| CHAIR: Rudolph I. Estrada OTHER MEMBERS: Manuel P. Alvarez,
Archana Deskus,
Paul H. Irving,
Jack C. Liu,
Lester M. Sussman NUMBER OF
MEETINGS HELD
IN 2022:4 | · | monitorPRIMARY RESPONSIBILITIES › Be responsible for the Company’s risk management standards; › Monitor the Company’s risk exposure in the identified enterprise risk categories; |
| · | timely› Timely identify the material risks that the Company faces; |
| · | communicate› Communicate necessary information on material risks to senior management and, as appropriate, to the Board or relevant Board committee; |
| · | › Approve and/or develop the risk appetite and tolerance levels for the Company; › Oversee the Company’s Independent Asset Review function; › Oversee the Company’s risk management framework and implement responsive risk management strategies appropriate to the Company’s risk profile; and |
| · | integrate | › Integrate risk management into the Company’s decision-making.decision-making; › Review and revise BSA/AML & OFAC policies and procedures; › Monitor BSA/AML & OFAC compliance risks across the Bank; and › Review assessments of BSA program enhancements from internal audits, regulators and independent third parties, including consultants. | | | | |
| 29 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | |  | | |
In addition, the Company’s Chief Risk Officer works directly with the Risk Oversight
Executive Committee and the CEO. The Bank also has a Risk Oversight Committee, which consists of the same directors as the Company’s Risk Oversight Committee. The Bank’s Risk Oversight Committee generally meets jointly with the Company’s Risk Oversight Committee. | | | | | CHAIR: Dominic Ng CONSIDERATION OF DIRECTOR NOMINEES |
Stockholder Nominees
OTHER MEMBERS: Rudolph I. Estrada NUMBER OF MEETINGS HELD
IN 2022:0 | | PRIMARY RESPONSIBILITIES › The Executive Committee is appointed by the Board to provide an efficient means of considering such matters and taking such actions, if any, as may require the attention of the Board in the interim between Board meetings. › The Executive Committee is authorized to exercise certain powers of the Board during intervals between Board meetings. | | | | |
Stockholder Nominees
The policy of the Nominating / Nominating/Corporate Governance Committee is to consider properly submitted stockholder nominations for Board candidacy as described abovebelow in “Identifying and Evaluating Nominees for Directors.” In evaluating these nominations, the Nominating / Nominating/Corporate Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to meet the membership criteria set forth under “Director“Director Nominee Qualifications” and Experience” discussed below.above. Any stockholder nominations proposed for consideration by the Nominating / Nominating/Corporate Governance Committee should include the nominee’s name and qualifications for Board membership and should be addressed to: Corporate Secretary
East West Bancorp, Inc.
135 N. Los Robles Avenue, 7thFloor
Pasadena, California 91101
In addition, nominationsNominations for directordirectors may be made by any stockholder entitled to vote for the election of directors if proper notice is given in accordance with our Amended and Restated Bylaws (the “Bylaws”). Notice of a stockholder’s intention to make any nominations must be made in writing, contain the Bylaws.information required by our Bylaws regarding the stockholder and the director nominee and be delivered to the Secretary of the Company at the Company’s principal executive offices. Notice must be provided not less than 90 calendar days or more than 120 calendar days prior to the anniversary of the previous year’s annual meeting. If the meeting will be held more than 30 calendar days before or 60 calendar days after the anniversary date of the prior year’s annual meeting, notice must be delivered no more than 120 calendar days prior to the annual meeting and not later than the later of the 90th calendar day prior to the annual meeting and the 10th calendar day following the date of the initial public announcement of the date of such meeting.
In addition to satisfying the foregoing requirements, our Bylaws require that stockholders who intend to solicit proxies in support of director nominees other than the Board’s nominees must provide notice to the Company and solicit proxies from at least 67% of the voting power of shares entitled to vote. The notification shall contain the following information:
| 30 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | | | | |
› A representation that the stockholder, or
beneficial owner, if any, will, or is part of a group
that will file a definitive proxy statement and form
of proxy with the SEC and solicit proxies in support
of such director nominee(s) or nomination(s)
in accordance with Rule 14a-19 under the
Exchange Act; › The name and record address of the stockholder,
as they appear on the Company’s books; | › A description of all arrangements or
understandings between the stockholder and
each proposed nominee and any other person
or persons (including their names) pursuant to
which the nominations are to be made by the
stockholder; and › A representation that the stockholder or a
qualified representative intends to appear in
person via the internet or by proxy at the meeting
to nominate the person named in the notice. |
In addition to the procedures set forth above, following discussions with stockholders, in March 2023 the Board amended our Bylaws to implement “stockholder proxy access,” which will first apply for the election of directors at our 2024 annual meeting of stockholders. This bylaw will allow a stockholder, or group of up to 20 stockholders, that meet certain ownership and procedural requirements, to nominate up to two director candidates or, if greater, up to 20% of the number of directors then serving on the Board using our proxy statement. The stockholder or group members will be required to have owned continuously at least three percent of our outstanding common stock for three years or more as of the date we receive the nomination and will be required to continue to hold that number of shares through the annual meeting of stockholders. Notice of a stockholder’s intention to make any nominations must be made in writing and must be delivered to the Secretary of the Company at the principal executive offices of the Company not less than thirty (30)120 calendar days or more than sixty (60)150 calendar days prior to the meeting at which directors are to be elected. However, in the event that less than forty (40) calendar days’ noticeanniversary of the meeting is given to stockholders, notice by the stockholder, to be timely, must be delivered not later than the close of business on the tenth (10th) day following the mailing date of the meeting notice to stockholders. The notification shallprior year’s proxy statement regarding the nomination and must contain information regarding the following information: | · | all information about each proposed nominee that would be required in a proxy solicitation under the federal proxy rules; |
| · | a description of all arrangements or understandings between the stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nominations are to be made by the stockholder; and |
| · | a representation that the stockholder intends to appear in person or by proxy at the meeting to nominate the person named in the notice. |
We maydirector nominee and the person making the nomination, including proof of the required number of shares held by the stockholder or group, as well as the additional information that is specified in our Bylaws. Except as otherwise required by law, we will disregard nominations not made in accordance with the requirements in the Bylaws.
Director Qualifications
Our Corporate Governance Guidelines contain Board membership criteria that apply to the Nominating/Corporate Governance Committee’s nominees for a position on the Board. Under these criteria, members of the Board should have the highest professional and personal ethics and values. They should have broad experience at the policy-making level in business, government, education, finance, accounting, law or public interest, as well as a high level of financial experience, extensive knowledge of the Company’s business and/or industry, risk oversight/management expertise and broad international exposure/Greater China experience. The Nominating/Corporate Governance Committee strives to nominate director candidates with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills, and expertise to oversee the Company’s businesses. In addition, the Nominating/Corporate Governance Committee seeks to nominate directors with a diversity of origin, background, experience, and thought. All directors should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties.
Identifying and Evaluating Nominees for Directors
Our Corporate Governance Guidelines contain Board membership criteria that apply to the Nominating/Corporate Governance Committee’s nominees for a position on the Board. Under these criteria, members of the Board should possess the following:
| › | The highest professional and personal ethics
and values | | › | Broad experience at the policy-making level
in business, government, education, finance,
accounting, law or public interest | | › | A high level of financial experience | | › | Extensive knowledge of the Company’s business
and/or industry, risk oversight/management
expertise and broad international exposure/
Asia experience | › | A variety of complementary skills so that, as a
group, the Board will possess the appropriate
talent, skills, and expertise to oversee the
Company’s businesses |
| › | A diverse background and experience, including
with respect to race, ethnicity, gender and
national origin | | › | A commitment to enhancing stockholder value | | › | Sufficient time to carry out their duties and to
provide insight and practical wisdom based on
experience, including limited service on other
boards of public companies in order to perform
responsibly all director duties | | | | | | | | |
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| BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | | | | |
The Nominating/Corporate Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director and regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Committee considers various potential candidates for director. Candidates may come to the attention of the Committee through current Board members, professional search firms, stockholders or other persons. These candidates are evaluated at regular or special meetings of the Committee and may be considered at any point during the year. As described above, the Committee considers properly submitted stockholder nominations for candidates for the Board. Following verification of the stockholder status of persons proposing candidates, recommendations are aggregated and considered by the Committee. If any materials are provided by a stockholder in connection with the nomination of a director candidate, those materials are forwarded to the Committee. In evaluating the nominations, the Nominating/Corporate Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board.
COMMUNICATIONS WITH THE BOARD |
Communications with the Board
Our Board welcomes suggestions and comments from stockholders. All stockholders are encouraged to attend the Annual Meeting of stockholders where senior management and representatives from our independent auditors,registered public accounting firm, as well as members of the Board, will be available to answer questions. Stockholders may also send written communications to the Board by writing to the Secretary of the Board at East West Bancorp, Inc., 135 N. Los Robles Avenue, 7th Floor, Pasadena, California 91101. at:
All communications (other than commercial communications soliciting the sale of goods or services to, or employment with, the Company or directors of the Company) will be directed to the appropriate committee, the Chairman of the Board, the Lead Independent Director, or to any individual director specified in the communication, as applicable.
Stock Ownership Guidelines The independent directors generally meet in executive sessions without management or any of the other non-independent directors present at every regularly scheduled meeting of the Board. The sessions are chaired by the Lead Director. Any director can request for an additional executive session to be scheduled.
STOCK OWNERSHIP GUIDELINES |
All directors and executive officersNamed Executive Officers are required to own the Company’s Common Stockcommon stock to further align director’sthe financial interests of our directors and management’s financial interestsmanagement with those of our stockholders. The Company’s stock ownership guideline for directors is three times their annual cash retainer, and the guideline should be met within five years of the date of election. The stock ownership guideline for the CEO is six times his annual base salary, and the stock ownership guideline for Named Executive Officers is one time their annual base salary. These guidelines should be met within five years of the date of hire. The Company’s Stock Ownership Guidelines for directors and executive officerssenior management are posted on the Company’s website, which can be found at www.eastwestbank.comwww.eastwestbank.com/investors by clicking onInvestor Relations — Corporate Information — Governance Documents.
Named Executive officersOfficers have additional holding requirements for stock acquired as part of their compensation. The majorityNamed Executive Officers are required to hold until retirement at least 51% of any stock acquired upon the exercise of stock options (net of taxes and net of the shares acquiredgrant price paid) and at least 51% of any stock received upon vesting (net of taxes) haveof restricted stock or restricted stock units (“RSUs”).
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| BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | | | | |
No Pledging/Hedging of Company Securities
Pursuant to be held until retirement. Under these guidelines, if the holding requirement is greater than the guidelines set forth above for theour Insider Trading Policy, directors, officers and executive officers, the higher holding requirements apply and an executive may have holding requirements longer than the above guidelines. Executive officersemployees may not pledge the Company’s securities or engage in hedging strategies, including those designed to hedge or offset any decrease in the market value of the Company’s securities granted as compensation or held directly or indirectly by such person. Additionally, directors, officers and employees may not sell short or trade derivatives involving the Company’s securities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Certain Relationships and Related Transactions
Our Code of Conduct and Corporate Governance Guidelines provide guidance for addressing actual or potential conflicts of interests, including those that may arise from transactions and relationships between the Company and its executive officers or directors. In order to provide further clarity and guidance on these matters,, the Company has adopted a writtenpolicy regarding the review, approval or ratification of related party transactions.
The policy generally provides that the Audit Committee will review and approve in advance, or will ratify, all related party transactions between the Company and our directors, director nominees, executive officers, and persons known by the Company to own more than 5% of our Common Stock,common stock, and any of their immediate family members. Related party transactions include transactions or relationships involving the Company and amounts in excess of $120,000 and in which the above related parties had or will have a direct or indirect material interest. Under the policy, the failure to approve a related party transaction in advance would not invalidate the transaction or violate the policy as long as it is submitted to the Audit Committee for review and ratification as promptly as practicable after entering into the transaction.
The Audit Committee works with our General Counsel in reviewing and considering whether any identified transactions or relationships are covered by the policy. In determining whether to approve or ratify a transaction or relationship that is covered by the policy, the Audit Committee considers, among other things:
| › | · | theThe identity of the parties involved in the
transaction or relationship; | › | The terms of the transaction, including whether
those terms are fair to the Company and are in the
ordinary course of business and on substantially
the same terms with transactions or relationships
with unrelated third parties. |
| › | · | theThe facts and circumstances of the transaction
or relationship, including the identity of the party involved;relationship; | |
| › | · | theThe material facts of the transaction
or relationship; | |
| › | · | theThe benefits to the Company of the transaction or
relationship; and | |
| · | the terms of the transaction, including whether those terms are fair to East West and are in the ordinary course of business and on substantially the same terms with transactions or relationships with unrelated third parties. |
During 2015,2022, we did not enter into any related party transactions that required review, approval or ratification under our related party transaction policy. From time to time, we may lend money through our subsidiary, the Bank, to various directors and corporations or other entities in which a director may own a controlling interest. These loans (i) are made in the ordinary course of business, (ii) are made on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with other persons, and (iii) do not involve more than a normal risk of collectability and do not present other unfavorable features. As of December 31, 2022, none of these loans were categorized as nonaccrual, past due, restructured, or potential problem loans. We do not haveprovide any loans to NEOs.Named Executive Officers. None of our directors or executive officers, any associate or affiliate of those persons, or persons who beneficially owned more than 5% of our outstanding shares had any transactions or proposed transactions with us greater than $120,000 during the past year.year, other than the aforementioned loans made in the ordinary course of business.
| 33 | EAST WEST BANCORP 2023 PROXY STATEMENT |
DIRECTOR COMPENSATIONBOARD OF DIRECTORS AND CORPORATE GOVERNANCE | | | | |
Director Compensation
The Compensation Committee is responsible for reviewing and making recommendations to the Board of Directors with respect to the compensation of directors. Employees of the Company and its subsidiaries are not compensated for service as directorsa director of the Company or its subsidiaries and are excluded from the table below. The compensation received by Mr. Ng and Ms. Gouw as employeesan employee of the Company is shownprovided below in the “Summary“Summary Compensation Table.Table.”
Director compensation is reviewed by the Compensation Committee of the Board and adjustments are generally considered every two years. The Committee will engage an outside independent consultant to review director compensation amounts and structure at the same group of peer banks used by the Compensation Committee to review the compensation of senior management. In 2022, the Compensation Committee engaged Meridian Compensation Partners, LLC as its independent compensation consultant for this purpose.
In 2015,2022, non-employee directors received an annual cash retainer of $45,000$130,000 and an annual stock award of $100,000$130,000 of Common Stock.common stock. The Lead Independent Director received an additional annual cash retainer of $50,000.$35,000. The Board believes that the role of a Lead Independent Director is essential to maintaining an independent leadership with respect to matters such as Board oversight, corporate strategy, management succession, internal controls, Board composition and functions, and accountability to stockholders, and therefore the annual cash retainer paid for the Lead Independent Director’s additional service is justified. The essential duties of the Lead Independent Director are explained in further detail in the section titled “Board Leadership Structure” above and in our Corporate Governance Guidelines. The Lead Independent Director also acts as the Board representative to the Company’s strategic advisory council of outside community leaders and receivesis charged with developing strategic networks of new business, for which he received a cash retainer of $70,000 for such additional Board service.
The chair of each committee chairs received an additional annual cash retainer as follows: Audit — $20,000;$25,000; Compensation — $20,000;$25,000; Risk Oversight — $15,000;$25,000; and Nominating/Corporate Governance — $12,500.$20,000. Non-employee directors also received a meeting fee of $1,500 for each committee meeting attended.attended through June 30, 2022.
| 34 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | | | | |
The following table summarizes the compensation paid by the Company to non-employee directors for the fiscalcalendar year that ended December 31, 2015:2022: 2015Non-Employee Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) 1 | Stock Awards ($)2 | Total ($) | | Manuel P. Alvarez3 | 178,022.11 | 184,977.89 | 363,000.00 | | Molly Campbell | 145,011.20 | 129,988.80 | 275,000.00 | | Archana Deskus | 137,511.20 | 129,988.80 | 267,500.00 | | Serge Dumont | 130,011.20 | 129,988.80 | 260,000.00 | | Rudolph I. Estrada | 269,011.20 | 129,988.80 | 399,000.00 | | Paul H. Irving | 159,011.20 | 129,988.80 | 289,000.00 | | Sabrina Kay | 133,011.20 | 129,988.80 | 263,000.00 | | Jack C. Liu | 165,511.20 | 129,988.80 | 295,500.00 | | Lester M. Sussman | 170,011.20 | 129,988.80 | 300,000.00 |
| | | Fees Earned | | | | | | | | | | | or | | | Stock | | | | | | Name (1) | | Paid in Cash | | | Awards(2) | | | Total | | | Molly Campbell | | $ | 54,029 | | | $ | 99,971 | | | $ | 154,000 | | | Iris S. Chan | | | 55,529 | | | | 99,971 | | | | 155,500 | | | Rudolph I. Estrada | | | 205,529 | | | | 99,971 | | | | 305,500 | | | Paul H. Irving | | | 48,029 | | | | 99,971 | | | | 148,000 | | | John M. Lee | | | 55,529 | | | | 99,971 | | | | 155,500 | | | Herman Y. Li | | | 62,029 | | | | 99,971 | | | | 162,000 | | | Jack C. Liu | | | 72,529 | | | | 99,971 | | | | 172,500 | | | Keith W. Renken | | | 81,529 | | | | 99,971 | | | | 181,500 | | | Lester M. Sussman | | | 48,032 | | | | 99,968 | | | | 148,000 | |
| 1. | (1) | Tak-Chuen Clarence Kwan’s term ended onAnnual cash retainers were paid to directors in June 2022 for service from May 5, 2015. Mr. Kwan did not receive any compensation during the year ended December 31, 2015.2022 to May 2023. |
| 2. | (2) | The Company granted 2,2302,006 shares of the Company’s common stock to each non-employee director on August 6, 2015. Mr. Sussman was appointed to the Board of Directors on October 29, 2015, and was granted 2,446 shares of the Company’s stock on November 3, 2015.June 30, 2022. The grant date fair value is based on the number of shares granted and the closing price of the Company’s stock on the grant date. The closing price of the Company’s common stock was $44.83$64.80 on June 30, 2022. The grant date fair values are computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 718, Compensation—Stock Compensation. See the Company’s Annual Report on Form 10-K, Note 13 - Stock Compensation Plans to the Company’s Consolidated Financial Statements for the year ended December 31, 2022, on the Company’s accounting for share-based compensation plans. |
| 3. | Included pro-rated cash and $40.87 on August 6, 2015 and November 3, 2015, respectively.stock awards for board service from January 2022 to May 2022. |
Proposal 2: Advisory Vote to Approve Executive Compensation PROPOSAL SNAPSHOT What am I voting on? Stockholders are being asked, as required by Section 14A of the Exchange Act, to approve, on an advisory basis, the compensation of the Named Executive Officers for 2022 as described in the “Compensation Discussion and Analysis” section beginning on page 37 and the Compensation Tables section beginning on page 53. Voting recommendation: FOR the advisory vote to approve executive compensation. The Compensation Committee takes very seriously its stewardship responsibility to oversee the Company’s compensation programs and values thoughtful input from stockholders. The Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions. This proposal, commonly known as a “Say-on-Pay” proposal, gives our stockholders the opportunity to express their views on our NEO compensation as a whole. This vote is not intended to address any specific item of compensation or any specific NEO, but rather the overall compensation of all our NEOs and the philosophy, policies and practices described in this Proxy Statement. Our Board of Directors and management value the opinions of our stockholders, including their advisory votes regarding the compensation paid to our NEOs, and as such, we hold our Say-on-Pay vote every year. We revisit the frequency of our Say-on-Pay votes every 6 years.
| 35 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | | | | |
COMPENSATION OF EXECUTIVE OFFICERSWe believe that the information provided in “Compensation Discussion and Analysis” beginning on page 37 demonstrates that our executive compensation program was designed appropriately and is working to ensure management’s interests are aligned with our stockholders’ interests to support long-term value creation. The sustained success of the Company’s customer focus and bridge banking model between East and West is reflected in the following key metrics:
› Total loans grew 16% in 2022, to a record $48.2 billion; › Total deposits grew 5% in 2022, to a record $56.0 billion; › ROA of 1.80% in 2022 was substantially above the KRX median of 1.18% and average of 1.22%; and › ROE of 19.51% in 2022 was substantially above the KRX median of 10.77% and average of 11.44%. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting: “RESOLVED, that the stockholders hereby approve, on an advisory basis, the compensation of our Named Executive Officers as reflected in this Proxy Statement and as disclosed pursuant to Item 402 of Regulation S-K, which disclosure includes the compensation discussion and analysis, the compensation tables, narratives and all related material.” Because your vote is advisory, it will not be binding upon the Board. However, the Board and the Compensation Committee will consider the vote results when evaluating our compensation policies and practices in the future. Currently, we expect to hold an advisory vote on the compensation paid to our NEOs each year and expect that the next such vote, following this vote, will occur at our annual stockholder meeting in 2024.
| 36 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
Overview of Our Compensation StrategyDiscussion and Analysis
ThisThe following Compensation Discussion and Analysis (“CD&A”) provides information aboutdescribes the strategiesstructure and policies developed to execute this philosophy as it pertains to total executive compensation. The strategies and policies of the Compensation Committee have been refined to strongly correlate our executive compensation with the Company’s overall performance along with the individual performanceguiding principles of our executives, which have in turn, resulted in the appreciation of our stock price.
Our2022 executive compensation program is based onfor the Compensation Committee’s commitment to strong governance processes and meeting stockholder expectations on its compensation practices. In refining our 2015 compensation program and developing our 2016 compensation program, the Company solicited input and talked with many of its larger stockholders. The Committee also considered published guidance from governance advisors and its larger shareholders that publish compensation guidance and also considered the expectations of banking regulators. The Committee also reviewed and considered the practices of peer banks with which the Company competes for employees.Company’s Named Executive Officers, as set forth below.
As a result of our ongoing outreach and review process, the Compensation Committee over the past few years has transitioned executive compensation to a predominantly performance-based compensation structure with the substantial majority of compensation at risk. The Committee has continued to develop and refine incentive metrics that are focused on the bridge business model and sustaining the strong performance of the Company.
2022 Named Executive
Officers (“NEOs”) | Dominic Ng | Chairman and Chief Executive Officer | | Irene H. Oh | Executive Vice President, Chief Financial Officer | | Douglas P. Krause | Vice Chairman, Chief Corporate Officer | | Parker L. Shi | Executive Vice President, Chief Operating Officer | | Gary Teo | Executive Vice President, Chief Human Resources Officer |
The Company has a commitment to closely align the pay2022 Business and performance of the executives with stockholder interests through strong and sustainable governance practices. The Company continuously reviews its executive compensation practices to ensure that they are effective. Our practices have the following features:
| · | A substantial majority of executive compensation is at risk and subject to performance metrics |
| · | A majority of the CEO’s compensation is long-term incentive compensation that is at risk and subject to performance metrics |
| · | Our stock ownership guidelines for senior officers include the requirement that the majority of stock grants must be held until retirement |
| · | We do not provide “single trigger” change in control payments to our executive officers |
| · | No tax gross-ups for change in control benefits |
| · | The Company has the right to “claw back” any bonus payment or incentive award from the named executive officers in the event of a restatement of the Company’s financial statements |
| · | We have 100% independent directors on our Compensation Committee |
| · | Our compensation consultants are independent from management |
| · | We have transparent, objective peer and market comparative financial performance metrics aligned with stockholder interests |
| · | Annual review and approval of our compensation strategy |
2015 Financial Performance Highlights
The Company’s long term organizational objective isIn 2022, we continued to build a “financial bridge” between the United Statesdeliver strong and Greater China. Thisconsistent financial bridge consists of the specialized skills, expertise, and infrastructure that enable our customers to satisfy their business and financial needs within and across these two markets.performance. The Company believes this strategy provides the Company with a competitive advantageachieved record loans of $48.2 billion, record deposits of $56.0 billion, and the Company is not awarerecord assets of any other$64.1 billion.
We also outperformed peer banks in terms of the largest 50 United States banks that focus on this as their primary long term business strategy. The Company is one of the few U.S. banks with banking branches in China. The Company has grown its domestic lending with a focus on industriesROA, ROE, and sectors with the most cross-border growth potential, including entertainment and media, technology, life sciences, agriculture, aviation, clean technology, venture capital, and private equity. In 2015, the Company realized tangible value from these long term bridge banking efforts by again delivering strong financial results for the stockholders. The compensation decisions described in this CD&A reflect the payment of performance-based compensation consistent with the sustained strong financial performance of the Company over many years, including 2015.
total shareholder return (“TSR”). The Compensation Committee is pleased to report thatbelieves the Company has achieved record net income and strong financial performance again in 2015, which reflectsCompany’s 2022 pay decisions reflected the continued successful alignment between the Company’s financial and organizational objectives and its executive compensation program. For We have outperformed peer banks over time. We consistently achieved a higher ROA and ROE for each of the seventh consecutive year, the Company increased its earnings per share and at a rate substantially greater than its peers. Specifically, our diluted earnings per share (“EPS”) for the full year of 2015 totaled $2.66, an increase of $0.25 or 10.4% from $2.41 in 2014. Our 10.4% increase in diluted EPS was higher thanlast three years relative to the median increase of 5.3%ROA and the average increase of 6.9%ROE achieved by (i) our KBW Regional Bank Peers.4
In addition, in 2015, the Company outperformed all FDIC-insured commercial banks and the KBW Regional Bank Peers as in termscompensation peer group described on page 42 of average Return on Equity (“ROE”) and average Return on Assets (“ROA”).
The Company believes that ROE and ROA are important performance metrics because they measure the return that the Company earned on its stockholders’ investment and the resources it deployed. In that regard, in 2015, among of all FDIC-insured commercial banks in the country with assets over $20 billion, the Company was in the Top 4 in terms of ROE, in the Top 5 in terms of ROA, and in the Top 6 in terms of net interest margin.5
Another important performance metric is Total Shareholder Return (“TSR”this Proxy (the “Peer Group”), because it correlates directly withand (ii) the Company’s stock price performance and is therefore aligned with stockholder interests. In that regard, our one, three and five-year annualized Total Shareholder Return (“TSR”) of 9.48%, 27.19% and 18.35% were substantially above our KBW Regional Bank Peers’ averages of 5.90%, 16.80% and 11.30%, respectively.6 The consistent financial performance ofbanks comprising the Company, year after year, has resulted in long term value for our stockholders.
4 2015 financial data regarding EPS, ROE, ROA and NPA for KBW Regional Bank Peers was obtained from SNL Financial LC.
52015 ROE, ROA and net interest margin financial data for all FDIC-insured commercial banks was obtained from SNL Financial LC.
6 Source from Keefe, Bruyette &and Woods as of December 31, 2015.
Nasdaq Regional Banking Index (“KRX”).
| 37 | EAST WEST BANCORP 2023 PROXY STATEMENT |
Other financial highlights for 2015 include:
| COMPENSATION DISCUSSION AND ANALYSIS | · | Record Loans: Total loans receivable increased to a record $23.7 billion as of December 31, 2015 from $21.8 billion as of December 31, 2014. |
| · | Record Deposits: Total deposits grew to a record $27.5 billion as of December 31, 2015 from $24.0 billion as of December 31, 2014. |
| · | Improvement in Credit Quality: Nonperforming assets (“NPA”) to total assets improved six basis points to 0.40% as of December 31, 2015, compared to 0.46% as of December 31, 2014. Our NPA to total assets is lower than our KBW Regional Bank Peers’ median and average of 0.58% and 0.61%, respectively.7 |
72015 financial data for the KBW Regional Bank Peers was obtained from SNL Financial LC.
Compensation Objectives and Elements of Compensation
There are five primary objectives of the Company’s executive compensation program. The following table describes each objective and how it is achieved:
Compensation Program Objective | | How Objective is Achieved | | | | | Support the achievement of the Company’s vision and business strategy
| | · Incentive program performance objectives are tied to both financial and strategic objectives.
· The compensation programs provide an incentive for executives to not only meet but exceed Company goals.
| Pay for performance, which we believe will increase long-term stockholder value
| | · Compensation awards are based upon performance against Company financial and strategic goals, as well as business division goals.
· When goals are not achieved and when performance is below the threshold goals, there will be no bonus payouts and compensation awards will be below target levels.
| Attract and retain talented executives to succeed in today’s competitive marketplace | | · Executives are held accountable for results and rewarded with above target compensation levels when Company and business division goals are exceeded.
· Payments of certain long-term incentive awards are deferred through vesting and holding requirements.
| Align the interests of our executive officers and stockholders
| | · Long-term incentive compensation awards are equity-based.
· A significant portion of compensation is equity-based.
· Stock ownership requirements are in place for all NEOs.
| Avoid creating excessive risk | | · Incentive awards are capped.
· Multiple performance metrics are used, including those that serve to reduce risk.
· The Executive Compensation Recovery Policy (clawback policy) is applied to performance-based bonus payments and to long-term performance-based equity awards.
· The payments of certain long-term incentive equity awards are deferred through vesting and holding requirements.
· The Compensation Committee has the authority and discretion to reduce bonus payments even if established goals are achieved.
|
Pay for Performance Philosophy
Company Results Compared to Peers 
| 38 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
Our Compensation Philosophy We designed our executive compensation program to attract and retain talented managers, while rewarding them for delivering on our key financial and strategic goals. Guiding principles of our executive compensation program include:
| Our Executive Compensation Program | | What We Do |  | Place a substantial majority of executive compensation at risk and subject to performance metrics | | Engage with and consider stockholder input in designing our executive pay programs | | Grant all of our NEOs’ total long-term incentives in performance-based restricted stock units | | Link annual NEO incentive pay to objective, pre-established financial performance goals | | With oversight from the Compensation Committee, perform annual risk assessments to ensure that our compensation policies and programs are not likely to materially increase the Company’s risk exposure | | Engage an independent compensation consultant that reports solely to the Compensation Committee` | | Maintain stock ownership requirements for all NEOs, including a requirement that a majority of stock grants (net of taxes) must be help until retirement | | Maintain a relevant peer group | | Maintain a clawback policy | | Listen to and engage with our stockholders regarding executive compensation decisions and philosophy | | Conduct an annual review and approval of our compensation strategy | | What We Don’t Do |  | Do not allow re-pricing of stock options without stockholder approval | | Do not provide “single trigger” change in control payments to executive officers | | Do not permit hedging or pledging of Company stock | | Do not permit gross-ups for excise or other taxes on severance or in connection with a change in control |
| 39 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
Overview of Our Executive Compensation Program With input from our stockholders, we have designed an executive compensation program that aligns pay with measurable achievement of our corporate goals. Our 2022 executive compensation program remained the same as our 2021 structure. The components of each element of our executive compensation program are described in the table below. 
