UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

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Securities Exchange Act of 1934

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Prudential Financial, Inc.

 

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2014 P R O X Y S T A T E M E N T

Notice of Annual Meeting of Shareholders to be held on May 13, 2014


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Rebuilding the Town Commons

“These projects are the latest examples of our deep and lasting commitment to Newark and our neighbors. We are proud to be an active partner in the city that has been our home for more than 138 years.”

John Strangfeld

Prudential’s Chairman and CEO

Rebuilding the Town Commons

Military Park is a six acre green space located in the heart of downtown Newark, NJ. Originally providing space for local troop drills, the Park transitioned into a town commons after the Civil War.

After many years of benign neglect, Military Park is scheduled for a make-over, thanks to significant investments from a number of organizations including Prudential. The $3.2 million project will restore historically significant statues, replace ailing trees and gardens, improve lighting, and create new seating areas and a new café. New programming in the Park will draw residents, local business employees and visitors to Newark to the site.

Rebuilding Military Park into a gathering place for all Newarkers is part of Prudential’s commitment to the city’s redevelopment.

In 2013, Prudential began a targeted campaign of investments and grant making around the site of Prudential’s new office tower. The initiative will provide up to $10 million in grants from The Prudential Foundation and $75 million in social investments that will benefit Newark businesses, community organizations and residents.

These resources will help to transform the physical and social fabric around the new tower and help expand its benefits into the surrounding neighborhoods.

Since 2010, Prudential’s Shareholder Vote Incentive Program has provided registered shareholders who vote their proxy an opportunity to have a tree planted in their name. In early 2014, this partnership between Prudential and its registered shareholders reached an important milestone: More than 500,000 trees have been planted since the program’s inception.

By voting their proxies, or electing electronic delivery of proxy materials or direct deposit of stock dividends, shareholders have supported significant reforestation efforts. Since its inception, the program has helped to restore national forests in California, Minnesota and Florida. In the past two years, efforts have focused on

Osceola National Forest, located in northern Florida, near Prudential’s regional office in Jacksonville. This year, in addition to continued efforts in Osceola National Forest, a portion of the trees selected through the program will be used to plant trees in Newark, New Jersey, in support of “Newark Greenstreets.” This project is helping to improve the environmental health of the city while providing job training for city residents. Planting trees in Newark provides another opportunity to solidify our ongoing commitment to support the city and other communities where our employees live and work.


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Prudential Financial, Inc.

751 Broad Street,

Newark, NJ 07102

 

 

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Thomas J. Baltimore, Jr.

 

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Gordon M. Bethune

 

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Gaston Caperton

 

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Gilbert F. Casellas

 

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James G. Cullen

 

Prudential Financial, Inc.

751 Broad Street, Newark, NJ 07102

March 26, 201325, 2014

LETTER FROM THE BOARD OF DIRECTORS

TO OUR SHAREHOLDERS

As directors, we are pleased to be stewards of your Company. We strive to govern Prudential in a prudent and transparent manner to help the Company we focus on achieving long-termachieve sustainable operating and financial performance, and creatingto deliver long-term value for our shareholders through prudent execution of strongshareholders. We focus our attention on overseeing the Company’s business strategies, excellent risk management, talent development and succession planning,planning. We are pleased to share our progress and oversight.perspectives regarding specific actions that we undertook for our shareholders in 2013.

Over the past year, we have been gratified byOutreach and Engagement

We greatly appreciate your continued response to our efforts to improve shareholder engagement and outreach, which was one ofengage with our key priorities. As evidence of our progress,shareholders. In 2013, we received approximately 2,800more than 2,500 direct communications from you, a significant increase from 2011. Thank you for your continued interest and engagement with us.you.

Your support forAt last year’s annual meeting, our advisory “say on pay” proposal atreceived the ratesupport of almost 96%78 percent of the votes cast, expressed satisfaction with Prudential’sa decrease from the previous year. Over the past year, as part of our ongoing effort to align our executive compensation program. We regularly reviewprogram with the interests of our compensation programs,shareholders, we met with investors and other stakeholders to gain a deeper understanding of your opinions about our executive compensation. In response to your feedback, we made further changesseveral modifications to our executive compensation program including a change in 2012the mix of the long-term incentive program so that participants receive a greater proportion of their long-term awards in performance shares. We believe these actions are responsive to continue improvingyour feedback and reinforce the alignmentlink between the interests of our executive compensationofficers and our shareholders.

BUILDING SUSTAINABLE GROWTH

Achieving Sustainable Performance

In 2013, the Company accomplished its goal of delivering a superior return on equity with the strategic goalsstrong performance across its businesses. This result was achieved through execution of the Company. We hopeCompany’s strategy of delivering growth organically and through targeted acquisitions in key markets and segments that we will continue to meet your expectations for oversight again this year.

GROW BY TAKING PRUDENT RISKS AND PROTECT BY LIVING OUR VALUES

Grow. Incomplement Prudential’s business mix. The combination of organic growth and opportunities presented through the past year, the Company grew its business through transactionsintegration of Star Life and Edison Life in Japan that led the industry. We entered into innovative pension risk transfer agreements with two iconic American companies, capitalizing on our well established capabilitieswas acquired in insurance2011 and our track record of keeping our promises to our customers. We also acquired The Hartford’s Individual Life Insurance business creating an organization with greater scale, enhanced product offerings and an expanded distribution network to meet the life insurance needs of Americans and their families. As a result of that acquisition, our Individual Life Insurance business will rank among the five largest individual life insurance companieswas acquired in the US (in terms of new recurring premium sales). We will also have leadership positionsU.S in universal, term and variable life insurance. Together, these transactions build on the success of the recent Star Life and Edison Life acquisitions that strengthened our businesses in Japan.

Taking Prudent Risks.Risk taking is an inherent part of our business, and we take our responsibility for oversight of Prudential’s risk profile very seriously. Through our oversight, we set standards for managing risks and monitoring the management of those risks within the Company.

We also reviewed the Company’s Enterprise Risk Management Governance structure and the systems for identifying and managing risk on an ongoing basis. The complex environment in which we operate,2013, as well as our regulatory responsibilities and growing businesses require vigilance for early identification and assessment ofthe landmark pension risk followed by responses that are thoughtful and appropriate. To support this effort,transfer agreements we approvedcompleted in late 2012, have distinguished the restructuring ofCompany within the Company’s risk management function by separating the roles of our Chief Risk Officer and the Chief Actuary.industry.

 

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       1  


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Letter From the Board of Directors

LETTER FROM THE BOARD OF DIRECTORS(CONTINUED)

 

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William H. Gray III

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Mark B. Grier

 

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Constance J. Horner

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Martina Hund-Mejean

 

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Karl J. Krapek

 

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Christine A. Poon

Protect.Prudential has a strong commitment in promoting a culture of ethics and integrity that defines how we do business.Our International Growth Story Anchored by Japan

AsOur International Businesses present long-term opportunities for our Company. More than half of Prudential’s employees work in our operations outside of the U.S. Today, Japan is central to our international strategy. Consequently, in April 2013, we held the Board’s annual offsite in Tokyo, the headquarters of Prudential in Japan. Over the course of several days, we met with the senior management of our Asian businesses to discuss their strategies, outlook, challenges and opportunities. We also met many employees, whose observations and experiences reinforced the strength of Prudential’s culture, commitment to doing business the right way and sharp focus on talent management.

