Proxy Statement

This booklet contains our Notice of Annual Meeting and 2020 Proxy Statement. Our 2019 Annual Report contains information about our Company and its financial performance. Our Annual Report is not a part of our proxy solicitation materials. We make available, free

This summary highlights selected information about the matters to be voted on at the Annual Meeting. You should read the entire Proxy Statement before voting. For more complete information regarding the Company's 2017Company’s 2019 performance, please review the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2017.2019.

In 2017,2019, the Company'sCompany’s accomplishments included:

The Company structured its 2017Company's 2019 executive compensation program to align with shareholder interests and the long-term interests of the Company, appropriately balance risk and reward, and attract and retain a talented executive team. The program was designedcompensation decisions were based on the following principles:

Highlights of our program include:

Please see the Questions and Answers About the Annual Meeting and Voting section beginning on page 5057 for important information about the proxy materials, voting, and the Annual Meeting.

Fulfilling its responsibility to identify, evaluate, and recommend director candidates, the Nominating and Governance Committee accepts shareholder recommendations of director candidates and evaluates such candidates in the same manner as other candidates. The Nominating and Governance Committee determines the need for additional or replacement Board members, then identifies and evaluates the director candidate under the Director Qualifications described below based on the information the Nominating and Governance Committee receives with the recommendation or which it otherwise possesses, which may be supplemented by certain inquiries. If the Nominating and Governance Committee determines, in consultation with other directors, including the Chairman of the Board, that a more comprehensive evaluation is warranted, the Nominating and Governance Committee may then obtain additional information about the director candidate’s background and experience, including by means of interviews. The Nominating and Governance Committee and the Board consider the skills and experiencesChairman of the directors inBoard will then evaluate the broader context ofdirector candidate further, again using the Board’s overall composition, with a view toward constituting a board that has the best skill set and experience to oversee the Company’s business. As indicated below, our directors have a combined wealth of leadership experience derived from extensive service guiding large, complex organizations as executive leaders or board members, and in government and academia. They collectively have substantive knowledge and skills applicable to our business, including in the areas of regulation, public accounting and financial reporting, finance, risk management, business development, technology, marketing, operations, strategic planning, management development and succession, compensation, corporate governance, public policy, international matters, banking, and financial services.

To submit a candidate for consideration for nomination at the 2021 Annual Meeting of Shareholders, shareholders must submit the recommendation, in writing, by December 2, 2020. The written notice must demonstrate that it is being submitted by a shareholder of record of the Company and include information about each proposed director candidate, including name, age, business address, principal occupation, principal qualifications, and other relevant biographical information. In addition, each committee annually conductsthe shareholder must confirm the candidate’s consent to serve as a self-evaluation.director. Shareholders must send recommendations to Discover Financial Services, 2500 Lake Cook Road, Riverwoods, Illinois 60015, Attention: Corporate Secretary, and they will be forwarded to the Nominating and Governance Committee.

The Nominating and Governance Policies, which containCommittee is responsible for identifying, evaluating, and recommending candidates to the Board. The Nominating and Governance Committee may consider director independence guidelinescandidates from a wide range of sources, including shareholders, officers, and providedirectors. The Board is responsible for nominating directors for election by the shareholders and filling any vacancies on the Board that a majority ofmay occur. The Nominating and Governance Committee will continue to evaluate the memberscomposition of the Board, including the mix of skills and each memberexperiences of existing directors, as well as the potential benefits from new and different perspectives and skill sets.

Fulfilling its responsibility to identify, evaluate, and recommend director candidates, the Nominating and Governance Committee accepts shareholder recommendations of director candidates and evaluates such candidates in the same manner as other candidates. The Nominating and Governance Committee determines the need for additional or replacement Board members, then identifies and evaluates the director candidate under the Director Qualifications described below based on the information the Nominating and Governance Committee receives with the recommendation or which it otherwise possesses, which may be supplemented by certain inquiries. If the Nominating and Governance Committee determines, in consultation with other directors, including the Chairman of the AuditBoard, that a more comprehensive evaluation is warranted, the Nominating and Governance Committee may then obtain additional information about the Compensationdirector candidate’s background and Leadership Development Committee (the "Compensation Committee"), theexperience, including by means of interviews. The Nominating and Governance Committee and the Risk Oversight Committee must consistChairman of directors who are independent. The Board uses these guidelines to assist it in determining whether directors qualify as "independent" pursuant to the guidelines and the requirements set forth in the New York Stock Exchange's Corporate Governance Rules (the "Rules"). In each case, the Board broadly considers all relevant facts and circumstances and applies the guidelines and the Rules in determining whether directors qualify as "independent." Our Corporate Governance Policies are available through the investor relations page of our internet site, www.discover.com, and in print free of charge to any shareholder who requests a copy.