2022 Pay Mix for NEOs
The Company is committed2022 pay mix for our NEOs highlights the Company’s commitment to thealign compensation outcomes to results and underscores our compensation philosophy of paying for performance and the premise that compensation programs should serve to motivate and reward the achievement of financial and strategic goalsplacing significant emphasis on at-risk, performance-based pay. In 2022, 83% of the Company in order to increase long term stockholder value. The compensation of the NEOs is predominantly variable andCEO’s target pay was at risk based uponand linked to performance-based outcomes. For the achievementother NEOs, 70% of the Company’s financial budgettarget pay, on average, was at risk and performance goals. The majority of compensation is tied to meeting shortdirect performance results.
| 40 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
Compensation-Setting Process and long term performance goals. Metrics in 2015 for both short-term incentive (earnings per share, loan growth, and Non-Performing Assets/total assets) and LTI compensation (ROA and ROE compared to peers) are tied to our strategic and risk management goals as discussed below. Goals are challenging and at the time such goals are set, it is uncertain whether they will be met. In 2015, annual incentive goals again required increased and record earnings to meet target performance. Success in meeting those goals translated into strong financial performance and stockholder return in 2015. As noted above, the Company’s performance was substantially better than peer banks in various key metrics for financial institutions, including TSR, ROE, ROA, and nonperforming assets to total assets ratio. The Company has also increased earnings and earnings per share every year since the 2008 financial crisis, including 2015. Other achievements in 2015 and prior years are discussed in “2015 Financial Performance Highlights.”Roles 30 ROLE OF THE COMPENSATION COMMITTEE
Compensation Committee
As outlined in our Corporate Governance Guidelines, the Compensation Committee is responsible for developing and overseeing the Company’s executive compensation policies and programs. The goal of the Compensation Committee is to maintain compensation that is competitive within the markets in which we compete for talent, and thatwhich reflects the long termlong-term interests of our stockholders. The Compensation Committee is responsible for:
| · | | › | Developing the overall compensation strategy and policies for the Company; | | |
| › | · | Developing, evaluating and approving the goals and objectives of the compensation of the CEO; | | |
| › | · | Evaluating and approving the individual compensation, including bonus and equity incentive compensation and perquisites of each of the NEOs; | | |
| › | · | Establishing the guidelines for stock ownership for the executive management; | | |
| › | · | Along withWith input from the Head ofChief Human Resources Officer and Chief Risk Officer, of East West Bancorp, Inc. and the Bank, reviewing our incentive compensation programs to evaluate and ensure that none of them encourage excessive risk; | | |
| · | | › | Retaining outside advisors, including compensation consultants, to provide professional counsel; |
| · | Developing and maintaining a balanced compensation strategy of long-term and short-termshort- term incentives; | | |
| › | ·Retaining outside advisors, including compensation consultants, to provide professional counsel; | | Annually, approving |
| › | Approving annually the Compensation Committee Report and our Compensation Discussion and Analysis for inclusion in our Proxy Statement; and | | |
| › | · | Providing reports to the Board on compensation matters. | | | | | | | | | | | | | | |
Compensation Committee Resources in Setting PayROLE OF THE COMPENSATION CONSULTANT
The Compensation Committee considers several resources, analytical tools and performance measures in determining compensation levels, as presented in the chart below:
Compensation Committee
Resource | | Description | Compensation Committee Consultant
| | The independent compensation consultant reports directly to the Compensation Committee. The independent compensation consultant also advises the Compensation Committee on trends and issues in executive compensation and provides comparative compensation information for companies with which the Company competes for talent. The Compensation Committee has the sole authority to retain and oversee the work of the consultants, who do not provide services to Company management. | The Company’s Human Resources Department
| | The Company’s Human Resources Department provides additional analysis, administrative support and counsel as requested by the Compensation Committee. | Say on Pay Proposal | | The Compensation Committee has considered the annual “Say-on-Pay” vote and solicited input from a number of our larger stockholders. The Compensation Committee believes that the proposed compensation structure with the modifications discussed elsewhere in this Proxy Statement is appropriate for the Company. |
The Compensation Committee retained Towers Watson (now Willis Towers Watson) as its compensation consultant. The compensation consultant, Meridian Compensation Partners, LLC, reports directly to the Compensation Committee and is independent of management and does not perform any other work for the Company. The compensation consultant informsadvises the Compensation Committee on practicestrends and trendsissues in executive compensation amongand provides comparative compensation information for companies with which the Company competes for talent. The Compensation Committee has the sole authority to retain and oversee the work of the consultants, who do not provide services to Company management. The Compensation Committee evaluates the independence of the consultant annually.
ROLE OF MANAGEMENT The Company’s Human Resources Department provides additional analysis, administrative support and counsel as requested by the Compensation Committee. Members of management do not recommend, determine, or participate in Committee discussions related to their individual compensation arrangements. The CEO provides executive compensation recommendations for his direct reports, including the other NEOs, but does not participate in discussions related to his own compensation. | 41 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
2022 STOCKHOLDER ADVISORY VOTE ON EXECUTIVE COMPENSATION Our compensation policies and practices continue to evolve based on input and correspondence submitted from our stockholders, our review of market practices, our consideration of the independent compensation consultant’s advice, our review of reports issued by proxy advisory firms, and the results of the most recent annual “Say-on-Pay” vote by stockholders.
Approximately 97.5% of the votes cast at our 2022 annual meeting of stockholders approved the Company’s peers and2021 executive compensation. The Compensation Committee views the broader banking sector. It also provides advice and recommendations related to determining pay levels forhigh approval percentage as an indication that stockholders were generally satisfied with the executive officerscompensation structure and designinghow it was designed. USE OF PEER GROUP The Compensation Committee, with input from its independent compensation consultant, reviews at least annually the Company’scomposition of peer companies against which the Company evaluates itself for compensation programs for executives.purposes. In determining the composition, financial institutions were primarily chosen based on comparable asset size, with additional consideration of other metrics such as market capitalization, revenue, geographic presence, business model, and complexity of operations.
As part of their work in 2016,
In November 2021, the Compensation Committee and Willis Towers Watson evaluated and updated a list ofapproved our compensation peer companies for compensation survey purposes (the “2016 Compensation Level Peer Group”)group which consisted of 20 publicly-traded commercial banks to which22 bank holding companies with similar market capitalization and asset size as the Company is similar in terms(the “Peer Group”). The composition of the 2022 Peer Group was updated to better reflect the Company’s business focus, asset size. Thesize, and continued growth by removing New York Community Bancorp, Prosperity Bancshares, Commerce Bancshares, and Webster Financial Corporation, and adding First Citizens BancShares, Pinnacle Financial Partners Inc., Valley National Bancorp, and Wintrust Financial Corporation. As of December 31, 2022, our Peer Group’s total assets ranged from $31.8 billion to $212.6 billion, with a median total asset size of the group ranges from approximately $18 billion to $60 billion and market capitalization ranges from $2.3 billion to $9.4$73.3 billion. The Company’s asset size was $32.4 billion and its market capitalization was $5.98 billion asAs of December 31, 2015. In terms2022, the median market capitalization of asset sizeour Peer Group was $7.4 billion, with a range between $2.6 billion and $22.3 billion. With respect to total assets and market capitalization, the Company is atranked in the 71th41st percentile and 88nd61st percentile, ofrespectively, relative to the 2016 Compensation Level Peer Group respectively.as of December 31, 2022. The companies in the 2016 Compensation Level Peer Group are as follows:THE COMPANIES IN THE PEER GROUP WERE AS FOLLOWS:
• Associated Banc-Corporation
• FY 2022 Peer Group
| | BankUnited, Inc. (NYSE: BKU) | KeyCorp (NYSE: KEY) | Synovus Financial (NYSE: SNV) | | BOK Financial Corporation • Commerce Bancshares
(Nasdaq: BOKF)
| Northern Trust Corporation
(Nasdaq: NTRS) | Umpqua Holdings Corporation (Nasdaq: UMPQ) | | Comerica Inc. • (NYSE: CMA)
| PacWest Bancorp (Nasdaq: PACW) | Valley National Bankcorp
(Nasdaq: VLY) | | Cullen/Frost Bankers, Inc. •
(NYSE: CFR)
| Pinnacle Financial Partners
(Nasdaq: PNFP) | Western Alliance (NYSE: WAL) | | First Horizon (NYSE: FHN) | Popular (Nasdaq: BPOP) | Wintrust Financial Corporation
(Nasdaq: WTFC) | First Citizens Bancshares Inc.
(Nasdaq: FCNCA) | Regions Financial Corporation
(NYSE: RF) | Zions Bancorp (Nasdaq: ZION) | | First Republic Bank (NYSE: FRC) | Signature Bank (Nasdaq: SBNY) | | Huntington Bancshares
(Nasdaq: HBAN) | SVB Financial Group (Nasdaq: SIVB) |
| 42 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | • First Horizon National Corporation
• First Republic Bank
• FirstMerit Corporation
• Fulton Financial Corporation
• PacWest Bancorp
| | | • People’s United Financial, Inc.
• Popular, Inc.
• Signature Bank
• SVB Financial Group
• Synovus Financial Corporation
| | • TCF Financial Corporation
• UMB Financial Corporation
• Webster Financial Corporation
• Wintrust Financial Corporation
• Zions Bancorporation
|
It is important to note that in determining executive compensation, the Compensation Committee does not solely rely on comparative data from the Peer Group. While comparisons can be useful in identifying general compensation trends and overall pay levels, the Compensation Committee recognizes there may be meaningful differences between us and our peer companies. The majoritylisting of NEOs, for example, may vary amongst our peer companies, with titles, compensation, and tenure that do not readily track with ours. The Compensation Committee uses the comparison data as a general indicator of market trends in executive compensation but does not use it exclusively to set compensation levels for the CEO or other NEOs. In addition to peer data, the Compensation Committee also uses salary data from published industry sources. Any compensation decisions also consider individual and company performance, the position and tenure, responsibilities within the Company, and other factors to determine total compensation for the NEOs. See “Compensation-Setting Process” below for a more detailed discussion.
For purposes of determining long-term incentive awards, the Compensation Committee and its independent compensation consultant determined it would be appropriate to continue benchmarking to banks in the 2016 Compensation Level Peer Group are the same as the 2015 Compensation Level Peer Group. However, three banks were removed and three banks were added. City National Corporation was removed because it was acquired by the Royal Bank of Canada at the end of 2015. Huntington Bancshares was removed because it had almost three times the revenue and more than two times the assets of the Company. Bank of Hawaii was removed because it had less than half the assets and market capitalization of the Company. Meanwhile, First Citizens Bancshares Inc., People’s United Financial Inc. and PacWest Bancorp were added because they were useful comparative peers and did not materially change the Company’s position. Pay data for the 2016 Compensation Level Peer Group was obtained from each peer company’s annual proxy statement, and survey group data was obtained from the independent compensation consultant.
Furthermore, the Compensation Committee determined that for performance purposes in setting metrics for long term performance shares it would, rather than using a peer group of specific banks that may not be relevant over a longer time period, it would use a broader and more stable peer group as a better way to measure long term performance. The Compensation Committee selected the KBW Regional Bank Index (KRX) as the performance peer groupKRX (the “2016“Long-Term Performance Metrics Peer Group”). This will further increaseThe use of this benchmark compares our performance to a broader index of financial institutions determined by a third party, aligns with our investors’ perspectives and increases the transparency of the Company’s goal setting process by referring to a broad index compiled by a third party. Target financial metrics for long term compensation where the metric was relative to other banks were set at the 50thpercentile level of the 2016 Performance Metrics Peer Group.process.
COMPENSATION-SETTING PROCESS Accordingly, as used herein, “Peer Group” shall refer to the 2016 Compensation Level Peer Group in the context of a discussion of compensation levels and to the 2016 Performance Metrics Peer Group in the context of a discussion of performance.
Factors and Steps in Setting Pay
Compensation for the NEOs and certain other executive officers is generallytypically evaluated and set annually by the Compensation Committee in the first quarter of each year, based onusing the latest available competitive compensation data provided by the independent compensation consultant, peer data, andas well as Company business departmentdepartments and individual performance data. An individual executive’s compensation is generally established after considering the following factors:
| › | · | Competitive pay data for similar jobs and responsibilities in the market; | | |
| › | · | The Company’s performance against financial measures including earnings per share;measures; | | |
| › | · | The Company’s performance relative to strategic initiatives approved by the Compensation Committee; |
| › | ·Individual performance and overall contributions; | | Business |
| › | The business climate, economic conditions and other factors; and | | |
| › | · | The results of the most recent “Say-on-Pay” stockholder vote. | | |
The Compensation Committee approves the compensation of the other four NEOs after discussing their performance
As a rapidly growing organization, we encounter significant competition for top management talent – those individuals with the CEO. The Compensation Committee also reviews with the CEO the performance and compensationstrategic vision, understanding of the next 10 most highly compensated corporate officers of the Company. Compensation data from the Company’s Compensation Level Peer Group and survey data for similar jobs and job levels are considered for base salary adjustments. Achievement against performance goalsspecialized industries and the executive’s individual contribution toward Company objectives are consideredinternational banking experience necessary to sustain our growth. This challenge to attract and retain qualified personnel has been an important consideration in determining the annual performance-based bonus payoutour compensation decisions, and long-term incentive (“LTI”) awards. The CEO uses discretion and takes intowe expect it will continue to be a significant consideration among other things, individual contributions and their overall performance compared to other executives.going forward.
With respect toFor the CEO, the Compensation Committee annually reviews and approves the corporate goals and objectives relevant to the CEO’s compensation,performance, evaluates the CEO’s performance against those objectives and approves the CEO’s compensation level based on that evaluation. With assistance from the assistance of theindependent compensation
consultant, the Compensation Committee also considers the Company’s peer groupPeer Group and other peer data on base pay, performance-based bonus targets and long-term incentive awards and uses broad discretion when setting compensation types and amounts for the CEO.
The Compensation Committee is responsibleseparately reviews and discusses with the CEO his annual compensation recommendations for approving the CEO’s and the other senior executives’NEOs. A variety of factors help determine the final approved compensation amounts for the NEOs. For base salary adjustments, compensation data from our Peer Group and survey data for similar jobs and job levels are considered. For annual compensationperformance-based bonus payout and informinglong-term incentive | 43 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
awards, the Board of its actions.Compensation Committee considers the executive’s achievement against performance goals, along with individual contributions toward Company objectives.
The Compensation Committee does not benchmark to a particular percentile in positioningdetermining target total direct compensation. The Compensation CommitteeRather, it uses market peer proxy and survey data as a reference point, giving consideration to factors such as tenure, individual performance, any unique circumstances of the NEO’s position based on eachthat individual’s responsibilities, market factors, and succession considerations, and retention considerations. The Compensation Committee aims to have base salaries at below or not much above the market median, with the substantial majority of NEO compensation consisting of incentive compensation to advance the Compensation Committee’s pay-for-performance philosophy. This methodologyWe believe this approach drives higher realized compensation when our financial and stock performance is strong and lowerless realized compensation when our financial and/or stock performance is weaker.lower. Say-on-Pay Vote
The compensation program that was voted on by the stockholders in connection with our 2015 Annual Meeting was substantially similar in structure to the program in place in prior years, and aligned with a period when total stockholder return (“TSR”) exceeded that of the peer group by substantial margins for the past one-year, three-year, and five-year periods. Since 2009, the Company increased earnings per share each consecutive year and at a rate substantially greater than peer banks. The Company also outperformed the peer groups in terms of ROE, ROA and other key metrics since 2009. This performance continued through 2015 resulting in rankings in the top 4, 5, and 6, respectively, of all banks in the country with assets over $20 billion in terms of ROE, ROA and net interest margin, according to SNL Financial LC. For additional detail see “Proxy Statement Summary” of this Proxy Statement.
The Compensation Committee considered the 2015 “Say-on-Pay” vote on the Company’s 2014 executive compensation, which was approved by approximately 98% of stockholder votes. The Committee viewed that as an indication that stockholders were generally satisfied with the compensation structure and its contribution to our strong financial performance. The Company also considered stockholder input on the program.
Based on the quality and value of the feedback, the Compensation Committee believes the 2016 compensation approach is one of the more stockholder-centric compensation programs among our peers.
DISCUSSION OF OUR FISCAL 2015 EXECUTIVE COMPENSATION PROGRAM |
Primary Elements of Our Executive Compensation Program
Total Rewards Element | | Why We Provide It | | How We Determine the
Amount | | What it is Intended to
Reward | | | | | | | | Base Salary
| | To provide a competitive level of fixed income based on:
· Impact on business.
· Relative importance of executive to organization versus other executives.
· Experience in the job.
·Individual performance.
| | Survey group analysis and salary survey data are utilized to establish base salary levels.
Annual merit increases are awarded based on individual performance and marketplace competitiveness.
| | Individual performance, level of experience and responsibility. | | | | | | | | Performance-Based Bonus Plan
| | To provide performance-based pay for annual performance relative to:
· Company performance measures.
· Company strategic goals.
· Departmental and individual performance.
| | Performance-based:
· Potential awards are based on a calculated target.
· Strategic goals are established by the CEO to develop organizational capabilities that drive growth and stockholder value.
| | Company performance and individual and departmental performance.
Development of critical company capabilities.
| Long-Term Incentive Awards
| | To drive value creation for stockholders over the long-term:
· Provides at-risk performance pay opportunity for long-term performance.
· Equity awards vest through achievement of company performance measures.
· Aligns with stockholder interests.
| | Performance-based:
· Equity awards are granted based on a combination of the executive’s performance and the total annual peer compensation and salary survey data.
| | Rewards overall company performance and creation of stockholder value.
|
34 BASE SALARY
Base Salary
Base salary is a fixed portion of compensation that is based on peer groupdelivered in cash to reflect each executive’s role and ongoing performance. NEO base salary data,levels are typically reviewed annually by the Compensation Committee and adjusted as appropriate, typically to reflect merit, promotions or changes in responsibilities, or market adjustments. When determining any base salary surveys, and each individual’s skills, responsibilities, experience and relative importance toincreases, the Company. Actual salaries reflectCompensation Committee considers an individual’s responsibilities,total compensation package, his or her performance, in his or her role over timeCompany performance, comparative peer and market compensation data, internal parity, and other relevant factors, such asincluding the Compensation Committee’s (andscope of the CEO’s in the case ofexecutive’s responsibilities relative to peers and other NEOs) assessment of each NEO’s performance.executives, and retention concerns. | Executive | Title | FY2021 Base Salary ($000s) | FY2022 Base Salary ($000s) | % Change | | Dominic Ng | Chairman and CEO | $1,275.0 | $1,275.0 | 0.0% | | Irene H. Oh | Executive Vice President, Chief Financial Officer | $651.4 | $677.4 | +4.0% | | Douglas P. Krause | Vice Chairman, Chief Corporate Officer | $546.0 | $589.7 | +8.0% | | Parker L. Shi | Executive Vice President, Chief Operating Officer | $800.0 | $800.0 | 0.0% | | Gary Teo | Executive Vice President, Chief Human Resources Officer | $382.2 | $401.3 | +5.0% |
Performance-Based Bonus Plan The Compensation Committee has developed a cash incentive program (the “Performance-BasedPerformance-Based Bonus Plan”)Plan to motivate and reward executives for achieving critical Company-wide financial metrics and strategic goals (collectively, the “Corporate Goals”) and departmental or individual goals (collectively, “Individual Goals”). For 2022, performance on Corporate Goals was measured 70% based on financial performance and 30% based on strategic goals. The 2015 Performance-Based Bonus PlanPerformance of Individual Goals was structured to balance financial rewards and business risksmeasured by including multiple Company performance measures. Additionally, NEOs, excludinggoals determined for executives (other than the CEO, and the President and COO, whose goals were all company-wide goals, were also assigned individual and departmental goals. The 2015 Performance-Based Bonus Planbonus is subject to our Executive Recovery Policy, which provides for the claw back of executive compensation if triggering events occur. The target award opportunity for eachpaid 100% based on corporate performance).
Each NEO is expressedassigned a bonus target, stated as a percentage of the individual’s annual base salary. An NEO’s actual payout under the Performance-Based Bonus Plan depends on (i) the achievement of the Corporate Goals and, if applicable, Individual Goals, and (ii) the relative weightings of Corporate Goals and Individual Goals assigned to such NEO. | 44 | EAST WEST BANCORP 2023 PROXY STATEMENT |
 | | Under the 2015 Performance-Based Bonus Plan, executives
| | |
In determining each NEO’s target bonus percentage and weighting for Corporate Goals and Individual Goals, the Board and the Committee generally considered competitive market information as well as individual performance and contributions to the Company. Following its annual review, the Committee determined that adjustments to the weights and potential payout of performance objectives were appropriate to align with market practice and balance incentives tied to corporate and individual performance. As such, the Committee approved the following features to the 2022 Performance-Based Bonus Plan.
| › | Target incentive opportunities, defined as a percentage of base salary, were eligibleincreased from 100% to earn formula-based incentive compensation as follows:· 75%145% of salary for Mr. Ng and from 80% to 100% for Ms. Oh and Mr. Krause. Targets for Mr. Shi and Mr. Teo remained unchanged at 100% and 60%, respectively.
| | | | › | Weightings for Corporate Goals and Individual Goals of the Performance-Based Bonus Plan is based on were set at 100% Corporate Goals for Mr. Ng, at 65% Corporate Goals and 35% Individual Goals for Ms. Oh, Mr. Krause and Mr. Shi, and at 30% Corporate Goals and 70% Individual Goals for Mr. Teo. | | |
| › | To balance the more short-term focus inherent in financial metrics that are readily comparablegoals against the long-term vision and performance objectives described in the strategic goals, maximum achievement for strategic goals was increased to peer banksmatch the maximum achievement for financial goals: i.e., up to measure200% of achievement of stated goals. |
| › | To fully align and motivate our executives by emphasizing sustained value for the Company’s performance against its peers.Company while reinforcing personal accountability, maximum achievement for Individual Goals for non-CEO NEO was increased up to 200% of achievement of stated goals1. | | |
| › | · 25%The achievement of Corporate Goals and Individual Goals under the Performance-Based Bonus Plan is based on non-formulaicstrategic objectives focused on the Company’s business modelresults in an annual award that can be earned between zero and strategy that are not readily comparable to other banks. Achievement of strategic objectives is capped and cannot be above the achievement level200% of the financial metrics and accordingly, this portionbonus target.
| | | | | | | | | | | | | | | | |
| 1. | For Mr. Teo, there was no change to the maximum achievement percentage of the incentive plan can only serve to reduce compensation that would otherwise be payable based on achievement of financial metrics. Moreover, the Company has historically never measured itself at 100% for achievement of strategic objectives and this measure has each year reduced the annual incentive compensation that was payable based on pure financial performance.Individual Goals. |
The financial, strategic and individual goal weights for each NEO were determined as follows: | | | | Corporate Performance | | | Executive | Title | Target Bonus %
of Salary | Financial | Strategy | Individual | | Dominic Ng | Chairman and CEO | 145% | 70% | 30% | - | | Irene H. Oh | Executive Vice President, Chief Financial Officer | 100% | 45% | 20% | 35% | | Douglas P. Krause | Vice Chairman, Chief Corporate Officer | 100% | 45% | 20% | 35% | | Parker L. Shi | Executive Vice President, Chief Operating Officer | 100% | 45% | 20% | 35% | | Gary Teo | Executive Vice President, Chief Human Resources Officer | 60% | 21% | 9% | 70% |
| 45 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
20152022 Financial Metrics
Financial metrics comprised 70% of the Performance-Based Bonus Plan Corporate Goals in 2022. On an annual basis, the Company evaluates the performance metrics used, and modifies the metrics and the weightings as deemed appropriate. In 2022, the Company updated the metrics to more closely align with key priorities for Performance-Based Bonusthe year, including growing operating earnings, total loans, and pre-tax, pre-provision (“PTPP”) income, while managing credit quality. The weighting for the financial metrics consisted of 80% on growth, including operating EPS, PTPP income, and average total loan growth (excluding PPP), and 20% on credit quality. Specific to the growth metrics, the weightings were 30% for operating EPS, 20% for PTPP income, and 30% for average total loan growth (excluding PPP). The balance of the weightings consisted of 20% for the average quarter-end criticized loans ratio.
For 2022, target operating EPS was set at 10% higher than the actual 2021 adjusted EPS. Target PTPP income and average total loan growth for 2022 were set to be 17% and 12% higher, respectively, than 2021 results, which positioned the Company at the top quartile (ranked in the 83rd percentile and 81st percentile, respectively) against the same metrics as measured by analyst Consensus estimates and models for the Proxy peer group. For credit quality, target metric for average quarter-end criticized loans ratio was set to be equivalent to the average quarter- end ratio for 2021.
The 2022 financial metrics, measured against actual results, are summarized as follows:
| 46 | EAST WEST BANCORP 2023 PROXY STATEMENT |
 | | | | |
2022 Strategic Metrics and Results
In determining the 2022 Performance-Based Bonus payouts for the strategic component, the Compensation Committee evaluated management’s performance in three key strategic areas: Strategic Growth, Operational Excellence, and Leadership Development and Succession Planning.
We continued to deliver strong multi-year financial performance based on our strategic focus on commercial banking, bridge banking, omni-channel banking, and wealth management. To invest in our future, improve efficiency, and strengthen our risk management, we focused on product innovation, improved service levels, and continued to reinforce our credit culture. In 2022, we continued to deliver development programs and enabled leaders and top talent to build their knowledge, skills, and experience to become better leaders and effective team members in managing and driving growth of our business.
| Strategic Growth | | The 75% portion› Continued to optimize core industries across commercial loans. Maintained continuous growth of the Performance-Based Bonus Plan for 2015 is based on the achievement of certain corporate goalsanchor industries and financial metrics that were weighted as follows:accelerated growth across emerging industries;
· 50% weighting on achieving target diluted earnings per share› Continued to generate cross border referrals across geographies to enable more clients to get access to our global capabilities and services; and
· 25% weighting on achieving target› Continued to incubate innovation and promote new growth in total loansopportunities.
| | | | | Operational Excellence | | › Continued to practice process improvement to enhance our operational processes’ service levels to meet customers’ increasing service expectations; and
· 25% weighting on achieving a target NPA/total asset ratio.› Rationalized our technology vendor spending to reallocate funding to more strategic technology investments.
| | | | | Leadership Development and Succession Planning | | The 2015 financial metric performance goals were challenging and› Continued to develop leaders at the time they were established, it was uncertain whether they would be achieved.most senior level and created talent programs to accelerate the development of top talent; and
The target goals were set at a level that would require better than the projected performance of peer banks and accordingly to meet target performance levels for 2015, the Company had to perform better than the then projected performance of peer banks.› Recruited new leaders in key positions.
|
2015 Financial Metrics Results
Diluted Earnings Per Share
The 2015 financial objectives included a 50% weighting based on achieving target diluted earnings per share (“EPS”) of $2.62. A threshold of 50% achievement would be achieved if diluted earnings were $2.52 per share with no credit given for diluted earnings less than that amount. A maximumAt its March 2023 meeting, the Compensation Committee approved the achievement of 200% would be achieved if diluted earnings per share were $2.71 per share or more.
The target diluted earnings per share goal of $2.62 was determinedthe executive team’s efforts at 114% for the strategic component based on the Company’s annual financial budgetweighting of 40% for 2015. This goal was in linestrategic growth with analysts’ expectations112% results, 30% for operational excellence with 126% results, and 30% for leadership development and succession planning with 103% results.
2022 Individual Metrics
2022 marked Mr. Ng’s 30th anniversary as CEO of the Company. Since the Company became publicly traded on the Nasdaq in 1999, its total assets grew 30 times, total loans grew 32 times, total deposits grew 37 times, and total earnings grew 40 times. The Board recognized that under Mr. Ng’s leadership, the Company successfully built upon its strong financial momentum from prior years and achieved record 2022 financial results. In 2022, the Company achieved record earnings of $7.92 per diluted share, up by 30% from the previous year, record net income of $1.1 billion, record revenue of $2.3 billion, record assets of $64.1 billion, record loans of $48.2 billion, and record deposits of $56.0 billion. In addition, the Company reported a return on average assets of 1.80%, return on average equity of 19.51%, and return on average tangible equity of 21.29% for 2015. The Company was required to achieve increased diluted earnings per share in 2015 for a sixth consecutive year and exceed analysts’ expectations for the majority2022, as well as delivered three-year TSR of the banks included in our 2015 Peer Group. See “Compensation Discussion and Analysis – 2015 Financial Performance Highlights” for further details. The Company recognizes that diluted earnings per share growth is an important metric for stockholders to measure the Company’s performance. It believes that including this metric as a performance measurement aligns the interests of management and those of the stockholders. Actual diluted earnings per share for 2015 were $2.66, which resulted in 144% achievement of this goal. For 2015, our diluted earnings per share increased 10.4%44% compared to the 5.3% median increasePeer Group’s 10% and 6.9% average increaseKRX’s 6%. Under Mr. Ng’s leadership, the Company continues to deploy its growth strategy in diluted earnings per sharecommercial and bridge banking, omni-channel banking, and wealth management, while improving operational excellence, and actively promoting leadership development and hiring talent.
| 47 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
For the other NEOs, the Compensation Committee concluded as follows: (i) Ms. Oh maintained strong capital positions and implemented effective asset/liability management through a rising interest environment, which generated material net interest margin expansion, while protecting downside risk through the appropriate use of balance sheet hedging. Ms. Oh effectively demonstrated strong expense discipline while continuing to make strategic investments in infrastructure to streamline processes and improve efficiencies. Ms. Oh had been, and continues to be, engaged with women leadership initiatives, and was named one of American Banker’s list of 2022 Most Powerful Women to Watch; (ii) Mr. Krause continued to highlight and maintain our disciplined credit culture, and significantly improved asset quality in 2022 while supporting strong loan growth and promoting collaboration between the credit team and frontline business units; he also continued to develop the management information system for earlier identification of weaknesses in loans and portfolios, while maintaining strong compliance programs across the Company; (iii) Mr. Shi led corporate development strategy, and oversaw day-to- day operations across the Company; he continued to enhance the Company’s cybersecurity programs and controls monitoring systems through business innovation and new technologies; and (iv) Mr. Teo implemented leadership development and succession planning programs across the Company, while continuing to deliver development and training programs to our employees.
2022 Performance-Based Bonus for NEOs
After taking into account the Company’s financial and strategic performance, the Compensation Committee determined that the NEOs had a payout of 170% for the corporate component, which consisted of a 194% payout for the financial metrics (70% weighting) and a 114% payout for the strategic metrics (30% weighting). Payouts for the individual component (excluding the CEO) ranged from 89% to 137%. Overall payouts (excluding the CEO) ranged from 114% to 158%.
For 2022, each NEO was awarded the performance-based bonus amounts set forth in the table below. In addition, Mr. Krause received a one-time bonus of $100,000 for assuming additional responsibilities and strengthening the corporate risk management function, and Mr. Teo received a one-time bonus of $120,000 for continuous recruitment of senior executives and top talent and managing and supporting leadership and Board transitions.
| | Target Weightings | 2022 Payout (as a % of Target) | | | Corporate Performance | Corporate Performance | Executive | Target Bonus as % Salary | Financial | Strategic | Individual | Financial | Strategic | Individual | Total Payout | | Dominic Ng | 145% | 70% | 30% | - | 194% | 114% | - | 170% | | Irene H. Oh | 100% | 45% | 20% | 35% | 194% | 114% | 116% | 151% | Douglas P. Krause | 100% | 45% | 20% | 35% | 194% | 114% | 137% | 158% | | Parker L. Shi | 100% | 45% | 20% | 35% | 194% | 114% | 112% | 150% | | Gary Teo | 60% | 21% | 9% | 70% | 194% | 114% | 89% | 114% |
| 48 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
Long-Term Incentive Awards
Long-term incentive (“LTI”) awards are compensation awards designed to align the compensation of our Peer Groupexecutive officers to stockholder returns. These awards are generally granted as stock in 2015. We were at the 71thpercentilefirst quarter of each year, allowing the Compensation Committee adequate time to evaluate prior year performance. When determining the annual LTI awards for our executive officers, the Compensation Committee believes it is important to take into account not only the grant date values included in the “Summary Compensation Table,” but also to consider the effect of the year-end value of our Peer Group for diluted earnings per share growth. Diluted earnings per share goal achievement is discussed in further detail at “Compensation Discussion and Analysis – 2015 Financial Performance Highlights.”
