | | $ | — | | | $ | — | | | $ | 432,528 | | | $ | 1,163,011 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Bryan J. Salvatore | | Benefit | | Death | | | Disability | | | For Cause | | | Retirement | | | Without Cause | | | For Good Reason | | | Change in Control | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance (1) (2) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 936,000 | | | $ | 936,000 | | | $ | 1,404,000 | | Cash Incentives (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 416,000 | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested Restricted Stock Units (PBRSUs and TBRSUs) (4) | | | 1,029,262 | | | | 1,204,883 | | | | — | | | | — | | | | — | | | | — | | | | 1,569,518 | | Unexercisable Stock Options (5) | | | 726,287 | | | | 862,530 | | | | — | | | | — | | | | — | | | | — | | | | 862,530 | | Other Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Health & Welfare (6) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 23,566 | | Outplacement (7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,000 | | Cash Severance Related to Company’s 401(k) and NQ Retirement Savings Plan (8) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 53,988 | | TOTAL | | $ | 1,755,549 | | | $ | 2,067,413 | | | $ | — | | | $ | — | | | $ | 936,000 | | | $ | 936,000 | | | $ | 4,359,602 | |
* | Please refer to the change in control definitions below for an explanation of what constitutes a change in control under the CIC Plan, the 2006 Plan and the 2014 Plan. Prior to receiving any benefits under the CIC Plan, the participant must execute certain waivers and general releases in favor of the Company. In addition, in order to be eligible to participate in the CIC Plan, participants must execute a non-solicitation and non-interference agreement,regardless of whether or not they ever receive benefits thereunder. This agreement also contains a non-disparagement and cooperation provision and provides that all proprietary information relating to the Company’s business and all software, works of authorship and other developments created during employment by the Company are the sole property of the Company. |
Change in Control under the CIC Plan is defined as follows: (i) subject to certain exceptions, a change in the composition of the Board of Directors such that the Incumbent Directors (as defined in the CIC Plan) at the beginning of any consecutive twenty-four month period cease to constitute a majority of the Board; (ii) subject to certain exceptions, any person or group is or becomes the beneficial owner of 35% or more of the Company’s outstanding voting securities; (iii) the consummation of a merger, consolidation, share exchange or similar form of corporate transaction involving the Company or any affiliate that requires shareholder approval, unless the shareholders immediately prior to the transaction own more than 50% of the total voting stock of the successor corporation and a majority of the board of directors of the successor | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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corporation were Incumbent Directors immediately prior to the transaction; (iv) the approval by shareholders of a sale of all or substantially all of the Company’s assets and such sale is consummated; or (v) the approval by shareholders of a plan of liquidation or dissolution of the Company. The definition of a “A “change in control” under the 2006 Plan and the 2014 Plan is substantially consistent with the definition in the CIC Plan, except that pursuant to the 2006 Plan and the 2014 Plan, a “change in control” is triggered by the consummation of a merger, consolidation, share exchange or similar form of corporate transaction involving the Company or any affiliate that requires shareholder approval, unless the shareholders immediately prior to the transaction own more than 50% of the total voting stock of the successor corporationor a majority of the board of directors of the successor corporation were Incumbent Directors immediately prior to the transaction. (1) | Pursuant to Mr. Zubretsky’s offer letter, in the event his employment is involuntarily terminated, other than for cause or in connection with a change in control, or he terminates his employment for “good reason,” Mr. Zubretsky will receive a lump sum payment equal to 2.4x his current base salary, provided he provides a full release of claims and agrees to certain non-solicitation, non-interference, confidentiality and non-disparagement provisions. |
(2) | Pursuant to the CIC Plan, in the event ofboth a Change in Control and a subsequent involuntary or constructive termination, the NEO is entitled to a lump sum severance payment equal to the product of his or her Multiplier and the sum of his or her applicable annual base salary plus target short-term incentive compensation award opportunity. |
(3)(2) | As discussed above, the Company entered into severance arrangements with each of its executive officers, including each NEO. These arrangements provide for a lump sum cash severance award designed to approximate one year’s target cash compensation (base salary and target bonus opportunity), or in the case of Mr. Farber, two times his current base salary, in each case in the event the (i) executive’s employment is involuntarily terminated, other than in connection with that person’s death, disability, a Change in Control or for Cause (as these terms are defined under the CIC Plan) or (ii) the executive voluntarily terminates his or her employment for “good reason.” |