Shareholders who wish to recommend a candidate for the Nominating and Risk Oversight Committees setting forthGovernance Committee’s consideration must submit the roles and responsibilities of each committee. The committee charters arerecommendation in writing in accordance with the Policy Regarding Director Candidates Recommended by Shareholders, available through the investor relations page of our internet site, www.discover.com.

All membersIn 2019, there were no director candidates submitted by shareholders. Shareholders may make recommendations at any time, but recommendations for consideration as nominees at the annual meeting of shareholders must be received not less than 120 days before the first anniversary of the Audit, Compensation,date that the proxy statement was released to shareholders in connection with the previous year’s annual meeting.

To submit a candidate for consideration for nomination at the 2021 Annual Meeting of Shareholders, shareholders must submit the recommendation, in writing, by December 2, 2020. The written notice must demonstrate that it is being submitted by a shareholder of record of the Company and include information about each proposed director candidate, including name, age, business address, principal occupation, principal qualifications, and other relevant biographical information. In addition, the shareholder must confirm the candidate’s consent to serve as a director. Shareholders must send recommendations to Discover Financial Services, 2500 Lake Cook Road, Riverwoods, Illinois 60015, Attention: Corporate Secretary, and they will be forwarded to the Nominating and Governance and Risk Oversight Committees satisfy the standards of independence applicable to members of such committees. Committee.

In addition, shareholders may nominate director candidates by complying with the advance notice or proxy access Bylaw provisions discussed at the end of this Proxy Statement in the Shareholder Proposals and Director Nominations for the 2021 Annual Meeting section.

Our Corporate Governance Policies describe our director qualifications. The Board seeks members who combine a broad and relevant spectrum of experience and expertise with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated. Directors should be selected based upon their potential contributions to the Board has determined that all membersand management and their ability to represent the interests of shareholders. Also, the Audit Committee are financially literateBoard will consider the diversity of a candidate’s perspectives, background, and are “audit committee financial experts” as such termother demographics. Generally, no director is defined in Item 407(d) of Regulation S-K underpermitted to serve on more than three additional public company boards (in addition to the Exchange Act and have accounting or related financial management expertise.Company’s Board).  

The Nominating and Governance Committee is responsible for identifying, evaluating, and recommending candidates to the Board. The Nominating and Governance Committee may consider director candidates from a wide range of sources, including shareholders, officers, and directors. The Board is responsible for nominating directors for election by the shareholders and filling any vacancies on the Board that may occur. Effective at the 2018 Annual Meeting of Shareholders, Director Lenny will retire from the Board. After careful consideration, the Board has determined that it is in the best interests of all shareholders to decrease the size of the Board from 12 to 11 directors, effective upon Mr. Lenny's retirement. The Nominating and Governance Committee will continue to evaluate the composition of the Board, including the mix of skills and experiences of existing directors, as well as the potential benefits from new and different perspectives and skill sets.

Our Corporate Governance Policies describe our director qualifications. The Board seeks members who combine a broad and relevant spectrum of experience and expertise with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated. Directors should be selected based upon their potential contributions to the Board and management and their ability to represent the interests of shareholders. Also, the Board will consider the diversity of a candidate’s perspectives, background, and other demographics. Generally, no director is permitted to serve on more than fourthree additional public company boards (in addition to the Company'sCompany’s Board).

The Company's Bylaws, as well as the Board of Directors Corporate Governance Policies, provide that the office of the Chairman and the office of the Chief Executive Officer may be, but need not be, held by the same person. The Company has a strong independent Board, with all directors except for Mr. Hochschild having been determined to be independent under New York Stock Exchange listing standards. Further, as previously noted, all standing committees of the Board are composed solely of independent directors. In light of the recent Chief Executive Officer transition, and given the tenure that Mr. Weinbach has had serving as our Lead Director until January 1, 2019, the Board believes that having an Independent Chairman, separate from the combined position of Chairman and CEO enhances the effectiveness of the Board andChief Executive Officer role, is the most appropriate leadership structure at this time. Although the Board believes that this best serves the interests of the Company and its shareholders, the Board retains the flexibility to combine the roles in the future. The Board recognizes its responsibility for the Company. Becauseestablishment and maintenance of histhe most effective leadership structure for the Company, taking into account all relevant facts and circumstances. Pursuant to the Board of Directors Corporate Governance Policies, the Board has indicated that it will appoint a Lead Director whenever the position as CEO, Mr. Nelmsof Chairman is the director most familiar with Discover’s business and industry and best positioned to set and execute the Company’s strategic priorities. Mr. Nelms' leadership, drivennot held by his deep business and financial services expertise, enhances the Board’s ability to exercise its responsibilities. In addition, this model provides enhanced efficiency, effective decision-making and clear accountability.an independent director.