Growth in Total Loans
stock on those awards over time. The 2015 financial objectives included a 25% weighting based on achieving growth in total loans to $23.55 billion. Net interest income istiming of the largest componentgrants generally follows the filing of revenue for most banks, including those in our Peer Group. As such, the ability to grow loans and increase net interest income, is an important financial metric by which to measure performance. A threshold of 50% achievement would be achieved if loans grew to $22.89 billion, with no credit given if loans were less than that amount. A maximum achievement of 200% would be achieved if loans grew to $24.42 billion or more in 2015. The target was determined based on the Company’s annual financial budget for 2015. Loan growth in this highly competitive environment was, we believed, possible in part due toreport on Form 10-K and occurs before the bridge infrastructure that the Company has built and continued to develop. Our goal was to grow the loan portfolio in a safe and prudent manner. Our loan growth goal was
challenging in light of our financial metric goals of maintaining a lower NPA/total asset ratio than our Peer Group and maintaining a ROA above our Peer Group, which requires that loan growth be achieved with a pricing discipline to avoid loan growth that results from “buying” market share, and the ongoing run-offstart of the covered loan portfolio,Company’s “blackout period,” during which reducesinsiders may not engage in Company stock transactions. LTI awards issued in 2022 were granted under the impactCompany’s 2021 Stock Incentive Plan, as amended (the “2021 Stock Incentive Plan”), which is the Company’s current omnibus stockholder-approved plan for equity awards to employees.
One hundred percent of any organic loan growth. Actual total loans totaled $24.60 billion asthe value of LTI awards granted to our NEOs is made through performance-based restricted stock units (“PSUs”). Awards are subject to three one-year performance periods (for example, January 1, 2022, through December 31, 2015, resulting2022; January 1, 2023, through December 31, 2023; and January 1, 2024, through December 31, 2024, for awards granted in 200% achievement of the loan growth goal. The Company was pleased its bridge banking model achieved results above expectations while maintaining pricing2022), and credit quality discipline. The increase in loans was largely driven by balanced, diversified loan originations in commercial real estate loans, commercial loans and consumer loans. Commercial loan growth, particularly in California, our largest market, is where the Company’s bridge model with its strong focus on imports, exports and cross-border investments, is well aligned to national and local trends and business opportunities.
NPA/Total Assets Ratio
The 2015 financial objectives included a 25% weighting based on achieving a Non-Performing Assets/total assets ratio (“NPA/total assets”) of less than 0.68%. The target level was set to equal the Company’s ratio as ofare payable at the end of the priorthree-year period. Each year, which ratio was betteran NEO is eligible to earn a “target” number of PSUs equal to one third of the total PSUs granted based on actual performance. As described below, the actual number of PSUs earned may be higher or lower than the year-end average of its Peer Group. This financial metric aligned with risk management goals of ensuring that growth was accomplished in a prudent way. This goal also had strategic significance because the Company believes a low NPA/total assets ratio is important in maintaining the confidence of both domestic and international customers, and regulators with respect totarget amount depending on the Company’s financial strength. This not only helps retain and attract customers but also provides regulators the comfort level to allow continued expansion of our footprint both in the U.S. and in Asia. A threshold of 50% achievement would be achieved if the NPA/total assets ratio was less than 0.88%. However, if the ratio was above 0.88%, there would be no credit given toward bonus goals. Our NPA/total assets ratio as of December 31, 2015 was 0.40%, which resulted in 200% achievement of this goal. This ratio was also better than the Peer Group average for 2015 of 0.61%.
2015 Strategic Objectives for Performance-Based Bonus
 | | The 25% portion of the Performance-Based Bonus Plan for 2015 was based on the achievement of strategic objectives tied to building the Company’s platform and positioning it for sustained future growth.
Those strategic objectives were focused on three areas:
· 33% on bridge banking
· 33% on enhancing consumer banking
· 34% on upgrading talent, leadership and engagement, consistent with the Company’s business model.
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2015 Strategic Objectives Results
The determination with respectperformance that year relative to the achievement of these strategic initiatives was made by the Compensation Committee in February 2015, after consultation with the CEO. The development of bridge banking was measured based on internal goals set to increase the number of customers and the development of new resources to support cross-border customers. The leveraging of branches considered commercial and consumer loan referrals as well as customer service and deposits. The goal of employee development and retention was measured by taking into account turnover of employees with strong performance reviews and growth and development of internal talent.
Since achievement of the strategic goals cannot be readily compared to the performance of peer banks and such goals have more subjectivity in their measurement, the Compensation Committee has capped the level of achievement of the strategic goals at the level of achievement of the financial performance goals for purposes of calculating incentive compensation. Thus, the achievement of the strategic goals can only decrease and cannot increase the incentive compensation potential of the officers. Ever since the Compensation Committee implemented separate non-financial strategic goals, these goals have reduced the compensation that would have otherwise been paid based solely on financial metrics.
Although the strategic goals by their nature are long term goals and good efforts were made in each area, the CEO recommended to the Compensation Committee that the progress towards the strategic goals in 2015 did not move as quickly as desired. After discussion with the CEO, the Compensation Committee determined achievement of these strategic goals to be 87%.Specifically, while the strategic goal to upgrade talent, leadership and engagement was achieved and exceeded (113%); the strategic goals of building bridge banking (90%) and enhancing consumer banking (58%) were only met in part.
Performance-Based Bonus Awards for NEOs
In 2015, using the above discussed performance goals, the Company achieved 151% of the target corporate goals consisting of 172% achievement of corporate metrics (75% weighting) and 87% achievement of strategic metrics (25% weighting). The strong overall goal achievement of 151% of the target goals reflects performance substantially better than our Peer Group with earnings per share (“EPS”) growth of 10.4% compared to our Peer Group median earnings per share growth average of 5.3%; return on equity (“ROE”) of 12.74% substantially above the Peer Group median of 8.21%; return on assets (“ROA”) of 1.27% substantially above the Peer Group median of 1.00%. The strong overall goal achievement at above target levels benefitted stockholders and is, we believe, a contributing factor to our one-year TSR, which was 9.5% as compared to the Peer Group one-year TSR of 5.9%.
The performance-based bonus awards for the CEO and the President and COO were based solely on the achievement of the corporate goals listed above. For the CFO and the Chief Risk Officer and General Counsel, 50% of their performance-based bonus was based on the achievement of the corporate goals listed above and 50% was based on individual and department goals. For the Head of International and Commercial Banking, 30% of his performance-based bonus was based on the achievement of the corporate goals listed above and 70% was based on individual and department goals. The payment of these bonuses is also subject to the Company satisfying the regulatory capital requirement administered by the federal banking agencies to be well-capitalized. In addition, the Compensation Committee reserves sole discretion to reduce bonus payments downward.
Long-Term Performance Awards for CEO and President and COO On July 26, 2011, the Company’s Compensation Committee approved Long-Term Performance awards for the CEO, and the President and COO that were payable in part in 2015. The Long-Term Performance awards were intended in large part to recognize and reward these executives with completing the transformational FDIC assisted acquisition of United Commercial Bank in 2009. However, performance measures were established and the payments were deferred until the transformational acquisition also provided tangible benefit to shareholders through higher than peer stock price appreciation through and after the end of integration and end of the FDIC loss share period. The Long-Term Performance awards were as follows:
| · | the CEO will receive a $2.5 million cash payment on each of October 31, 2015 and on March 31, 2016 subject to (a) the Company meeting certain long-term performance criteria; and (b) he being employed by the Company as CEO, Chairman or Non-Executive Chairman; |
| · | the President and COO will receive a $1.25 million cash payment on each of October 31, 2015 and on March 31, 2016 subject to (a) the Company meeting certain long-term performance criteria; and (b) she being employed by the Company; |
The long-term criteria for the October 2015 and March 2016 performance payouts were as follows: (a) the Company satisfies applicable regulatory requirements for well-capitalized banks at the end of each fiscal year through the date of payment and (b) the Company achieves a minimum of the 60th percentile of TSR for its peer group from November 6, 2009 (the date of the transformational acquisition of the United Commercial Bank) through the last day of the year prior to the 2015 and 2016 payment dates.
From November 6, 2009 to December 31, 2014, the Company’s TSR result was 380.72, and thus far exceeded the 60th percentile of TSR for the 2014 Peer Group, which was 109.77.8 Accordingly, on October 31, 2015,defined as the CEO received a $2.5 million cash paymentbanks in the KRX for 2022 and the PresidentKBW Nasdaq Bank Index (“BKX”) for 2023 and COO received2024. The Company was added to the BKX and removed from the KRX on September 19, 2022. The actual number of PSUs earned in a $1.25 million cash payment because their performance goals had been met and they were still employed byyear can range from 0% to 200% of the Company. Moreover, the Company concluded that the CEO’s $2.5 million cash payment and the President and COO’s $1.25 million cash payment was due and payable on March 31, 2016, since both the performance goals and employment requirements with the Company were again met. Specifically, from November 6, 2009 to December 31, 2015, the Company’s TSR was 426.31, and again far exceeded the 60th percentile of TSR for the 2015 Peer Group, which was 118.44.8
Long Term Incentive Awards
LTI awards are compensation awards that provide a strong link between the return to our stockholders and the compensation of our executives.target PSUs. The Compensation Committee determined it was appropriate to award performance-based Restricted Stock Units (“RSUs”) in 2015. The performance period was three years for the awards granted in 2015, similar to the awards granted in the prior year. The Compensation Committee believes that this practice further aligns our compensation program with theindustry best practices for LTI awards and reflects an appropriate balance between financial reward and long-term performance.
| Metric | Weighting | Threshold
(50% payout) | Target
(100% payout) | Maximum
(200% payout) | | ROA | 37.5% | 30th percentile | 50th percentile | >= 80th percentile | | ROE | 37.5% | 30th percentile | 50th percentile | >= 80th percentile | | TSR | 25% | 30th percentile | 50th percentile | >= 80th percentile |
LTI
In determining the amount of equity awards are generally granted in the first quarter ofto each year which allowsNEO, the Compensation Committee adequate timeconsiders its overall long-term incentive guidelines for all NEOs, while taking into account the competitive market for executive talent, and the benefits of incentive compensation tied to evaluate prior year performance. The timing of the grants generally follows the filing of the annual report of the Company on Form 10-K and before the startperformance of the Company’s “blackout period” during which insiders may not engagecommon stock. As described above, the Compensation Committee also considers the Company’s financial performance relative to the Long-Term Performance Peer Group in Company stock transactions.determining the actual number of PSUs awarded in a particular year. In 2021, the Company’s ROA and ROE of 1.47% and 15.70% respectively, were above the 2021 median ROA and ROE of 1.28% and 10.58% respectively, for the Long-term Performance Peer Group, and ranked 77.5th percentile and 92nd percentile relative to the Long-term Performance Peer Group. The Company’s blackout periods generally start ten days beforeTSR in 2021 ranked 96th percentile relative to the end of each quarter.Long-term Performance Peer Group. Taking into account the various factors above, the Compensation Committee approved the 2022 LTI awards for each NEO, which are granted undersummarized in the Company’s 1998 Stock Incentive Plan as amended, which is the Company’s omnibus stockholder-approved plan for equity awards to employees.table below. The Company calculates the aggregate grant date fair value of awards atas of the date of grant in accordance with the same standard it applies for financial accounting purposes. 8 Source from SNL Financial LC.
Consistent with SEC regulations, the In 2022, Mr. Teo received a grant date fair value of 2015 LTI4,529 RSUs as an annual grant. In addition to their annual PSUs or RSUs, NEOs were each granted an award equity grants for the NEOs are presented in the Summary Compensation Table and 2015 Grants of Plan-Based Awards table. Total outstanding unexercised or unvested LTI grants are shown in the 2015 Outstanding Equity Awards table.
In 2015, 100%,23 RSUs on February 1, 2022, as part of the LTI grants were at riskSpirit of Ownership Program1.
| 1. | The Spirit of Ownership Program applies to all employees of the Company and was launched in 1998 with the premise that each employee is a shareholder, with a vested stake in the Company’s long-term success, growth, and profitability. |
| 49 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
| NEO | 2022 Target PSUs | 2022 RSUs | | Dominic Ng | 58,230 | 23 | | Irene H. Oh | 10,999 | 23 | | Douglas P. Krause | 9,750 | 23 | | Parker L. Shi | 9,058 | 23 | | Gary Teo | 0 | 4,552 |
PSU Payouts
The PSUs awarded in 2020 had performance-based goals. As noted elsewhere, in 2015 100% of the LTI grants also are at risk and have performance-based goals. Our goals are similar to most of our peers using long-termthree one-year performance goals relative to peers, such that they also set target levels at the peer level, and increase or decrease the award if performance is better or worse than peers. Unlike many of our peers, 100% of the long-term compensation of our NEOs is at risk and it is not certain whether any of it will be realized. The financial metrics used for 2015 LTI compensation equity grants were closely tied to the strategic and risk management goals of the Company. The vesting for the 2015 performance-based RSUs is subject to meeting the three-year service condition ending March 7, 2018 and pre-established performance goals in each of the three yearsperiods, with the last performance period ending on December 31, 2017. In order to meet the performance condition,2022. Based on the Company’s performance for ROA (37.5% weighting), ROE (37.5% weighting), and TSR (25% weighting) relative to the Long-Term Performance Peer Group, the Compensation Committee determined that the PSUs paid out at 199.4% of target for 2020, resulting from the 94th percentile rank for TSR, 79.5th percentile rank for ROA, and 92nd percentile rank for ROE; 196.9% of target for 2021 resulting from the 96th percentile rank for TSR, 77.5th percentile rank for ROA, and 92nd percentile rank for ROE; and 150.0% of target for 2022 resulting from the 22nd percentile rank for TSR, 98th percentile rank for ROA, and 98th percentile rank for ROE. Please refer to the Option Exercises and Stock Vested table on page 56 for the number of shares each NEO earned. Mr. Shi joined the Company in 2021 and did not participate in the 2020-2022 PSU program.
The PSUs awarded in 2021 have three one-year performance periods. The first two performance periods ended on December 31, 2021, and December 31, 2022, respectively. Based on the Company’s performance for ROA (37.5% weighting), ROE must equal or exceed(37.5% weighting), and TSR (25% weighting) relative to the 50thLong-Term Performance Peer Group, the Compensation Committee determined that the PSUs were earned at 196.9% of target in 2021 resulting from the 96th percentile rank for TSR, 77.5th percentile rank for ROA, and 92nd percentile rank for ROE; and 150.0% of target in 2022 resulting from the 22nd percentile rank for TSR, 98th percentile rank for ROA, and 98th percentile rank for ROE. The last performance period ends on December 31, 2023. Earned shares will not be payable until the end of the third year.
The PSUs awarded in 2022 have three one-year performance periods. The first performance period ended on December 31, 2022. Based on the Company’s performance for ROA (37.5% weighting), ROE (37.5% weighting), and TSR (25% weighting) relative to the Long-Term Performance Peer Group, over each yearthe Compensation Committee determined that the PSUs were earned at 150.0% of target in 2022 resulting from the three-year period from January 1, 2015 through22nd percentile rank for TSR, 98th percentile rank for ROA, and 98th percentile rank for ROE. The second and last performance periods end on December 31, 2017. TSR, ROA2023, and ROE ratios at the 30thpercentile results in 50% of the award being payableDecember 31, 2024, respectively.
Retirement Programs and the amount of the award is proportionately reduced from target for performance between the 30thand 50thpercentile. A 200% award will be given for performance at or above the 80thpercentile with the award prorated between 100% and 200% for performance between the 50thand 80thpercentiles. No award is payable for performance below the 30thpercentile. | · | The target TSR metric is set at the 50th percentile level of the Peer Group. This is a challenging goal because of strong competition within our Peer Group. TSR is an important metric as it correlates directly with the Company’s stock price performance and is therefore aligned with stockholder interests. This metric helps ensure the Company’s business model is sustainable and an appropriate risk/reward balance is being achieved. |
| · | The target ROA metric is set at the 50th percentile level of the Peer Group. This is a challenging goal because of strong competition within our Peer Group. We believe that ROA is also important to our long term strategy and risk management practices. Performance targets are unlikely to be met if the Company is “buying” market share and not maintaining a pricing discipline to ensure that the Company’s business model is sustainable and an appropriate risk/reward balance is being achieved. |
| · | The target ROE metric is set at the 50th percentile level of the Peer Group. This is a challenging goal because of strong competition within our Peer Group. ROE is a significant metric in measuring a bank’s long term performance and is a direct measurement of profitability for stockholders. This metric helps ensure the Company’s business model is sustainable and an appropriate risk/reward balance is being achieved. |
In 2015, 100% of the value of the LTI awards granted to the NEOs was comprised of performance RSUs with a three year vesting period. For all LTI awards, dividend equivalents are paid only on earned shares after the vesting periods have ended.
Selection of Metrics and Alignment with Performance
The Compensation Committee believes that the metrics set in 2015 are challenging and with the addition of a TSR component to the metrics even more closely correspond to the creation of stockholder value. As discussed above, the annual incentive metrics required a level of performance above both the Company’s prior year performance and above the level achieved by peers in order to meet the target level of performance. These challenging metrics, which at target required performance better than the prior year’s performance and peer bank performance, have been met at above target levels in each of the past few years and this has translated into strong financial performance. The Compensation Committee believes that its goal setting process is appropriate, the goals are challenging and achievement was uncertain when the goals were set. Above target performance by the Company for the past several years is the result of consistent superior performance over that time and performance in each year was above prior Company levels and better than peer performance. As noted above, the Company has increased earnings per share for seven (7) consecutive years and at a rate substantially higher than peer banks in 2015, and the Company is in the Top 4 for all banks in the United States with assets over $20 billion in terms of ROE, Top 5 in terms of ROA, and Top 6 in terms of net interest margin. Also, as noted, this superior above target performance has created stockholder value and our TSR is above our Peer Group average for the past one-year, three-year and five-year periods. The Company’s selection of goals and metrics has accordingly served to align executive pay with both Company performance and this has translated into superior TSR for stockholders.
Perquisites
Benefits – Detailed Information
Our NEOs receive the same customary benefits as all other employees, including medical, dental, life, disability, vacation cash-out, and a 401(k) planPlan, which includes company matching contributions. The NEOs are eligible to participate in the same plans and to the same extent as most other salaried employees. The Company does not currently provideEmployees are allowed to cash out their earned vacation once a deferred compensation plan foryear if they meet both vacation usage and time away from work requirements set by the senior officers.Company. The Company maintains a legacy plan which no longer accepts new contributions. None of the NEOs are part of the legacynon-qualified deferred compensation plan.plan (“Deferred Compensation Plan”) to help attract and retain executives and key employees. Our Deferred Compensation Plan provides NEOs and other key employees the opportunity to defer a specified percentage of their annual base salary and/or their bonus under the annual cash bonus plan (in each case, up to 80%). In 2022, Messrs. Ng and Shi, participated in the Deferred Compensation Plan. The deferred amounts are credited to a participant’s account and are immediately vested. Amounts in a participant’s account are then hypothetically or “notionally” invested | 50 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
in one or more investment funds selected by such participant, with gains or losses adjusted based on the rate of return on the assets in each notional investment fund. The available investment funds used to track such notional investment returns are substantially the same as those offered under our 401(k) Plan. Returns on participant contributions are not guaranteed. The Company has the discretion to make contributions to the Deferred Compensation Plan on behalf of its participants. In addition,2022, the Company sponsors a Supplemental Executive Retirement Plan (the “SERP”) which provides supplemental retirement benefitsdid not make any such contributions to certain NEOs. The SERP is discussed in further detail under the heading “Retirement Plans.”Deferred Compensation Plan.
Perquisites – Detailed Information
In general, the NEOs do not have different or greater benefits than other employees, with the exception ofexcept for financial planning services for the CEO,and the use of a Company-owned car for the CEO. The financial planning services are intended to help ensure compliance by the CEO with all applicable tax and an automobile allowance forregulatory requirements. For certain executives, the Headuse of International and Commercial Banking pursuant to an employment agreement entered into between him and the Company on September 7, 2005. a company car is permitted in recognition of their extensive business-related travel.
The Compensation Committee reviews the perquisites provided to the NEOs annually as part of their overall review of executive compensation. Based on a review of competitive pay data provided by the outsideits external independent compensation consultants,consultant, the Compensation Committee determined that the perquisites provided in 20152022 are within an appropriate range of competitive compensation practices.practices relative to our Peer Group. Details about the NEOs perquisites, including the cost to the Company, are shown in the “Summary Compensation Table” under the “All“All Other Compensation”Compensation” column on page 5053 together with the accompanying footnotes.
2015 COMPENSATION DECISIONS FOR NAMED EXECUTIVE OFFICERS |
The following contributions and achievements were taken into consideration by the Compensation Committee in making the 2015 compensation decisions. The 2015 performance-based bonus awards were based on 2015 financial performance and were paid to the NEOs in February 2016.
The Committee’s determination on each of these matters was based on the recommendation of Mr. Ng (except in the case of his own compensation), the parameters established by the executive’s employment agreement, if applicable, and the factors described below. In addition, in determining equity awards, the Committee considered its overall long-term incentive guidelines for all executives, which attempt to balance in the context of the competitive market for executive talent, the benefits of incentive compensation tied to performance of the Company’s common stock with the dilutive effect of equity compensation awards.
Dominic Ng
2015 Key Accomplishments | · The 2015 compensation decisions below reflect both the long-term vision and leadership Mr. Ng has provided and the strong financial performance of the Company
· In 2015, he continued to chart and drive the Company’s unique long-term organizational objective to build a “financial bridge” between the United States and Greater China
· Mr. Ng brings to the Company long experience and deep first-hand knowledge of banking practices and the banking industry in both the United States and Greater China and also of U.S.–Greater China cross-border transactions and relations.
· Under his leadership, the Company successfully executed on its bridge strategy and achieved its sixth consecutive year of record earnings, with diluted earnings per share totaling $2.66, which constitutes an increase of $0.25 or 10% from $2.41 in 2014. Our 10% increase in diluted EPS was higher than the 2015 Peer Group’s median and average increases of 5.3% and 6.9%, respectively.
· For the sixth year in a row, the Company substantially outperformed its peer banks. Our one, three and five-year annualized TSR were 9.5%, 27.2% and 18.4% compared to the 2015 Peer Group averages of 5.90%, 16.8% and 11.3%.
· In 2015, the Company was in the Top 4, 5 and 6 of all FDIC-insured commercial banks in the country with assets over $20 billion in terms of ROE, ROA and net interest margin, respectively.
| Base Salary | Mr. Ng’s 2015 base salary was $1,000,000. For the fourth year in a row, the Compensation Committee decided not to increase Mr. Ng’s base salary and to focus on long-term and performance incentives.
| Performance-based Bonus | In the first quarter of 2016, Mr. Ng received a performance-based bonus of $1,310,000 related to the 2015 fiscal year. Mr. Ng’s performance-based bonus award was 131% of his 2015 target bonus, and was determined based on the Company’s achievement of the corporate goals under the formula-based Performance Based Plan, as adjusted. Although the Company’s strong financial performance in 2015 was one of the best in the industry, the Compensation Committee used its downward discretion to reduce Mr. Ng’s bonus from the amount otherwise payable under the bonus formula (151% of base salary) due to regulatory matters and needing to meet regulatory expectations in BSA/AML and risk management.
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42 Other Compensation Policies and Information
Long-Term Incentives | In the first quarter of 2015, Mr. Ng received an LTI award of $4,000,000 of restricted stock units which is subject to the 100% achievement of challenging performance metrics and performance standards. All the LTI equity grants are subject to a three year cliff vesting schedule.
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| In addition, Mr. Ng received a $2.5 million cash payment on October 31, 2015, pursuant to a long-term performance award approved on July 26, 2011 by the Company’s Compensation Committee, which required the Company to satisfy applicable regulatory requirements for well-capitalized banks at the end of each fiscal year through the date of payment and achieve a minimum of the 60th percentile of TSR for its Peer Group from November 6, 2009 through the last day of the year prior to the 2015 payment date. The Company’s actual TSR from November 6, 2009 to December 31, 2014 was 380.72, which far exceed the 60th percentile of TSR for the Peer Group which was 109.77.
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Julia S. Gouw
2015 Key Accomplishments | · Contributions to sustained strong performance on Company-wide objectives over the long term and focus on stockholder value.
· The Company’s strong overall goal achievement of the target goals reflects performance substantially better than the Peer Group.
| Salary | Ms. Gouw’s 2015 base salary was $601,005. The base salary was not increased for 2016 due to a pre-planned retirement and was also unchanged in 2015.
| Performance-based Bonus | In the first quarter of 2016, Ms. Gouw received a performance-based bonus of $707,518 related to the 2015 fiscal year. Ms. Gouw’s performance-based bonus award was 118% of her 2015 target bonus, and was determined based on the Company’s achievement of the corporate goals under the formula-based Performance Based Plan, as adjusted. Although the Company’s strong financial performance in 2015 was one of the best in the industry, the Compensation Committee used its downward discretion to reduce Ms. Gouw’s bonus from the amount otherwise payable under the bonus formula (151% of base salary) due to regulatory matters and needing to meet regulatory expectations in BSA/AML and risk management. | Long-Term Incentives | In the first quarter of 2015, Ms. Gouw received an LTI award of $650,000 of restricted stock units which is subject to the 100% achievement of challenging performance metrics and performance standards. All the LTI equity grants are subject to a three year cliff vesting schedule.
In addition, Ms. Gouw received a $1.25 million cash payment on October 31, 2015, pursuant to a long-term performance award approved on July 26, 2011 by the Company’s Compensation Committee, which required the Company to satisfy applicable regulatory requirements for well-capitalized banks at the end of each fiscal year through the date of payment and achieve a minimum of the 60th percentile of TSR for its Peer Group from November 6, 2009 through the last day of the year prior to the 2015 payment date. The Company’s actual TSR from November 6, 2009 to December 31, 2014 was 380.72, which far exceed the 60th percentile of TSR for the Peer Group which was 109.77.
|
Douglas P. Krause
2015 Key Accomplishments | · Contributions to sustained strong performance on Company-wide objectives over the long term and focus on stockholder value.
· Continued focus on enterprise-wide risk management and compliance.
· Reduction of legal expenses and management of legal, compliance, risk management, governance and other matters.
| Salary | Mr. Krause’s 2015 base salary was $375,000. The base salary was not increased for 2016 and was also unchanged in 2015.
| Performance-based Bonus | In the first quarter of 2016, Mr. Krause received a performance-based bonus of $214,875 related to the 2015 fiscal year. Mr. Krause’s performance-based bonus was 96% of his 2015 target bonus. 50% of the possible bonus amount was determined based on the Company’s achievement of the corporate goals under the formula-based Performance Based Plan and goal achievement of these goals was 151%. 50% of the possible bonus amount was based on department goals, which were rated overall at 40% due to regulatory matters and needing to meet regulatory expectations in BSA/AML and risk management.
| Long-Term Incentives | In the first quarter of 2015, Mr. Krause received an LTI award of $225,000 of restricted stock units which is subject to the 100% achievement of challenging performance metrics and performance standards. All the LTI equity grants are subject to a three year cliff vesting schedule.
|
Irene H. Oh
2015 Key Accomplishments
| · Contributions to sustained strong performance on Company-wide objectives over the long term and focus on stockholder value
· Provided strong leadership, assumed additional responsibilities; and enhanced discipline around revenue opportunities; department goals achieved at above target levels
| Salary | Ms. Oh’s 2015 base salary was $403,090. Her 2016 salary will be increased by 6%, to $430,000. The Compensation Committee took into consideration her strong leadership, external market standards and internal parity.
| Performance-based Bonus | In the first quarter of 2016, Ms. Oh received a performance-based bonus of $366,257 related to the 2015 fiscal year. Ms. Oh’s performance-based bonus award was 151% of her 2015 target bonus and was determined based on the Company’s achievement of the corporate goals under the formula-based Performance Based Plan and the achievement of department goals.
| Long-Term Incentives | In the first quarter of 2015, Ms. Oh received an LTI award of $250,000 of restricted stock units which is subject to the 100% achievement of challenging performance metrics and performance standards. All the LTI equity grants are subject to a three year cliff vesting schedule.
|
Andy Yen
2015 Key Accomplishments | · Enhanced the Company’s bridge banking platform
· Expanded the customer base and the capabilities of the Company’s China and Hong Kong operations
· Expanded the customer base and capabilities of the Company’s U.S. Commercial Banking department.
| Salary | Mr. Yen’s 2015 base salary was $370,977. His 2016 salary will be increased by 7%, to $400,000. The Compensation Committee took into consideration external market standards and internal parity.
| Performance-based Bonus | In the first quarter of 2016, Mr. Yen received a performance-based bonus of $196,828 related to the 2015 fiscal year. Mr. Yen’s performance-based bonus award was 105% of his 2015 target bonus and was determined based on the Company’s achievement of the corporate goals under the formula-based Performance Based Plan and on the achievement of department goals.
| Long-Term Incentives | In the first quarter of 2015, Mr. Yen received an LTI award of $275,000 of restricted stock units. All the LTI equity grants are subject to a three year cliff vesting schedule. (Mr. Yen was not an NEO in 2015, so he was not awarded performance shares in 2015.)
|
2016 EXECUTIVE COMPENSATION PROGRAM DECISIONS |
The Compensation Committee met in February 2016 and made decisions with respect to the executive compensation program for 2016 with respect to our NEOs. Consistent with the long term strategy and risk management practices of the Company, and consistent with recent governance and compensation trends, the Company reduced the proportion of potential short term incentives and increased the proportion of potential long-term incentives. These compensation decisions, which will be described in more detail in next year’s Compensation Discussion & Analysis, are summarized follows:
The following salary decisions were made: Ms. Oh’s salary was adjusted to $430,000 and Mr. Yen’s salary was adjusted to $400,000, while the salaries of the other NEOs again remained unchanged.