(3) | Represents payment of target 20162019 STIP award earned in 2016,2019, pro-rated for the period prior to the Change in Control (the amount included above assumes full year payout at target). In the event of death, disability, or in certain circumstances, an involuntary termination of employment (other than for cause), occurring prior to the payment date, each NEO remains eligible for an award under the 20162019 STIP, but payment is at the discretion of the Compensation Committee. For all applicable NEOs, each NEO’s actual 20162019 STIP award was earned and paid during the first quarter of 2017.2020. See the Summary Compensation Table on page 5740 for more information. |
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 51
(4) | PBRSUs Represents the value of unvested PBRSUs granted in 2014, 20152017, 2018 and 20162019 (see “Outstanding Equity Awards at Fiscal Year-End 2016”2019” on page 6444 for more information). |
Death.Death. In the event of aan NEO’s death, a pro-rated portion of the PBRSUs vests but (A) for awards granted in 2014 and 2015, the awards remain subject to the performance-based vesting conditions determined atbased on the enddate of the original performancetermination event. For the 2017 and 2018 awards and the 2019 RTSR PBRSUs, the values of all applicable NEO’s awards are presented at 150% of target. For all applicable NEOs, values for the 2019 ROE PBRSUs based on return on equity for the 2019-2021 period are presented at target. Disability. In the event of an NEO’s disability, a pro-rated portion of the PBRSUs vests and (B) for awards granted in 2016,the participant is given an additional one-year service credit, and the awards remain subject to the performance-based vesting conditions determined based on the date of the termination event. For all applicable NEOs, values presented for the 2014 award2017 PBRSUs are based on the actual payout of 150% of target and values for 2015 assume payout at target. For Messrs. Huber and Roche, values for the 2016 award are at 53% of target, respectively. For Mr. Slabbert, values for his two 2016 awards are at target and 53% of target, respectively. Since Mr. Zubretsky and Mr. Farber were hired during 2016, the performance of their PBRSUs is based on the Company’s achievement of a specified total shareholder return from the grant date (June 20, 2016 and October 3, 2016, respectively) through December 31, 2018. Based on Company performance since these grant dates, Mr. Zubretsky’s and Mr. Farber’s awards are valued at 25% and 150% of target, respectively. Disability. In the event of a NEO’s disability, a pro-rated portion of the PBRSUs vests and the participant is given an additional one-year service credit, but (A) for awards granted in 2014 and 2015, the awards remain subject to the performance-based vesting conditions determined at the end of the performance period, and (B) for awards granted in 2016, the awards remain subject to the performance-
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based vesting conditions determined based on the date of the termination event. For all applicable NEOs, values for the 20142018 and 2019 PBRSUs are presented at target.
Retirement. In the event Mr. Huber, who is retirement eligible under the terms of his 2018 and 2019 PBRSU awards, had retired as of December 31, 2019, a pro-rated portion of the 2018 and 2019 PBRSUs would have vested and the amounts payable, if any, would be determined and paid at the end of the applicable performance period based upon the Company’s actual level of performance against the pre-established metrics. Therefore, the value for Mr. Huber’s award areis presented at target. Mr. Huber has announced his retirement from the Company, effective April 1, 2020. Without Cause / For Good Reason. The terms of Mr. Farber’s PBRSUs provide that if his employment is terminated without cause (other than as a result of his death, disability, or a change in control), or if he terminates his employment for good reason, then he will be given one additional year’s vesting credit. As a result, Mr. Farber’s 2017 PBRSU award would have been deemed to be vested as of December 31, 2019. The value for this award is based on the actual payout ofat 150% of target and values for 2015 and 2016 are at target. Change in Control. In the event of a change in control, unless such awards are assumed by the successor entity, 100% of the PBRSUs vest based upon the level of achievement to date. If awards are assumed, then participants are not entitled to any acceleration unless aan NEO’s employment is involuntarily or constructively terminated following the change in control. For all applicable NEOs, values for the 20142017, 2018 and 2019 awards based on relative total shareholder return are valuedpresented at 150% of target and the 2015 award is valued at 107% of target. For Messrs. Huber and Roche, values for the 2016 award are valued at 53% of target. For Mr. Slabbert, value for one of his2019 awards is at 53% of target and the other is valued at target. The performance of Mr. Farber’s PBRSUs is based on the Company’s achievement of a specified total shareholder return from the grant date, October 3, 2016, through December 31, 2018. Based on Company performance since the grant date, Mr. Farber’s award is valuedequity are presented at 150% of target. TBRSUs Represents the value of unvested TBRSUs granted to Mr. Roche in 2014, 20152017 and 2016all NEOs in 2019 (see “Outstanding Equity Awards at Fiscal Year-End 2016”2019” on page 6444 for more information). Death and