Risk Management and the New Regulatory Environment

Managing and monitoring risks is important to our oversight of Prudential, and we take this responsibility very seriously. We regularly review the Company’s risk profile, including its approach to capital management, its operational footprint, and its investment risks and strategies.

In 2013, we also spent considerable time assessing the global regulatory environment. Last September, Prudential was designated as a non-bank “Systemically Important Financial Institution” (SIFI) by the Financial Stability Oversight Council in the U.S. and a “Global Systemically Important Insurer” (GSII) by the Geneva-based Financial Stability Board. While the capital standards and the requirements associated with leverage, liquidity, stress-testing and overall risk management have not been finalized, we have been working with management over the last year to prepare for federal oversight. We have supported their efforts to advise the Federal Reserve Board and other regulators about the important differences in the risk and operating profiles of banks and insurance companies and to influence the development of smart regulation.

Talent Development and Succession Planning

Recruiting, developing and retaining top industry talent is a key priority for the Company and it is a role in which we are actively engaged. Each fall, we spend the majority of one of our Board meetings discussing talent at all business and functional leadership levels across the Company. This exercise gives us rich insight into the Company’s pool of talent and its succession plans.

Fostering a Strong Worldwide Ethical Culture

We recognize the importance of doing business the right way in all of our locations across the globe. We expect employees, wherever they are located in the world, to adhere to strong ethical values. We work with management to cultivateset and communicate the right ethical “tone” for the Company, which guides our conduct and protects the Company’s reputation. The Company recently appointed a strong company culture and system of core values that give high priority to ethical standards, principles of fair dealing, professionalism, integrity and compliance with legal requirements. Thisnew chief corporate ethics officer, who is located in Japan, as a foundational expectation of all our employees, and we believe that the “right tone at the top” should be apparent in allvisible reminder of our actions.

To preserve that tone and continue our business success, succession planning for our most senior managers is an important area of focus. Every year, we review and discuss plans for the development of our high potential leaders.

In addition, we are making strides to highlight the sustainable value we provide to shareholders and customers. We published our first Sustainability Report last year, and the Company has joined a growing network of investors, corporations and public interest groups committed to accelerating and expanding the adoption of sustainable business practices and solutions to build a healthy global economy.

Engagement and paying close attention to shareholder perspectives of the Company foster long-term relationships that are important components of sustainability. Therefore, in partnership with management, we work to connect with shareholders, address your concerns and sustain your trust throughout the year.

Living our Values. In the Company’s commitment to social responsibility, Prudential thinks globally and acts locally. The Company has a long-standing and deep investment in our hometown of Newark, N.J., with a sharp focus on a few critical areas within education and economic development, especially public school reform and small business growth. We are beginning construction on a new office tower in downtown Newark, which will create another physical example of our ongoing commitment to the local community for many years to come.

We want to underscore the Board’s commitment to the values that distinguish Prudential as a company. These values served the Company and our employees well last year, as we faced the shock and aftermath of Superstorm Sandy right here in our communities and neighborhoods.

The Prudential Foundation committed $3 million after the disaster to support 15 organizations, and we established programs to help our own employees who were impacted by the storm. In addition, more than 500 Prudential employees applied for and received immediate assistance from the Company’s Associate Relief Fund. We could not be more proud of the Prudential employees who made donations of nearly $80,000 which were matched by the Prudential Foundation. In addition, employee food drives collected more than 3,000 pounds of food for the Community Food Bank of New Jersey, which provided meals for individuals and families affected by the storm.

worldwide commitment.

 

 

 
2      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


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Letter From the Board of Directors

LETTER FROM THE BOARD OF DIRECTORS(CONTINUED)

 

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ChristineDouglas A. PoonScovanner

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John R. Strangfeld

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James A. Unruh

 

REMEMBERING OUR COLLEAGUE AND FRIEND

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William H. Gray III

In 2013, we mourned the passing of our esteemed colleague, fellow Director, and friend, William “Bill” H. Gray III. A staunch and globally recognized champion of human rights, diversity and education, Bill served as one of the highest ranking African-American members of Congress, promoted democracy in South Africa and Haiti, transformed the United Negro College Fund, and mentored a generation of political and business leaders. Bill was an active and important voice on our Board for nearly 22 years, and we will miss his wisdom, judgment and knowledge.

YOUR VIEWPOINTSYour Viewpoints

We value your support. Wesupport, and we encourage you to share your opinions, suggestions, interests and concerns and invite youwith us. You can do so by writing to write to us with your comments and suggestions at the address below. You can also send an email to the Independent Directors at independentdirectors@prudential.comindependentdirectors@ prudential.com or provide feedback on executive compensation via our website atwww.prudential.com/executivecomp.executivecomp.

If you would like to write us, you may do so atby writing Prudential Financial, Inc., Board of Directors, c/o Margaret M. Foran, Chief Governance Officer, Vice President and Corporate Secretary, 751 Broad Street, 21st Floor, Newark, NJ 07102.

The Board of Directors of Prudential Financial, Inc.

 

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       3  


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Prudential Financial, Inc.

751 Broad Street,

Newark, NJ 07102

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Prudential Financial, Inc.

751 Broad Street, Newark, NJ 07102

March 26, 201325, 2014

DEAR FELLOW SHAREHOLDERS:

We are pleased to invite you to the Annual Meeting of Shareholders on May 14, 2013,13, 2014, at 751 Broad Street, Newark, NJ, at 2:00 p.m. We hope that you will attend the meeting, but whether or not you are planning to attend, we encourage you to designate the proxies on the proxy card to vote your shares.

Because every shareholder’s vote is important, we continue our outreach to give you more information about the Company. We are offering again an incentive to registered shareholders, to encourage them to vote. We are excited that shareholder voting has increased each year and are again offering a voting incentive to registered shareholders. Because of your active participation, we have planted over 342,000more than 500,000 trees as a result ofthrough the incentive program.initiative. This year, trees will be planted in Osceola National Forest located in Florida, as well as in residential areas located in Newark, NJ, our Company’s headquarters. These planting sites will help improve the environment we share with our neighbors.

Every shareholder’s vote is important. I thank you for your commitment to the Company and urge you to vote your shares.

Sincerely,

 

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John R. Strangfeld

Chairman and Chief Executive Officer

 

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4      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


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Prudential Financial, Inc.

751 Broad Street,

Prudential Financial, Inc.

751 Broad Street, Newark, NJ 07102

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

OF PRUDENTIAL FINANCIAL, INC.

 

Date:

May 13, 2014

 May 14, 2013

Time:

2:00 p.m.

 2:00 p.m.