Metrics for the financial objectives for the 2016 performance-based bonus plan will be earnings per share with a 50% weight, and total loan growth (excluding strategy loan sales) with a 50% weight. These goals continue to be closely tied to the strategic goals of the Company. The goals are each set with challenging targets. In order to meet the target goals set for earnings per share and loan growth, the performance of the Company must be substantially better than the projected performance of peers. These financial metrics will be given an overall 75% weighting.
| · | The diluted earnings per share target metric of $2.82 represents a 6% increase in diluted earnings per share. Our target increase of 6% is in line with analysts’ expectations. A threshold goal of $2.74 per share, which represents a 3% increase from 2015, has been set, at which point 50% credit for goal achievement is given; no credit is given for diluted earnings per share below this level. 200% credit is given for goal achievement if earnings reach $2.90 per share, which would represent a 9% increase in diluted earnings per share from 2015. |
| · | Continuing to increase earnings at or above the rate of our peers is a particularly challenging goal in light of the fact that we have already achieved seven consecutive years of increased earnings per share and six years in a row of record earnings. It is also challenging with the reduction to earnings from the drop in accretion income from prior failed bank purchases and increased expenses due to our Written Agreement with the Federal Reserve Bank of San Francisco dated November 9, 2015 to enhance our BSA/AML program. It is challenging for an already high-performing bank to continue to increase earnings per share faster than peers and especially in light of the factors referenced above. |
| · | The loan growth metric of $25.60 billion of loans represents an 8% increase in loans from December 31, 2015. The calculation of achievement of this loan growth metric will exclude the effect of any potential loan sales because the focus of the metric is the Company’s ability to originate loans. A threshold goal of $24.89 billion |
| | of loans, a 5% increase, has been set, at which point 50% credit for goal achievement is given; no credit is given for loan growth below this level. 200% credit is given for goal achievement if loans reach $25.60 billion, which would represent an 8% increase in loans from 2015. |
| · | Continuing to grow loans at a faster rate than competitors is a goal we believe possible due to the bridge market focus and infrastructure the Company has built and continues to develop. Our goal is to grow loans in a safe and prudent manner while also maintaining a lower NPA/total asset ratio than our peers. Our loan growth goal should also be considered in relation to our financial metric goal of maintaining a ROA that is above peers which requires that loan growth be done with a pricing discipline to ensure that loan growth is not the result of “buying” market share. |
Metrics used for strategic objectives considered under the 2016 performance-based bonus plan were set at a 25% weighting, the same as in 2015. These are not financial metrics but are important measurement tools for the Company to continue to focus on its risk management practices and core business strategies. The 25% weighting based on the achievement of risk management and strategic initiatives is tied to building the Company’s platform and positioning it for sustained growth in the future. The goals will be focused in three areas: 60% on BSA/AML and risk management, 20% on bridge banking, and 20% on talent and leadership in all areas of the Company consistent with the business model.
| · | The BSA/AML and risk management strategic goal will be measured by the achievement of tasks under the BSA/AML written agreement with the Federal Reserve Board and the enhancement of the Bank’s overall risk management. |
100% of the LTI awards granted in 2016 have challenging goals over a three-year performance period. LTI awards at 100% achievement were granted in the following amounts: Mr. Ng—$4,000,000; Mr. Krause—$350,000; Ms. Oh—$350,000; and Mr. Yen—$275,000. Due to a pre-planned retirement effective March 31, 2016, Ms. Gouw did not receive an LTI grant in 2016. The LTI awards of Messrs. Ng, Krause and Yen and of Ms. Oh are subject to the achievement of challenging performance metrics and performance standards as described below. All LTI awards comply with IRC Section 162(m) and are subject to a three year cliff vesting schedule.
| · | The financial metrics used for 2016 LTI compensation equity grants continue to be closely tied to long-term financial performance that reflect the achievement of strategic and risk management goals of the Company to continue to build its bridge platform. In order to earn the full restricted stock unit award, the Company’s ROE, ROA and TSR must equal or exceed the 50th percentile of the 2015 Peer Group over each year of the three-year period from January 1, 2016 through December 31, 2018. The ROE and ROA goals each have a 37.5% weighting and the TSR goal has a 25% weighting. ROE, ROA and TSR at the 30th percentile results in 50% of the award being payable and the amount of the award is proportionately reduced from target for performance between the 30th and 50th percentile. No award is payable for performance below the 30th percentile. A 200% award will be given for performance at or above the 80th percentile with the award prorated between 100% at the 50th percentile and 200% at the 80th percentile. |
| · | We believe that ROE, ROA and TSR are some of the most significant metrics in measuring a bank’s long term performance and the alignment of the interests of management with those of stockholders. ROE is a direct measurement of the return on stockholders’ investment. The Company believes that for long term strategy and risk management purposes, ROA is an important and prudent metric, reflecting the Company’s achievement of its long term business model. TSR measures how much the Company’s stock price has risen or fallen over time. The new relative three-year TSR metric underscores the connection between executive pay and stockholders’ interests by measuring our ability to provide greater return to our stockholders than other regional banks. The three metrics evaluated together, help ensure the Company’s business model is sustainable and an appropriate risk/reward balance is being achieved. The target for ROE, ROA and TSR metrics is set at the 50th percentile level of the 2015 Peer Group, respectively. This is a challenging goal because of strong competition within our peer group. |
OTHER COMPENSATION POLICIES AND INFORMATION |
In addition to adhering to the processes described in the preceding sections, the Compensation Committee maintains a strong corporate governance culture with respect to executive compensation. ItOver the years, it has adopted over the years various policies, including those described below, to further align executive compensation towith performance and what the Company believes is in the best interest of thestockholders. Claw backsSTOCK OWNERSHIP GUIDELINES
The Company maintains the following stock ownership and holding guidelines for Any Restatement; Executive Compensation Recovery Policyour NEOs, and they are reviewed periodically by the Nominating/Corporate Governance Committee. | CEO | | › 6x annual base salary | | | | | | | | NEOs (other than CEO) | | › 1x annual base salary | |
NEOs have additional holding requirements for stock acquired as part of their compensation. NEOs shall hold until retirement at least 51% of any stock acquired upon the exercise of stock options (net of taxes and net of the grant price paid) and at least 51% of any stock received upon vesting (net of taxes) of restricted stock or RSUs.
The Nominating/Corporate Governance Committee reviews compliance with the guidelines annually, and all NEOs met the stock ownership and holding guidelines for 2022. CLAWBACKS FOR ANY RESTATEMENT; EXECUTIVE COMPENSATION RECOVERY POLICY The Company has adopted an Executive Compensation Recovery Policy for our NEOs, which was approved by the Compensation Committee.Committee in 2012. Under this policy, all annual performance-based bonus payments and annual LTI awards willthat are based upon the Company’s financial performance may be subject to claw backclawback in the event of a restatement of the Company’s financial statements on whichstatements. The clawback will be required without regard for the performance bonus payments are based. The officerreason of the restatement, and the affected officers will be required to repay the Company the amount of any incentive payment or incentive award received in excess of what would have been paid based on the restated numbers. The claw back will be required without regard to the reason for the restatement. Trading Restrictions; Pledging Stock
| 51 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
TRADING RESTRICTIONS; NO HEDGING OR PLEDGING OF COMMON STOCK As set forthprovided in the Company’s Insider Trading Policy, it is against Company policy for all employees,any employee, including itsany executiveofficers, officer, to engage in speculative transactions in Company securities, which include but are not limited to trades in puts or calls in Company securities or selling Company securities short. In addition, under our Governance Guidelines,Insider Trading Policy, it is also against Company policy for NEOs to pledge their shares of common stock in the Company.Company for any purpose. No Tax Gross UpsNO TAX GROSS UPS
We do not provide for any tax gross ups of excise or other taxes on severance payments or in connection with a change in control. Tax Deductibility of Executive CompensationCOMPENSATION PROGRAM RISK ANALYSIS
Section 162(m) of the Code generally limits the tax deductibility of compensation paid by a public company to its CEO and certain other highly compensated executive officers to $1 million in the year the compensation becomes taxable to the executive. There is an exception to the limit on deductibility for performance-based compensation meeting certain requirements. Although the Company does consider the impact of this rule when making compensation decisions, Company policy does not require all executive compensation to be tax-deductible. In the interest of flexibility and overall benefit for the Company’s stockholders, the Compensation Committee will continue to facilitate the awarding of responsible but adequate executive compensation while taking advantage of Section 162(m) whenever feasible. The Company believes that all performance-based compensation paid in 2015 and that will be paid pursuant to compensation decisions made in 2015 will be deductible under Section 162(m).
Outreach to Stockholders
The Compensation Committee regularly reaches out to stockholders to solicit their views on our executive compensation program and to make management available to answer questions or address concerns based on publicly- available information. Our compensation policies and practices continue to evolve based on this input, our review of correspondence submitted by stockholders to our Board and management, our review of market practice, our consideration of the advice of the Compensation Committee’s independent compensation consultant, our review of reports issued by proxy advisory firms and the results of the most recent annual “Say-on-Pay” vote by stockholders. Compensation Program Risk Analysis
The Compensation Committee reviewedreviews the Company’s compensation policies and practices for our NEOs as well as the incentive plans forand other employees andemployees. The Compensation Committee has determined that our incentive compensation programs are not reasonably likely to have a material adverse effect on the Company. To conduct this review, the Company completedannually completes an inventory of its incentive compensation plans and policies. This evaluation coveredcovers a wide range of practices and policies including: the balanced mix between pay elements, shortelements; short-term and long- term and long term programs,programs; caps on incentive payouts,payouts; governance controls in place to establish, review and approve goals,goals; use of multiple performance measures,measures; Compensation Committee discretion on individual awards,awards; use of stock ownership guidelines,Stock Ownership Guidelines; use and provisions in severance/change of control policies,policies; use of the Executive Compensation Recovery Policy, and Compensation Committee oversight of compensation programs.
As described in the report below, the
The Compensation Committee, also evaluated, along with the independent compensation consultant, determined that the Company’s Chief Risk Officer,compensation programs do not create risks that are reasonably likely to have a material adverse effect on the conformity of the criteria and targets of our compensation program with the risk profile of the Company and whether the proposed goals or the structure of the awards might have the inadvertent effect of encouraging excessive risk or other undesirable behavior.Company. REPORT BY COMPENSATION COMMITTEE |
The following Compensation Committee Report is not deemed filed or incorporated by reference into any other document, including the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except tothe extent the Company specifically incorporates this Report into any such filing by reference.
The Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis. Based upon this review and our discussions, the East West Bancorp, Inc. Compensation Committee recommended to the Board that the Compensation Discussion and Analysis section be included in this 2016 Proxy Statement and be includedincorporated by reference in its Annual Report on Form 10-K for the year ended December 31, 2015.2022. 
| 52 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | THE COMPENSATION COMMITTEE | | | | | | Jack C. Liu, Chairman | | Rudolph I. Estrada | | Keith W. Renken |
COMPENSATION OF NAMED EXECUTIVE OFFICERS |
Summary Compensation Table The NEOs only receive compensation for services as executive officers and employees of the Bank, and no separate compensation is paid for their services to the Company. The table below and the accompanying footnotes summarize the 2015, 20142022, 2021, and 20132020 compensation for the NEOs (other than Mr. Yen for whom only 2015 compensation is shown as Mr. Yen was not a named executive officer in 2014 or 2013):NEOs. Name and
Principal
Position | Year | Salary ($) | Bonus
($)4 | Stock
Awards
($)1 | Option
Awards
($) | Non-Equity
Incentive Plan Compensation
($)2 | All Other
Compensation
($)3 | Total ($) | Dominic Ng Chairman
and Chief
Executive
Officer | 2022 | $1,275,000 | - | $4,538,539 | - | $3,142,875 | $119,994 | $9,076,408 | | 2021 | 1,275,000 | - | 5,065,596 | - | 2,181,270 | 127,306 | 8,649,172 | | 2020 | 1,275,000 | - | 4,487,082 | - | 1,034,025 | 137,668 | 6,933,775 | Irene H. Oh Executive Vice
President and
Chief Financial
Officer | 2022 | $673,319 | - | $858,902 | - | $1,024,744 | $40,778 | $2,597,743 | | 2021 | 649,358 | - | 801,528 | - | 677,818 | 15,555 | 2,144,259 | | 2020 | 635,524 | - | 749,529 | - | 414,324 | 22,012 | 1,821,389 | Douglas P. Krause Vice Chairman
and Chief
Corporate
Officer | 2022 | $582,792 | $100,000 | $758,090 | - | $934,584 | $50,118 | $2,425,584 | | 2021 | 541,900 | - | 694,926 | - | 578,542 | 25,150 | 1,840,518 | | 2020 | 516,692 | - | 560,159 | - | 439,088 | 41,932 | 1,557,871 | Parker L. Shi Executive
Vice President and Chief
Operating
Officer | 2022 | $800,000 | - | $707,684 | - | $1,197,120 | $43,615 | $2,748,419 | | 2021 | $400,7695 | $150,000 | 1,300,071 | - | 519,520 | 392,367 | 2,762,727 | | 2020 | | | - | - | - | - | | Gary Teo Executive Vice
President and
Chief Human
Resources
Officer | 2022 | $398,296 | $120,000 | $352,001 | - | $273,573 | $29,969 | $1,173,839 | | 2021 | 379,330 | - | 321,860 | - | 272,126 | 28,520 | 1,001,836 | | 2020 | 361,685 | - | 282,057 | - | 197,179 | 36,727 | 877,648 |
Summary Compensation Table |
Name and Principal
Position | | Year | | | Salary
($) | | | Bonus
($) | | | Stock
Awards
($)(1) | | | Option
Awards
($) | | | Non-Equity
Incentive Plan
Compensation
($)(2) | | | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(3) | | | All Other
Compensation
($) (4) | | | Total
($) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dominic Ng | | | 2015 | | | $ | 1,000,000 | | | $ | - | | | $ | 4,119,935 | | | $ | - | | | | $ 3,810,000 | (5) | | $ | - | | | $ | 110,586 | | | $ | 9,040,521 | | | Chairman and Chief | | | 2014 | | | | 1,000,000 | | | | - | | | | 3,249,986 | | | | - | | | | 1,540,000 | | | | - | | | | 69,984 | | | | 5,859,970 | | | Executive Officer | | | 2013 | | | | 1,000,000 | | | | - | | | | 2,250,000 | | | | - | | | | 2,401,500 | | | | - | | | | 59,770 | | | | 5,711,271 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Julia S. Gouw | | | 2015 | | | $ | 601,005 | | | $ | - | | | $ | 669,511 | | | $ | - | | | | $ 1,957,518 | (5) | | $ | - | | | $ | 14,237 | | | $ | 3,242,271 | | | President and Chief | | | 2014 | | | | 598,088 | | | | - | | | | 499,981 | | | | - | | | | 912,693 | | | | - | | | | 10,882 | | | | 2,021,644 | | | Operating Officer | | | 2013 | | | | 580,667 | | | | - | | | | 600,000 | | | | - | | | | 934,184 | | | | - | | | | 18,248 | | | | 2,133,099 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Douglas P. Krause | | | 2015 | | | $ | 375,000 | | | $ | - | | | $ | 231,784 | | | $ | - | | | $ | 214,875 | | | $ | 292,863 | | | $ | 25,461 | | | $ | 1,139,983 | | | Executive Vice President, | | | 2014 | | | | 372,500 | | | | - | | | | 199,985 | | | | - | | | | 280,000 | | | | 259,844 | | | | 8,873 | | | | 1,121,202 | | | Chief Risk Officer, | | | 2013 | | | | 356,667 | | | | - | | | | 200,000 | | | | - | | | | 361,908 | | | | 230,162 | | | | 10,243 | | | | 1,158,980 | | | General Counsel and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate Secretary | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Irene H. Oh | | | 2015 | | | $ | 403,090 | | | $ | - | | | $ | 257,501 | | | $ | - | | | $ | 366,257 | | | $ | - | | | $ | 13,475 | | | $ | 1,040,323 | | | Executive Vice President | | | 2014 | | | | 387,500 | | | | - | | | | 199,985 | | | | - | | | | 395,000 | | | | - | | | | 9,800 | | | | 992,285 | | | and Chief Financial Officer | | | 2013 | | | | 359,228 | | | | - | | | | 225,000 | | | | - | | | | 376,988 | | | | - | | | | 18,131 | | | | 979,347 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Andy Yen | | | 2015 | | | $ | 370,977 | | | $ | - | | | $ | 274,976 | | | $ | - | | | $ | 196,828 | | | $ | - | | | $ | 46,433 | | | $ | 889,214 | | | Executive Vice President | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | and Head of International | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Business Banking, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial Banking | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1. | (1) | Represents the aggregate grant date fair values of the RSUs and performance-based RSUs granted in 2015, 2014,2022, 2021, and 20132020 in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)FASB ASC Topic No. 718,Compensation—Stock Compensation.Compensation. See the Company’s Annual Report on Form 10-K, Note 1513 - Stock Compensation Plans to the Company’s Consolidated Financial Statements for the year ended December 31, 20152022 on the Company’s accounting for share-based compensation plans. With the exception of Mr. Andy Yen’s restricted stock unitShi’s 2021 RSU awards, Mr. Teo’s 2020 and 2022 RSU awards, and the broad employee RSU grant, all of the other NEO’sNEO equity awards are performance-based awards with payouts that depend on the probable outcome of the performance criteria and the price of the Company’s common stock on the award certification date. For the 2022 performance-based RSUs, assuming that the highest level of performance conditions will be achieved, the grant date fair value of the maximum awards for the NEOs would be as follows: for Mr. Ng, $7,911,539; for Ms. Oh, $1,494,402; for Mr. Krause, $1,318,590; for Mr. Shi, $1,230,684. | | |
| 2. | (2) | Represents incentive compensation receivedearned under our Performance-Based Bonus Plan in 2016, 20152023, 2022, and 20142021 related to fiscal years 2015, 20142022, 2021, and 2013,2020, respectively. Mr. Shi joined the Company in June 2021, and his 2021 payout amount was pro-rated based on the month of employment. |
| (3) | Includes the year-to-date change in the actuarial present value of the accumulated benefit under the SERP. |
| (4) | 2015 “All Other Compensation” includes: |
| 3. | Includes: for Mr. Ng: | Ng, (i) Vacation cash-out of $56,731, (ii) Financialfinancial planning and administrative services of $38,695 and$48,500, (ii) vacation cash-out of $53,942, (iii) Company’sCompany contributions under its 401(k) planPlan of $11,925. | | $13,725 and (iv) auto usage of $3,827; for Ms. Gouw: | Oh, (i) Company’svacation cash-out of $27,658 and (ii) Company contributions under its 401(k) planPlan of $11,925. | | $13,120; for Mr. Krause: | Krause, (i) Vacation cash-out of $15,865 and (ii) Company’sCompany contributions under its 401(k) planPlan of $9,596. | | Ms. Oh: | $13,725 and (ii) vacation cash-out of $36,393; for Mr. Shi, (i) Company’sCompany contributions under its 401(k) planPlan of $11,925. | | Mr. Yen: | (i) Car$14,913, (ii) housing and moving allowance of $18,692, (ii) Vacation$25,000,(iii) vacation cash-out of $15,994$3,077, and (iii) Company’s(iv) cell phone allowance of $625; for Mr. Teo, (i) Company contributions under its 401(k) planPlan of $11,890.$13,725 and (ii) vacation cash-out of $16,244. These amounts reflect the Company’s actual costs to provide the perquisites or other personal benefits to the NEOs. | | |
| 4. | Includes: Mr. Shi’s sign-on bonus of $150,000 in 2021, Mr. Krause’s one-time bonus of $100,000 in 2022 for assuming additional responsibilities and strengthening the corporate risk management function and Mr. Teo’s one-time bonus of $120,000 in 2022 for continuous recruitment of senior executives and top talent and managing and supporting leadership transitions. | | |
| 5. | Mr. Shi’s 2021 salary reflects the actual days employed by the Company. |
Any perquisites that were not disclosed above did not individually exceed $10,000.
| 53 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | (5) | Includes performance-based cash awards of $2,500,000 and $1,250,000 for Mr. Ng and Ms. Gouw, respectively, which were paid in October 2015 and approved in July 2011. Refer to “Compensation Discussion and Analysis – Section One – Overview and Executive Summary – Elements of Compensation: Performance-Based Bonus in the Proxy Statement for Annual Meeting of Stockholders held on May 22, 2012 for additional information. | | |
The table below summarizes theall plan-based awards granted by the Compensation Committee to the NEOs in 2015:2022. Grants of Plan-Based Awards Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards1 | Estimated Future Payouts Under
Equity Incentive Plan Awards2 | | Name | Grant Date | Threshold
($) | Target
($) | Maximum
($) | Threshold
(#) | Target
(#) | Maximum
(#) | All Other Stock Awards: Number of Shares of Stock or Units (#)3 | Grant Date Fair Value of Stock Award ($)4 | | Dominic Ng | 02/01/2022 | - | - | - | - | - | - | 23 | 2,000 | | 03/04/2022 | 924,375 | 1,848,750 | 3,697,500 | 29,115 | 58,230 | 116,460 | - | 4,536,539 | | Irene H. Oh | 02/01/2022 | - | - | - | - | - | - | 23 | 2,000 | | 03/04/2022 | 338,713 | 677,427 | 1,354,854 | 5,500 | 10,999 | 21,998 | - | 856,902 | | Douglas P. Krause | 02/01/2022 | - | - | - | - | - | - | 23 | 2,000 | | 03/04/2022 | 294,840 | 589,680 | 1,179,360 | 4,853 | 9,705 | 19,410 | - | 756,090 | | Parker L. Shi | 02/01/2022 | | | | | | | 23 | 2,000 | | 03/04/2022 | 400,000 | 800,000 | 1,600,000 | 4,529 | 9,058 | 18,116 | - | 705,684 | | Gary Teo | 02/01/2022 | - | - | - | - | - | - | 23 | 2,000 | | 03/04/2022 | 120,393 | 240,786 | 481,572 | - | - | - | 4,529 | 350,001 |
2015 Grants of Plan-Based Awards |
| | | Estimated Future Payouts Under Non-Equity
Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity
Incentive Plan Awards(2) | | | All Other Stock
Awards: Number
of Shares of | | | Grant Date Fair | | | Name | | Grant
Date | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | Stock or Units
(#)(3) | | | Value of Equity
Award ($)(4) | | | Dominic Ng | | 2/27/2015 | | $ | 500,000 | | | $ | 1,000,000 | | | $ | 2,000,000 | | | | 50,063 | | | | 100,126 | | | | 200,252 | | | | - | | | | 4,119,935 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Julia S. Gouw | | 2/27/2015 | | | 300,503 | | | | 601,005 | | | | 1,202,010 | | | | 8,136 | | | | 16,271 | | | | 32,542 | | | | - | | | | 669,511 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Douglas P. Krause | | 2/27/2015 | | | 112,500 | | | | 225,000 | | | | 450,000 | | | | 2,817 | | | | 5,633 | | | | 11,266 | | | | - | | | | 231,784 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Irene H. Oh | | 2/27/2015 | | | 121,680 | | | | 243,360 | | | | 486,720 | | | | 3,129 | | | | 6,258 | | | | 12,516 | | | | - | | | | 257,501 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Andy Yen | | 2/27/2015 | | | 93,750 | | | | 187,500 | | | | 375,000 | | | | - | | | | - | | | | - | | | | 6,883 | | | | 274,976 | |
| 1. | (1) | These grants show the potential payment for our NEOs under our formula-based Performance-Based Bonus Plan. Additional information regarding the Performance-BasedPerformance- Based Bonus Plan is discussed in the section “CompensationCompensation Discussion and Analysis – 2015Elements of our Executive Compensation Decisions for Named Executive Officers” Program in this Proxy Statement. The actual payments the NEOs received are based upon the performance attained and are included in the Non-Equity Incentive Plan Compensation column in the “Summary“Summary Compensation Table”Table” above. | | |
| 2. | (2) | Represents performance-based RSUs that cliff vest on February 27, 2018,March 4, 2025, assuming that the employee remains employed through such date. Vesting is subject to meeting pre-established performance goals over multiple performance periods with the last performance period ending on December 31, 2017.2024. Dividends are accrued and paid at the time of vesting. |
| | Actual payout may range from zero to the maximum number of performance-based RSUs. Awards will be paid out 100% in stock in a number of shares equal to the number of performance-based RSUs vested. The target units represent the target number of performance-based RSUs granted on the grant date, and the Company’s TSR, ROA and ROE performance at the 50th50th percentile compared to the 2015 Peer Groupperformance of the banks comprising the KRX for each year,2022 and the KBW Nasdaq Bank Index (“BKX”) for 2023 and 2024, representing a payout of 100%. The Company was added to the BKX and removed from the KRX on September 19, 2022. Threshold units represent the Company’s TSR, ROA and ROE performance at the 30th30th percentile compared to the 2015 Peer GroupKRX for each year,2022 and the BKX for 2023 and 2024, resulting in a payout of 50% of the target number of performance-based RSUs. Maximum units represent the Company’s TSR, ROA and ROE performance at the 80th80th percentile and above compared to the 2014 Peer Groupbanks comprising the KRX for each year,2022 and the BKX for 2023 and 2024, resulting in a payout of 200% of the target number of performance-based RSUs. The actual percentage payout would be linearly interpolated between the 30th30th percentile of the TSR, ROA and ROE performance (50% payout), the 50th50th percentile of the TSR, ROA and ROE performance (100% payout) and the 80th80th percentile of the TSR, ROA and ROE performance (200% payout). TSR is weighted at 25%, ROA and ROE are weighted equally at 37.5% each. | | |
| 3. | (3) | Represents RSUs thatgranted on February 1, 2022, as part of the all employee Spirit of Ownership Program for all NEOs and Mr. Teo’s RSUs granted on March 4, 2022. All RSUs cliff vest on February 27, 2018 assuming thatthree years from the employee remains employed through such date. There is no performance goal on these RSUs.date of grant. | | |
| 4. | (4) | The assumptions applied in determining the grant date fair value are the same as those set forth in footnote 1 to the “Summary Compensation Table.Table” above. |
The table below sets forth the outstanding equity awards held by the NEOs as of December 31, 2015.2022. There were no outstanding option awards.awards held by NEOs as of December 31, 2022. With the exception of (i) the RSUs granted on January 24, 2020, February 12, 2021, and February 1, 2022, as part of the all-employee Spirit of Ownership Program, (ii) Mr. Andy Yen’s outstanding restricted stock unit awards,Shi’s sign-on and additional RSUs granted in 2021 and (iii) Mr. Teo’s RSUs granted on March 4, 2020 and March 4, 2022, all of the outstanding equity awards are performance-based awards with payouts that depend on the outcome of the performance criteria and the price of the Company’s common stock on the award certification date. The performance-based awards have a term of three years and will vest based on the achievement of the applicable performance criteria. | 54 | EAST WEST BANCORP 2023 PROXY STATEMENT |
Outstanding Equity Awards at December 31, 2015COMPENSATION DISCUSSION AND ANALYSIS | | | | |
| | | | | Stock Awards | | | Name | | Grant Date | | Number of
Shares or Units
of Stock That
Have Not
Vested (#)(1) | | | Market Value
of Shares or
Units of Stocks
That Have Not
Vested ($) (2) | | | Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested (#) | | | Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares or Units
of Stocks That
Have Not
Vested ($)(2) | | | Dominic Ng | | 3/7/2013 | | | 89,109 | (3) | | $ | 3,703,370 | | | | - | | | $ | - | | | | | 3/7/2014 | | | 117,594 | (4) | | | 4,887,207 | | | | 58,796 | (4)(5) | | | 2,443,562 | | | | | 2/27/2015 | | | 63,998 | (6) | | | 2,659,757 | | | | 133,502 | (5)(6) | | | 5,548,343 | | | | | | | | | | | | | | | | | | | | | | | Julia S. Gouw | | 3/7/2013 | | | 23,762 | (3) | | $ | 987,549 | | | | - | | | $ | - | | | | | 3/7/2014 | | | 18,091 | (4) | | | 751,862 | | | | 9,046 | (4)(5) | | | 375,952 | | | | | 2/27/2015 | | | 10,400 | (6) | | | 432,224 | | | | 21,695 | (5)(6) | | | 901,644 | | | | | | | | | | | | | | | | | | | | | | | Douglas P. Krause | | 3/7/2013 | | | 7,920 | (3) | | $ | 329,155 | | | | - | | | $ | - | | | | | 3/7/2014 | | | 7,236 | (4) | | | 300,728 | | | | 3,618 | (4)(5) | | | 150,364 | | | | | 2/27/2015 | | | 3,601 | (6) | | | 149,658 | | | | 7,511 | (5)(6) | | | 312,157 | | | | | | | | | | | | | | | | | | | | | | | Irene H. Oh | | 3/7/2013 | | | 8,911 | (3) | | $ | 370,341 | | | | - | | | $ | - | | | | | 3/7/2014 | | | 7,236 | (4) | | | 300,728 | | | | 3,618 | (4)(5) | | | 150,364 | | | | | 2/27/2015 | | | 4,000 | (6) | | | 166,240 | | | | 8,344 | (5)(6) | | | 346,777 | | | | | | | | | | | | | | | | | | | | | | | Andy Yen | | 3/7/2013 | | | - | | | $ | - | | | | 6,601 | (7) | | $ | 274,338 | | | | | 3/7/2014 | | | - | | | | - | | | | 6,784 | (7) | | | 281,943 | | | | | 2/27/2015 | | | - | | | | - | | | | 6,883 | (7) | | | 286,057 | |
Outstanding Equity Awards at Year-End | Stock Awards | Name | Grant Date | Number of Shares or
Units of Stock That
Have Not Vested (#)1 | Market Value of
Shares or Units of
Stocks 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 | Dominic Ng | 1/24/2020 | 413 | 2,702 | - | - | | 3/4/2020 | 205,2564 | 13,526,370 | - | - | | 2/12/2021 | 303 | 1,977 | - | - | | 3/4/2021 | 75,3815 | 4,967,608 | 43,4635 7 | 2,864,212 | | 2/1/2022 | 233 | 1,516 | - | - | | 3/4/2022 | 29,1156 | 1,918,679 | 77,6406 7 | 5,116,476 | Irene H. Oh | 1/24/2020 | 413 | 2,702 | - | - | | 3/4/2020 | 34,2104 | 2,254,439 | - | - | | 2/12/2021 | 303 | 1,977 | - | - | | 3/4/2021 | 11,9025 | 784,342 | 6,8635 7 | 452,272 | | 2/1/2022 | 233 | 1,516 | - | - | | 3/4/2022 | 5,5006 | 362,450 | 14,6666 7 | 966,489 | Douglas P. Krause | 1/24/2020 | 413 | 2,702 | - | - | | 3/4/2020 | 25,5454 | 1,683,416 | - | - | | 2/12/2021 | 303 | 1,977 | - | - | | 3/4/2021 | 10,3165 | 679,824 | 5,9485 7 | 391,973 | | 2/1/2022 | 233 | 1,516 | - | - | | 3/4/2022 | 4,8756 | 321,263 | 13,0006 7 | 856,700 | Parker L. Shi | 6/14/2021 | 4,3053 | 283,700 | - | - | | 12/1/2021 | 13,2373 | 872,318 | - | - | | 2/1/2022 | 233 | 1,516 | - | - | | 3/4/2022 | 4,5296 | 298,461 | 12,0786 7 | 795,940 | Gary Teo | 1/24/2020 | 413 | 2,702 | - | - | | 3/4/2020 | 7,0153 | 462,289 | - | - | | 2/12/2021 | 303 | 1,977 | - | - | | 3/4/2021 | 4,7615 | 313,750 | 2,7465 7 | 180,961 | | 2/1/2022 | 233 | 1,516 | - | - | | 3/4/2022 | 4,5293 | 298,461 | - | - |
(1)1. | Represents grants of performance-based RSUs. The vesting of the performance-based RSUs is subject to meeting the three-year service condition from the grant date and pre-established performance goals in each of the three years ending December 31 of the respective fiscal year. Dividends are accrued on the performance RSUs and paid at the time of vesting. | | | |
(2)2. | The amounts shown represent the number of shares or units shown in the column immediately to the left multiplied by the closing price on December 31, 20152022, of the Company’s common stock as reported on NASDAQ,Nasdaq, which was $41.56. $65.90. | | | |
(3)3. | This performance-based RSU granted on March 7, 2013Reflects RSUs that will cliff vested on March 7, 2016. | | | (4) | This performance-based RSU granted on March 7, 2014 cliff vests on March 7, 2017,vest three years from the date of grant, assuming that the employee remains employed through such date. | | | |
(5)4. | The ultimateThis equity granted on March 4, 2020, cliff vested on March 4, 2023. | | |
| 5. | This equity RSU granted on March 4, 2021, cliff vests on March 4, 2024, assuming that the employee remains employed through such date. | | |
| 6. | This equity granted on March 4, 2022, cliff vests on March 4, 2025, assuming that the employee remains employed through such date. | | |
| 7. | Reflects the maximum potential payout, but the actual number of shares ultimately paid out may vary from the amount shown on the table, with the possibility of payout, ranging from no payout to maximum payout depending on the outcome of the performance criteria. |
| 55 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | | | (6) | This performance-based RSU granted on February 27, 2015 cliff vests on February 27, 2018, assuming that the employee remains employed through such date. | | | (7) | Includes RSUs granted on March 7, 2013, 2014 and February 27, 2015 that cliff vested or will cliff vest on March 7, 2016, 2017 and February 27, 2018, respectively, assuming that the employee remains employed through such date. |
The following table summarizes, for the NEOs, the option exercises and stock awards vested during 2015.2022. The amounts reflected below show the number of shares acquired at the time of exercise or vesting, as applicable. The amounts reported as value realized are shown on a before-tax basis:basis. Option Exercises and Stock Vested | | Option Awards | Stock Awards | Name | Number of Shares
Acquired on
Exercise (#) | Value Realized on
Exercise ($) | Number of Shares Acquired on
Vesting (#) | Value Realized on
Vesting ($)1 | | Dominic Ng | - | - | 169,921 | 13,131,914 | | Irene H. Oh | - | - | 27,385 | 2,116,732 | | Douglas P. Krause | - | - | 20,549 | 1,588,446 | | Parker L. Shi | - | - | - | - | | Gary Teo | - | - | 5,671 | 438,674 |
Option Exercises and Stock Vested in the 2015 Fiscal Year |
| | | Option Awards | | | Stock Awards | | | Name | | Number of
Shares Acquired
on Exercise (#) | | | Value Realized
on
Exercise ($) | | | Number of
Shares Acquired
on Vesting (#) | | | Value Realized
on Vesting ($) (1) | | | Dominic Ng | | | - | | | $ | - | | | | 90,703 | | | $ | 3,672,564 | | | Julia S. Gouw | | | - | | | | - | | | | 27,211 | | | | 1,101,773 | | | Douglas P. Krause | | | - | | | | - | | | | 7,936 | | | | 321,329 | | | Irene H. Oh | | | - | | | | - | | | | 9,071 | | | | 367,285 | | | James T. Schuler | | | - | | | | - | | | | 11,338 | | | | 459,076 | |
| 1. | (1) | The amount represents the number of shares vested multiplied by the closing price of the Company’s common stock on the NASDAQNasdaq on the vesting date. It excludes any reduction in value associated with the cancellation of shares to satisfy taxes.for tax withholding purposes. |
The following table summarizes information about NEO participation in our nonqualified Deferred Compensation Plan, which is described on page 50 above, in the “Retirement Programs and Perquisites” section. In 2022, Mr. Ng and Mr. Shi participated and made contributions to the Deferred Compensation Plan. Nonqualified Deferred Compensation Table | Nonqualified Deferred Compensation in 2022 | Name | Executive Contributions in 2022 ($)1 | Registrant Contributions in 2022 ($) | Aggregate
Earnings in
2022($)2 | Aggregate Withdrawals/ Distributions
($) | Aggregate Balance on December 31, 2022 ($) | | Dominic Ng | 637,500 | - | (21,596) | - | 615,904 | | Irene H. Oh | - | - | - | - | - | | Douglas P. Krause | - | - | - | - | - | | Parker L. Shi | 642,769 | - | (81,467) | - | 659,712 | | Gary Teo | - | - | - | - | - |
| 1. | The amounts included in this column are included in the Summary Compensation Table for 2022 as “Salary.” |
| 2. | Reflects hypothetical or “notional” gains on account balances based on the NEO’s selected investments. |
| 56 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
Retirement Plans We have two retirement plans. Our 401(k) Plan (the “401(k) Plan”) is a qualified retirement plan under the Internal Revenue Code of 1986, as amended (the “Code”), and is open to all employees of the Company and its subsidiaries with at least three months of service. We also have a Supplemental Executive Retirement Plan (“SERP”)which was established in 2001 in order to provide supplemental retirement benefits to certain employees whose contributions to the 401(k) Plan are limited under applicable Internal Revenue Service regulations. The SERP was also intended as a retention incentive to ensure the continued employment of the officers participating in the plan. At the present time, only one NEO (Chief Risk Officer and General Counsel Douglas P. Krause) is accruing benefits under the SERP. The following table presents certain information concerning pension benefits for theAs of December 31, 2022, none of our NEOs under the Company’s SERP:
Pension Benefits for the 2015 Fiscal Year |
| Name | | Plan Name | | | Number of Years
of Credited
Service (#) | | | Present
Value of
Accumulated
Benefit ($) | | | Payments
During Last
Fiscal Year ($) | | | Julia S. Gouw | | | Supplemental Executive Retirement Plan | | | | 19 | | | $ | 4,093,657 | | | $ | 292,223 | | | Douglas P. Krause | | | Supplemental Executive Retirement Plan | | | | 19 | | | | 2,020,647 | | | | - | |
In 2001, the Board designated certain employees as eligible to participate in the SERP. Of the NEOs, Ms. Gouw and Mr. Krause are the only currentwere participants in the SERP. Benefits under the SERP include income generally payable either commencing upon a designated retirement date until age 80 or in a discounted lump sum if previously elected on or prior to December 31, 2008. A participant will be entitled to a projected benefit equal to 50% of his or her 2001 total compensation, adjusted 3% per year for cost of living. The designated retirement date is the 20thanniversary of employment by the Company and early retirement after 15 years is permitted with lower benefits. Upon a termination of employment for “cause” prior to completing 15 years of service and prior to a change in control, the participant forfeits all benefits. SERP benefits begin to vest after 15 years of service; however vesting accelerates to 100% upon a change in control of the Company. The participant is entitled to all vested benefits in the case of a termination without “cause.” When the SERP was established, the Company purchased life insurance contracts on the participants in order to finance the cost of these benefits. Due to the tax-advantaged effect of this life insurance investment, the return on the life insurance contracts will be approximately equal to the accrued benefits to the participants under the SERP, other than in the event of accelerated vesting because of a change of control. Additionally, as
As part of the life insurance contracts purchased when the SERP was established, beneficiaries of the SERP participants would be entitled to a death benefit. As of December 31, 2015, beneficiaries of the SERP participants would be entitled to death benefits of $21,580,000 for Mr. Ng, $4,143,681 for Ms. Gouw, and $7,740,000 for Mr. Krause. Although Mr. Ng isand Mr. Krause are not currently a participantparticipants in the SERP, heeach was at the time it was established in 2001 and death benefits for his beneficiarytheir beneficiaries remain in effect.