Disability. In For Mr. Roche’s 2017 award, in the event of a NEO’shis death or disability, a pro-rated portion of the TBRSUs vest, plus an additional year in the case of disability. For the 2019 awards, in the event of an NEO’s death or disability, the award vests in full. Retirement. In the event Mr. Huber, who is retirement eligible under the terms of his 2019 TBRSU awards, had retired as of December 31, 2019, a pro-rated portion of the 2019 TBRSUs would have vested. Change in Control. In the event of a change in control, unless such award is assumed by the successor entity, 100% of the TBRSUs vest. If awards are assumed, then participants are not entitled to any acceleration unless the participant’s employment is involuntarily or constructively terminated following the change in control. (5) | With respect to all equity awards granted to Mr. Zubretsky prior to June 20, 2017, such awards are not subject to acceleration in connection with a change in control unless specifically approved in writing by the Committee of Independent Directors. If the Committee of Independent Directors had elected to accelerate such awards, (i) Mr. Zubretsky’s PBRSUs would have been valued at 25% of target and been worth $825,916 as of December 31, 2016, and (ii) Mr. Zubretsky’s options would have accelerated and been worth $2,316,556 as of December 31, 2016. |
(6) | Non-Qualified Stock OptionsRepresents intrinsic value (difference between fair market value of THGour Common Stock and the exercise price of the options multiplied by the number of unvestedaccelerated options). Unless such award is assumed by the successor entity, upon a change in control such unvested options immediately vest and become exercisable in full. If awards are assumed, then participants are not entitled to any acceleration unless involuntarily or constructively terminated following the change in control. In the event a participant’s employment is terminated by reason of death or disability, then a pro-rata portion of his or her outstanding stock options automatically vest (plus an additional one-year service credit in the case of disability) and the unvested portion is automatically cancelled and forfeited. Pursuant to the terms of their option award agreements, Mr. Zubretsky and Mr. Farber are entitled to credit for one additional year of vesting in the event of a termination without cause or for good reason. |
Death. In the event an NEO’s employment is terminated by reason of death, for the 2017 awards, a pro-rata portion of an NEO’s outstanding stock options automatically vest, and the unvested portion is automatically cancelled and forfeited. For the 2018 and 2019 awards, any unvested options immediately vest and become exercisable in full upon an NEO’s death. Disability. In the event an NEO’s employment is terminated by reason of disability, for the 2017 awards, then a pro-rata portion, based on actual service during the life of the award, plus an additional one-year service credit, of the NEO’s outstanding stock options automatically vest, and the unvested portion is automatically cancelled and forfeited. For the 2018 and 2019 awards, any unvested options immediately vest and become exercisable in full if an NEO’s employment is terminated by reason of disability. Retirement. In the event Mr. Huber, who is retirement eligible under the terms of his 2018 and 2019 option awards, had retired as of December 31, 2019, a pro-rated portion of the 2018 and 2019 options would have vested and become exercisable. THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 52
Without Cause / For Good Reason. The terms of Mr. Farber’s option awards provide that if his employment is terminated without cause (other than as a result of his death, disability, or a change in control), or if he terminates his employment for good reason, then he will be given one additional year’s vesting credit. Change in Control. Unless such award is assumed by the successor entity, upon a change in control such unvested options immediately vest and become exercisable in full. If awards are assumed, then participants are not entitled to any acceleration unless involuntarily or constructively terminated following the change in control. (7)(6) | Represents the estimated cost of continued health and dental benefits for a period not to exceed one year. All such benefits terminate in the event the NEO obtains other employment that provides the NEO with group health benefits. |
(8)(7) | Represents the estimated cost of one year of outplacement services. |
(9)(8) | Represents a lump sum payment equal to the amount which would be credited for 20162019 to the NEO’s account balances under the 401(k) Plan and the Non-Qualified Retirement Savings Plan, based upon the higher of the NEO’s 20152018 or annualized 20162019 eligible compensation. |