The Company appointed a lead independent director (the "Lead Director") to strengthen the Board’s independence and autonomous oversight of our business as well as Board communication and effectiveness. The Board evaluates its leadership structure periodically, including the appointment and performance of the Lead Director.

In accordance with our Corporate Governance Policies, the non-employee directors meet regularly in executive sessions without management present. Our Corporate Governance Policies also require that if any non-employee directors are not independent, then the independent directors will meet in a separate independent director session at least once per year. Currently, all non-employee directors are independent. The Lead Director, who is independent,Independent Chairman presides over executive and independent director sessions.

The Board is responsible for approving the Company'sCompany’s enterprise-wide risk management framework, which is described in the Company'sCompany’s Enterprise Risk Management Policy and certain additional risk management policies. The Board receives reports of material exceptions to such policies. Additionally, the Board approves the risk appetite and limits, and capital targets and thresholds of the Company. It also appoints the Chief Risk Officer, and other risk management function leaders, as appropriate. The Board regularly devotes time during its meetings to review and discuss the most significant risks facing the Company, and management’s responses to those risks. During these discussions, the CEO, the General Counsel, the Chief Financial Officer and/or the Chief Risk Officer present management’s assessment of risks, a description of the most significant risks facing the Company, and any mitigating factors and plans or practices in place to address and monitor those risks. Within these discussions, the Board receives updates from the Chief Risk Officer on the risks posed to the Company by cybersecurity threats and the Company's progress on information security program. In addition to these discussions, the Board receives annual information security training and, in 2017,2018, had an independent third party provide training tailored specifically to cybersecurity issues and risks that the Company faces. In connection with its annual cybersecurity training in 2019, the Board participated in a cybersecurity event simulation. The Board has also delegated certain of its risk oversight responsibilities to its committees as set forth below, and regularly receives reports from the committees on risk management matters.

In order to monitor and control risk exposures; (vi)improve its effectiveness, and to solicit and act upon feedback they receive, the Board and its committees annually engage in a formal self-evaluation process. The Nominating and Governance Committee begins the process each year by reviewing and approving the Company's information security program, which seeksself-evaluation procedures to mitigate information security risks, including cybersecurity risks;ensure the independence and (vii) receiving reports regarding compliance with risk appetite limits, risk management policies, procedures and controls. The Risk Oversight Committee shares information with (which it may do through the Chairintegrity of the Committee)process. In addition, they consider the substantive topics that will be part of the self-evaluation, which may include how directors feel about board operations, regulatory matters, strategic and meets in joint session with the Audit Committee as necessary or desirable to provide the committees with the information necessary to permit them to fulfill their duties and responsibilities with respect tofinancial oversight, oversight of risk management, matters.executive compensation, succession planning, and governance matters, among many other topics. For example, at least quarterly, the Risk Oversightpast several years, the Nominating and Audit Committees meetGovernance Committee has assigned the Lead Director (effective 2019, the Independent Chairman) with the task of interviewing each director in joint sessionthese areas. The Lead Director (effective 2019, the Independent Chairman) then reports the findings to the Nominating and receive updates on the Company's information security program, including trendsGovernance Committee and developments regarding information security risks.

Each standing committee also conducts its own self-evaluation. They evaluate their performance against the requirements of their charters and other aspects of their responsibilities. The full Board and each committee then discuss the results of their respective self-evaluations, frequently in executive session, highlighting actions to be taken in response to the self evaluation. Finally, the full Board conducts an evaluation of the Company’s Executive CommitteeLead Director (effective 2019, the Independent Chairman) to ensure that he continues to satisfy the Board's obligations and the Discover Bank President. The Chief Risk Officer, a memberexpectations of the Executive Committee, serves as the Risk Committee chair. The Risk Committee provides a forum for key members of our executive management team to review and discuss credit, market, liquidity, operational, legal and compliance and strategic risks across the Company and for each business unit. The Risk Committee regularly reports to the Risk Oversight Committee on risks and risk management.

We provide orientation to new directors to help familiarize them with our industry and lines of business as the Audit Committee deems appropriatewell as our legal, compliance, regulatory, and risk profile. Similarly, we provide directors joining a new committee orientation on the guidelines and policies for assessing and managing the Company's exposure to risks, the corporation's major financial risk exposures and the steps management has taken to monitor and control such exposures. The Audit Committee shares information with (which it may do through the Chair of the Committee) and meets in joint session with the Risk Oversight Committee as necessary or desirable to provide the committees with the information necessary to permit them to fulfill their dutiesrequirements and responsibilities with respectrelevant to oversightthat particular committee. Discover also periodically offers educational sessions on a variety of risk management matters.