When Ms. Gouw retired from the Company on December 31, 2008, she had 19 years of service under theSERP and was eligible for early retirement under the SERP. Ms. Gouw is currently receiving distributions under the SERP. Ms. Gouw came out of retirement on November 30, 2009, to become the President and COO of the Company following the transformational acquisition of the operations of United Commercial Bank. Under the terms of the SERP, she continues to receive the annual distributions whether or not she is an active employee of the Company or any other company.
Mr. Krause had 19 years of service under the SERP as of December 31, 2015. As of December 31, 2015, the present value2022, Mr. Ng’s beneficiaries would be entitled to death benefits of the future benefit$21,580,000 and Mr. Krause’s beneficiaries would be entitled to death benefits of $7,740,000 under the SERP after the 20thanniversary of employment calculated using an 8% discount rate, pursuant to the SERP documents, was $2,152,962 for Mr. Krause.SERP.
The SERP is an unfunded non-qualified plan, which means that the participants have no rights under the SERP beyond those of a general creditor of the Company, and there are no specific assets set aside by the Company in connection with the plan. There are accordingly, no assurances to the participants that upon retirement the Company will be able to pay the accrued benefits. The SERP is not an employment contract. There are no other Company plans that provide for specified retirement benefits, excluding those executives covered under the SERP and the 401(k) Plan.
Employment Agreements and Potential Payments Upon upon
Termination or Change in Control The Bank, the Company’s principal subsidiary, has entered into employment agreements with certainthe NEOs with the exception of the NEOs.Mr. Teo. This is intended to ensure that the Bank will be able to maintain a stable and competent management base. CEOChief Executive Officer
The Bank entered into an employment agreement with its CEO, Mr. Ng, in June 1998 in connection with the sale of the Bank by its prior stockholders. This employment agreementstockholders (the “Ng Employment Agreement”). The Ng Employment Agreement was reapproved by the Board and amended on March 1, 20162023, to provide for a termination date of March 1, 2019.2026. In addition to a base salary and bonus to be determined annually, the employment agreement provides for, among other things, use of a Company car, participation in stock benefit plans and other fringe benefits applicable to executive personnel and four weeks paid vacation per year. In the event the Bank chooses to terminate Mr. Ng’s employment for any reason other than for causeCause (as defined in the employment agreement)Ng Employment Agreement), or in the event of Mr. Ng’s resignation from the Bank upon (i) failure to re-electre- elect him to his current offices; (ii) a material change in functions, duties or responsibilities; (iii) a relocation of his principal place of employment by more than 25 miles; (iv) liquidation or dissolution of the Bank; (v) a breach of the employment agreement by the Bank; or (vi) his death or permanent disability, Mr. Ng, or, in the event of death, his beneficiary, would be entitled to receive an amount equal to the greater of (i) the remaining payments due to him and the contributions that would have been made on his behalf to any employee benefit plans of the Bank during the remaining term of the employment agreement andor (ii) three times the base salary currently in effect plus three times the preceding year’s bonus.bonus payable in a lump sum. Under the assumption that Mr. Ng’s employment with the Company was terminated on December 31, 20152022, for any reason other than cause,Cause, he would be entitled to receive severance payments totaling $7,047,012.$13,350,052. Also, if Mr. Ng’s employment with the Company was terminated for any reason other than cause,Cause, his outstanding and unvested stock options (if any), time-based and performance-based RSUs would become fully vested. If Mr. Ng’s employment with the Company was terminated on December 31, 2022, for any reason other than cause on December 31, 2015,Cause, the market value of his RSUs, which would accelerate in vesting, is $19,242,239, respectively.was $24,409,195 based on the closing price of the Company’s common stock as of that date. There is no employment contract
| 57 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
Chief Financial Officer On December 21, 2016, the Bank entered into an Executive Employment Agreement with Mr. Ngits Chief Financial Officer, Ms. Oh (the “Oh Employment Agreement”). The Oh Employment Agreement, effective as of December 21, 2016, had an initial term of two years and was subject to annual renewal thereafter as may be agreed by the Bank’s Board of Directors and Ms. Oh. The Oh Employment Agreement was reapproved by the Board and amended December 21, 2022, to provide for a termination date of December 21, 2023. The Oh Employment Agreement provides that providesMs. Oh will receive an annual base salary, subject to periodic review and increase, and will be eligible to participate in an annual performance-based bonus plan. However, any actual bonus for any paymentsgiven year will be determined and paid in accordance with the Bank’s annual bonus plan arrangements applicable to senior executives generally. Ms. Oh will also be eligible to receive annual stock grants as approved by the Board. In addition, Ms. Oh will be entitled to participate in all employee benefit plans and perquisite arrangements available to senior executives of the Bank and shall receive reimbursement of reasonable business expenses. Ms. Oh’s employment with the Bank may be terminated by the Bank with or early vestingwithout Cause (as defined in the Oh Employment Agreement), in the event of any stock options,disability (as defined in the Oh Employment Agreement) or any RSUs upon a change of control.death. President and COO
The Bank may terminate Ms. Gouw does not have anOh’s employment with the Bank at any time without Cause, for any reason or no reason at all, upon one month advance written notice. In addition, it shall be considered termination without Cause by the Bank if Ms. Oh terminates her employment due to: (i) relocation of her office more than 50 miles from its current location in Pasadena, California without her consent; (ii) any material breach by the Bank of her employment agreement or any other material agreement providingbetween her and the Bank which causes her material harm; or (iii) if, following a Change of Control, the successor does not assume all material obligations of the Bank to her. It shall also be considered termination without Cause if without Ms. Oh’s consent, (a) the Oh Employment Agreement is not, whether initially or with severancerespect to any subsequent renewal period, renewed or any other payments in connection with her termination orapproved by the Bank’s Board (other than in connection with a change of controlfor Cause event), and (b) within one month following the end of the Company. CFO
then-current employment term, Ms. Oh doesresigns from the Bank. In the event of termination of Ms. Oh’s employment by the Bank without Cause, and contingent upon Ms. Oh’s execution and non-revocation of a general release of claims, the Bank shall pay to Ms. Oh the following: (i) a single lump sum amount consisting of an amount equal to two times of Ms. Oh’s then annual base salary and an amount equal to the annual cash bonus payout last received by Ms. Oh; and (ii) any annual bonus earned but unpaid with respect to a performance year ending on or preceding the date of termination. Under the assumption that Ms. Oh’s employment with the Company was terminated on December 31, 2022, for any reason other than Cause, she would be entitled to receive severance payments totaling $2,379,598. In addition, any equity awards would continue to vest according to the grant date schedules, provided that performance RSUs will be settled based on performance unit goal achievement, except that if such termination of employment occurs within two years after a Change of Control (as defined in the Oh Employment Agreement), any performance RSUs will be settled as follows: (i) any RSUs for which the performance period has lapsed will continue to vest based on performance unit goal achievement, and (ii) any RSUs for which the performance period has not have an employment agreement or any other agreement providing her with severance or any other paymentslapsed will be converted into time-based units based on the target performance level. The outstanding equity awards held by Ms. Oh as of December 31, 2022, are disclosed in connection with her termination or in connection with a change of control of the Company.table on page 55 under “Outstanding Equity Awards at Year-End.”
Chief Risk Officer and General Counsel
In the event of a termination of Ms. Oh’s employment as the result of her death or due to disability, Ms. Oh or her beneficiary will be entitled to receive (i) the Accrued Obligations (as defined in the Oh Employment Agreement) and (ii) any annual bonus earned but unpaid with respect to a performance year ending on or preceding the date of termination. The Oh Employment Agreement also provides that if Ms. Oh’s employment terminates as a result of death or disability, all unvested RSUs that have been granted prior to the date of death or disability shall immediately vest. The market value on December 31, 2022, of her RSUs which would have accelerated in vesting as a result of her death or disability would have been $4,116,806. | 58 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
Vice Chairman and Chief Corporate Officer The Bank entered into an employment agreement with its Vice Chairman and Chief RiskCorporate Officer, and General Counsel, Mr. Krause, in 1999. This employment agreement1999 (the “Krause Employment Agreement”). The Krause Employment Agreement was reapproved by the Board of Directors and amended on March 1, 20162023, to provide for a termination date of March 1, 2019.2026. In addition to a base salary and bonus to be determined annually, the employment agreementKrause Employment Agreement provides for, among other things, participation in stock benefit plans and other fringe benefits applicable to executive personnel and four weeks paid vacation per year. In the event the Bank chooses to terminate Mr. Krause’s employment for any reason other than for causeCause (as defined in the employment agreement)Krause Employment Agreement), or in the event of Mr. Krause’s resignation from the Bank upon (i) a material change in functions, duties or responsibilities; (ii) a relocation of the principal place of his employment by more than 25 miles; (iii) liquidation or dissolution of the Bank; (iv) a breach of the employment agreement by the Bank; or (v) his death or permanent disability, Mr. Krause, or, in the event of death, his beneficiary, would be entitled to receive an amount equal to the greater of (vi)(i) the remaining payments due to him and the contributions that would have been made on his behalf to any employee benefit plans of the Bank during the remaining term of the employment agreement and (vii)agreement; or (ii) three times the base salary currently in effect plus three times the preceding year’s bonus.bonus payable in a lump sum. Under the assumption that Mr. Krause’s employment with the Company was terminated on December 31, 2015,2022, for any reason other than cause,Cause (as defined in the Krause Employment Agreement), he would be entitled to receive severance payments totaling $1,838,637.$4,961,054 payable in a lump sum. Also, if Mr. Krause’s employment with the Company was terminated for any reason other than cause, his outstanding andCause, all unvested stock options, time-based and performance-based RSUs would become fully vested. If Mr. Krause’s employment with the Company was terminated on December 31, 2022, for any reason other than cause on December 31, 2015,Cause, the market value of his RSUs, which would acceleratehave accelerated in vesting, is $1,242,062.was $3,315,034. There is no employment contract with Mr. Krause that provides for any payments, or early vesting of any stock options, or any RSUs upon a change of control, other than the SERP described in more detail above. As noted, if a change in control occurred on December 31, 2015, Mr. Krause would immediately vest and be entitled to receive payments under the SERP. There is no additional incremental benefit from the accumulated benefit amount reported as of December 31, 2015 if a change in control occured on December 31, 2015. Head of International and Commercial Banking
The Bank entered into an employment agreement with its Head of International and Commercial Banking, Mr. Yen, in 2005. In addition to a base salary and bonus to be determined annually, the employment agreement provides for, among other things, an automobile allowance of not less than $850 per month, participation in stock benefit plans and other fringe benefits applicable to executive personnel and four weeks paid vacation per year.
In the event the Bank chooses to terminate Mr. Yen’s employment for any reason other than for cause, he will receive a severance payment of six month’s base salary. In addition, the employment contract with Mr. Yen provides for severance of two times current salary if he is terminated within 12 months of a change of control or if he resigns within 12 months of a change of control upon (i) reduction in his base salary, or automobile allowance, (ii) a material reduction in this duties; or (ii) a relocation of principal place of his employment by more than 35 miles.
Under the assumption that Mr. Yen’s employment with the Company was terminated on December 31, 2015, for any reason other than cause, he would be entitled to receive severance payments totaling $800,000. There is no employment contract with Mr. Yen that provides for any payments or early vesting of any stock options or any RSUs upon a change of control.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is, or ever has been, an officer or employee of the Company or any of its subsidiaries.
Except as provided herein, there are no existing or proposed material transactions between the Company or the Bank and any of its executive officers, directors, or the immediate family or associates of any of the foregoing persons.
PROPOSAL 2 | ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION | |
Proposal Snapshot
Stockholders are being asked to approve, on an advisory basis, the compensation of the Named Executive Officers for 2015 as described in the Compensation Discussion and Analysis section beginning on page 28 and the Compensation Tables section beginning on page 43.
FORthe advisory vote to approve executive compensation. The Compensation Committee takes very seriously its stewardship responsibility to oversee the Company’s compensation programs and values thoughtful input from stockholders. The Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.
Chief Operating Officer This proposal, commonly known as a “Say-on-Pay” proposal, gives our stockholders the opportunity to express their viewsThe Bank entered into an employment agreement with its Chief Operating Officer, Mr. Shi, on our named executive officers’ compensation as a whole. This vote is not intended to address any specific itemDecember 1, 2021 (the “Shi Employment Agreement”) with an initial term of compensation or any specific named executive officer (“NEO”), but rather the overall compensation of all of our NEOs and the philosophy, policies and practices described in this Proxy Statement. We currently hold our Say-on-Pay vote every year.
We believe that the information provided in “Compensation Discussion and Analysis” beginning on page 28 demonstrates that our executive compensation program was designed appropriatelytwo years and is workingsubject to ensure management’s interests are aligned with our stockholders’ interests to support long-term value creation. The sustained success of the Company’s bridge model between East and West is reflected in the following key metrics:
| · | Sixth Consecutive Year of Record Earnings: Our diluted earnings per share (“EPS”) for the full year of 2015 were $2.66, which was an increase of $0.25 or 10.4% from $2.41 in 2014. Our 10.4% increase in diluted EPS was higher than the median and average increase of 5.3% and 6.9%, respectively, achieved by our KBW Regional Bank Peers.10 |
| · | TSR Substantially Above Peer Group: Our one, three and five-year annualized Total Shareholder Return (“TSR”) of 9.5%, 27.2% and 18.4% were substantially above the KBW Regional Bank Peer averages of 5.9%, 16.8% and 11.3%, respectively. 11 |
| · | ROE Significantly Above Peer Group: Our return on equity (“ROE”) of 12.74% in 2015 was substantially above the KBW Regional Bank Peer median of 8.21% and average of 8.94%. |
| · | ROA Significantly Above Peer Group: Our return on assets (“ROA”) of 1.27% in 2015 was substantially above the KBW Regional Bank Peer median of 1.00% and average of 1.05%. |
| · | The Company was in the Top 4 in terms of ROE, Top 5 in terms of ROA, and Top 6 in terms of Net Interest Margin of all FDIC-insured commercial banks in the country with assets over $20 billion. 12 |
| · | Record Loans: Total loans receivable increased to a record $23.7 billion as of December 31, 2015 from $21.8 billion as of December 31, 2014. |
| · | Record Deposits: Total deposits grew to a record $27.5 billion as of December 31, 2015 from $24.0 billion as of December 31, 2014. |
102015 EPS, ROE, ROA and NPA financial data for KBW Regional Bank Peers was obtained from SNL Financial LC.
11Source from Keefe, Bruyette & Woodsannual renewal thereafter as of December 31, 2015.
122015 ROE, ROA and net interest margin financial data for all FDIC-insured commercial banks was obtained from SNL Financial LC.
| · | Improvement in Credit Quality: Nonperforming assets (“NPA”) to total assets improved six basis points to 0.40% as of December 31, 2015, compared to 0.46% as of December 31, 2014. Our NPA to total assets is lower than the KBW Regional Bank Peer median of 0.58% and average of 0.61%. |
Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the stockholders hereby approve, on an advisory basis, the compensation of our named executive officers as reflected in this Proxy Statement and as disclosed pursuant to the compensation disclosure rules of the SEC, which disclosure includes the compensation discussion and analysis, the compensation tables and all related material.”
Because your vote is advisory, it will notmay be binding upon the Board. However, the Board and the Compensation Committee will consider the vote results when evaluating our compensation policies and practices in the future.
PROPOSAL 3 | APPROVAL OF THE EAST WEST BANCORP, INC. 2016 STOCK INCENTIVE PLAN | |
Proposal Snapshot
Stockholders are being asked to approve the East West Bancorp, Inc. 2016 Stock Incentive Plan, as amended, restated and renamed from the 1998 Stock Incentive Plan (the “2016 Stock Incentive Plan”). The 2016 Stock Incentive Plan includes the following proposed material changes (please refer to Exhibit A for the entire proposed Plan):
| · | An increase in the amount of shares available for grant by an additional 3,000,000 shares; |
| · | The Plan has been revised to include a “double-trigger,” such that stock awards do not vest unless there is a change in control of the Company combined with a termination of employment within a specified period following the change; |
| · | The Plan adds a minimum required vesting period for grants made under the Plan, so that awards are aligned with retention and performance incentives; |
| · | Both the “no liberal share counting” provisions and the “no repricing” provision of the Plan were strengthened. |
FORthe ratification of the approval of the amendments to the 2016 Stock Incentive Plan. | |
OVERVIEW OF 2016 STOCK INCENTIVE PLAN |
The Company’s 2016 Stock Incentive Plan (the “Plan”) was originally established under the name 1998 Stock Incentive Plan and most recently approvedagreed by the Company’s stockholders on May 24, 2011. Upon recommendation of the Compensation Committee (the “Committee”), the Company’sBank’s Board of Directors adopted the amended, restated and renamed Plan on April 12, 2016,Mr. Shi.
The Shi Employment Agreement provides that Mr. Shi will receive an annual base salary, subject to stockholder approval. The principal features of the Plan are summarized below. The description of the Plan provided below includes the amendments to the Plan. The summary is qualified in its entirety by the full text of the amendedperiodic review and restated Plan, which is set forth as Exhibit A to this Proxy Statement. The principal amendment is an increase, of 3,000,000 in the total number of shares of common stock reserved for issuance as awards under the Plan. The maximum amount that may be paid under the Plan to any one participant during a calendar year under all performance awards under the Plan, including any form of awards based on the specified performance criteria remains, under the new Plan, 1,000,000 shares. The new Plan adds that non-employee directors may not be granted more than 100,000 shares in any calendar year. In addition, the amended Plan does not provide for automatic vesting of awards upon a change in control. Instead, the amended Plan utilizes the more conservative “double-trigger” vesting, under which awards vest if the participant’s employment is terminated following a change in control. The Plan also includes additional performance criteria to further increase flexibility with respect to grants of performance-based compensation and to permit the alignment of compensation with performance.
The Plan, as amended and restated, is being resubmitted to the Company’s stockholders, in accordance with Section 162(m) of the Internal Revenue Code (the “Code”), in order to allow the Company to provide certain performance-based compensation that is deductible for Federal income tax purposes. The affirmative vote of the stockholders on or prior to June 25, 2017 is required for approval of the amended and restated Plan. If the Plan is not approved by the Company’s stockholders, the Plan will remain in effect without amendment. Accordingly, if the stockholders of the Company do not approve the amended and restated Plan, there will be no increase in the number of shares available under the Plan, no change in the vesting criteria, and no addition of performance criteria. Consequently, employees will not be able to receive certain performance-based compensation under the Plan if stockholder approval is not obtained.
The Board of Directors recommends that stockholders vote “FOR” approval of the 2016 Stock Incentive Plan.
The Board believes that the Plan and the grants under the Plan have historically contributed substantially to the success of the Company. Since 2011, the year in which the Plan was last approved by stockholders, the Company has had strong performance and growth in a challenging economy due to the valuable contributions from our employees. The sustained success of the Company is reflected in the following key metrics:
| · | Sixth Consecutive Year of Record Earnings: Our diluted earnings per share (“EPS”) for the full year of 2015 were $2.66, which was an increase of $0.25 or 10.4% from $2.41 in 2014. Our 10.4% increase in diluted EPS was higher than the median and average increase of 5.3% and 6.9%, respectively, achieved by our KBW Regional Bank Peers.13 |
| · | TSR Substantially Above Peer Group: Our one, three and five-year annualized Total Shareholder Return (“TSR”) of 9.5%, 27.2% and 18.4% were substantially above the KBW Regional Bank Peer averages of 5.9%, 16.8% and 11.3%, respectively.14 |
| · | ROE Significantly Above Peer Group: Our return on equity (“ROE”) of 12.74% in 2015 was substantially above the KBW Regional Bank Peer median of 8.21% and average of 8.94%. |
| · | ROA Significantly Above Peer Group: Our return on assets (“ROA”) of 1.27% in 2015 was substantially above the KBW Regional Bank Peer median of 1.00% and average of 1.05%. |
| · | The Company was in theTop 4 in terms of ROE,Top 5 in terms of ROA, andTop 6 in terms of Net Interest Margin of all FDIC-insured commercial banks in the country with assets over $20 billion.15 |
| · | Record Loans: Total loans receivable increased to a record $23.7 billion as of December 31, 2015 from $21.8 billion as of December 31, 2014. |
| · | Record Deposits: Total deposits grew to a record $27.5 billion as of December 31, 2015 from $24.0 billion as of December 31, 2014. |
| · | Improvement in Credit Quality: Nonperforming assets (“NPA”) to total assets improved six basis points to 0.40% as of December 31, 2015, compared to 0.46% as of December 31, 2014. Our NPA to total assets is lower than the KBW Regional Bank Peer median of 0.58% and average of 0.61%. |
Stockholder approval of the Plan will ensure the Company’s continuing ability to provide a flexible range of compensation awards, including performance-based compensation awards, under the Plan. An increase in the number of shares available for future grants is necessary to permit the Plan to continue to operate as intended. The additional amendments further expand the Company’s flexibility with respect to performance-based compensation. Unless otherwise specified thereon, proxies received in the accompanying form will be voted in favor of approval of the Plan.
132015 EPS, ROE, ROA and NPA financial data for KBW Regional Bank Peers was obtained from SNL Financial LC.
14Source from Keefe, Bruyette & Woods as of December 31, 2015.
15 2015 ROE, ROA and net interest margin financial data for all FDIC-insured commercial banks was obtained from SNL Financial LC.
The purpose of the Plan is to:
| · | enable the Company and its subsidiaries to attract, retain and motivate their employees, consultants and other service providers by providing for or increasing the proprietary interests of such employees, consultants and other service providers in the Company, and |
| · | enable the Company and its subsidiaries to attract, retain and motivate non-employee directors and further align their interests with those of the stockholders of the Company by providing for or increasing the proprietary interest of such directors in the Company. |
Since its adoption in 1998, the Plan has been used primarily for the Company’s stock option incentive programs and restricted stock program. The Board believes that the Plan and the ability to issue performance restricted stock helps the Company compete for, motivate, and retain high-caliber employees and more closely links the interests of the employees and the stockholders of the Company by encouraging employees to focus on long-range objectives. All full-time employees of the Company have received annual grants of stock options or restricted stock under the Company’s Spirit of Ownership Program and most officers of the Company have received additional grants from time to time in connection with their performance reviews in recognition of their achievements and to retain and reward our vital human resources. The Company’s compensation philosophy, in compliance with guidance from our banking regulators, is shifting more towards equity based compensation. As such, it is important for the Company to have an adequate amount of shares to carry out this initiative.
Employees, non-employee directors, consultants and other service providers of the Company or any subsidiary are eligible to receive awards under the Plan. The Committee (as described in “Administration,” below) will determine which individuals will be participants, the types of awards to be made to participants and the terms, conditions and limitations applicable to the awards. It is expected that approximately 2,800 employees and nine non-employee directors will be eligible to participate in an annual performance-based bonus plan. However, any actual bonus for any given year will be determined and paid in accordance with the Plan.
The maximum aggregate numberBank’s annual bonus plan arrangements applicable to senior executives generally. Mr. Shi will also be eligible to receive annual stock grants as approved by the Board. In addition, Mr. Shi will be entitled to participate in all employee benefit plans and perquisite arrangements available to senior executives of shares for which awardsthe Bank and shall receive reimbursement of reasonable business expenses. Mr. Shi’s employment with the Bank may be granted underterminated by the Plan is limited to the remaining shares of the Company’s common stock, $.001 par value (the “Common Stock”) available for grant immediately prior to stockholder approval of the amended and restated Plan plus an additional 3,000,000 shares of Common Stock, as providedBank with or without Cause (as defined in the amendments, subject to adjustment for stock splits, dividends and similar events. Common Stock which is subject to any unexercised or undistributed portion of any terminated, expired or forfeited award (or awards settled in cash in lieu of Common Stock) will become available for grant pursuant to new awards. However, shares delivered or withheld in satisfaction of the exercise price of an award or any tax withholding will not become available for grant pursuant to new awards. Stock appreciation rights to be settled in shares of Common Stock are counted in full against the number of shares available for award under the Plan regardless of the number of shares issued upon settlement of the stock appreciation right. The Committee may make such additional rules for determining the number of shares of Common Stock granted under the Plan as it deems necessary or appropriate. The Common Stock which may be issued pursuant to an award under the Plan may be treasury shares or authorized but unissued shares or Common Stock acquired, subsequently or in anticipation of the transaction, in the open market or otherwise to satisfy the requirements of the Plan, or any combination of such shares.
The maximum aggregate number of Common Shares available for grants of awards to any one non-employee director participant under the Plan shall not exceed 100,000 Common Shares per calendar year.
The Plan provides for the grant of incentive stock options (“ISOs”)Shi Employment Agreement), as defined in Section 422 of the Code, and options which do not qualify as ISOs, known as nonqualified stock options (“NSOs,” and, together with ISOs, “options”). Options granted under the Plan may be accompanied by stock appreciation rights (“Tandem SARs”), and stock appreciation rights may be granted alone (“Stand Alone SARs,” and, together with Tandem SARs, “SARs”). Performance awards (“Performance Awards”) may also be granted under the Plan, which Performance Awards may be contingent on the performance of the Company, a subsidiary or subsidiaries, any branch, department, business unit or portion thereof or a participant. The Plan also provides for the granting of restricted stock and other awards including, without limitation, restricted stock units. All of the foregoing grants are sometimes referred to herein as “awards,” and the recipient of any award or grant is sometimes referred to herein as a “grantee.” The participants in the Plan will consist of those employees, non-employee directors, consultants or other service providers of the Company and its subsidiaries who are designated as grantees by the Committee administering the Plan, as described below.
The number of shares available under the Plan, any outstanding awards and individual per-person limits are automatically adjusted in the event of stock dividends and similar events. disability (as defined in the Shi Employment Agreement) or death.