CEO Pay Ratio Set forth below is an estimate of the relationship between the annual total compensation of our median employee and the annual total compensation of John C. Roche, our Chief Executive Officer. The pay ratio below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. For the 2019 fiscal year: The base salary of the median compensated employee of our Company (other than our CEO) was $76,888, and when general bonus, 401(k) match and the cost of medical and health benefits is included, the annual total compensation of the median compensated employee (calculated in accordance with the methodology used to determine the amounts reported in the Summary Compensation Table on page 40) was $97,544; Mr. Roche’s total compensation, calculated in accordance with the methodology used to determine the amounts reported in the Summary Compensation Table on page 40 (and then adding the cost of certain medical and health benefits, as described below), was $4,994,450; Based on the foregoing, for 2019 the ratio of the total compensation of Mr. Roche to the annual total compensation of our median compensated employee was 51 to 1. To calculate our CEO pay ratio as described above, we used the following methodology and assumptions: Median Employee For our 2019 ratio, we evaluated our workforce as of December 31, 2019 and determined that neither the changes to the median compensated employee’s compensation nor the changes to our employee population and compensation structure as a whole have significantly impacted our pay ratio disclosure. Therefore, we used the same median compensated employee identified pursuant to our 2018 identification process; and We calculated the actual annual total compensation paid to the selected median compensated employee using the same methodology as was used to calculate Mr. Roche’s compensation in the Summary Compensation Table on page 40 (including annual bonus of $5,400 and the Company’s contribution to the 401(k) plan on behalf of median employee of $4,613), and added the $10,642 cost of medical and health benefits attributed to the median compensated employee through Company-sponsored benefit plans. CEO Mr. Roche’s total compensation was calculated by using the same methodology as was used to calculate the amounts in the Summary Compensation Table on page 40 and by adding the $14,673 cost of medical and health benefits that the Company attributed to Mr. Roche in 2019 through Company-sponsored benefit plans; this amount was added in order to provide a like comparison to the elements of compensation included for the median employee. In accordance with SEC rules, we have used estimates and assumptions, as described above, in calculating the pay ratio reported above. The estimates and assumptions that we use may differ from estimates and assumptions used by other companies, including companies in our compensation peer group described above. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 53
(10) | Pursuant to Mr. Farber’s offer letter, in the event his employment is involuntarily terminated, other than for cause or in connection with a change in control, or he terminates his employment for “good reason,” Mr. Farber will receive a lump sum payment equal to 2.0x his current base salary, provided he provides a full release of claims and agrees to certain non-solicitation, non-interference, confidentiality and non-disparagement provisions. |
(11) | As discussed above and on page 71 of the CD&A in the section titled “Leadership Transition Severance Arrangements,” the Company entered into severance arrangements with each of its U.S. executive officers serving at that time (excluding Messrs. Eppinger and Bullis) for the period ending September 1, 2018. These arrangements provide for a lump sum cash severance award equal to a pre-established multiple of base salary if during that time an executive (i) is involuntarily terminated, other than in connection with that person’s death, disability, a Change in Control or for Cause (as these terms are defined under the CIC Plan) or (ii) voluntarily terminates his or her employment for “good reason”. |
(12) | Pursuant to the terms of his Service Agreement, in the event Mr. Slabbert’s employment is terminated by the Company, other than for the reasons set forth in the agreement (generally, misconduct or disability), Mr. Slabbert would be entitled to one year’s base salary plus benefits. Amounts reflect base salary. For the value of benefits, see Note 16 below. |
(13) | Performance-Based Cash Awards Represents the value of unvested performance-based cash awards granted in 2014 and 2015 under Chaucer’s 2014 and 2015 Long-Term Cash Incentive Plan. Payouts under the performance-based awards are determined by Chaucer’s average post-tax return on equity over the performance periods (2014-2016 for the 2014 awards and 2015-2017 for the 2015 awards). |
Death or Disability. In the event of Mr. Slabbert’s death or disability, a pro-rated portion of the performance-based cash awards vests, subject to actual performance against the pre-established performance condition. For Mr. Slabbert, values for the 2014 award are based on the actual payout of 112% of target and values for 2015 are valued at target.
Change in Control. In the event of a change in control, unless such awards are assumed by the successor entity, 100% of the performance-based cash awards vest based upon the level of achievement to date. If awards are assumed, then participants are not entitled to any acceleration unless Mr. Slabbert’s employment is involuntarily or constructively terminated following the change in control. Mr. Slabbert’s 2014 award is valued at 123% of target, and the 2015 award is valued at 111% of target.
Time-Based Cash Awards Represents the value of an unvested time-based cash award granted in 2014.
Death or Disability. In the event of Mr. Slabbert’s death or disability, a pro-rated portion of the time-based cash award vests.
Change in Control. In the event of a change in control, unless such award is assumed by the successor entity, 100% of the time-based cash award vests. If the award is assumed, then participants are not entitled to any acceleration unless Mr. Slabbert’s employment is involuntarily or constructively terminated following the change in control.