Place:

Prudential’s Corporate Headquarters

751 Broad Street, Newark, NJ 07102

AGENDA:

 

Election of 1312 directors named in the proxy statement;

 

Ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2013;2014;

 

Advisory vote to approve named executive officer compensation;

 

ShareholderA shareholder proposal regarding written consent;executive stock ownership; and

 

Transaction of other business that may properly come before the meeting.

Record date: You can vote if you were a shareholder of record on March 15, 2013.14, 2014.

If you are attending the meeting, you will be asked to present your admission ticket and photo identification, such as a driver’s license, as described in the Proxy Statement.

By Order of the Board of Directors,

 

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Margaret M. Foran

Chief Governance Officer, Vice

President and Corporate Secretary

March 26, 201325, 2014

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Important Notice Regarding the Availability of Proxy Materials for the 20132014 Annual Meeting of Shareholders to be held on May 14, 2013:13, 2014: Our 20132014 Proxy Statement and Annual Report for the year ended December 31, 2012,2013, are available free of charge on our website at www.prudential.com/governance.

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       5  


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Summary Information

 

To assist you in reviewing the proposals to be acted upon at the Annual Meeting, including the election of directors and the non-binding advisory vote to approve named executive officer compensation, we call your attention to the following information about the Company’s 20122013 financial performance and key executive compensation actions and decisions. The following description is only a summary. For more complete information about these topics, please review the Company’s Annual Report on Form 10-K and the complete Proxy Statement.

 

BUSINESS HIGHLIGHTS

 

Financial Performance. 20122013 was a year of major progress and accomplishment for our Company on many fronts:

 

  

Our Financial Services Businesses reported after-tax adjusted operating income of $3.0$4.6 billion and posted earnings per share of Common Stock of $6.27,$9.67 for 2013, compared to $2.8$3.0 billion, and $5.83$6.40 per share of Common Stock, in 2011for 2012.(1).

 

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We reported book value for our Financial Services Businesses, excluding accumulated other comprehensive income and the impact of $57.86foreign currency exchange rate remeasurement on net income or loss, of $59.99 per share of Common Stock as of year-end 2012December 31, 2013, compared to $58.39$58.08 as of year-end 2011.2012. Based on U.S. generally accepted accounting principles as of year-end 2012,December 31, 2013, we reported book value for our Financial Services Businesses of $79.19$72.30 per share of Common Stock, compared to $69.07$79.04 per share as of year-end 2011.2012.

 

 

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Our Financial Services Businesses reported operating return on average equity based on after-tax adjusted operating income of 10.8% for 2012 compared to 10.6% for 2011.

Our Financial Services Businesses reported operating return on average equity based on after-tax adjusted operating income of 16.4% for 2013 compared to 11.3% for 2012.(2)

 

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Assets under management surpassed, for the first time, the $1 trillion milestone reaching $1.06reached $1.107 trillion at December 31, 2012,2013, an increase of 18%4% from a year earlier.

 

 

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Dividend.We declared an annual dividend of $1.60 per share of Common Stock for 2012, an increase of 10% from the 2011 Common Stock dividend, and announced that we will movemoved to a quarterly Common Stock dividend schedule beginning in the first quarter of 2013.2013 and declared quarterly dividends totaling $1.73 per share during the year, with our fourth quarter dividend representing a 32.5% increase from prior quarters.

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 (1)Adjusted Operating Income (“AOI”) and earnings per share (“EPS”) are defined in the Compensation Discussion and Analysis (“CD&A”) section of this Proxy Statement. We use EPS and return on equity (“ROE”), which are based on AOI, and book value excluding accumulated other comprehensive income and the impact of foreign currency exchange rate measurement on net income or loss as performance metrics undermeasures in our incentive compensation programs.
(2)Excludes impact on attributed equity of accumulated other comprehensive income and foreign currency exchange rate remeasurement included in net income or loss.

 

 
6      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


Summary Information(continued)

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Corporate Transactions. We solidified our position as the preferred provider of pension risk transfer strategies by entering into and completing landmark agreements to take on retiree pension obligations from General Motors Co. and Verizon Communications, Inc., which together brought us over $33 billion in group annuity account values. In September 2012, we announced an agreement to acquire The Hartford’s Individual Life Insurance business, including approximately 700,000 life insurance policies

with face amount in force of approximately $135 billion, through a reinsurance transaction for cash consideration of $615 million. The transfer was completed in January 2013.

Share Repurchase Program. We repurchased $650 million of our outstanding shares of Common Stock, including $150 million under a program announced in June 2012 to repurchase up to $1 billion of our outstanding shares of Common Stock through June 2013.

 

COMPENSATION HIGHLIGHTS

The Compensation Committee has increasedtook the following actions to improve and maintain the rigor of the performance goals and payout scales under our incentive programs with respect to 2012 performance:executive compensation program:

 

  

There was no increaseModified the mix of our long-term incentive program so that plan participants receive a greater portion of theirlong-term incentive awards in base salaries for anythe form of the Named Executive Officers (“NEOs”);performance shares and units, resulting in a more strongly performance-oriented program.

 

 

  

The sizeRequired achievement of the midpoint of EPS guidance in 2014 to earn target annual incentive pool was reduced by approximately 10% fromaward funding, instead of the 2011 level;low point of the guidance range as in prior years.

 

 

  

The Annual Incentive Award earnedIncreased the rigor of the performance share program by our CEO decreased by approximately 11% onrequiring an average ROE of 13.5% over the 2013 through 2015 and 2014 through 2016 performance periods to earn a year-over-year basis while his long-term incentive awards are unchanged, resulting in a decreasetarget award. For the 2014 through 2016 performance period, the Committee reduced the maximum award payment from 150% to 125% of approximately 4% in total direct compensation;the target award level.

 

 

  

The mandatory deferralImplemented a relative performance modifier for 2013 to balance reliance on absolute performance based on a single measures (EPS) with an assessment of each NEO’sperformance relative to peers under our annual incentive award was increased from 20% to 30%;program.

 

 

  

The rigorReduced long-term disability payments by any non-qualified pension plan payments similar to the treatment of the annual incentive award program was strengthened by setting target and maximum awards for senior executives, including the NEOs, and requiring achievement of at least the midpoint of guidance to maintain the same level of funding as in 2011;qualified pension plan payments.

 

 

  

The rigorHeld base salaries flat in 2014 for all of the performance shares program was strengthened by requiring average ROE (AOI basis, subject to certain adjustments) of 13.5% over the 2013-2015 performance period to receive a target award; andNamed Executive Officers (NEOs).

 

Approximately 90% of our NEOs’ total direct compensation is performance based.

For additional information, see the CD&A in this Proxy Statement.

The compensation of our NEOs reflects both our 20122013 performance and the increased rigor of our annual incentive program.