The Bank may terminate Mr. Shi’s employment with the Bank at any time without Cause, for any reason or no reason at all, upon thirty days’ advance written notice. In the event of termination of Mr. Shi’s employment by the sharesBank without Cause, and contingent upon Mr. Shi’s execution and non-revocation of Common Stock have been affected in such a way thatgeneral release of claims, the Bank shall pay to Mr. Shi the following: (i) a single lump sum amount consisting of an adjustmentamount equal to two times of outstanding awardsMr. Shi’s then annual base salary and a lump sum bonus equal to 100% of Mr. Shi’s then annual base salary; if Mr. Shi is appropriate in order to preventterminated without Cause during the dilution orterm of his current contract, he would receive severance payments totaling $2,400,000.
enlargement of rights under the awards (including, without limitation, any extraordinary distribution, dividend in partial liquidation, dividend in property other than cash, spin-off, split-off or split-up), the Committee will make appropriate equitable adjustments, which may include, without limitation, adjustments to any or all of the number and kind of shares of stock (or other securities) which may thereafter be issued in connection with such outstanding awards and adjustments to any exercise price specified in the outstanding awards.
No
| 59 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
In addition, as part of his severance, any equity awards may be granted under the Plan after June 25, 2026 and no Performance Awards may be granted under the Plan subsequentwould continue to vest according to the Company’s annual meeting of stockholders in 2021. Administration
The Plan will be administered by the Compensation Committee (the “Committee”), consisting of not less than two members of the Board. Each member of the committee must be an “outside director” as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), a “non-employee director” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and an independent director under the rules of any stock exchange on which the Common Stock may be listed and under any other applicable regulatory requirements.
The Committee will periodically determine the participants in the Plan and the nature, amount, pricing, timing, and other terms of awards to be made to such individuals. The Committee has the power to interpret and administer the Plan. All questions of interpretation with respect to the Plan, the number of shares of Common Stock or other securities, stock appreciation rights, or units granted, and the terms of any agreements evidencing such awards will be determined by the Committee, and its determination will be final and conclusive upon all parties in interest. Unless prohibited by applicable law or the rules of a stock exchange, the Committee may delegate responsibilities and powers under the Plan to others.
Stock Options
Options which may be granted by the Committee represent a right to purchase a specified number of shares of Common Stock at a specified price during such period of time as the Committee determines. The exercise price per share of Common Stock of any option will be no less than the fair market value per share of the Common Stock subject to the option on thegrant date the option is granted. Fair market value, for purposes of the Plan, is the closing price per share of the Company’s Common Stock on NASDAQ for the date as of which fair market value is to be determined. The maximum number of shares of Common Stock for which options and SARs can be granted to any one employee under the Plan may not exceed 1,000,000 shares per calendar year.
An option may be exercised, in whole or in part, by giving written notice of exercise to the Company, specifying the number of shares to be purchased. At the discretion of the Committee, the exercise price of the option may be paid in cash, by the tender of Common Stock already owned by the participant, by cash forwarded through a broker or other agent sponsored exercise or financing program, through a combination of the foregoing, or through such other means as the Committee determines are consistent with the Plan’s purpose and applicable law, including the net withholding of shares of stock through relinquishment of options. No fractional shares will be issued or accepted.
For ISOs, the aggregate fair market value (determined on the date of grant) of the shares with respect to which incentive stock options are exercisable for the first time by an employee during any calendar year under all plans of the corporation employing such employee, any parent or subsidiary corporation of such corporation and any predecessor corporation of any such corporation will not exceed $100,000.
Subject to the foregoing and the other provisions of the Plan, stock options granted under the Plan may be exercised at such times and in such amounts and be subject to such restrictions and other terms and conditions, if any, as determined in its discretion by the Committee.
Stock Appreciation Rights
An SAR is a right to receive, upon surrender of the right, an amount payable in cash and/or shares of Common Stock under such terms and conditions as the Committee determines. An SAR may be granted in tandem with part or all of (or in addition to, or completely independent of) an option or any other award under the Plan. An SAR issued in tandem with a stock option may only be granted at the time of grant of the related option. The amount payable in cash and/or shares of Common Stock with respect to each SAR will be equal in value to a percentage (including up to a maximum of 100%) of the amount by which the fair market value per share of Common Stock on the exercise date exceeds the fair market value per share of Common Stock on the date of grant of the SAR. The applicable percentage will be established by the Committee. The exercise price of any SAR will be no less than the fair market value per share of the Common Stock subject to the SAR on the date the SAR is granted. The agreement evidencing the award may state whether the amount payable is to be paid wholly in cash, wholly in shares of Common Stock or partly in each. If the award agreement does not state the manner of payment, the Committee will determine the manner of payment at the time of payment. The amount payable in shares of Common Stock, if any, is determined with reference to the fair market value per share of Common Stock on the date of exercise. Tandem SARs are exercisable only to the extentschedules, provided that the options to which they relate are exercisable. Upon exercise of the Tandem SAR, and to the extent of such exercise, the participant’s underlying option will automatically terminate. Similarly, upon the exercise of the tandem option, and to the extent of such exercise, the participant’s related SAR will automatically terminate.
Repricing Prohibited
The Plan prohibits repricing of options, SARs or other purchase rights without further stockholder approval. Repricing means the grant of a new option or SAR in return for the cancellation or exchange of an award that has a higher grant price than the new award, the amendment of an outstanding award to reduce the grant price, the cancellation or exchange of an option or SAR at a time when the grant price is greater than the fair market value of the Common Stock or any action thatperformance RSUs would be treated, for accounting purposes, as a repricing. The grant of a substitute award under the anti-dilution and adjustment provisions explained under “General,” above, is not a repricing.
Other Terms of Options and SARs
No dividend equivalents may be granted in connection with any option or SAR. The term of any option or SAR may not exceed ten years from the date of grant.
Unless otherwise provided in a grantee’s award agreement, the following provisions of this paragraph will apply in the case of a grantee whose employment or service is terminated. If the employment or service of a grantee is terminated for reasons other than resignation by a grantee without the consent of the Company (or Board, in the case of a non-employee director), termination for cause, disability or death, all outstanding options and SARs held by the grantee immediately prior tosettled based on performance unit goal achievement, except that if such termination of employment occurs within two years after a Change of Control (as defined in the Shi Employment Agreement), any performance RSUs would be settled as follows: (i) any RSUs for which the performance period has lapsed would continue to vest based on performance unit goal achievement, and (ii) any RSUs for which the performance period has not lapsed will be exercisableconverted into time-based units based on the target performance level. The outstanding equity awards held by Mr. Shi as of December 31, 2022, are disclosed in the grantee (but only totable on page 55 under “Outstanding Equity Awards at Year-End.”
In the extent exercisable immediately prior toevent of a termination of employment) at any timeMr. Shi’s employment as the result of his death or due to disability, Mr. Shi or his beneficiary will be entitled to receive the Accrued Obligations (as defined in the Shi Employment Agreement). The Shi Employment Agreement also provides that if Mr. Shi’s employment terminates as a result of death or disability, all unvested RSUs that have been granted prior to the expiration date of the option or SAR or within three months following the date of termination, whichever is the shorter period. Following the death of a grantee during employment or service or termination by reason of disability, all outstanding options or SARs of the grantee will be exercisable (whether or not so exercisable immediately prior to the death of the grantee) by the person entitled to do so under the will of the grantee, or, if the grantee fails to make testamentary disposition of the option or SAR or dies intestate, by the legal representative of the grantee, at any time prior to the expiration date of the option or SAR or within one year after the date of death or disability shall immediately vest. The market value on December 31, 2022, of his RSUs which would have accelerated in vesting as a result of his death or disability is $1,853,965.
CEO to Median Employee Pay Ratio We are providing the following information about the relationship of the grantee, whichever istotal annual compensation of our median employee and the shorter period. Followingtotal annual compensation of Mr. Ng, our Chairman and CEO. For the deathyear ended December 31, 2022, the annual total compensation of a grantee after ceasing employment or service and within a period following termination of employment or service during which an option or SAR remains exercisable, all outstanding options or SARs of the grantee will be exercisable (but only to the extent exercisable immediately prior to the death of the grantee) by the person entitled to do so under the will of the grantee or, if the grantee shall fail to make testamentary disposition of the option or SAR or dies intestate, by the legal representative of the grantee, at any time prior to the expiration date of the option or SAR or within one year after the date of death of the grantee, whichever is the shorter period. If a grantee resigns without the consent of the Company (or Board,our CEO was $9,076,408 as shown in the case“Summary Compensation Table.” The annual total compensation of our median employee for 2022, excluding the CEO, was $109,718, resulting in a non-employee director), all outstanding options and SARs will be exercisable (but onlyratio of 83 to the extent exercisable immediately prior to the termination of employment) at any time prior to the expiration date of the option or SAR or within 30 days of the date of termination, whichever1, which is the shorter period. If the employment of a grantee is terminated by the Company for cause or if the grantee is removed from the Board for cause, all outstanding options and SARs held by the grantee will terminate as of the date of
termination of employment or removal.
Restricted Stock
Restricted stock is Common Stock that is issued toreasonable estimate calculated in a participant and is subject to such terms, conditions and restrictions as the Committee deems appropriate, which may include, but are not limited to, restrictions upon the sale, assignment, transfer or other disposition of the restricted stock and the requirement of forfeiture of the restricted stock upon termination of employment or service under certain specified conditions, including the failure to achieve performance conditions. The restriction period applicable to restricted stock must, in the case of a time-based restriction, be not less than three years, with no more frequent than ratable vesting over such period or, in the case of a performance-based restriction period, be not less than one year. The Committee may provide for the lapse of any such term or condition or waive any term or condition based on such factors or criteria as the Committee may determine, provided that the Committee will not accelerate the vesting of, or waive the restrictions with respect to, restricted stock except in the case of death, disability or involuntary termination other than for cause. Subject to such restrictions as the Committee may impose, the participant will have, with respect to awards of restricted stock, all of the rights of a stockholder of the Company, including the right to vote the restricted stock and the right to receive any dividends on such stock.
Unless otherwise provided in an award agreement, if the grantee of restricted stock ceases to be an employee or terminates service for any reason, any outstanding shares of restricted stock held by the grantee will vest or be forfeited according to the following provisions:
(i) If a grantee ceases to be an employee, consultant, other service provider or non-employee director by reason of disability, death or retirement (as defined in an award agreement), any shares of restricted stock held by the grantee at the time of disability or death will immediately vest; and
(ii) If a grantee ceases to be an employee, consultant, other service provider or non-employee director for any reason other than disability, death or retirement (as defined in an award agreement), any shares of restricted stock held by the grantee at the time of termination of employment will be immediately forfeited.
Restricted Stock Units
Restricted stock units are unfunded, unsecured rights to receive a share of Common Stock, or cash, that are subject to transfer or other restrictions as the Committee may impose. Restricted stock units are also subject to forfeiture if certain events specified by the Committee occur prior to the lapse of the restrictions. The restricted stock unit award agreement details the number of restricted stock units awarded, the restrictions imposed on the restricted stock units, the duration of those restrictions, the events the occurrence of which would cause a forfeiture of the restricted stock units and such other terms and conditions as the Committee deems appropriate. Restricted stock units are subject to the same three-year and one-year minimum vesting requirements applicable to restricted stock. Restricted stock units may include, in the discretion of the Committee, the right to receive dividend equivalents.
Performance Awards
Performance Awards may be granted under the Plan from time to time based on such terms and conditions as the Committee deems appropriate,manner consistent with the termsapplicable rules.
In determining the median employee, we identified and included all U.S.-based employees of East West Bank, other than the CEO, who were employed with us as of December 31, 2022. Further, we also included all employees of East West Bank outside of the U.S., who are based in Hong Kong and were employed with us as of December 31, 2022. The U.S. and Hong Kong-based employees represented 96% of our 3,100 total employees, excluding employees on leave of absence as of December 31, 2022. We excluded employees of East West Bank (China) Limited, our wholly owned subsidiary in China, and other employees based in China, totaling 138 or 4% of our total employees. As of December 31, 2022, the Company had 2,872 U.S.-based employees and 228 non-U.S. employees. Our definition of “total compensation,” for purposes of determining our median employee, includes total cash compensation paid during 2022 (excluding 401(k) deferrals and overtime wages) and the Plan. Performance Awards are awardsgrant date fair value of RSUs (or RSU equivalents) awarded in 2022. We did not annualize the paymentcompensation for any employees that were not employed by us for all of 2022, or vestingmake any full-time equivalent adjustments for part-time employees. For our non-U.S. employees who were included in this calculation, we used the foreign exchange rates applicable as of which is contingent upon the achievement of specified levels of performance under specified “Performance Criteria” duringDecember 31, 2022, in order to convert their total compensation into U.S. dollars. After determining our median employee, we then calculated such employee’s annual total compensation, in a “Performance Period” by the Company, a subsidiary or subsidiaries, a branch, department, business unit or other portion thereof or the participant individually, and/or upon a comparison of such performancemanner consistent with the performancerequirements of a peer groupItem 402(u), for purposes of corporations or other measure selected or defined bycalculating the Committee at the time the Performance Award is granted. Performance Awards may be in the form of performance units, performance shares, performance-based options and such other forms of Performance Awards as the Committee determines. The maximum amount that may be paid in cash or in fair market value of Common Stock or other securities under all Performance Awards under the Plan paid to any one participant during a calendar year cannot exceed 1,000,000 shares, in the case of Performance Awards paid in Shares. In the case of multi-year Performance Periods, the amount which is earned in any one calendar year is the amount paid for the Performance Period divided by the number of calendar years in the period. In applying this limit, the amount of cash and the number of Shares earned by a Participant is measured as of the close of the applicable calendar year which ends the Performance Period, regardless of the fact that certification by the Committee and actual payment to the Participant may occur in a subsequent calendar year or years.ratio presented above. The Performance Criteria to be used in determining whether a Performance Award has been earned, the level of achievement of such Performance Criteria necessary for the Performance Award to be earned in whole or in part, and the Performance Period over which such performance will be measured will be determined by the Committee at the time a Performance Award is granted. Such Performance Criteria may be based on one or more of the following pre-established
| 60 | EAST WEST BANCORP 2023 PROXY STATEMENT |
objective measures of performance during the Performance Period:
| COMPENSATION DISCUSSION AND ANALYSIS | · | total stockholder return; | | |
| · | return on stockholder equity; |
| · | ratio of non-performing assets to total assets; |
| · | commercial business loans; |
The Committee may in its discretion also determine to use other objective performance measures asPay Versus Performance Criteria.
Unless otherwise provided in an award agreement, the following provisions apply if the recipient of a Performance Award ceases to be an employee or terminates service for any reason prior to payment of the Performance Award:
(i) If a grantee ceases to be an employee, consultant, other service provider or non-employee director by reason of disability, death or retirement (as defined in an award agreement), the employee will be entitled to a pro-rata portion of the Performance Award based upon the number of whole and partial months of employment or service during the Performance Period, contingent upon achievement of the performance goals and subject to any negative discretion retained by the Committee; and
(ii) If a grantee ceases to be an employee, consultant, other service provider or non-employee director for any reason other than disability, death or retirement (as defined in an award agreement), any Performance Award shall be immediately forfeited.
Effect of Change in Control
Notwithstanding any other provision of the Plan to the contrary, and unless the award agreement otherwise provides, in the event the employment or service of a Plan participant is terminated by the Company and its affiliates without “cause” within three years following the occurrence of a Change in Control of the Company (as defined in Section 3(F) of the Plan), (i) all options and Stand-Alone SARs which are then outstanding will become fully vested and exercisable and (ii) all restrictions with respect to shares of restricted stock and restricted stock units which are then outstanding will lapse, and such shares and units will be fully vested and nonforfeitable, (iii) the uncompleted performance periods for all Performance Awards which are then outstanding shall be deemed to be completed, and all Performance Criteria and other conditions relating to such Performance Awards shall automatically be deemed waived for the entire performance period, and the participant shall become entitled to receipt of the target number of shares of Common Stock subject to such awards. Further, after a Change in Control, no administrative power given the Committee can be used to affect detrimentally the rights of any grantee with respect to any award which is outstanding immediately prior to the Change in Control.
Transferability
The Plan provides that awards cannot be assigned, pledged or otherwise transferred except by will or by the laws of descent and distribution.
Possible Anti-Takeover Effect
The provisions of the Plan providing for the acceleration of the exercise date of stock options and SARs, the lapse of restrictions applicable to restricted stock and restricted stock units and the deemed achievement of Performance Criteria upon the occurrence of a termination of employment following a Change in Control, may be considered as having an anti-takeover effect.
Amendment and Termination
The Board may at any time amend, suspend or terminate the Plan. The Committee may at any time alter or amend any or all award agreements under the Plan to the extent permitted by law. However, no such action by the Board or by the Committee may impair the rights of participants under outstanding awards without the consent of the participants affected thereby. Further, the Board may not amend the Plan to the extent that such matters must be approved by the Company’s stockholders.
Payment of Taxes
The Plan provides for the withholding of applicable taxes required by law from all amounts paid to the participant in satisfaction of an award. This provides the authority to withhold cash, require cash payments or withhold or receive shares of Common Stock or property.
New Plan Benefits
The actual amount of awards to be received by or allocated to participants or groups under the Plan is not determinable in advance because the selection of participants who receive awards under the Plan, and the size and type of awards to such individuals and groups are generally determined by the Committee in its discretion.
Equity Compensation Plans
The following table sets forth information asconcerning the compensation of our CEO and other NEOs for each of the fiscal years ending December 31, 2015 concerning common stock issuable under the Company’s equity compensation plans.2022, 2021, and 2020, and our financial performance for each such fiscal year. | | | | | | Value of Initial $100
Investment Based on: | | | Year | Summary Compensation
Table Total for CEO1 | Compensation Actually Paid
Total to CEO | Average
Summary
Compensation Table Total
for Non-CEO
NEOs2 | Average Compensation Actually Paid to
non-CEO NEOs | Total
Shareholder
Return | Peer Group
Total
Shareholder Return6 | Net
Income
($ in
millions) | Return
on
Equity | | 20223 | $9,076,408 | $6,591,588 | $2,236,396 | $2,110,635 | $135 | $106 | $1,128 | 19.51% | | 20214 | $8,649,172 | $27,525,426 | $1,938,007 | $3,294,597 | $162 | $117 | $873 | 15.70% | | 20205 | $6,933,775 | $13,751,400 | $1,284,762 | $1,961,790 | $104 | $88 | $568 | 11.17% |
| 1. | The CEO in 2022, 2021, and 2020 was Dominic Ng. |
| 2. | The non-CEO NEOs were Irene H. Oh, Douglas P. Krause, Parker L. Shi, and Gary Teo in 2022, Irene H. Oh, Douglas P. Krause, Parker L. Shi, and Nick Huang in 2021, and Irene H. Oh, Douglas P. Krause, Andy Yen, Gary Teo, and Catherine Zhou in 2020. |
| 3. | The LTI Plan Categoryfor the 2022-2024 performance period has an estimated payout of 175%. The LTI Plan for the 2021-2023 performance period has an estimated payout of 174%. The LTI Plan for the 2020-2022 performance period paid out at 182%. |
| 4. | The LTI Plan for the 2021-2023 performance period has an estimated payout of 175%. The LTI Plan for the 2020-2022 performance period has an estimated payout of 174%. The LTI Plan for the 2019-2021 performance period paid out at 182%. |
| 5. | The LTI Plan for the 2020-2022 performance period has an estimated payout of 175%. The LTI Plan for the 2019-2021 performance period has an estimated payout of 175%. The LTI Plan for the 2018-2020 performance period paid out at 167%. | | 6. | The peer group used is the KBW Nasdaq Regional Banking Index (“KRX”). |
The following table reconciles the total compensation shown in the Summary Compensation Table to the compensation actually paid to NEOs shown in the Pay Versus Performance Table above. | | CEO | Average of Non-CEO NEOs | | Year | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | | Summary Compensation Table Total | $9,076,408 | $8,649,172 | $6,933,775 | $2,236,396 | $1,938,007 | $ 1,284,762 | | Less: Fair Value of Stock Awards Granted in Fiscal Year | (4,538,539) | (5,065,596) | (4,487,082) | (669,169) | (774,147) | (474,638) | | Add: Fair Value of Stock Awards Granted in Fiscal Year - Value at Yearend | 6,470,141 | 9,535,338 | 10,627,632 | 953,841 | 1,118,976 | 1,060,278 | | Change in Fair Value for Stock Awards Granted in Prior Years that were Unvested at the End of Fiscal Year | (4,846,683) | 10,881,577 | 1,180,999 | (463,118) | 781,123 | 100,365 | | Change in Fair Value of Stock Awards Granted in Prior Years that Vesting during the Fiscal Year | (237,471) | 2,894,477 | (1,009,781) | (18,447) | 193,214 | (56,099) | | Add: Dividends Paid on Unvested Shares Units for the Fiscal Year | 667,731 | 630,458 | 505,857 | 71,132 | 37,423 | 47,041 | | Compensation Actually Paid | $6,591,588 | $ 27,525,426 | $13,751,400 | $2,110,635 | $3,294,597 | $1,961,710 |
For the fiscal year ending December 31, 2022, the most important financial performance measures used to link compensation actually paid to our NEOs to Company are listed as follows. | Important Financial Performance Measurement |
| Return on Assets | | Return on Equity | | Total Shareholder Return |
| 61 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | Number of securities
to be issued upon
exercise of
outstanding
options,
warrants and rights
(a) | | | Weighted average
exercise price of
outstanding options,
warrants and rights
(b) | | | Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
(c) | | Equity compensation plans approved by security holders | | | - | | | $ | - | | | | 3,016,324 | | Equity compensation plans not approved by security holders | | | - | | | | - | | | | - | | Total | | | - | | | $ | - | | | | 3,016,324 | |
Federal Income Tax Consequences
The following is a brief summarygraphs compare the compensation actually paid to our CEO and the average of compensation actually paid to our non-CEO NEOs with Total Shareholder Return, Net Income, and Return on Average Equity. Compensation Actually Paid vs. TSR 
Compensation Actually Paid vs. Net Income 
Compensation Actually Paid vs. ROE 
| 62 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| COMPENSATION DISCUSSION AND ANALYSIS | | | | |
Proposal 3: Advisory Vote on Frequency of Stockholder
“Say-on-Pay” PROPOSAL SNAPSHOT What am I voting on? Every six years, stockholders must decide whether advisory votes on executive compensation should be held every one, two or three years. Voting recommendation: FOR holding an advisory vote on executive compensation every “ONE” year. Section 14A of the principal Federal income tax consequencesSecurities Exchange Act requires us to submit a non-binding, advisory proposal to stockholders at least once every six years to determine whether advisory votes on executive compensation should be held every one, two or three years. When voting on this proposal, you should indicate your preference as whether our executive compensation should be reviewed by stockholders every “one,” “two,” or “three” years. If you have no preference, you should “Abstain.” The option of the grant and exercise of awards under present law. Incentive Stock Options. An optionee will not recognize any taxable income for Federal income tax purposes upon receipt of an incentive stock option or, generally, at the time of exercise of an incentive stock option. The exercise of an incentive stock option generally will result in an increase in an optionee’s taxable income for alternative minimum tax purposes.
If an optionee exercises an incentive stock option and does not dispose of the shares received in a subsequent “disqualifying disposition” (generally, a sale, gift or other transfer withinone year, two years after the date of grant of the incentive stock option or within one year after the shares are transferred to the optionee), upon disposition of the shares any amount realized in excess of the optionee’s tax basis in the shares disposed of will be treated as a long-term capital gain, and any loss will be treated as a long-term capital loss. In the event of a “disqualifying disposition,” the difference between the fair market value of the shares received on the date of exercise and the option price (limited, in the case of a taxable sale or exchange, to the excess of the amount realized upon disposition over the optionee’s tax basis in the shares) will be treated as compensation received by the optionee in the year of disposition. Any additional gain will be taxable as a capital gain and any loss as a capital loss,three years, which will be long-term or short-term depending on whether the shares were held for more than one year. Under proposed regulations, special rules apply in determining the compensation income recognized upon a disqualifying disposition if the option price of the incentive stock option is paid with shares of the Company’s Common Stock. If shares of the Company’s Common Stock received upon the prior exercise of an incentive stock option are transferred to the Company in payment of the option price of an incentive stock option within either of the periods referred to above, the transfer will be considered a “disqualifying disposition” of the shares transferred, but, under proposed regulations, only compensation income determined as stated above, and no capital gain or loss, will be recognized.
Neither the Company nor any of its subsidiaries will be entitled to a deduction with respect to shares received by an optionee upon exercise of an incentive stock option and not disposed of in a “disqualifying disposition.” Except as described in “Other Tax Matters” below, if an amount is treated as compensation received by an optionee because of a “disqualifying disposition,” the Company or one of its subsidiaries generally will be entitled to a corresponding deduction in the same amount for compensation paid.
Nonstatutory Stock Options. An optionee will not recognize any taxable income for Federal income tax purposes upon receipt of a nonstatutory stock option. Upon the exercise of a nonstatutory stock option the amount by which the fair market value of the shares received, determined as of the date of exercise, exceeds the option price will be treated as compensation received by the optionee in the year of exercise. If the option price of a nonstatutory stock option is paid in whole or in part with shares of the Company’s Common Stock, no income, gain or loss will be recognized by the optionee on the receipt of shares equal in value on the date of exercise to the shares delivered in payment of the option price. The fair market value of the remainder of the shares received upon exercise of the nonstatutory stock option, determined as of the date of exercise, less the amount of cash, if any, paid upon exercise will be treated as compensation income received by the optionee on the date of exercise of the stock option.
Except as described in “Other Tax Matters” below, the Company or one of its subsidiaries generally will be entitled to a deduction for compensation paid in the same amount treated as compensation received by the optionee.
Stock Appreciation Rights. An awardee will not recognize any taxable income for Federal income tax purposes upon receipt of stock appreciation rights. The value of any Common Stock or cash received in payment of stock appreciation rights will be treated as compensation received by the awardee in the year in which the awardee receives the Common Stock or cash. The Company generally will be entitled to a corresponding deduction in the same amount for compensation paid.
Restricted Stock. An awardeegreatest number of restricted stock will not recognize any taxable income for Federal income tax purposes in the year of the award, provided the shares are subject to restrictions (that is, they are nontransferable and subject to a substantial risk of forfeiture). However, an awardee may elect under Section 83(b) of the Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the shares on the date of the award, determined without regard to the restrictions. If the awardee does not make a Section 83(b) election, the fair market value of the shares on the date the restrictions lapse will be treated as compensation income to the awardee and will be taxable in the year the restrictions lapse. Except as described in “Other Tax Matters” below, the Company or one of its subsidiaries generally will be entitled to a deduction for compensation paid in the same amount treated as compensation income to the awardee.
Restricted Stock Units. A grantee will not be subject to tax upon the grant of a restricted stock unit. Upon vesting of the restricted stock unit, the fair market value of the shares covered by the award on the vesting date will be subject to employment taxes. Upon distribution of the cash and/or shares underlying the restricted stock units, the grantee will recognize as ordinary income an amount equal to the cash and/or fair market value (measured on the distribution date) of the shares received, and such amount will generally be deductible by the Company or one of its subsidiaries. This amount of income will generally be subject to income tax withholding on the date of distribution. If any dividend equivalent amounts are paid to the grantee, they will be includible in the grantee’s income as additional compensation (and not as dividend income) and will be subject to income and employment tax withholding. Except as described in “Other Tax Matters” below, the Company or one of its subsidiaries generally will be entitled to a deduction for compensation paid in the same amount treated as compensation income to the awardee.
Performance Awards. An awardee who receives a performance award will not recognize any taxable income for Federal income tax purposes upon receipt of the award. The fair market value of the shares on the date the performance condition is determined to be achieved will be treated as compensation income to the awardee and will be taxable in the year the performance condition is achieved (if, in the case of performance share awards, the awardee does not make a Section 83(b) election upon the receipt of the performance shares, in which case the awardee would recognize compensation income on the date of the award). Any cash received pursuant to a performance award will be treated as compensation income received by the awardee generally in the year in which the awardee receives such cash. Except as described in “Other Tax Matters” below, the Company or one of its subsidiaries generally will be entitled to a deduction for compensation paid in the same amount treated as compensation income to the awardee.
Other Tax Matters. The exercise by an awardee of a stock option or stock appreciation right, the lapse of restrictions on restricted stock or restricted stock units or the achievement or fulfillment of performance awards following the occurrence of a Change in Control, in certain circumstances, may result in (i) a 20% Federal excise tax (in addition to Federal income tax) to the awardee on certain payments of the Company’s Common Stock or cash resulting from such exercise or deemed achievement or fulfillment of performance awards or, in the case of restricted stock or restricted stock units on all or a portion of the fair market value of the shares or units on the date the restrictions lapse and (ii) the loss of a compensation deduction which would otherwise be allowable to the Company or one of its subsidiaries as explained above. The Company and its subsidiaries may lose a compensation deduction, which would otherwise be allowable, for all or a part of compensation paid in the form of (i) restricted stock or restricted stock units or (ii) performance awards based on performance criteria other than those specified in the Plan, if, as of the close of the tax year, the employee is the Chief Executive Officer of the Company (or acts in that capacity) or is another “covered employee” as defined under the Code (other than the Chief Executive Officer), if the total compensation paid to such employee exceeds $1,000,000.
Vote Required for Approval
Approval of the adoption of the Plan requires the affirmative vote of a majority of the outstanding shares of stockvotes present in person or by proxy and entitled to vote at the meeting.Annual Meeting, will be deemed to be the recommendation of the stockholders.
67 In 2017, our stockholders voted in accordance with the Board’s recommendation to review and approve executive compensation every year. Accordingly, for the past six years, we have held an advisory “say-on-pay” vote every year. The Board believes holding an advisory “say-on-pay” vote every year has worked well for us, as it has allowed the Board and the Compensation Committee the opportunity to evaluate individual compensation decisions each year in light of timely, ongoing feedback from stockholders. It is also consistent with our efforts to engage in an ongoing dialogue with stockholders about corporate governance and executive compensation. Upon careful consideration, the Board of Directors recommends that stockholders continue to hold an advisory vote on executive compensation every year.
PROPOSAL 4 | RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |
As this is a non-binding, advisory vote, the result will not be binding on us. However, we value your opinion on this matter and will take the result of this non-binding, advisory vote into account when making a determination as to the frequency of future say-on-pay votes.