(14) | All unvested awards were forfeited in connection with Mr. Slabbert’s separation from Chaucer in February 2017. |
(15) | Represents the value of unvested matching shares issued pursuant to the Chaucer SIP. These shares are subject to vesting restrictions, but generally such vesting is accelerated in the event of death, disability or change-in-control. |
(16) | Represents estimated cost of one year’s benefits due under the Services Agreement. |
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(17) | In the event termination is due to being deemed redundant (generally a position elimination), Mr. Slabbert would also be entitled to the same benefits with respect to his unvested cash awards and unvested SIP shares as if he was terminated for death or disability. |
SECTION 16(a) BENEFICIAL OWNERSHIPOWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires executive officers and directors, and persons who beneficially own more than ten percent (10%) of our Common Stock, to file initial reports of ownership, and reports of changes in ownership, of our Common Stock with the SEC. Such persons are required by SEC regulations to provide to THG copies of all their Section 16(a) filings. Based solely on a review of the forms furnished to THG and written representations from THG’s executive officers and directors, THG believes that during 2016,2019, THG’s executive officers, directors and greater than 10% shareholders fully complied with all Section 16(a) filing requirements, except that due to an administrative oversight, a report covering the Compensation Committee’s certification of achievement of PBRSU goals for one award for each of Messrs. Eppinger, Huber, Lavey, Robinson, Roche, and Welzenbach, was filed three filing days late.requirements. HOUSEHOLDING INFORMATION Some brokers and nominees may be participating in the practice of “householding” proxy statements, annual reports and notices of Internet availability of proxy materials. This means that only one copy of our Proxy Statement, our Annual Report or our Notice may have been sent to multiple shareholders in your household. We will promptly deliver a separate copy of any of the documents to you if you call 1-800-407-5222 or write to THG at 440 Lincoln Street, Worcester, Massachusetts 01653 (attention: Investor Relations). If you want to receive separate copies of our Annual Report, Proxy Statement and/or Notice in the future, or are receiving multiple copies at your household and would like to receive only one copy for your household, you should contact your broker or nominee, or our Investor Relations department. ANNUAL REPORT ON FORM 10-K Shareholders may obtain without charge a copy of THG’s Annual Report on Form 10-K, including financial statements and financial statement schedules, required to be filed with the SEC pursuant to the Exchange Act for the fiscal year ended December 31, 2016,2019, by calling 1-800-407-5222 or by writing to THG at 440 Lincoln Street, Worcester, Massachusetts 01653 (attention: Investor Relations). The information is also available on the Company’s website atwww.hanover.com, under “Investors-Annual Reports.” OTHER MATTERS Management knows of no business that will be presented for consideration at the Annual Meeting other than as stated in the Notice of Meeting. If, however, other matters are properly brought before the Annual Meeting, it is the intention of the proxy holders to vote the shares represented thereby on such matters in accordance with the recommendation of the Board, and authority to do so is included in the proxy. SHAREHOLDER PROPOSALS Proposals submitted by shareholders of THG must be received by the Company’s Corporate Secretary, The Hanover Insurance Group, Inc., 440 Lincoln Street, Worcester, Massachusetts 01653 on or before November 30, 2017,27, 2020, to be eligible under the SEC’s shareholder proposal rule (Rule 14a-8) for inclusion in the proxy materials relating to the 20182021 Annual Meeting of Shareholders. | | | | | The Hanover Insurance Group, Inc. 2017 Proxy Statement
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Any shareholder proposal to be considered at the Company’s 20182021 Annual Meeting of Shareholders, but not included in the proxy materials, must be submitted to the Company’s Corporate Secretary by February 14, 2018,10, 2021, or the persons appointed as proxies may exercise their discretionary voting authority with respect to that proposal. The persons appointed as proxies may also exercise their discretionary voting authority with respect to shareholder proposals submitted prior to February 14, 2018,10, 2021, unless the proponent otherwise complies with the requirements of the SEC’s Rule 14a-4 or Rule 14a-8. DATED at Worcester, Massachusetts this 3027th day of March 2017.2020. By Order of the Board of Directors, 
CHARLES F. CRONIN Vice President and Secretary | | | | | The Hanover Insurance Group, Inc. 2017 Proxy StatementTHE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT 54
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AppendixAppendix A
Excerpt from Our Corporate Governance Guidelines Relating to Director Independence Standards A majority of the directors will be independent, and each year the Board will affirmatively determine that each such independent director has no material relationship with the Company. That determination will be set forth in our proxy statement. When evaluating the independence of each of the Company’s directors, the Board will broadly consider all relevant facts and circumstances that may bear on that director’s independence. The Board has adopted the following categorical standards to assist it in determining the independence of Board members, which include those standards established by the New York Stock Exchange for its listed companies. A director is not independent if: The director is, or has been within the last three years, an employee of the Company, or an immediate family member is, or has been within the last three years, an executive officer of the