 

Named Executive Officer  2012 Base Salary  

2012 Annual
Incentive Award

(as adjusted for
mandatory
deferrals)(1)

  

2012 Long-Term
Incentive

Award Value(2)

  2012 Total Direct
Compensation
    

2013 Base Salary

($)

    

2013 Annual
Incentive Award

(as adjusted for
mandatory
deferrals)(1)

($)

    

2013 Long-Term
Incentive

Award Value(2)

($)

    

2013 Total Direct
Compensation

($)

John R. Strangfeld

  $1,400,000  $3,941,000  $10,189,000  $15,530,000    1,400,000    5,460,000    10,840,000    17,700,000
Robert M. Falzon    650,000    1,393,000    3,197,000    5,240,000

Richard J. Carbone

  $700,000  $1,732,500  $2,742,500  $5,175,000    700,000    2,500,000        3,200,000

Mark B. Grier

  $1,190,000  $3,377,500  $8,447,500  $13,015,000    1,190,000    4,550,000    8,950,000    14,690,000

Edward P. Baird

  $770,000  $2,310,000  $4,490,000  $7,570,000    770,000    2,835,000    4,715,000    8,320,000

Charles F. Lowrey

  $770,000  $2,835,000  $5,715,000  $9,320,000    770,000    3,920,000    6,180,000    10,870,000

 (1)The following amounts are not included in the 20122013 Annual Incentive Award column because they have been mandatorily deferred into the Book Value Performance Program: Mr. Strangfeld $1,689,000;$2,340,000; Mr. Carbone, $742,500;Falzon, $597,000; Mr. Grier, $1,447,500;$1,950,000; Mr. Baird, $990,000;$1,215,000; and Mr. Lowrey, $1,215,000.$1,680,000. 

 (2)Represents long-term awards granted in 20132014 for 20122013 performance. 

Response to advisory vote and shareholder feedback

We were gratified that almost 96%Approximately 78% of the votes cast in 2012at the 2013 Annual Meeting of Shareholders on the non-binding advisory vote on our named executive officer compensation were voted in support of theour executive compensation paid to senior executives. Nevertheless, consistentprogram. Consistent with its strong interest in shareholdercommitment to engagement, communication, and transparency, the Compensation Committee continuedcontinues to examineregularly review our executive compensation program to assureensure alignment between the interests of our senior executives and shareholders.shareholders, and made several modifications as discussed above and in more detail in the CD&A.

 

 
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Summary Information(continued)

 

 

RECENT CORPORATE GOVERNANCE CHANGES

RECENT CORPORATE GOVERNANCE CHANGES

  

EliminationPolitical Contributions. In 2013, our Corporate Governance and Business Ethics Committee amended its Charter to reflect our political disclosure and accountability policies. As a result of Supermajority Voting Requirement. Atthis amendment, the 2012 Annual Meeting of Shareholders, our shareholders, uponCommittee reviews and approves an annual report on political activities, contributions and lobbying expenses. It also monitors and evaluates the recommendation of our Board, approved amendmentsCompany’s ongoing political strategy as it relates to our Certificate of Incorporationoverall public policy objectives for the next year and provides guidance to eliminate supermajority voting requirements. These amendments and corresponding changes to our By-Laws were implemented effective May 9, 2012.the Board.

 

 

 

Special Meeting Authorization Requirement. OurIn 2013, the Board recently amended our By-LawsBy-laws to reduce to 10% the threshold that allows shareholders to call a special meeting to 10%.meeting. This right, as well as our established shareholder communication and engagement mechanisms, provides shareholders the opportunity to raise important matters outside the annual meeting process.

 
 

 

SHAREHOLDER ACTIONS

ELECTION OF DIRECTORSElection of Directors (Item 1)

You will find important information about the qualifications and experience of each of the director nominees whowhom you are being asked to elect. The Corporate Governance and Business Ethics Committee performs an annual assessment to see that your directors have the skills and experience to effectively oversee the Company. All of your directors have proven leadership ability, sound judgment, integrity and a commitment to the success of our Company.

RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMRatification of the Appointment of the Independent Registered Public

Accounting Firm (Item 2)

The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as the Company’s independent registered public accounting firm (independent auditor) for 2013. We2014. While we are not required to have shareholders ratify the selection of PricewaterhouseCoopers as ourthe Company’s independent auditor. Weauditor, we are doing so because we believe it is good corporate practice. If shareholders do not ratify the selection, the Audit Committee will reconsider the appointment, but may nevertheless retain PricewaterhouseCoopers as the Company’s independent auditor.

ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATIONAdvisory Vote to Approve Named Executive Officer Compensation (Item 3)

Shareholders are being asked to cast a non-binding, advisory (“Say on Pay”) vote on our named executive officer compensation. We were gratified that, lastLast year, almost 96%approximately 78% of the votes cast by our shareholders’ voteson this proposal supported our executive compensation program. Please see “Consideration of Last Year’s ‘Say on Pay’ Vote” in ourthe CD&A for a discussion of how ourthe Board and the Compensation Committee responded to the results of the 20122013 advisory vote.

Consistent with the recommendation of ourthe Board and the preference of our shareholders, we have decided to hold an annual “Say on Pay” vote. In evaluating this year’s “Say on Pay” proposal, we recommend that you carefully review ourthe CD&A, which explains how and why the Compensation Committee arrived at its executive compensation actions and decisions for 2012.2013. We suggest you also refer to our corporate governance policies which are contained in this Proxy Statement.

SHAREHOLDER PROPOSALShareholder Proposal (Item 4)

Finally, you are also being asked to consider one shareholder proposal regarding written consentexecutive stock ownership contained in this Proxy Statement.

 

 
8      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


Contents

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ELECTION OF DIRECTORS

 

Page 10

 11 Director Nominees
 20 Corporate Governance
 20 Board Leadership
 2223 Communication with Directors
 3132 Compensation of Directors

 

 
 

 

 

APPOINTMENT OF THE INDEPENDENT
AUDITORS FOR 2013—RATIFICATION

 

Page 26

27

  2627   Audit Committee Pre-Approval Policies and Procedures
  2728   Report of the Audit Committee



ADVISORY VOTE TO APPROVE NAMED
EXECUTIVE OFFICER COMPENSATION
AND CD&A

 

Page 2829

 3334 Compensation Discussion and Analysis (“CD&A”) Executive Summary
 3738 Philosophy and Objectives of Our Executive Compensation Program
 3839 How We Make Compensation Decisions
 3839 Role of the Compensation Consultant
 4952 Supplemental Compensation Analysis
 5155 Perquisites and Other Personal Benefits
 5458 20122013 Summary Compensation Table
 5660 All Other Compensation
 5761 Grants of Plan-Based Awards
 6063 Pension Benefits
 6466 Nonqualified Deferred Compensation

 

 

SHAREHOLDER PROPOSAL

 

Page 28

29

 2829 Proposal Regarding Shareholder Action by Written ConsentExecutive Stock Ownership
 

Voting Securities and Principal Holders

  3031  

General Information About the Meeting

  71  

Voting Instructions and Information

  71  

Board Recommendations

  72  

Attending the Annual Meeting

  72  

Submission of Shareholder Proposals

  72  

PROXY STATEMENTProxy Statement

The Board of Directors of Prudential Financial, Inc. (Prudential Financial or the Company) is providing this Proxy Statement in connection with the Annual Meeting of Shareholders to be held on May 14, 2013,13, 2014, at 2:00 p.m., at Prudential Financial’s Corporate Headquarters, 751 Broad Street, Newark, NJ 07102, and at any adjournment or postponement thereof. Proxy materials or a Notice of Internet Availability were first sent to shareholders on or about March 26, 2013.25, 2014.