Proposal 4: Ratification of Auditors Proposal SnapshotPROPOSAL SNAPSHOT
What am I voting on? Stockholders are being asked to ratify the appointment of KPMG LLP a registered public accounting firm, to serve as the Company’s Independent Auditorsindependent registered public accounting firm for the fiscal year ending December 31, 2016.2023. Although the Audit Committee has the sole authority to appoint the independent auditors,registered public accounting firm, as a matter of good corporate governance, the Board submits its selection of the independent auditorsregistered public accounting firm to our stockholders for ratification. If the stockholders should not ratify the appointment of KPMG LLP, the Audit Committee will reconsider the appointment. | 63 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| RATIFICATION OF AUDITORS | · | Voting recommendation: | | |
FORthe ratification of the appointment of KPMG LLP as independent auditors.
|
Voting recommendation: FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023. KPMG LLP has been approved by the Audit Committee of the Company to be the independent auditorsregistered public accounting firm of the Company for the 2016 fiscal2023 year. The stockholders are being asked to ratify the selection of KPMG LLP. KPMG LLP has served as our independent registered public accounting firm since 2009. If the stockholders do not ratify suchselection by the affirmative vote of a majorityof the votes cast,present and entitled to vote, the Audit Committee will reconsider its selection. Under applicable SEC regulations, the selection of the independent auditorsregistered public accounting firm is solely the responsibility of the Audit Committee. Representatives from the firm of KPMG LLP will be present at the Annual Meeting to respond to stockholders’ questions and will be given the opportunity to make a statement if they desire to do so. FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Audit Fees, Audit Related Fees, Tax Fees and All Other Fees The following table presents information regardingis a description of the aggregate fees billed for services renderedearned by KPMG LLP for services rendered to the fiscalCompany for the years ended December 31, 20152022 and 2014, respectively.December 31, 2021. | | | 2015 | | | 2014 | | | Audit Fees (a) | | $ | 2,638,000 | | | $ | 2,220,000 | | | Audit-Related Fees (b) | | | 43,000 | | | | 96,000 | | | Tax Fees (c) | | | - | | | | 8,000 | | | All Other Fees(d) | | | 23,000 | | | | - | | | | | $ | 2,704,000 | | | $ | 2,324,000 | |
| | 2022 | 2021 | | Audit Fees1 | $3,061,241 | $2,692,124 | | Audit-Related Fees2 | 48,258 | 61,224 | | Tax Fees3 | 32,031 | 8,336 | | All Other Fees | - | - | | | $3,141,530 | $2,761,684 |
| (a)1. | Audit fees consist of fees for professional services rendered by KPMG forrelate to the integrated audit of the Company’s consolidated financial statements, ininternal control over financial reporting, the Form 10-K and review of the Company’s interim consolidated financial statements, included in the Form 10-Qs, including services normallyand other audits provided by an accountant in connection with statutory and regulatory filings or engagements.provided by KPMG LLP. Audit fees also include the statutory audit for East West Bank (China) Limited provided by KPMG China. |
| (b)2. | Audit-related fees consist of fees for certain professional services provided by KPMG Hong Kong in connection with the review of regulatory filings for theEast West Bank’s Hong Kong branch. |
| (c)3. | Tax fees include tax compliance fees for East West Bank (China) Limited provided by KPMG China and tax compliance, planning and advisory services.consulting services by KPMG LLP. |
| (d) | All other fees include fees for continuing professional education services. |
68 Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
AUDIT COMMITTEE POLICY ON PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Consistent with SEC rules regarding auditor independence, the Audit Committee is responsible for appointing, setting fees for and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility and in accordance with the Exchange Act, it is the policy of the Audit Committee to pre-approve all permissible services provided by our independent registered public accounting firm, except for minor audit-related engagements which in the aggregate do not exceed 5% of the total fees we pay to our independent registered public accounting firm during a fiscal year.the year in which the services were provided. All of the services listed above for 2022 were approved by the Audit Committee prior to the service being rendered as described in the operating procedures below. Each year, prior to engaging our independent registered public accounting firm, management submits to the Audit Committee for approval a list of services expected to be provided during that fiscal year within each of the three | 64 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| RATIFICATION OF AUDITORS | | | | |
categories of services described below, as well as related estimated fees, which are generally based on time and materials. Audit services include audit work performed on the financial statements, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters and discussions surrounding the proper application of financial accounting and/or reporting standards. Audit-related services include assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, statutory audits, employee benefit plan audits and special procedures required to meet certain regulatory requirements. Tax services include compliance and other non-advisory services performed by the independent registered public accounting firm when it is most efficient and effective to use such firm as the tax service provider. As appropriate, the Audit Committee then pre-approves the services and the related estimated fees. The Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the estimate periodically throughout the year by category of service. During the year, circumstances may arise when it becomes necessary to engage our independent registered public accounting firm for additional services not contemplated in the initial annual proposal. In those instances, the Audit Committee pre-approves the additional services and related fees before engaging our independent registered public accounting firm to provide the additional services. REPORT BY THE AUDIT COMMITTEE |
The following Audit Committee Report is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or the liabilities of Section 18 of the Exchange Act and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by the Company under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates this Audit Committee Report therein.
The Audit Committee operates pursuant to a written charter most recently adopted by the Company’s Board on February 26, 2015.March 28, 2023. The Company’s Audit Committee Charter is available through the Company’s website at www.eastwestbank.comwww.eastwestbank.com/investors by clicking onInvestor Relations — Corporate Information — Governance DocumentsCommittee Charting. The Audit Committee held six meetings during the year ended December 31, 2022. These meetings were attended by all members of the Audit Committee. The meetings of the Audit Committee are designed to facilitate and encourage communication among the Audit Committee, the Company, the Company’s internal audit function and the Company’s independent registered public accounting firm. The BoardAudit Committee recognizes the importance of maintaining the independence of the Company’s independent registered public accounting firm, both in fact and appearance. Each year, the Audit Committee evaluates the qualifications, performance and independence of the Company’s independent registered public accounting firm and determines whether to re-engage the current independent registered public accounting firm. In doing so, the Audit Committee considers the quality and efficiency of the services provided by the independent registered public accounting firm, and the independent registered public accounting firm’s capabilities, technical expertise and knowledge of the Company’s operations and industry. Based on this evaluation, the Audit Committee has determined that each ofretained KPMG LLP as the Company’s independent registered public accounting firm for the year 2023. The members of the Audit Committee and the Board believe that, due to KPMG LLP’s knowledge of the Company and of the industries in which the Company operates, including significant matters in audit, it is in the best interests of the Company and its stockholders to continue retention of KPMG LLP to serve as the Company’s independent underregistered public accounting firm. Although the standardsAudit Committee has the sole authority to appoint the independent registered public accounting firm, the Audit Committee will continue to recommend that the Board ask the stockholders, at the Annual Meeting, to ratify the appointment of Rule 5605(a)(2) of NASDAQ’s listing standards.the independent registered public accounting firm. | 65 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| RATIFICATION OF AUDITORS | | | | |
Management is responsible for the financial reporting process, the system of internal controls, including internal control over financial reporting, risk management and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. KPMG LLP, the Company’s independent registered public accounting firm, is responsible for the integrated audit of the consolidated financial statements and internal control over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes and procedures. The members of the Audit Committee currently are not professionally engaged in the practice of accounting or auditing. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by management regarding the effectiveness of internal control over financial reporting, that the financial statements have been prepared with integrity and objectivity and that such financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. The Audit Committee also relies on the opinions of the Company’s independent registered public accounting firm of the consolidated financial statements and the effectiveness of internal control over financial reporting. In performing its function, the Audit Committee has among other tasks: | › | · | reviewedReviewed and discussed the audited financial statements and the quarterly financial reports of the Company as of end of each quarter and for the year ended December 31, 20152022 withmanagement and with the independent registered public accounting firm;KPMG; |
| › | · | discussedDiscussed with the Company’s independent registered public accounting firmKPMG the matters required to be discussed underby the applicable requirements of the PublicCompany Accounting Oversight Board (“PCAOB”) Auditing Standard No. 16,Communicationsand the SEC, as well as other matters including the scope of the audit, the Company’s significant accounting policies, new accounting pronouncements and the critical audit matter addressed during the audit; and | | › | Met with Audit Committees;KPMG with and without management to discuss the results of their examinations and their observations and recommendations regarding the quality and adequacy of the Company’s internal controls; |
| › | · | receivedReceived from KPMG written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm written disclosures regarding the auditors’ independence requiredby PCAOB Ethics and Independence Rule 3526,Communication with Audit Committees Concerning Independence, and discussedaccountant’s communications with the independent registered public accounting firm,Audit Committee concerning independence, and discussed, with KPMG, their independence; and | | › | Reviewed and approved the amount of fees paid to KPMG for audit, audit-related and tax compliance and other services and concluded that the provision of services by them did not impair their independence. | | | | | | | | | | | | |
Based on the foregoing review and discussions, and subject to the limitations on the Audit Committee’s role and responsibilities described above and in the Audit Committee charter, the Audit Committee recommended to the Board that theCompany’s audited financial statements be included in its Annual Report on Form 10-K for the year ended December 31, 2015,2022 forfiling with the SEC. 
| 66 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| THE AUDIT COMMITTEE | | | | Keith W. Renken, Chairman | | Molly Campbell | | Rudolph I. Estrada | | Lester Sussman |
OTHER INFORMATION
| STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS AND MANAGEMENT | | | | |
Stock Ownership of Principal Stockholders, Directors, and Management The following table presents the beneficial ownership of the Company’s Common Stockcommon stock as of March 28, 2016,31, 2023, by (i) each person or entity known to the Company to beneficially own more than 5% of the outstanding Common Stock,common stock (or have the right to acquire within 60 days), (ii) the directors and director nominees, (iii) the ChiefNamed Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and the three highest compensated executive officers whose total annual compensation in 2015 exceeded $100,000 (the “Named Executive Officers” or “NEOs”),Officers, and (iv) all directors and executives,executive officers, as a group: | Name and Address of Beneficial Owner | | Common Stock
Number of Shares
Beneficially Owned | | | Percent
of Class | | | 5% Holders | | | | | | | | | | BlackRock, Inc. (1) | | | | | | | | | | 55 East 52nd Street | | | | | | | | | | New York, NY 10055 | | | 10,641,064 | | | | 7.4 | % | | Vanguard Group, Inc.(2) | | | | | | | | | | 100 Vanguard Boulevard | | | | | | | | | | Malvern, PA 19355 | | | 9,686,101 | | | | 6.7 | % | | Capital Research Global Investors (3) | | | | | | | | | | 333 South Hope Street 55th Floor | | | | | | | | | | Los Angeles, CA 90071 | | | 8,680,000 | | | | 6.0 | % | | Capital World Investors (4) | | | | | | | | | | 333 South Hope Street 55th Floor | | | | | | | | | | Los Angeles, CA 90071 | | | 7,198,000 | | | | 5.0 | % | | Directors and Executive Officers (5) | | | | | | | | | | Molly Campbell | | | 2,159 | | | | * | | | Iris S. Chan | | | 17,201 | | | | * | | | Rudolph I. Estrada | | | 15,179 | | | | * | | | Julia S. Gouw (6) | | | 2,000 | | | | * | | | Paul H. Irving | | | 20,037 | | | | * | | | Douglas P. Krause | | | 59,190 | | | | * | | | John M. Lee | | | 313,558 | | | | * | | | Herman Y. Li | | | 52,230 | | | | * | | | Jack C. Liu | | | 28,137 | | | | * | | | Dominic Ng (7) | | | 617,165 | | | | * | | | Irene H. Oh | | | 37,972 | | | | * | | | Keith W. Renken (8) | | | 77,683 | | | | * | | | Lester M. Sussman | | | 3,446 | | | | * | | | Andy Yen | | | 36,042 | | | | * | | | All Directors and Executive Officers, as a group (14 persons) | | | 1,281,999 | | | | * | |
| Name and Address of Beneficial Owner | Common Stock Number of Shares Beneficially Owned | Percent of Class | The Vanguard Group1
100 Vanguard Boulevard Malvern, PA 19355 | 14,665,380 | 10.40% | BlackRock, Inc.2 55 East 52nd Street
New York, NY 10055 | 13,021,208 | 9.2% | Capital International Investors3
333 South Hope Street, 55th Fl.
Los Angeles, CA 90071 | 12,372,131 | 8.8% |
* Less than 1%.
| Directors and Named Executive Officers4 | | Manuel P. Alvarez | (1)2,695 | * | | Molly Campbell | 13,193 | * | | Archana Deskus | 8,193 | * | | Serge Dumont | 2,006 | * | | Rudolph I. Estrada5 | 18,957 | * | | Paul H. Irving | 36,568 | * | | Sabrina Kay | 2,006 | * | | Douglas P. Krause | 93,109 | * | | Jack C. Liu | 17,136 | * | | Dominic Ng6 | 937,852 | * | | Irene H. Oh | 127,215 | * | | Parker L. Shi | 0 | * | | Lester M. Sussman | 19,577 | * | | Gary Teo | 11,405 | * | | All Directors and Executive Officers, as a group (14 persons) | 1,289,912 | * |
| 1. | Represents shares of the Company’s common stock beneficially owned as of December 31, 2015,2022, based on the Schedule 13G/A filed by The Vanguard Group on February 9, 2023. According to the Schedule 13G/A, Vanguard Group has shared voting power with respect to 53,673 shares, sole dispositive power with respect to 14,471,823 shares and shared dispositive power with respect to 193,557 shares of the Company’s common stock. | | |
| 2. | Represents shares of the Company’s common stock beneficially owned as of December 31, 2022, based on the Schedule 13G/A filed by BlackRock, Inc. on January 26, 2016.24, 2021. According to the Schedule 13G/A, BlackRock, Inc. has sole voting power with respect to 10,044,76912,587,808 shares and sole dispositive power with respect to 10,641,06413,021,208 shares of the Company’s common stock. | | |
| 3. | (2) | Represents shares of the Company’s common stock beneficially owned as of December 31, 2015,2022, based on the Schedule 13G/A filed by Vanguard Group, Inc.Capital International Investors on February 11, 2016.13, 2023. According to the Schedule 13G/A, Vanguard Group, Inc. has sole voting power with respect to 103,238 shares, shared voting power with respect to 6,600 shares, sole dispositive power with respect to 9,584,763 shares and shared dispositive power with respect to 101,338 shares of the Company’s common stock. |
| (3) | Represents shares of the Company’s common stock beneficially owned as of December 31, 2015, based on the Schedule 13G filed by Capital Research Global Investors, a division of Capital Research and Management Company (“CRMC”), on February 12, 2016. According to the Schedule 13G, Capital Research GlobalInternational Investors has sole voting power with respect to 8,680,00012,372,131 shares and sole dispositive power with respect to 8,680,00012,372,131 shares of the Company’s common stock as a result of CRMC acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940.stock. | | |
| 4. | (4) | Represents shares of the Company’s common stock beneficially owned as of December 31, 2015, based on the Schedule 13G filed by Capital World Investors, a division of Capital Research and Management Company (“CRMC”) on February 12, 2016. According to the Schedule 13G, Capital World Investors has sole voting power with respect to 7,198,000 shares and sole dispositive power with respect to 7,198,000 shares of the Company’s common stock as a result of CRMC acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940. |
| (5) | Excludes time-based orand performance-based restricted stock units (“RSUs”) that were not vested as of March 28, 2016.31, 2023. There were no time-based or performance basedperformance-based RSUs that are expected to vest within 60 days from March 28, 2016.31, 2023. | | |
| 5. | (6) | 2,000601 of these shares are owned byheld in three trusts, for the benefit of family members, for whom Ms. Gouwwhich Mr. Estrada has voting and investment power; Ms. Gouw disclaims any beneficial interest in such shares.power. | | |
| 6. | (7) | 53,000 of these shares are held in two trusts, for the benefit of family members, for which Mr. Ng has voting and investment power. |
| 67 | (8)EAST WEST BANCORP 2023 PROXY STATEMENT |
| QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING | 32,000 of these shares are owned by a partnership for which Mr. Renken, as a partner, has voting and investment power. | | | |
Questions and Answers about the Annual Meeting and Voting The information provided in the “question and answer” format below is for your convenience only and does not contain all of the information you should consider before voting. You should read this entire Proxy Statement carefully before voting. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEImportant notice regarding availability of proxy materials for the
Annual Meeting to be held on May 23, 2023
Pursuant to the SEC rules related to the availability of proxy materials, the Company has made its
Proxy Statement and Annual Report on Form 10-K available at www.envisionreports.com/EWBC. |
When is the virtual Annual Meeting and what are the procedures for attending and participating virtually at the Annual Meeting?
 | DATE AND TIME Tuesday, May 23, 2023, at
2:00 p.m., Pacific Time |  | RECORD DATE March 31, 2023 |  | PLACE Virtual Annual Meeting Link:
www.meetnow.global/MKAYVNG |
We are holding the Annal Meeting in a virtual-only meeting format. If you are a registered stockholder (i.e., you hold your shares through our transfer agent, Computershare), you do not need to register to attend the Annual Meeting virtually. Please follow the instructions on the notice or proxy card that you received. If you hold your shares through an intermediary, such as a bank or broker, you must register in advance to attend the Annual Meeting. To register to attend the Annual Meeting, you must submit proof of your proxy power (legal proxy) reflecting your East West Bancorp, Inc. holdings along with your name and email address to Computershare at legalproxy@computershare.com or by mail to P.O. Box 43001, Providence, RI 02940-3001. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on May 18, 2023. If you choose to vote during the virtual Annual Meeting, you will need the 15-digit control number appearing on the Notice of Internet Availability or proxy card distributed to you. If you want to vote shares that you hold in street name during the virtual Annual Meeting, a control number must be obtained in advance to vote during the meeting or to submit questions during the meeting. To obtain a control number, beneficial stockholders must submit proof of their legal proxy issued by their broker, bank, or other nominee that holds their shares by sending a copy of the legal proxy, along with their name and email address, to Computershare via email at legalproxy@computershare.com or by mail to P.O. Box 43001, Providence, RI 02940-3001. Requests for a control number must be labeled as “Legal Proxy” and be received by Computershare no later than 5:00 p.m., Eastern Time, on May 18, 2023. The Annual Meeting will include a question and answer session. Questions may be submitted during the Annual Meeting through the virtual meeting website, www.meetnow.global/MKAYVNG. If we receive substantially similar questions, we may group such questions together and provide a single response to avoid repetition and allow time for additional topics. We encourage stockholders to log in to the virtual meeting website and access the webcast early, beginning approximately 15 minutes before the Annual Meeting’s 2:00 p.m. (Pacific Time) start time. If you experience technical difficulties, please contact the technical support telephone number posted on www.meetnow.global/MKAYVNG. | 68 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING | | | | |
Section 16(a)
| Whether or not you choose to participate in the Annual Meeting, it is important that your shares be part of the voting process. In addition, even if you plan to attend the Annual Meeting, we encourage you to return your proxy card or provide your bank, broker or other institution with voting instructions, before the Annual Meeting in order to ensure that your shares are represented. |
What matters am I voting on? YOU WILL BE VOTING ON: | › | The election of ten directors to hold office until the 2024 annual meeting of stockholders or until their successors are duly elected and qualified; |
| › | A non-binding advisory vote to approve the compensation paid to our Named Executive Officers for 2022, as described in this Proxy Statement; |
| › | A non-binding advisory vote to approve the frequency of future advisory votes on executive compensation; |
| › | A proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2023; and |
| › | Any other business that may properly come before the Annual Meeting. |
How does the Board recommend I vote on these proposals? THE BOARD UNANIMOUSLY RECOMMENDS A VOTE: | › | FOR the election of the ten nominees as directors; |
| › | FOR the approval, on a non-binding, advisory basis, of the compensation paid to our Named Executive Officers for 2022; |
| › | FOR the approval, on a non-binding, advisory basis, of holding an advisory vote on executive compensation every “ONE” year; and |
| › | FOR the ratification of the appointment of KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2023. |
Who is entitled to vote? Holders of our common stock as of the Exchange Act requiresclose of business on the Record Date may vote at the Annual Meeting. As of the Record Date, we had 141,395,435 shares of common stock outstanding. In deciding all matters at the Annual Meeting, each stockholder will be entitled to one vote for each share of common stock held on the Record Date. We do not have cumulative voting rights for the election of directors. | › | Stockholders of Record. If your shares are registered directly in your name with our transfer agent, you are considered the stockholder of record with respect to those shares, and this Proxy Statement was provided to you directly by us. As the stockholder of record, you have the right to delegate your voting directly to the individuals listed on the proxy card or to vote in person at the virtual Annual Meeting. |
| › | Beneficial Owner: Street Name Stockholders. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, or a street name stockholder, and this Proxy Statement was forwarded to you by your broker, bank or other nominee, who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares. Beneficial owners are also invited to attend the Annual Meeting. However, because beneficial owners are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you follow your broker’s, bank’s or other nominee’s procedures for obtaining a legal proxy giving you the right to vote your shares at the Annual Meeting. |
| 69 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING | | | | |
How do I vote? If you are a stockholder of record, you may: | › | Instruct the proxy holder or holders on how to vote your shares by using the internet voting site at www. envisionreports.com/EWBC or the toll-free telephone number 1-800-652-VOTE (8683), 24-hours a day, seven days a week, until 2:00 p.m. Pacific Time on May 23, 2023 (have your proxy card in hand when you visit the website or call); |
| › | Instruct the proxy holder or holders on how to vote your shares by completing and mailing your proxy card to the address indicated on your proxy card (if you received printed proxy materials), which must be received by the time of the Annual Meeting; or |
| › | Vote by ballot at the virtual Annual Meeting. |
If you are a street name stockholder, you will receive instructions from your broker, bank or other nominee. The instructions from your broker, bank or other nominee will indicate the various methods by which you may vote, including whether internet or telephone voting is available. | › | Brokerage firms and other intermediaries holding shares in street name for their customers are generally required to vote those shares in the manner directed by their customers. A “Broker Non-Vote” occurs when the entity holding shares in street name has not received voting instructions from the beneficial owner and either chooses not to vote those shares on a routine matter at the stockholders meeting or is not permitted to vote those shares on a non-routine matter. |
| › | The only “routine” matter to be decided at the Annual Meeting is the proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2023 (Proposal 4). |
| › | Absent timely direction from you, your broker will not have discretion to vote on the other matters submitted for a vote at the Annual Meeting, which are the election of directors and the non-binding advisory votes to approve our executive compensation for 2022 and on the frequency of future advisory votes on executive compensation, as they are “non-routine” matters. |
| › | A “Broker Non-Vote” does not have an effect on the outcome of any proposal. It is important, therefore, that you provide instructions to your broker, bank, trust company or other nominee so that your vote with respect to the proposals is counted. |
Can I change or revoke my vote? Yes. Subject to any rules that your broker, bank or other nominee may have, you can change your vote or revoke your proxy before the Annual Meeting. If you are stockholder of record, you may change your vote by: | › | Entering a new vote via internet or telephone by 2:00 p.m. Pacific Time on May 23, 2023; or |
| › | Returning a later-dated proxy card which must be received by the time of the Annual Meeting; or |
| › | Completing a ballot in person via webcast at the virtual Annual Meeting. |
If you are a stockholder of record, you may revoke your proxy by providing our Corporate Secretary with a written notice of revocation prior to your shares being voted at the Annual Meeting. The written notice of revocation may be hand delivered to the Company’s Corporate Secretary or mailed to and received by East West Bancorp at 135 N. Los Robles Ave., 7th Floor, Pasadena, California 91101, Attention: Corporate Secretary. | 70 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING | | | | |
If you are a street name stockholder, you may change your vote by: | › | Submitting new voting instructions to your broker, bank or other nominee pursuant to instructions provided by your broker, bank or other nominee; or |
| › | Completing a ballot at the virtual Annual Meeting, provided you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote the shares. |
If you are a street name stockholder, you must contact your broker, bank or other nominee that holds your shares to find out how to revoke your proxy. What is the effect of giving a proxy? The persons named in the proxy cards have been designated as proxy holders. When proxy cards are properly dated, executed and returned, the shares represented by those proxy cards will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, however, the shares will be voted in accordance with the recommendations of the Board as described above. If any matter not described in this Proxy Statement is properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote your shares. If the Annual Meeting is adjourned, the proxy holders can vote your shares on the new meeting date as well, unless you have properly revoked your proxy. What is a quorum? A quorum is the minimum number of shares required to be present at the Annual Meeting for the meeting to be properly held under our Bylaws and Delaware law. The presence, in person or by proxy, of a majority of all issued and outstanding shares of common stock entitled to vote at the Annual Meeting will constitute a quorum at the Annual Meeting.
Abstentions and Broker Non-Votes will be treated as shares present and entitled to vote for purposes of determining the presence of a quorum. Assuming the presence of a quorum, how many votes are needed for approval of each proposal? | Proposal | Vote Required | Effect of “Abstain” Vote | Proposal 1 —
Election of Directors | Each director nominee must be elected by a vote of the majority of the votes cast, which means that the number of votes cast “FOR” a nominee’s election exceeds the number of votes cast “AGAINST” that nominee | No effect | Proposal 2 —
Advisory Vote to Approve
Executive Compensation
Proposal 4 — Ratification of Auditors | Each of Proposal 2 and Proposal 4 is approved if “FOR” votes are cast by the majority of the shares present, in person or by proxy, and entitled to vote on such proposal | Same effect as “AGAINST” | Proposal 3 – Advisory Vote
on Frequency of Future
Advisory Votes on Executive
Compensation | The option of one year, two years or three years, which receives the greatest number of votes present in person or by proxy and entitled to vote at the Annual Meeting, will be deemed to be the recommendation of the stockholders | No effect |
| 71 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING | | | | |
What happens if a director nominee does not receive a majority vote? In an uncontested election, any director nominee who receives a greater number of “AGAINST” votes than votes “FOR” the nominee’s election shall immediately tender to the Board his or her offer to resign from the Board. The Board, after taking into consideration the recommendation of the Nominating/Corporate Governance Committee, will determine whether or not to accept the resignation of any nominee for director who receives a greater number of “AGAINST” votes than votes “FOR” the nominee’s election. In the event of a contested election, the director nominees who receive the largest number of votes cast “FOR” their election will be elected as directors. How are proxies solicited for the Annual Meeting?
Who pays for the solicitation? Proxies are solicited by and on behalf of the Board. All expenses associated with this solicitation will be borne by us. Although there is no formal agreement to do so, we may reimburse brokers, banks and other nominees for their reasonable expense in forwarding these proxy materials to their principals. Proxies will be solicited principally through the mail, however, our directors, officers and employees may also solicit proxies personally, by telephone or via the internet. Directors, officers and employees will not be paid any additional compensation for soliciting proxies. We have retained Georgeson LLC to assist in the distribution and solicitation of proxies. Georgeson LLC may solicit proxies by personal interview, telephone, fax, mail and email. We expect that the Company’s directors, executive officersfee for these services will not exceed $12,000, plus reimbursement of customary out-of-pocket expenses. Is my vote confidential? Your vote will not be disclosed either within the Company or to third parties, except as necessary to meet applicable legal requirements, to allow for the tabulation of votes and any persons holding more than ten percent of a registered classcertification of the Company’s equity securities filevote, or to facilitate a successful proxy solicitation. I share an address with another stockholder, and we received multiple copies of the proxy materials. How can we obtain a single copy of the proxy materials? Stockholders who share an address and receive multiple copies of our proxy materials can request to receive a single copy in the future. To receive a single copy of the proxy materials, stockholders may contact us at:
Stockholders who hold shares in street name may contact their broker, bank, or other nominee to request information about “householding” (providing one copy of this Proxy Statement for all stockholders residing at one address).
In some cases, stockholders who hold their shares in street name and who share the same surname and address may receive only one copy of the proxy materials. If you would like to have a separate copy of the proxy materials mailed to you or receive separate copies of future mailings, please submit your request to your broker, bank or other nominee. We will deliver such additional copies promptly upon receipt of such request. | 72 | EAST WEST BANCORP 2023 PROXY STATEMENT |
| OTHER INFORMATION | | | | |
Where can I find the voting results of the Annual Meeting? We will disclose voting results on a Current Report on Form 8-K to be filed with the SEC within four business days after the Annual Meeting. If final voting results are not available to us in time to include them in the Form 8-K, we will file a Form 8-K to publish preliminary results and each exchange on whichwill provide the Common Stock is publicly listed, initial reports of ownership and reports of changesfinal results in ownership of Common Stock and other equity securities of the Company. Directors, officers and stockholders holding greater than ten percent are required by the SEC’s regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of copies of reports on Forms 3, 4, and 5 provided during the fiscal year ended December 31, 2015, the Company believes that all persons subjectan amendment to the reporting requirements of Section 16(a) filed all required reports on a timely basis.Form 8-K after final results become available. PROPOSALS OF STOCKHOLDERS |
Other Information PROPOSALS OF STOCKHOLDERS Proposals of stockholders intended to be included in the proxy materials for the 20172024 annual meeting of stockholders must be received by the Secretary of East West Bancorp, Inc. at 135 N. Los Robles Avenue, 7th7th Floor, Pasadena, California 91101 by December 15, 201612, 2023 (120 calendar days prior to the anniversary of this year’s April 10, 2023 mailing date).
Under Rule 14a-8 adopted by the SEC under the Exchange Act, proposals of stockholders must conform to certain requirements as to form and may be omitted from thethis Proxy Statement and proxy under certain circumstances. In order to avoid unnecessary expenditures of time and money by stockholders and by the Company, stockholders are urged to review this rule and, if questions arise, to consult legal counsel prior to submitting a proposal.
SEC rules also establish a different deadlineIn addition, the Company’s Bylaws provide that for submission of stockholder proposals that are not intendedand director nominations (other than under our proxy access bylaw) to be includedbrought properly before an annual meeting by a stockholder, the notice must be made in writing, contain the information required by our Bylaws regarding the stockholder and the director nominee and be delivered to the Secretary of the Company at the Company’s Proxy Statement with respectprincipal executive offices. Notice must be provided not less than 90 calendar days or more than 120 calendar days prior to discretionary voting (the “Discretionary Vote Deadline”). The Discretionary Vote Deadlinethe anniversary of the previous year’s annual meeting. If the meeting will be held more than 30 calendar days before or 60 calendar days after the anniversary date of the prior year’s annual meeting, notice must be delivered no more than 120 calendar days prior to the annual meeting and not later than the later of the 90th calendar day prior to the annual meeting and the 10th calendar day following the date of the initial public announcement of the date of such meeting. Accordingly, a stockholder proposal or director nomination (other than under our proxy access bylaw) for the 2017our 2024 annual meeting of stockholders ismust be submitted no earlier than February 28, 2017 (4523, 2024 and no later than January 24, 2024. For director nominations using our proxy access bylaw, the notice must be made in writing and must be delivered to the Secretary of the Company at the principal executive offices of the Company not less than 120 calendar days or more than 150 calendar days prior to the anniversary of the mailing date of this Proxy Statement). If a stockholder gives noticethe prior year’s proxy statement regarding the nomination, the nominee and the person making the nomination, including proof of such a proposal after the Discretionary Vote Deadline, Proxy holders will be allowed to use their discretionary voting authority to vote againstrequired number of shares held by the stockholder proposal without discussion when and if the proposal is raised at the 2017or group. Accordingly, a proxy access nomination for our 2024 annual meeting of stockholders.
stockholders must be submitted no earlier than November 12, 2023 and no later than December 12, 2023. The Company has not been notified by anyCompany’s Bylaws require the stockholder of his or her intentnotice to present aset forth certain information as to the matter the stockholder proposal from the floor at the Annual Meeting. The enclosed Proxy grants the Proxy holders discretionary authorityproposes to vote on any matter properly broughtbring before the Annual Meeting.annual meeting.
ANNUAL REPORT ON FORM 10-K |
ANNUAL REPORT ON FORM 10-K Our financial statements for the fiscal year ended December 31, 2015 are included in our Annual Report on Form 10-K, which was filed with the SEC and which we will make available to stockholders at the same time as this Proxy Statement. Our annual report and this Proxy Statement are posted on our website at www.eastwest.comwww.eastwestbank.com and are available from the SEC at its website at www.sec.gov. You may also obtain a copy of our annual reportAnnual Report and any exhibits thereto without charge by sending a written request to Investor Relations, East West Bancorp, Inc., 135 N. Los Robles Avenue, 7th7th Floor, Pasadena, California 91101.The Company’s annual report91101. The Annual Report on Form 10-K for the fiscal year ended December 31, 2015 will be mailed to all stockholders. The annual reportAnnual Report on Form 10-K includes financial statements required to be filed with the SEC pursuant to the Exchange Act for the fiscal year ended December 31, 2015,2022, and the report thereon of KPMG LLP, the Company’sour independent registered public accountingfirm. Management knows of no business, which 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.
| 73 | EAST WEST BANCORP INC. 2023 PROXY STATEMENT |
| | | | |  | | | DOUGLAS P. KRAUSE | | Corporate Secretary |
Pasadena, California
April 13, 2016
73
EXHIBIT A
(2016 East West Bancorp, Inc. Stock Incentive Plan)
EAST WEST BANCORP, INC.