Company. The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $100,000$120,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). Compensation received by a director’s immediate family member for service as an employee of the Company (other than an executive officer) will not be considered in determining independence under this test. (i) The director or an immediate family member is a current partner of a firm that is the Company’s internal or external auditor; (ii) the director is a current employee of such a firm; (iii) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (iv) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time. The director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that company’s compensation committee. The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues. For the purposes of these guidelines, an “immediate family member” means a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home, but excluding anyone who is no longer an immediate family member as a result of legal separation, divorce, death or incapacitation. If the Company makes charitable contributions to any tax exempttax-exempt organization in which a director of this Company serves as an executive officer, the Board will consider the materiality of the relationship if the amount paid to the tax exempttax-exempt organization exceeds the greater of $1 million, or 2% of such organization’s consolidated gross revenues. Directors have an affirmative obligation to inform the Board of any circumstances or relationships that may impact their designation by the Board as “independent”, including any material changes in such circumstances or relationships. * * * * * A complete copy of the Company’s Corporate Governance Guidelines is available on the Company’s website at: http:https://www.hanover.com/about-corporate-governance.html
about-responsibility-conduct-ethics.html THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENTA-1
AppendixAppendix B
Non-GAAP Financial Measures The discussion of our results in the Proxy Statement Summary and CD&A includes a discussion of ourpre-tax operating income before interest expense andex-catpre-tax income taxes and ex-cat operating income, and also include these measures but excluding the Fourth Quarter Reserve Adjustment, and net premium written excluding the impact from the disposal of the U.K. motor business, each of which arenon-GAAP financial measures. Operating Income Operating income before interest expense and income taxes is anon-GAAP financial measure because it excludes from net income certain items of expense or income that management does not consider representative of the results attributable to the core operations of our business. The items excluded were primarily realized investment gains, losses on the repayment of debt, and from the settlement of pension obligations, gains on the disposal of the U.K. motor business,discontinued operations, interest expense on debt and income taxes. A reconciliation of operating income before interest expense and income taxes to income from continuing operations is presented below and on page 3638 of our Annual Report on Form10-K filed with the SEC on February 22, 2017 (page 43 of the printed copy of the Annual Report).24, 2020. Ex-Cat Operating Income Ex-cat operating income is anon-GAAP financial measure because it excludes from net income certain items of expense or income that management does not consider representative of the results attributable to the core operations of our business, including those items noted above, as well as the impact of catastrophe losses on our results. Although catastrophe losses are a significant component in understanding and assessing our financial performance, management has metrics that evaluate results excluding catastrophes due to the fact that they are not predictable as to the timing or the amount that will affect our operations. A reconciliation ofex-cat 2019 and 2018 operating income before interest expense and income taxes and ex-cat operating income to income from continuing operations, the most directly comparable GAAP financial measure, is set forth below. | | | | | | | | | | | | | | (in millions) | | 2016 | | | 2015 | | | 2014 | | Income from continuing operations, net of tax | | $ | 156.1 | | | $ | 330.8 | | | $ | 282.3 | | Adjustment for certainnon-operating items | | | 28.3 | | | | (50.8 | ) | | | (49.6 | ) | Operating income, net of interest expense and income taxes | | | 184.4 | | | | 280.0 | | | | 232.7 | | Income tax expense on operating income | | | 83.5 | | | | 125.5 | | | | 108.3 | | Interest expense on debt | | | 54.9 | | | | 60.1 | | | | 65.2 | | Operating income before interest expense and income taxes | | | 322.8 | | | | 465.6 | | | | 406.2 | | Pre-tax catastrophe effect | | | 125.1 | | | | 181.3 | | | | 223.0 | | Ex-cat operating income | | $ | 447.9 | | | $ | 646.9 | | | $ | 629.2 | |
B-1
(in millions) | | 2019 | | | 2018 | | | | | | | | | Income from continuing operations, net of tax | | $ | 429.0 | | | $ | 239.0 | Adjustment for certain non-operating items | | | (97.4) | | | | 53.1 | Operating income, net of interest expense and income taxes | | | 331.6 | | | | 292.1 | Income tax expense on operating income | | | 84.5 | | | | 69.3 | Interest expense on debt | | | 37.5 | | | | 45.1 | Operating income before interest expense and income taxes | | | 453.6 | | | | 406.5 | Pre-tax catastrophe effect | | | 169.3 | | | | 219.2 | Ex-cat operating income | | $ | 622.9 | | | $ | 625.7 |
Ex-Fourth Quarter Reserve Adjustment
For the year ended December 31, 2016, the Company also presented the operating income metric andex-cat operating income metric excluding the impact of a fourth quarter reserve adjustment. A reconciliation of 2017 operating income to these metrics is provided belowbefore interest expense and should be read in conjunction with the reconciliation presented above ofincome taxes and ex-cat operating income to income from continuing operations.operations is set forth below. The 2017 figures have not been restated to exclude the results of the Chaucer segment because compensation metrics in 2017 included Chaucer results.