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       9  


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Item 1—Election of Directors

 

Our Board of Directors has nominated 1312 directors for election at this Annual Meeting to hold office until the next annual meeting and the election of their successors. All of the nominees are currently directors. Each agreed to be named in this Proxy Statement and to serve if elected. All of the nominees are expected to attend the 20132014 Annual Meeting. All 13 directors, then serving on the Board, attended the 20122013 Annual Meeting.

 

Gaston Caperton, a member of the Board, has attained the age of 74 and will not stand for re-election. As a result, the Board will be reduced to 12 members immediately prior to the Annual Meeting.

We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.

DIRECTOR CRITERIA, QUALIFICATIONS AND EXPERIENCEDirector Criteria, Qualifications and Experience

Prudential Financial is a financial services company that offers a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. The Corporate Governance and Business Ethics Committee performs an assessment of the skills and the experience needed to properly oversee the interests of the Company. Generally, the Committee reviews both the short- and long-term strategies of the Company to determine what current and future skills and experience are required of the Board in exercising its oversight function. The Committee then compares those skills to the skills of the current directors and potential director candidates. The Committee conducts targeted efforts to identify and recruit individuals who have the qualifications identified through this process, keeping in mind its commitment to diversity.

 

While the Company does not have a formal policy on Board diversity, diversity is an integral part of our Corporate Governance Principles, and the Committee actively considers diversity in recruitment and nominations of directors. The current composition of our Board reflects those efforts and the importance of diversity to the Board:

 

  

Two director nominees have worked outside the United States;

 

 

  

TwoOne director nominees arenominee is African-American;

 

 

  

One director nominee is Asian-American;

 

 

  

One director nominee is Hispanic; and

 

 

  

Three director nominees are women.

 

The Committee looks for its current and potential directors collectively to have a mix of skills and qualifications, some of which are described below:

 

 

DIRECTORS’ SKILLS AND QUALIFICATIONS

 

 

academia/education

 

business ethics

 

business head/

administration

 

business operations

 

corporate governance

 

environmental/

sustainability/corporate

responsibility

 

finance/capital allocation

 

financial expertise/literacy

 

financial services industry

 

government/public policy

 

insurance industry

 

international

 

investments

 

marketing/sales

 

real estate

 

risk management

 

talent management

 

technology/systems

It is of critical importance to the Company that the Committee recruit directors who have qualities tohelp achieve the ultimate goal of a well-rounded, diverse Board that functions collegially as a unit. With respect toThe Board has also carefully considered whether the Board’s slate of director nominees, the Board has also considered whether the slate, taken as a whole, has representatives with the above listedabove-listed skills and qualifications.

Additionally, the Committee expects each of the Company’s directors to have proven leadership skills, sound judgment, integrity and a commitment to the success of the Company. In evaluating director candidates and considering incumbent directors for nomination to the Board, the Committee considers each nominee’s independence, financial literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors also include past performance on the Board and contributions to their respective committees.

Below each nominee’s biography, we have included an assessment of the skills and experience of such nominee. We have also included a chart that covers the assessment for the full Board.

 

 

 
10      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


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Item 1—Election of DirectorsDirectors:Director Nominees(continued)

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Director Nominees

The Board of Directors recommends that shareholders voteFORFOR” all of the nominees.

 

 
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THOMAS J. BALTIMORE, JR.

Age:4950

Director Since:October 2008

  

Prudential Committees:

 

   Executive

 

  Finance

 

   Investment (Chair)

 

Former Directorships Held During the Past Five Years:

 

  Integra Life Sciences Corporation (August 2012)

 

  

Public Directorships:

 

   RLJ Lodging Trust

 

  Duke Realty Corporation

  
       

Mr. Baltimore has been the President and Chief Executive Officer (CEO) of RLJ Lodging Trust (a NYSE-listed real estate investment company) since May 2011. Previously, he served as Co-Founder and President of RLJ Development, LLC (RLJ Lodging’s predecessor company) from 2000 to May 2011. He served as VP, Gaming Acquisitions, of Hilton Hotels Corporation from 1997 to 1998 and later as VP, Development and Finance, from 1999 to 2000. He also served in various management positions with Host Marriott Services, including VP, Business Development, from 1994 to 1996.

 

 

Skills and Qualifications

 

 

 

Business Head/Administrator:Administration:Over a decade of service as President of RLJ Development.

Business Operations:As President and CEO of RLJ Lodging Trust, Mr. Baltimore is responsible for the day-to-day oversight of its $3 billion portfolio, which includes 146148 hotels in major markets in North America. He spent over a decade as Co-Founder and President of RLJ Development, where he was responsible for developing, implementing and assessing the company’s operating plan.

Corporate Governance: Experience serving as a director of several public companies in addition to Prudential.

Investments:Through RLJ Lodging Trust, Mr. Baltimore has been responsible for overseeing the management of nearly $2 billion in equity; formerly served as VP, Development and Finance of Hilton Hotels.

Real Estate: President and CEO of RLJ Lodging Trust and a director of Duke Realty, one of the largest commercial real estate companies in the U.S., and former Co-Founder and President of RLJ Development.

 

 

 
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GORDON M. BETHUNE

Age:7172

Director Since:February 2005

  

Prudential Committees:

 

   Compensation

 

  Corporate Governance
and Business Ethics

  

Public Directorships:

 

   Honeywell International Inc.

 

   Sprint Nextel Corporation

 

  

Mr. Bethune has been Managing Director of g-b1 Partners (a travel advisory firm) since January 2005. He was Chairman and CEO of Continental Airlines, Inc. from 1996 until his retirement in December 2004. Mr. Bethune was the President and CEO of Continental Airlines from November 1994 to 1996 and served as President and Chief Operating Officer (COO) from February 1994 to November 1994. Prior to joining Continental, Mr. Bethune held senior management positions with The Boeing Company, Piedmont Airlines, Western Air Lines, Inc. and Braniff Airlines (various airline companies).Airlines.

 

 

Skills and Qualifications

 

 

 

Business Head/Administration:A decade of service as CEO of Continental Airlines.

Business Operations: Served as CEO and Chief Operating Officer of Continental Airlines.

Corporate Governance:Experience serving as a director of several large public companies in addition to Prudential.

International: Experience in the travel industry, including with g-b1 Partners and several major airlines and as a director of two large public companies with international operations.

Marketing/Sales: As Chairman and CEO of Continental Airlines, transformed the company into an industry leader through innovative marketing initiatives.

Talent Management:Extensive experience in developing and implementing strategies and policies for the acquisition and development of employee talent.