2016 STOCK INCENTIVE PLAN
(As Amended and Restated through April 12, 2016)
Section 1. PURPOSE OF PLAN
This East West Bancorp, Inc. 2016 Stock Incentive Plan (the “Plan”) was established under the name 1998 Stock Incentive Plan (“1998 Plan”). The 1998 Plan hereby is amended, restated, and renamed as set forth herein, effective upon and subject to the approval of the stockholders of East West Bancorp, Inc., a Delaware corporation (the “Company”). The purpose of this Plan is to enable the Company and its subsidiaries to attract, retain and motivate their employees, consultants and other service providers by providing for or increasing the proprietary interests of such employees, consultants and other service providers in the Company, and to enable the Company and its subsidiaries to attract, retain and motivate nonemployee directors and further align their interests with those of the stockholders of the Company by providing for or increasing the proprietary interest of such directors in the Company.
Section 2. PERSONS ELIGIBLE UNDER PLAN
Each of the following persons (each, a “Participant”) shall be eligible to be considered for the grant of Awards (as hereinafter defined) hereunder: (1) any employee of the Company or any of its subsidiaries, including any director who is also such an employee, (2) any director of the Company or any of its subsidiaries who is not also an employee of the Company or any of its subsidiaries (a “Non-employee Director”) and (3) any consultant or other service provider of the Company or any of its subsidiaries.
Section 3. AWARDS
(A) The Committee (as hereinafter defined), on behalf of the Company, is authorized under this Plan to enter into any type of arrangement with a Participant that is not inconsistent with the provisions of this Plan and that, by its terms, involves or might involve the issuance of (i) shares of common stock of the Company (“Common Shares”) or (ii) a Derivative Security (as such term is defined in Rule 16a-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as such rule may be amended from time to time) with an exercise or conversion privilege at a price related to the Common Shares or with a value derived from the value of the Common Shares. The entering into of any such arrangement is referred to herein as the “grant” of an “Award.”
(B) Awards may include, without limitation, sales or bonuses of stock, restricted stock, restricted stock units, stock options, stock purchase warrants, other rights to acquire stock, securities convertible into or redeemable for stock, stock appreciation rights, phantom stock, dividend equivalents, performance units or performance shares, and an Award may consist of one such security or benefit, or two or more of them in tandem or in the alternative; provided that Non Qualified Stock Options may not be granted in tandem with Incentive Stock Options, as such terms are hereinafter defined. Dividend equivalents may not be issued in connection with stock options or stock appreciation rights.
(C) Awards may be issued, and Common Shares may be issued pursuant to an Award, for any lawful consideration as determined by the Committee, including, without limitation, services rendered by the recipient of such Award.
(D) In the discretion of the Committee, Common Shares or other types of Awards authorized under the Plan may be used in connection with, or to satisfy obligations of the Company or an affiliate to eligible employees, consultants, other service providers and Non-employee Directors under, other compensation or incentive plans, programs or arrangements of the Company or an affiliate. The minimum vesting provisions contained within the Plan may be satisfied by reference to the vesting or performance period of any such other
compensation or incentive plan, program or arrangement the obligations of which are satisfied through the use of Awards under the Plan.
(E) Subject to the provisions of this Plan, the Committee, in its sole and absolute discretion, shall determine all of the terms and conditions of each Award granted under this Plan, which terms and conditions may include, among other things:
(i) a provision permitting the recipient of such Award, including any recipient who is a director or officer of the Company, to pay the purchase price of the Common Shares or other property issuable pursuant to such Award, in whole or in part, by any one or more of the following:
(a) the delivery of cash, including cash forwarded through a broker or other agent sponsored exercise or financing program;
(b) the delivery of other property deemed acceptable by the Committee; or
(c) the delivery of previously owned shares of capital stock of the Company or other property or the net withholding of Common Shares issuable or through relinquishment of stock options.
(ii) a provision required in order for such Award to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (an “Incentive Stock Option” qualified under the “Code”); provided, however, that no Award issued to any non-employee or any Non-employee Director may qualify as an Incentive Stock Option.
(F) For the purposes of the Plan, “Change of Control” shall mean the first to occur of the following events:
(I) any date upon which the directors of the Company who were last nominated by the Board of Directors (the “Board”) for election as directors cease to constitute a majority of the directors of the Company, excluding any directors who were nominated by those that became directors as a result of a contested director election (proxy contest);
(II) the date of the first public announcement that any person or entity, together with all Affiliates and Associates (as such capitalized terms are defined in Rule 12b-2 promulgated under the Exchange Act of such person or entity, shall have become the Beneficial Owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of voting securities of the Company representing over 50% of the voting power of the Company (an “over 50% Stockholder”);provided,however, that the terms “person” and “entity,” as used in this clause (II), shall not include (1) the Company or any of its subsidiaries, (2) any employee benefit plan of the Company or any of its subsidiaries, (3) any entity holding voting securities of the Company for or pursuant to the terms of any such plan or (4) any person or entity who was an over 50% Stockholder on the date of adoption of the Plan by the Board; or
(III) a reorganization, merger or consolidation of the Company (other than a reorganization, merger or consolidation the purpose of which is (A) to change the Company’s domicile solely within the United States or (B) the formation of a holding company in which the shareholders of the holding company after its formation are substantially the same as for the Company prior to the holding company formation), the consummation of which results in the outstanding securities of any class then subject to Awards being exchanged for or converted into cash, property or a different kind of securities.
(G) The Committee will have the authority to accelerate the vesting of any Award previously granted under this Plan in the case of death or disability.
(H) Notwithstanding anything to the contrary contained in this Section 3, neither an Award nor any interest therein may be sold, assigned, transferred, conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner other than by will or the laws of descent and distribution.
(I) All certificates evidencing Awards or Common Shares issued pursuant thereto shall bear any legend determined by the Board or the Committee to be necessary or appropriate.
3.1 Stock Options
A stock option is a right to purchase a specified number of Common Shares at a specified price during such specified time as the Committee shall determine.
(a) Stock options granted may be either Incentive Stock Options or of a type that does not comply with such Code requirements (“Non Qualified Stock Options”). The requirements imposed by the Code and the regulations thereunder for qualification as an Incentive Stock Option, whether or not specified in this Plan, shall be deemed incorporated within any Award agreement pertaining to an Incentive Stock Option.
(b) The exercise price per Common Share of any stock option shall be no less than the Fair Market Value per Share subject to the stock option on the date the stock option is granted, except that in the case of an Incentive Stock Option granted to an employee who, immediately prior to such grant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any subsidiary (a “Ten Percent Employee”), the exercise price per Common Share shall not be less than one hundred ten percent (110%) of such Fair Market Value per Common Share on the date the Incentive Stock Option is granted.
“Fair Market Value” means, as of any date of determination, the most recent closing price per share of the Common Shares as published inThe Wall Street Journal unless otherwise determined by the Committee.
(c) The term of any stock option shall not be greater than ten years from its date of grant, except that in the case of an Incentive Stock Option granted to a Ten Percent Employee, such term shall not be greater than five years.
(d) A stock option may be exercised, in whole or in part, by giving written notice of exercise to the Company, specifying the number of Common Shares to be purchased, and the stock option may be subject to performance conditions and other terms as the Committee may determine from time to time, consistent with the Plan.
(e) Notwithstanding any other provision contained in the Plan or in any Award agreement, but subject to the possible exercise of the Committee’s discretion contemplated in the last sentence of this Section 3.1(e), the aggregate Fair Market Value on the date of grant, of the Common Shares with respect to which Incentive Stock Options are exercisable for the first time by an employee during any calendar year under all plans of the corporation employing such employee, any parent or subsidiary corporation of such corporation and any predecessor corporation of any such corporation shall not exceed $100,000, or such other or successor limit imposed by the Code. If the date on which one or more of such Incentive Stock Options could first be exercised would be accelerated pursuant to any provision of the Plan or any Award agreement, and the acceleration of such exercise date would result in a violation of the restriction set forth in the preceding sentence, then, notwithstanding any such provision, but subject to the provisions of the next succeeding sentence, the exercise dates of such Incentive Stock Options shall be accelerated only to the date or dates, if any, that do not result in a violation of such restriction and, in such event, the exercise dates of the Incentive Stock Options with the lowest option prices shall be accelerated to the earliest such dates. The Committee may, in its discretion, authorize the acceleration of the exercise date of one or more Incentive Stock Options even if such acceleration would violate the $100,000 restriction set forth in the first sentence of this paragraph and even if such Incentive Stock Options are thereby converted in whole or in part to Non Qualified Stock Options.
(f) Unless otherwise provided in an Award agreement, if the recipient of a stock option ceases to be an employee, consultant, other service provider or Non-employee Director of the Company and its subsidiaries for any reason, any outstanding stock options held by the optionee shall be exercisable according to the following provisions and shall otherwise terminate:
(i) If an optionee ceases to be an employee, consultant, other service provider or Non-employee Director for any reason other than resignation without the consent of the Company (or the Board, in the case of a Non-employee Director), termination for cause, disability or death, any then outstanding stock option held by such optionee which is exercisable by the optionee immediately prior to termination shall be exercisable by the optionee at any time prior to the expiration date of such stock option or within three months after the date the optionee terminates service, whichever is the shorter period;
(ii) If the optionee is terminated from employment or removed from the Board for cause, any outstanding stock option held by the optionee, whether or not exercisable immediately prior to termination, shall terminate as of the date of termination or removal;
(iii) If an optionee resigns without the consent of the Company (or the Board in the case of a Non-employee Director), any then outstanding stock option held by such optionee which is exercisable by the optionee immediately prior to termination shall be exercisable by the optionee at any time prior to the expiration date of such stock option or within thirty days after the date the optionee terminates service, whichever is the shorter period;
(iv) Following the death of an optionee during employment or service with the Company or a subsidiary or termination by reason of disability, any outstanding stock option held by the optionee at the time of death or termination of service (whether or not exercisable by the optionee immediately prior to death or termination of service) shall be exercisable by the optionee or person entitled to do so under the will of the optionee, or, if the optionee shall fail to make testamentary disposition of the stock option or shall die intestate, by the legal representative of the optionee at any time prior to the expiration date of such stock option or within one year after the date of death or termination of service, whichever is the shorter period; and
(v) Following the death of an optionee after ceasing to be an employee, consultant, other service provider or Non-employee Director and during a period when a stock option is exercisable, any outstanding stock option held by the optionee at the time of death shall be exercisable by such person entitled to do so under the will of the optionee or by such legal representative (but only to the extent the stock option was exercisable by the optionee immediately prior to the death of the optionee) within one year after the date of death, but not later than the expiration date of such stock option.
(g) Except as provided in Section 7, the terms of outstanding Awards may not be amended to reduce the exercise price of outstanding stock options or stock appreciation rights or cancel or replace outstanding stock options or stock appreciation rights in exchange for cash, other Awards or stock options or stock appreciation rights with an exercise price that is less than the exercise price of the original stock options or stock appreciation rights without stockholder approval.
3.2 Stock Appreciation Rights
A stock appreciation right is a right to receive, upon surrender of the right, an amount payable in cash and/or Common Shares under such terms and conditions as the Committee shall determine.
(a) A stock appreciation right may be granted in tandem with part or all of (or in addition to, or completely independent of) a stock option or any other Award under this Plan. A stock appreciation right issued in tandem with a stock option may only be granted at the time of grant of the related stock option.
(b) The amount payable in cash and/or Common Shares with respect to each right shall be equal in value to a percentage (including up to a maximum of 100%) of the amount by which the Fair Market Value per Common Share on the exercise date exceeds the Fair Market Value per Common Share on the date of grant of the stock appreciation right. The applicable percentage shall be established by the Committee. The exercise price for a stock appreciation right shall be no less than the Fair Market Value per Common Share subject to the stock appreciation right on the date the stock appreciation right is granted. The Award agreement may state whether the amount payable is to be paid wholly in cash, wholly in Common Shares or partly in each; if the Award agreement does not so state the manner of payment, the Committee shall determine such manner of payment at the time of payment. The amount payable in Common Shares, if any, is determined with reference to the Fair Market Value per Common Share on the date of exercise. The term of a stock appreciation right shall not be greater than ten years from its date of grant.
(c) Stock appreciation rights issued in tandem with stock options shall be exercisable only to the extent that the stock options to which they relate are exercisable. Upon exercise of the tandem stock appreciation right, and to the extent of such exercise, the Participant’s underlying stock option shall automatically terminate. Similarly, upon the exercise of the tandem stock option, and to the extent of such exercise, the Participant’s related stock appreciation right shall automatically terminate.
(d) Notwithstanding any other provision of this Plan to the contrary, with respect to a stock appreciation right granted in connection with an Incentive Stock Option: (i) the stock appreciation right will expire no later than the expiration of the underlying Incentive Stock Option; (ii) the value of the payout with respect to the stock appreciation right may be for no more than one hundred percent (100%) of the difference between the exercise price of the underlying Incentive Stock Option and the Fair Market Value of the Common Shares subject to the underlying Incentive Stock Option at the time the stock appreciation right is exercised; and (iii) the stock appreciation right may be exercised only when the Fair Market Value of the Common Shares subject to the Incentive Stock Option exceeds the per Common Share exercise price of the Incentive Stock Option.
(e) Unless otherwise provided in an Award agreement, the post termination provisions of Section 3.1(f) shall also apply to stock appreciation rights.
3.3 Restricted Stock
(a) Restricted stock is stock that is issued to a Participant and is subject to such terms, conditions and restrictions as the Committee deems appropriate, which may include, but are not limited to, restrictions upon the sale, assignment, transfer or other disposition of the restricted stock and the requirement of forfeiture of the restricted stock upon termination of service under certain specified conditions and/or the failure to achieve performance conditions, including conditions relating to the Performance Criteria, as hereinafter defined. The restriction period applicable to restricted stock shall, in the case of a time based restriction, be not less than three years, with no more frequent than ratable vesting over such period or, in the case of a performance based restriction period, be not less than one year. The Committee may provide for the lapse of any such term or condition or waive any term or condition based on such factors or criteria as the Committee may determine; provided, however, except in the case of death, disability or involuntary termination other than for cause, the Committee will not accelerate the vesting of, or waive the restrictions with respect to, restricted stock. Subject to the restrictions stated in this Section 3.3 and in the applicable Award agreement, the Participant shall have, with respect to Awards of restricted stock, all of the rights of a stockholder of the Company, including the right to vote the restricted stock and the right to receive any cash dividends on such Common Shares. Unless otherwise determined by the Committee, dividends or other distributions on restricted stock which are paid in Common Shares or other securities or property shall be held subject to the same terms, conditions and restrictions as the restricted stock on which they are paid.
(b) Unless otherwise provided in an Award agreement, if the recipient of restricted stock ceases to be an employee, consultant, other service provider or Non-employee Director of the Company and its subsidiaries for
any reason, any outstanding shares of restricted stock held by the awardee shall vest or be forfeited according to the following provisions:
(i) If an awardee ceases to be an employee, consultant, other service provider or Non-employee Director by reason of death, disability or retirement (as defined in an Award agreement), any shares of restricted stock held by the awardee at the time of termination of service shall immediately vest;
(ii) If an awardee ceases to be an employee, consultant, other service provider or Non-employee Director for any reason other than death, disability or retirement (as defined in an Award agreement), any shares of restricted stock held by the awardee at the time of termination of service shall be immediately forfeited.
3.4 Performance Awards
(a) Performance awards may be granted under this Plan from time to time based on such terms and conditions as the Committee deems appropriate; provided that such Awards shall not be inconsistent with the terms and purposes of this Plan. Performance awards are Awards the payment or vesting of which is contingent upon the achievement of specified levels of performance under specified Performance Criteria, as hereinafter defined, or other performance criteria specified by the Committee, during a specified performance period by the Company, a subsidiary or subsidiaries, any branch, department, business unit or other portion thereof or the Participant individually, and/or upon a comparison of such performance with the performance of a peer group of corporations, prior performance periods or other measure selected or defined by the Committee at the time the performance award is granted. Performance awards may be in the form of performance units, performance shares, performance-based options pursuant to Section 3.1 and such other forms of performance awards as the Committee shall determine. The performance period applicable to performance awards shall be no less than one year, except in the case of earlier termination due to death, disability, retirement or Change of Control.
(b) Following completion of the applicable performance period, and prior to any payment of a performance award to the Participant, the Committee shall determine in accordance with the terms of the performance award and shall certify in writing whether the applicable performance goal or goals were achieved, or the level of such achievement, and the amount, if any, earned by the Participant based upon such performance, subject to any negative discretion retained by the Committee. For this purpose, approved minutes of the meeting of the Committee at which certification is made shall be sufficient to satisfy the requirement of a written certification. Performance awards are not intended to provide for the deferral of compensation, such that, unless a deferred election or arrangement is otherwise offered consistent with Section 409A of the Code, payment of performance awards shall be paid within two and one-half months following the end of the calendar year in which vesting occurs or such other time period if and to the extent as may be required to avoid characterization of such Awards as deferred compensation.
(c) Unless otherwise provided in an Award agreement, the following provisions shall apply if the recipient of a performance award ceases to be an employee, consultant, other service provider or Non-employee Director of the Company and its Participating subsidiaries for any reason prior to payment of the performance award:
(i) If an awardee ceases to be an employee, consultant, other service provider or Non-employee Director by reason of disability, death or retirement (as defined in an Award agreement) during the performance period, the Employee will be entitled to a pro-rata portion of the performance award based upon the number of whole and partial months of service during the performance period, contingent upon achievement of the performance goals and subject to any negative discretion retained by the Committee;
(ii) If an awardee ceases to be an employee, consultant, other service provider or Non-employee Director for any reason other than disability, death or retirement (as defined in an Award agreement) during the performance period, any performance award shall be immediately forfeited.
3.5 Other Awards
The Committee may from time to time grant Common Shares, other Share-based and non-Share-based Awards under the Plan (singly, in tandem or in combination with other Awards), including without limitation those Awards pursuant to which Common Shares are or may in the future be acquired, Awards denominated in Common Share units (including, without limitation, restricted stock units), securities convertible into Common Shares, phantom securities, dividend equivalents and cash. The Committee shall determine the terms and conditions of such other Common Shares, Share-based and non-Share-based Awards, provided that such Awards shall not be inconsistent with the terms and purposes of this Plan. Other Awards are not intended to provide for the deferral of compensation, such that, unless a deferred election or arrangement is otherwise offered consistent with Section 409A of the Code, payment of other Awards shall be paid within two and one-half months following the end of the calendar year in which vesting occurs or such other time period if and to the extent as may be required to avoid characterization of such Awards as deferred compensation.
Section 4. STOCK SUBJECT TO PLAN; LIMITATIONS
(A) Subject to the adjustment provisions of Section 7 hereof, the maximum aggregate number of Common Shares which may be granted pursuant to the Plan is the sum of (i) the number of Shares available under the Plan immediately prior to shareholder approval of this Plan (as of December 31, 2015, there were 3,016,324 Common Shares were available, subject to the counting, adjustment and substitution provisions of the Plan) and (ii) 3,000,000 Shares, all of which may be issued as Incentive Stock Options. In the case of a cash-denominated Award to be settled in shares (such that the maximum number of shares issuable cannot be determined at the date of the grant), this limitation will apply to the Awards at grant by deeming the Award to cover the number of shares having a then Fair Market Value equal to the maximum cash amount earnable under the Award. The foregoing shall be subject to adjustment as provided in Section 7 hereof. All awards issued under the Plan, regardless of type, shall count as one share against the aggregate number of Common Shares issuable hereunder.
(B) Any Common Shares which are subject to any unexercised or undistributed portion of any terminated, expired or forfeited Award (or Awards settled in cash in lieu of Common Shares) shall become available for grant pursuant to new Awards. If the exercise price of an Award is paid by delivering to the Company Common Shares previously owned by the Participant or if Common Shares are delivered or withheld for purposes of satisfying a tax withholding obligation, the number of Common Shares covered by the Award equal to the number of Common Shares so delivered or withheld shall, however, be counted against the number of Common Shares granted and shall not again be available for Awards under the Plan. Stock appreciation rights to be settled in Common Shares shall be counted in full against the number of Common Shares available for award under the Plan regardless of the number of Common Shares issued upon settlement of the stock appreciation right.
(C) Subject to the adjustment provisions of Section 7 hereof, the maximum amount that may be paid under all performance awards under the Plan, including any form of Awards based on the Performance Criteria, to any one Participant during a calendar year shall in no event exceed 1,000,000 Common Shares, in the case of performance awards paid in Common Shares. In the case of multi year performance periods, the amount which is earned in any one calendar year is the amount paid for the performance period divided by the number of calendar years in the period. In applying this limit, the amount of cash and the number of Common Shares earned by a Participant shall be measured as of the close of the applicable calendar year which ends the performance period, regardless of the fact that certification by the Committee and actual payment to the Participant may occur in a subsequent calendar year or years.
(D) Subject to the adjustment provisions of Section 7 hereof, the maximum aggregate number of Common Shares available for grants of stock options or stock appreciation rights to any one Participant under the Plan shall not exceed 1,000,000 Common Shares per calendar year. The limitations contained herein shall be interpreted and applied in a manner consistent with Section 162(m) of the Code.
(E) Subject to the adjustment provisions of Section 7 hereof, the maximum aggregate number of Common Shares available for grants of Awards to any one Non-employee Director Participant under the Plan shall not exceed 1,000,000 Common Shares per calendar year.
Section 5. PERFORMANCE-BASED COMPENSATION
(A) The Committee may, in its sole discretion, make Awards to Participants intended to comply with the “performance-based” compensation requirements of Section 162(m) of the Code. The granting or vesting of such Awards will be determined based on the attainment of objective written performance goals for a performance period specified by the Committee. The performance goal will state, in terms of an objective formula or standard, the method for computing the granting or vesting of the Award if the goal is attained. The performance goals must be established by the Committee in writing no later than 90 days after the commencement of the performance period or, if less, the number of days which is equal to 25% of the relevant performance period. Performance goals will be based on the attainment of one or more performance measures described below. To the degree consistent with Section 162(m) of the Code, the performance goals may be calculated without regard to extraordinary items. The Committee must certify in writing prior to the payment of performance-based compensation attributable to Awards of restricted stock, restricted stock units and/or performance shares or performance units that the performance goals applicable to such Awards, as well as any other material terms applicable to such Awards, were satisfied.
(B) The Committee shall establish Company performance goals for the granting or vesting of “performance-based” Awards, which may be a fixed target, comparison to a prior period, or a comparison to peer banks or other measure selected by the Committee, and which will be based solely upon one or more of the following performance measures: total stockholder return; return on stockholder equity; return on assets; ratio of non-performing assets to total assets; earnings per share; deposits; demand deposits, loans; commercial business loans; trade finance loans; non-interest income; expenses; and stock price (“Performance Criteria”). The Committee may elect to specify other performance criteria for Awards not intended to qualify as performance-based compensation under Section 162(m) of the Code. Performance measures may relate to the Company and/or one or more of its subsidiaries, one or more of its divisions or units or any combination of the foregoing, on a consolidated or nonconsolidated basis, and may be applied on an absolute basis or be relative to one or more peer group companies or indices, or any combination thereof, all as the Committee determines. For purposes of the Plan, each of the Performance Criteria shall be as set forth in the Company’s year-end financial statements and balance sheets or market reported prices, with such adjustments as are set forth below. For purposes of the Plan, each of the above criteria that are based upon income, earnings or profits of the Company shall be calculated before taking into account any bonus award paid or payable under this Plan unless otherwise determined by the Committee. In establishing performance criteria for any Plan Year, the Committee may elect to adjust the Performance Criteria to include or exclude changes in accounting principles but may not make other changes to the Performance Criteria except to the extent consistent with Section 162(m) of the Code.
Section 6. ADMINISTRATION OF PLAN
(A) This Plan shall be administered by a committee (the “Committee”) of the Board of Directors of the Company (the “Board”) consisting of two or more Non-employee Directors of the Company. In selecting directors for the Committee, it is intended that such directors shall qualify as “outside directors” within the meaning of Section 162(m) of the Code, “Non-Employee Directors” within the meaning of Rule 16b-3 and independent directors under the rules of any stock exchange on which the Common Shares may be listed and under any other applicable regulatory requirements, but no action of the Committee shall be void or voidable based on any failure of a member to so qualify. Any action of the Committee may be taken instead by the Board of Directors except to the extent required by Section 162(m) of the Code, and any grant of an Award to a Non-employee Director shall be subject to approval of the Board.
(B) Subject to the provisions of this Plan, the Committee shall be authorized and empowered to do all things necessary or desirable in connection with the administration of this Plan, including, without limitation, the following:
(i) adopt, amend and rescind rules and regulations relating to this Plan;
(ii) determine which persons are Participants and to which of such Participants, if any, Awards shall be granted hereunder;
(iii) grant Awards to Participants and determine the terms and conditions thereof, including the number of Common Shares issuable pursuant thereto;
(iv) determine whether, and the extent to which, adjustments are required pursuant to Section 7 hereof;
(v) interpret and construe this Plan and the terms and conditions of any Award granted hereunder; and
(vi) certify in writing prior to payment of compensation that the performance goals and any other material terms of an Award were in fact satisfied. For this purpose, approved minutes of the Committee meeting in which the certification is made are treated as a written certification.
(C) Unless prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or some of its responsibilities and powers to any one or more of its members and also may delegate all or some of its responsibilities and powers to any person or persons it selects. The Committee may revoke any such allocation or delegation at any time.
(D) Notwithstanding the foregoing provisions of this Section 6, no power given the Committee herein shall be used after a Change of Control to affect detrimentally the rights of any Participant with respect to any Awards hereunder which are outstanding immediately prior to the Change of Control.
Section 7. ADJUSTMENTS
If the outstanding securities of the class then subject to this Plan are increased, decreased or exchanged for or converted into cash, property or a different number or kind of securities, or if cash, property or securities are distributed in respect of such outstanding securities, in either case as a result of a reorganization, merger, consolidation, recapitalization, restructuring, reclassification, dividend (other than a regular cash dividend) or other distribution, stock split, reverse stock split or the like, or if substantially all of the property and assets of the Company are sold, then, the Committee shall make appropriate and proportionate adjustments in (i) the number and type of shares or other securities or cash or other property that may be acquired pursuant to Awards theretofore granted under this Plan and (ii) the maximum number and type of shares or other securities that may be issued pursuant to Awards thereafter granted under this Plan and under each limit (including the per person limits) specified in the Plan.
In case of any adjustment or substitution as provided for in this Section 7, the aggregate option price for all Common Shares subject to each then outstanding stock option, stock appreciation right, performance award or other Award, prior to such adjustment or substitution shall be the aggregate option price for all shares of stock or other securities (including any fraction), cash or other property to which such Common Shares shall have been adjusted or which shall have been substituted for such Common Shares. Any new option price per share or other unit shall be carried to at least three decimal places with the last decimal place rounded upwards to the nearest whole number.
If the outstanding shares of the Common Shares shall be changed in value by reason of any spin off, split off or split up, or dividend in partial liquidation, dividend in property other than cash, or extraordinary distribution to shareholders of the Common Shares, (a) the Committee shall make any adjustments to any then outstanding
stock option, stock appreciation right, performance award or other Award, which it determines are equitably required to prevent dilution or enlargement of the rights of optionees and awardees which would otherwise result from any such transaction, and (b) unless otherwise determined by the Committee in its discretion, any stock, securities, cash or other property distributed with respect to any restricted stock held in escrow or for which any restricted stock held in escrow shall be exchanged in any such transaction shall also be held by the Company in escrow and shall be subject to the same restrictions as are applicable to the restricted stock in respect of which such stock, securities, cash or other property was distributed or exchanged.
Section 8. CHANGE OF CONTROL
Notwithstanding any other provision of the Plan to the contrary, and unless the applicable Award agreement shall otherwise provide, in the event the employment or service of a Participant is terminated by the Company without “Cause”, as defined in this Section 8, within three years following the occurrence of a Change of Control of the Company:
(i) all stock options and freestanding stock appreciation rights which are then outstanding hereunder shall become fully vested and exercisable;
(ii) all restrictions with respect to shares of restricted stock and restricted stock units which are then outstanding hereunder shall lapse, and such shares and units shall be fully vested and nonforfeitable; and
(iii) the uncompleted performance periods for all performance awards which are then outstanding shall be deemed to be completed, and all performance criteria and other conditions relating to such performance awards shall automatically be deemed waived for the entire performance period, and the participant shall become entitled to receipt of the target number of shares of Common Shares subject to such awards.
For purposes of this Section 8, following a Change of Control, “Cause” means any termination of employment where it can be shown that the Participant has (i) willfully failed to perform his or her employment duties for the Company, (ii) willfully engaged in conduct that is materially injurious to the Company, monetarily or otherwise, or (iii) committed acts that constitute a felony under applicable federal or state law or constitute common law fraud. For purposes of this definition, no act or failure to act on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company.
Section 9. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and in any manner, except for the provisions of the Plan which specify that certain actions or matters must be approved by the stockholders, and provided that no such amendment or termination shall deprive the recipient of any Award theretofore granted under this Plan, without the consent of such recipient, of any of his or her rights thereunder or with respect thereto.
Section 10. EFFECTIVE DATE OF PLAN AND DURATION OF THE PLAN
This Plan as amended shall be effective as of the latter of the date upon which it was approved by the Board of Directors of the Company subject to stockholder approval and the date on which it was approved by the holders of a majority of the voting securities of the Company (the “Effective Date”). The Committee shall have authority to grant Awards hereunder from the Effective Date until the tenth (10th) anniversary of the Effective Date, subject to the ability of the Board to terminate the Plan as provided in Section 9 hereof. Absent additional stockholder approval, no performance awards may be granted under the Plan subsequent to the time required for re-approval under the regulations issued pursuant to Section 162(m) of the Code.
Section 11. FOREIGN PLAN REQUIREMENTS
To the extent the Committee deems it necessary, appropriate or desirable to comply with foreign law or practices and to further the purpose of the Plan, the Committee may, without amending this Plan, establish special rules and/or sub plans applicable to Awards granted to Participants who are foreign nationals, are employed outside the United States, or both, and may grant Awards to such Participants in accordance with those rules. In the event that the payment amount is calculated in a foreign currency, the payment amount will be converted to U.S. dollars using the prevailing exchange rate published inThe Wall Street Journal (or in such other reliable publication as the Committee, in its discretion, may determine to rely on) on the relevant date.
Section 12. RIGHTS OF PARTICIPANTS
(a) Status as an eligible Participant shall not be construed as a commitment that any Award will be made under the Plan to such eligible Participant or to eligible Participants generally.
(b) Nothing contained in the Plan (or in any other documents related to this Plan or to any Award) shall confer upon any employee, consultant or other service provider or Participant any right to continue in the employ or service of the Company or any of its subsidiaries or constitute any contract or limit in any way the right of the Company or any subsidiary to change such person’s compensation or other benefits or to terminate the employment of such person with or without cause or limit the right of the Board or the Company’s stockholders to elect or remove directors.
Section 13. WITHHOLDING
To the extent required by applicable Federal, state, local or foreign law, the Participant or his or her successor shall make arrangements satisfactory to the Company, in its discretion, for the satisfaction of any withholding tax obligations that arise in connection with an Award. The Company shall not be required to issue any Common Shares or make any cash or other payment under the Plan until such obligations are satisfied.
The Company is authorized to withhold from any Award granted or any payment due under the Plan, including from a distribution of Common Shares, amounts of withholding taxes due with respect to an Award, its exercise or any payment thereunder, and to take such other action as the Committee may deem necessary or advisable to enable the Company and Participants to satisfy obligations for the payment of such taxes. This authority shall include authority to withhold or receive Common Shares or other property, to make cash payments in respect thereof in satisfaction of such tax obligations, and the ability to restrict withholding to statutory minimum amounts where necessary or applicable to avoid adverse accounting treatment.
Section 14. GOVERNING LAW
This Plan and any Award granted hereunder shall be governed by and construed and enforced in accordance with the laws of the State of California without reference to choice or conflict of law principles.
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