| | | | | | (in millions) | | Year ended
December 31, 2016 | | Operating income before interest expense and income taxes | | $ | 322.8 | | Fourth quarter reserve adjustment | | | 174.1 | | Operating income excluding fourth quarter reserve adjustment before interest expense and income taxes | | | 496.9 | | Pre-tax catastrophe effect | | | 125.1 | | Ex-cat operating income excluding fourth quarter reserve adjustment before interest expense and income taxes | | $ | 622.0 | |
Net Premiums Written Excluding the Impact of the Disposal of the U.K. Motor Business
Net premiums written for Chaucer as reported for the twelve months ended December 31, 2015 reflect the June 30, 2015 disposal of the U.K. motor business, including the transfer of $137.4 million of unearned premium reserves written prior to then for this line of business. This transfer of unearned premium reserves is part of the disposition of the U.K. motor business and has no impact on net premiums earned. The following is a reconciliation of net premiums written to those excluding the impact of the U.K. motor business disposition:
(in millions) | | | | 2017 | | | | | | | Income from continuing operations, net of tax | | | | $ | 203.0 | Adjustment for certain non-operating items | | | | | 0.8 | Operating income, net of interest expense and income taxes | | | | | 203.8 | Income tax expense on operating income | | | | | 84.0 | Interest expense on debt | | | | | 48.5 | Operating income before interest expense and income taxes | | | | | 336.3 | Pre-tax catastrophe effect | | | | | 382.6 | Ex-cat operating income | | | | $ | 718.9 |
| | | | | | | | | | | | Year Ended December 31, | | | (in millions) | | 2016 | | | 2015 | | Net premiums written | | $ | 4,698.8 | | | $ | 4,616.8 | | Adjustment for impact of U.K. motor business disposition in 2015 | | | — | | | | 8.3 | | Total net premiums written excluding U.K. motor business disposition | | $ | 4,698.8 | | | $ | 4,625.1 | |
B-2
THE HANOVER INSURANCE GROUP 2020 PROXY STATEMENT B-1
The Hanover Insurance Company 440 Lincoln Street, Worcester, MA 01653 hanover.com 07148 (3/20)
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this example. Please do not write outside the designated areas.
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q IF YOU HAVE NOT VOTED VIAANNUAL MEETING OF THE HANOVER INSURANCE GROUP, INC. Annual Meeting of The Hanover Insurance Group, Inc. to be held on Tuesday, May 12, 2020 Date: Tuesday, May 12, 2020 Time: 9:00 A.M. (Eastern Time) for Shareholders as of March 16, 2020 Place: The Hanover Insurance Group, Inc., 440 Lincoln Street, Worcester, This proxy is being solicited on behalf of the Board of Directors MA 01653* Your vote is important to us. Please make your marks like this: Use dark black pencil or pen only VOTE BY: The Board of Directors Recommends a Vote FOR each of the director INTERNETOR TELEPHONE FOLD ALONGnominees listed in proposal 1 and FOR proposals 2 and 3. Go To Call 1: To elect four individuals to the Board of Directors: www.proxypush.com/THG 866-895-6920 Nominees: For Against Abstain 01. Jane D. Carlin -Three-year term expiring in 2023 For Against Abstain 02. Daniel T. Henry -Three-year term expiring in 2023 For Against Abstain 03. Wendell J. Knox -Three-year term expiring in 2023 For Against Abstain 04. Kathleen S. Lane -Three-year term expiring in 2023 Please separate carefully at the perforation and return just this portion in the envelope provided. Cast your vote online 24 hours a day/7 days Use any touch-tone telephone toll-free a week. OR 24 hours a day/7 days a week. Have this form and your control number Have this form and your control number located in the shaded box below ready. located in the shaded box below ready. Follow the simple recorded instructions. Mark, sign and date the attached Proxy Card. OR MAIL Detach the Proxy Card. Return the Proxy Card in the postage-paid envelope provided. For Against Abstain For Against Abstain PROXY TABULATOR FOR All votes must be received by 11:59 P.M., Eastern Time, on May 11, 2020 to ensure inclusion in the meeting. 2: To approve the advisory vote on the Company’s executive compensation. 3: To ratify the appointment of PricewaterhouseCoopersLLP as the Company’s independent, registered public accounting firm for 2020. If you plan to attend the meeting and vote your shares in person, please mark this box. Authorized Signatures -This section must be completed for your instructions to be executed in accordance with the terms of your Proxy as set forth under the heading “Proxy for Annual Meeting THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.qHANOVER INSURANCE GROUP, INC. c/o MEDIANT COMMUNICATIONS P.O. BOX 8016 CARY, NC 27512-9903 of Shareholders to be held on May 12, 2020 on the reverse side hereof. Please Sign Here Please Date Above Please Sign Here Please Date Above Please sign exactly as your name(s) appears on your stock certificate. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy. * While we intend to hold our Annual Meeting in person, we are monitoring the public health impact of the novel coronavirus outbreak and the COVID-19 illness and may decide to hold the Annual Meeting solely by means of remote communication. If so, notice will be posted on both our website (www.hanover.com) and our proxy hosting website (www.proxydocs.com/THG) and filed with the U.S. Securities and Exchange Commission as additional proxy material.