 

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       11  


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Item 1—Election of DirectorsDirectors:Director Nominees (continued)

 

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GASTON CAPERTON

Age:73

Director Since:June 2004

Prudential Committees:

   Investment

Public Directorships:

   Owens Corning

  United Bankshares, Inc.

Mr. Caperton is the Vice Chairman of the Board of Advisors for Leeds Equity Partners, a private equity firm focused on companies within the knowledge industries. Mr. Caperton is also the Chairman of The Caperton Group, a business investment and development company. He served as the President of The College Board from October 1999 to October 2012. He served as the Governor of the State of West Virginia from 1988 to 1996. From 1963 to 1987, he was an entrepreneur and was CEO and owner of the tenth largest privately owned insurance brokerage firm in the United States. From 1997 to 1999, he was a fellow at Harvard University John F. Kennedy Institute of Politics and was an Executive Director of Columbia University’s Institute on Education & Government at Teachers College. Mr. Caperton was the 1996 Chair of the Democratic Governors Association, served on the National Governors Association’s executive committee and was a member of the Intergovernmental Policy Advisory Committee on U.S. Trade. He also was the Chairman of the Appalachian Regional Commission, Southern Regional Education Board and the Southern Growth Policy Board.

Skills and Qualifications

Academia/Education: Experience through his role as President of The College Board where he reshaped the mission to connect greater numbers of students to college success and opportunity while raising educational standards. Mr. Caperton was a fellow at the John F. Kennedy Institute of Politics at Harvard University and an Executive Director at Columbia University, where he founded and managed the Institute on Education and Government.

Business Head/Administration: Served as President of The College Board.

Business Operations: Served as CEO and owner of the tenth largest privately owned insurance brokerage firm in the U.S.

Corporate Governance: Experience serving as a director of several large public and private companies.

Environmental/Sustainability/Corporate Responsibility: As Governor of West Virginia from 1988 to 1996, he initiated groundbreaking ethics legislation for public officials, integrated principles of sustainable

development into West Virginia policies and programs and significantly improved the future economic success of the citizens of that Appalachian state.

Government/Public Policy: Served two terms as Governor of West Virginia; former fellow at Harvard University’s John F. Kennedy Institute of Politics; former teacher and Executive Director of Columbia University’s Institute on Education & Government at Teachers College.

Insurance Industry: Insurance industry experience through service as CEO and owner of the tenth largest privately owned insurance brokerage firm in the United States.

International: Experience as a director on the boards of several international companies.

Marketing/Sales: Over two decades of experience as an entrepreneur, CEO and owner of a privately owned insurance brokerage firm, where he oversaw the company’s sales and marketing efforts.

12  Notice of Annual Meeting of Shareholders and 2013 Proxy Statement


Item 1—Election of Directors (continued)

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GILBERT F. CASELLAS

Age:6061

Director Since:January 2001

(Director of Prudential Insurance since April 1998)

  

Prudential Committees:

 

   Audit                        

    

Mr. Casellas has been Chairman of OMNITRU (consulting(a consulting and investment firm) since 2011. He was the VP, Corporate Responsibility of Dell Inc. (a global computer manufacturer) from 2007 to 2010. He served as a Member of Mintz Levin Cohn Ferris Glovsky & Popeo, PC from June 2005 to October 2007. He served as President of Casellas & Associates, LLC (a consulting firm) from 2001 to 2005. During 2001, he served as President and CEO of Q-linx, Inc. He served as the President and COO of The Swarthmore Group, Inc. from January 1999 to December 2000. Mr. Casellas served as Chairman, U.S. EEOC from 1994 to 1998 and General Counsel, U.S. Department of the Air Force, from 1993 to 1994.

 

 

Skills and Qualifications

 

 

 

Business Ethics: At Dell Inc., he was responsible for the company’s global sustainability and corporate philanthropy functions.

Business Head/Administration: As former Chairman and CEO of EEOC, he was responsible for an annual budget of approximately $250 million and a business administration serving approximately 3,000 employees.

Business Operations: Former President and CEO of Q-linx; former COO of The Swarthmore Group.

Corporate Governance:Experience serving as a director of a private company, and serving on the University of Pennsylvania Board for over 16 years and as VP, Corporate Responsibility at Dell Inc., where he oversaw the company’s global diversity, sustainability and corporate philanthropy functions. Mr. Casellas also has proven diversity experience through his appointment by the President as a civilian member to the Military Leadership Diversity Commission and as a member of the Diversity Advisory Board of Toyota Motor North America Inc., the Joint Diversity Council of Comcast Corporation, and previously as the chair of the Committee on Workplace Diversity for Yale University, a member of the

board of the Hispanic Federation, a member of the board of the University of Pennsylvania, and as a member of The Coca-Cola Company’s Diversity Task Force.

Environmental/Sustainability/Corporate Responsibility: At Dell, he oversaw global diversity, sustainability and corporate philanthropy, and contributed to a company culture recognized for leadership in environmentally conscious packaging, support of diverse suppliers and human rights.

Government/Public Policy: Served as Chairman of the U.S. EEOC and as General Counsel of the U.S. Department of the Air Force.

Investments:Serves as Chairman of OMNITRU, a consulting and investment firm, and served as President and COO of The Swarthmore Group, a registered investment advisor.

Risk Management:Former member of Mintz Levin Cohn Ferris Glovsky & Popeo, PC; former General Counsel of the U.S. Department of the Air Force; former VP, Corporate Responsibility of Dell Inc.

 

 

 
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JAMES G. CULLEN

Age:7071

Director Since:January 2001

Lead Director Since:May 2011

(Director of Prudential Insurance since April 1994)

  

Prudential Committees:

 

   Compensation (Chair)

 

  Executive (Chair)

  

Public Directorships:

 

   Agilent Technologies, Inc. (Non-Executive(Non-Executive Chairman)

 

   Johnson & Johnson

 

  NeuStar, Inc. (Non-Executive(Non-Executive Chairman)

  

Mr. Cullen served as the President and COO of Bell Atlantic Corporation from December 1998 until his retirement in June 2000. Mr. Cullen was the President and CEO, Telecom Group of Bell Atlantic Corporation from 1997 to 1998 and served as Vice Chairman of Bell Atlantic Corporation from 1995 to 1997. Mr. Cullen has also served as the Non-Executive Chairman of the Board of NeuStar, Inc. since November 2010 and the Non-Executive Chairman of the Board of Agilent Technologies, Inc. since March 2005.

 

 

Skills and Qualifications

 

 

 

Business Head/Administration: Formerly served as President and CEO of the Telecom Group at Bell Atlantic.

Business Operations: Former President and COO of Bell Atlantic.

Corporate Governance: Experience serving as a director of several large public companies including non-executive chairman and lead director.

International: Experience as a director on the boards of several international companies and held multiple positions at Bell Atlantic.

Marketing/SalesSales:: As Vice Chairman of Bell Atlantic, had accountability for strategic planning, business development and customer-focused network lines of business.