Shareholders and other interested parties may contact any member of our Board by writing to: Discover Financial Services, 2500 Lake Cook Road, Riverwoods, Illinois 60015, Attention: Secretary and General Counsel.Corporate Secretary. All communications should be accompanied by the following information: (i) if the person submitting the communication is a shareholder, a statement of the type and amount of the securities of the Company that the person beneficially owns; (ii) if the person submitting the communication is not a shareholder and is submitting the communication to the non-management directors as an interested party, the nature of the person’s interest in the Company; (iii) any special interest, meaning an interest not in the capacity of a shareholder of the Company, of the person in the subject matter of the communication; and (iv) the address, telephone number and e-mail address, if any, of the person submitting the communication. The Board'sBoard’s Policy Regarding Communications by Shareholders and Other Interested Parties with the Board of Directors is available through the investor relations page of our internet site, www.discover.com. Shareholder and interested party communications received in this manner will be handled in accordance with procedures approved by our independent directors.applicable procedures.

Our Directors'Directors’ Compensation Plan was approved by our shareholders in 2011, and provides for a specific amount of annual compensation for our non-employee directors. Directors who also are our employees do not receive any compensation under the Directors'Directors’ Compensation Plan. The compensation paid to our non-employee directors is delivered to further advancesadvance the interests of the Company and its shareholders by encouraging increased share ownership to promote long-term shareholder value. As more fully described in "Other Arrangements, Policies and Practices Related to Our Executive Compensation Program — Share Ownership Guidelines," theThe Nominating and Governance Committee maintains guidelines which recommend that directors hold five times the annual cash retainer in Company stock. Ten out of our eleven directors have met and exceeded the Company's stock ownership guidelines for directors. The remaining director was appointed in 2019 and is on track to meet the ownership guidelines within the required guidelines.

The Nominating and Governance Committee is responsible for reviewing the effectiveness of the non-employee director compensation and benefit programs in supporting the Company'sCompany’s ability to attract, retain, and motivate qualified directors. The Nominating and Governance Committee reviews director compensation at least every other year and considers a variety of factors, including our financial performance, general market conditions, director compensation at companies with which we compete for talent, director responsibilities, and trends in director compensation practices. Any recommendations for changes in director compensation are made to our Board. We did not make any changes to our director’s compensation structure or levels during 2019.

In 2017, management conducted a general market review of2019, the director compensation of the Company's proxy peers, and after considering the same, the Nominating and Governance Committee did not recommend any change to

Each non-employee director receives the following cash compensation under the Directors'Directors’ Compensation Plan for service on our Board and each standing committee of our Board:

Each non-employee director may elect to defer receipt of his or her cash compensation under the Directors'Directors’ Voluntary Nonqualified Deferred Compensation Plan until the director terminates all services forservice with the Company. A bookkeeping account is maintained for each participant and interest is credited to the deferred amount based on 120% of the quarterly long-term applicable federal rate in effect.

Pursuant to the Directors'Directors’ Compensation Plan, we may issue awards of up to a total of 1,000,000 shares of our Common Stock to our non-employee directors. Each non-employee director receives an annual grant of $140,000$150,000 in RSUsrestricted stock units ("RSUs") for service on our Board, beginning with the first annual meeting at which the director is elected to our Board. For those directors joining our Board on a date other than the date of an annual meeting, each director receives a grant of $140,000$150,000 in RSUs on the date on which the director becomes a member of our Board, adjusted on a pro-rata basis by multiplying such award by a fraction where the numerator is the number of months between such date and the next annual meeting of shareholders and the denominator is twelve.

The number of RSUs granted is determined by dividing the grant date dollar amountvalue by our share closing price on the date of grant. Effective February 22, 2018, each grant vests in its entiretyand converting into a whole number of shares. The 2019 RSU grants vest on the earlier of the first anniversary of its date of grant or immediately prior to the first annual meeting of shareholders following the date of grant, subject to the director'sdirector’s continued service through such date. Unless provided otherwise in the RSU agreement, RSUs granted to each non-employee director may become fully vested before the end of the regular restriction period if (i) such director is terminated due to disability or death or (ii) a change in control occurs. Upon vesting, the RSUs are converted into shares of our Common Stock. RSUs include the right to receive dividend equivalents in the same amount and at the same time as dividends paid to all Discover common shareholders. Each non-employee director may elect to defer the receipt of his or her stock compensation until the director terminates all services forservice with the Company. A bookkeeping account is maintained for each participant, which reflects the number of RSUs to which the participant is entitled under the terms of the Directors'Directors’ Compensation Plan.

Directors are reimbursed for reasonable expenses incurred in attending Board, committee and shareholder meetings, including reasonable expenses for travel, meals and lodging.

The table below sets forth cash and stock compensation (including deferred compensation) paid to non-employee directors for their Board service infor the year ended December 31, 2017.2019.