| | | | | A | | Company Proposals — | | The Board of Directors recommends a voteFOR all the nominees listed below,FOR Proposals 2 and 4, and that you vote for | | | | | 1 YEAR on Proposal 3. |
| | | | | | | | | | | | | | | | | | | | | | | 1. The election of four individuals to the Board of Directors:
| | For
| | Against
| | Abstain
| | | | | | | | For
| | Against
| | Abstain
| | + | 01 - Michael P. Angelini
| | One - year term
expiring in 2018
| | ☐ | | ☐ | | ☐ | | | | 02 - Jane D. Carlin | | Three - year term
expiring in 2020
| | ☐ | | ☐ | | ☐ | | | 03 - Daniel T. Henry
| | Three - year term
expiring in 2020
| | ☐ | | ☐ | | ☐ | | | | 04 - Wendell J. Knox | | Three - year term
expiring in 2020
| | ☐ | | ☐ | | ☐ | | |
| | | | | | | | | | | | | | | | | | | | | For
| | Against | | Abstain | | | | | | 1 Year | | 2 Years | | 3 Years | | Abstain | 2. The advisory approval of the Company’s executive compensation.
| | ☐ | | ☐ | | ☐ | | | | 3. Advisory vote on the frequency with which to hold future advisory votes on executive compensation.
| | ☐ | | ☐ | | ☐ | | ☐ | 4. The ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of The Hanover Insurance Group, Inc. for 2017.
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | |
| | | | | B | | Authorized Signatures — | | This section must be completed for your vote to be counted. Please date and sign below. |
In signing, please write name(s) exactly as appearing in the imprint on this card. For shares held jointly, each joint owner should sign. If signing as executor, or in any other representative capacity, or as an officer of a corporation, please indicate your full title as such.
| | | | | | | | | 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, YOUMUST COMPLETE SECTIONS A - B.
| | | | | 2017 Annual Meeting of Shareholders
| The Hanover Insurance Group, Inc.
| Directions To The Hanover
| | Tuesday, May 16, 2017, 9:00 a.m.
| | | | 440 Lincoln Street, Worcester, MA | | |
| | | | | From Boston.
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| • | | Follow the Mass Pike west to exit 11A. Bear left after the exit to Rte. 495 north.
| | • | | Follow Rte. 495 north to exit 25B.
| | • | | Take Interstate 290 west to exit 20.
| | • | | Turn right onto Lincoln Street.
| | • | | The Hanover is on your left.
| | From New Hampshire And Northeastern Massachusetts.
| | • | | Follow Route 495 south to exit 25B.
| | • | | Take Interstate 290 west to exit 20.
| | • | | Turn right onto Lincoln Street.
| | • | | The Hanover is on your left.
| | From Connecticut And Western Massachusetts.
| | • | | Follow the Mass Pike east to exit 10.
| | • | | Proceed along Interstate 290 east to exit 20. Stay to the right when exiting.
| | | • | | At the end of the exit ramp, proceed through one set of traffic lights to a second set of lights.
| | Where To Park.
| • | | Turn left onto Lincoln Street and drive approximatelyone-quarter mile.
| | Parking is available at The Hanover’s front entrance on
Lincoln Street. All visitors are requested to enter the main
lobby and register with the receptionist upon arrival.
| • | | The Hanover is on your left. | |
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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Please separate carefully at the perforation and return just this portion in the envelope provided. Proxy —for Annual Meeting of Shareholders to be held on May 12, 2020 This proxy is being solicited on behalf of the Board of Directors Please vote, date and sign this Proxy on the other side and return it in the enclosed envelope. The Hanover Insurance Group, Inc. PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 16, 2017
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned,Shareholder signing on the reverse side (the “undersigned”), having received the Annual Report, Notice of Annual Meeting of Shareholders and the Proxy Statement, hereby appoint(s) Joseph M. ZubretskyJohn C. Roche and J. Kendall Huber,Dennis F. Kerrigan, and each of them, Proxies of the undersigned (with full power of substitution) to attend the Annual Meeting of Shareholders of The Hanover Insurance Group, Inc. (the “Company”) to be held on May 16, 2017,12, 2020, and all adjournments thereof (the “Meeting”), and to vote all shares of Common Stock of the Company that the undersigned would be entitled to vote, if personally present, in regard to all matters that may properly come before the Meeting.
The undersigned hereby confer(s) upon the Proxies, and each of them, discretionary authority (i) to consider and act upon such business, matters or proposals other than the business set forth herein as may properly come before the Meeting, and (ii) with respect to the election of any substitute nominees designated by the Board of Directors in the event that any of the nominees are unavailable to serve.The Proxy, when properly executed, will be voted in the manner specified herein. If no specification is made, the Proxies intend to vote FOR all nominees for director, and FOR the advisory vote on executive compensation for the holding of an advisory vote on executive compensation every ONE YEAR, and FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent, registered public accounting firm for 2017. PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Your vote is important. Please vote your proxy today.2020.
| | | | | | | | | Change of Address— Please print your new address below. | | Comments— Please print your comments below. | | Meeting Attendance
| | | | | | | | | Mark the box to the right if you plan to attend the Annual Meeting.
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| | | | |  | | IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - B. | | + |
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