Talent Management: As former President and COO of Bell Atlantic, responsible for acquisition and development of employee talent.

 

 

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Item 1—Election of Directors (continued)

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WILLIAM H. GRAY III

Age:71

Director Since: January 2001

(Director of Prudential Insurance since September 1991)

Prudential Committees:

   Corporate Governance and Business Ethics

Former Directorships Held During the Past Five Years:

   JPMorgan Chase & Co. (May 2012)

  Visteon Corporation (January 2010)

Public Directorships:

   Dell Inc.

  Pfizer Inc.

Mr. Gray is Chairman of Gray Global Strategies, Inc. (a business advisory firm), and is a Senior Advisor to Gray Global Advisors, L.L.C. Mr. Gray was Co-Chairman of GrayLoeffler, LLC from 2009 to 2011. He served as the Chairman of the Amani Group from 2004 to 2009. Mr. Gray served as President and CEO of The College Fund/UNCF from 1991 until his retirement in 2004. From 1979 to 1991, Mr. Gray served as a Member of the U.S. House of Representatives. Mr. Gray, an ordained Baptist minister, is Pastor Emeritus of the Bright Hope Baptist Church of Philadelphia since 2005.

Skills and Qualifications

Academia/Education: Experience as President and CEO of the UNCF, a philanthropic organization that fundraises college tuition money for black students and provides general scholarship funds for 39 private historically black colleges and universities.

Business Ethics: Mr. Gray has previous experience with the Business Roundtable Institute for Corporate Ethics.

Business Head/Administration: Over a decade of experience as President and CEO of The College Fund/UNCF. Mr. Gray is also Chairman of Gray Global Strategies, Inc. and was Co-Chairman of GrayLoeffler.

Business Operations: Responsible for developing, implementing and assessing UNCF’s operating plan.

Corporate Governance:Experience serving as a director and Chair of Governance Committees for several large public companies in addition to Prudential.

Environmental/Sustainability/Corporate Responsibility: As President and CEO of the UNCF for 13 years, Mr. Gray was at the forefront of leadership initiatives to ensure sustainable educational benefits for future generations of students at historically black colleges and universities.

Financial Services: Over two decades of experience serving as a director of JPMorgan Chase & Co., a global financial services firm. As Chair of the U.S. House of Representatives’ Budget Committee, Mr. Gray helped develop the fiscal policies of the U.S. Government.

Government/Public Policy: Served as Co-Chairman of GrayLoeffler and a Member of the U.S. House of Representatives. During his tenure in the House, Mr. Gray served as Chair of the House Budget Committee and the Democratic Caucus of the House and as the Majority Whip.

International: Experience as a director on the boards of several international companies.

 
1412      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


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Item 1—Election of DirectorsDirectors:Director Nominees (continued)

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MARK B. GRIER

Age:6061

Director Since:January 2008

      

Mr. Grier has served as Vice Chairman since 2007 and a member of the Office of the Chairman of Prudential Financial since August 2002. From April 2007 through January 2008, he served as Vice Chairman overseeing the International Insurance and Investments division and Global Marketing and Communications. Mr. Grier was Chief Financial Officer of Prudential Insurance from 1995 to 1997 and has served in various executive roles. Prior to joining Prudential, Mr. Grier was an executive with Chase Manhattan Corporation.

 

 

Skills and Qualifications

 

 

 

Business Head/Administration: Experience as a current and former member of senior management for several large public companies.

Business OperationsOperations:: As Vice Chairman, Mr. Grier has oversight and responsibility for Finance, Risk Management, Investor Relations, Operations and Systems, Auditing, and Global Marketing and Communications.

Corporate Governance:Mr. Grier has developed corporate governance expertise through his membership on Prudential’s Board since 2008.

Environmental/Sustainability/Corporate Responsibility: As Vice Chairman, he supports ventures that create healthy and sustainable communities around the world and helps non-profit organizations achieve long-term sustainability, resulting in Prudential servingsolidifying Prudential’s stature as a leading example of corporate citizenship and social responsibility.

Finance/Capital Allocation: Over a decade of financial experience through various roles at Prudential, including Vice Chairman overseeing International Insurance and Investments and CFO of Prudential Insurance; former executive with Chase Manhattan, a leading global financial services firm.

Financial Services:Services Industry:Over two decades in the financial services industry.

Government/Public Policy: Mr. Grier has experience in oversight of Prudential’s public policy and government affairs function.

Insurance Industry:Insurance industry experience through service as a member of senior management.

International: Experience as a current and former member of senior management for large public companies with international operations.

Risk Management: Mr. Grier plays a key role in developing and implementing Prudential’s risk management policies and procedures.

Talent Management: Experience leading large, global teams at Prudential.

Technology/Systems:Mr. Grier has oversight and responsibility for Prudential’s Operations and Systems function.

 

 

 
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Item 1—Election of DirectorsDirectors:Director Nominees (continued)

 

 

 
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CONSTANCE J. HORNER

Age:7172

Director Since:January 2001

(Director of Prudential Insurance
since April 1994)

  

Prudential Committees:

 

   Compensation                        

 

   Corporate Governance and
Business Ethics (Chair)

 

  Executive

  

Public Directorships:            

 

   Ingersoll-Rand plc

 

  Pfizer Inc.

  

Ms. Horner served as a Guest Scholar at The Brookings Institution from 1993 to 2005, after serving as Assistant to the President of the United States and Director, Presidential Personnel from 1991 to 1993; Deputy Secretary, U.S. Department of Health and Human Services from 1989 to 1991; and Director, U.S. Office of Personnel Management from 1985 to 1989. Ms. Horner was a Commissioner, U.S. Commission on Civil Rights from 1993 to 1998.

 

 

Skills and Qualifications

 

 

 

Business Head/Administration:Former Assistant to the President of the U.S. and Director of Presidential Personnel; Deputy Secretary of the U.S. Department of Health and Human Services; Director of the U.S. Office of Personnel Management.

Corporate Governance:Experience serving as a director and Chair of Governance Committees of several large public companies.

Environmental/Sustainability/Corporate Responsibility:In providing oversight of sustainability issues and maintaining responsible business models for several international companies, Ms. Horner has encouraged sustainable product development and strong corporate citizenship initiatives.

Government/Public Policy:Ms. Horner has government/public policy experience through her various senior positions in the federal government, including Commissioner of the U.S. Commission on Civil Rights.

International:Experience as a director on the boards of several international companies.

Talent Management:Former Assistant to the President of the U.S. and Director, Presidential Personnel; former Director, U.S. Office of Personnel Management.

 

 

 
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MARTINA HUND-MEJEAN

Age:5253

Director Since:October 2010

  

Prudential Committees:

 

   Audit                                     

    

Ms. Hund-Mejean has served as the Chief Financial Officer (CFO) and a member of the Executive Committee at MasterCard Worldwide (a global transaction processing and consulting services company) since 2007. Ms. Hund-Mejean served as SVP and Corporate Treasurer at Tyco International Ltd. from 2003 to 2007; SVP and Treasurer at Lucent Technologies from 2000 to 2002; and held management positions at General Motors Company from 1988 to 2000. Ms. Hund-Mejean began her career as a credit analyst at Dow Chemical in Frankfurt, Germany.

 

 

Skills and Qualifications

 

 

 

Business Head/Administration: Over a decade of experience in senior positions at multiple Fortune 500 companies.

Business Operations: Has served as CFO of MasterCard Worldwide since 2007; SVP and Corporate Treasurer at Tyco; SVP and Treasurer at Lucent Technologies; and held management positions at General Motors.

Corporate Governance: Experience through her role at MasterCard, where she is responsible for Global Risk Management, Internal Audit and IR.

Finance/Capital Allocation:Over a decade of financial experience through various roles within the financial divisions at MasterCard and other companies.

Financial Services:Services Industry:Experience through her position as CFO of MasterCard.

International: Current and former member of senior management of several public companies with international operations.

Investments:Responsibilities included $30 billion Defined Benefit Plan while serving as SVP and Treasurer of Lucent Technologies Inc. (Alcatel-Lucent).

Risk Management: Experience through her role at MasterCard, where she is responsible for Global Risk Management, including the development and implementation of MasterCard’s risk management policies and procedures.

Talent Management:Experience leading large global teams at a number of Fortune 500 companies.

 

 

 
1614      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


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Item 1—Election of DirectorsDirectors:Director Nominees (continued)

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KARL J. KRAPEK

Age:6465

Director Since:January 2004

  

Prudential Committees:

 

  Executive

 Finance (Chair)

 Investment

 

Former Directorships Held During the Past Five Years:

 

  Visteon Corporation (June 2012)

  The Connecticut Bank & Trust Company (April 2012)

  Alcatel-Lucent (October 2008)

  

Public Directorships:

 

  Northrop Grumman Corporation

  

Mr. Krapek is a co-founder of The Keystone Companies, which was founded in 2002 and develops residential and commercial real estate. Mr. Krapek served as the President and COO of United Technologies Corporation (“UTC”) from 1999 until his retirement in January 2002. Prior to that time, Mr. Krapek held other management positions at UTC, which he joined in 1982.

 

 

Skills and Qualifications

 

 

 

Business Head/Administration:Formerly served as President and COO of UTC.

Business Operations: Formerly served as President and COO of UTC.

Corporate Governance: Experience serving as a director of several large public companies.

Environment/Environmental/Sustainability/Corporate Responsibility:Led the business units of UTC when the company was at the forefront of environmental and industry firsts in sustainable equipment design sensitive tothat achieved increasing efficiencies in the use of energy, water and materials.

Finance/Capital Allocation: President and COO of UTC with two decades of executive level experiencelevel-experience reviewing financial statements and capital structures of UTC and its subsidiaries.

International: Served as current or former director of several public companies with international operations and as a former Chairman, President or CEO of several large public companies with global operations.

Real Estate: Co-founder of The Keystone Companies, which develops residential and commercial real estate.

Technology/Systems: Two decades of experience at UTC, which provides high-tech products and support to the aerospace and building industries, includingserving as President and Chief Operating Officer. Experience serving as a director at several companies in the technology industry.

 

 

 
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CHRISTINE A. POON

Age:6061

Director Since:September 2006

  

Prudential Committees:

 

  Finance

 

 Investment

 

Former Directorships Held During the Past Five Years:

   Johnson & Johnson (March 2009)

 

  

Public Directorships:

 

  Koninklijke Philips Electronics NV

 

 Regeneron Pharmaceuticals

 

  

Ms. Poon has served as Dean of Fisher College of Business, The Ohio State University since May 2009. She served as Vice Chairman and a Member of the Board of Directors of Johnson & Johnson from 2005 until her retirement in March 2009. Ms. Poon joined Johnson & Johnson in 2000 as Company Group Chair in the Pharmaceuticals Group. She became a Member of Johnson & Johnson’s Executive Committee and Worldwide Chair, Pharmaceuticals Group, in 2001, and served as Worldwide Chair, Medicines and Nutritionals from 2003 to 2005. Prior to joining Johnson & Johnson, she served in various management positions at Bristol-Myers Squibb for 15 years.

 

 

Skills and Qualifications

 

 

 

Academia/Education:Serving as the Dean of Fisher College of Business at The Ohio State University, an international leader in business education.

Business Head/Administration:Experience as former executive of two Fortune 500 companies.

Business Operations: Currently serves as Dean of Fisher College of Business at The Ohio State University; formerly served in a variety of executive positions at two Fortune 500 companies.

Corporate Governance: Experience serving as a director of large public companies.

International: Current or former director of public companies with international operations and as former Worldwide Chair of the Pharmaceuticals Group and the Medicines and Nutritionals Group of Johnson & Johnson.

Marketing/Sales:As Worldwide Chair of the Pharmaceuticals Group at Johnson & Johnson, Ms. Poon was responsible for the strategic growth of the global pharmaceuticals group.

Talent Management:As Dean of Fisher College of Business at The Ohio State University, she is responsible for the acquisition and development of student talent.

 

 

 
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Item 1—Election of Directors:Director Nominees

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DOUGLAS A. SCOVANNER

Age:58

Director Since:November 2013

 

  

Prudential Committees:            

  Audit

Former Directorships Held During the Past Five Years:

  TCF Financial Corporation (September 2010)

Mr. Scovanner has been the Founder and Managing Member of Comprehensive Financial Strategies, LLC, a management consulting firm, since October 2013. Executive Vice President of Finance and Accounting, on an interim basis, of Hudson’s Bay Company. Previously, he served as the CFO (1994 to 2012) and Executive Vice President (2000 to 2012) of the Target Corporation (a North American retailer). Prior to joining the Target Corporation, Mr. Scovanner held various management positions at The Fleming Companies, Inc., Coca-Cola Enterprises, Inc., The Coca-Cola Company and the Ford Motor Company from 1979 to 1994.

Skills and Qualifications

Business Head/Administration:As CFO of Target, demonstrated business leadership and management insights; previous senior leadership roles in Finance at Fortune 500 companies.

Business Operations: As CFO of Target, led key operational and financial areas including financial planning and analysis, risk management, internal audit, internal and external communications, investor relations, indirect procurement and corporate aviation.

Corporate Governance:Experience serving as a Director and member of the Audit and Asset/Liability Management Committees of a public company; served as Chairman and Vice Chairman of the Board at private organizations.

Finance/Capital Allocation: Extensive financial expertise in cost management, creating value and resource allocation as CFO of Target, as well as previous leadership roles in Finance at other companies.

Financial Services Industry: Extensive experience in financing, mergers, acquisitions, investments and strategic transactions as CFO of Target, as well as serving as a member of the board of directors of TCF Financial Corp., a national bank holding company.

Investments: As CFO of Target, developed extensive experience in capital markets, including capital raising and derivatives.

Real Estate: Implemented and refined capital investment analysis process, which governed cumulative $40 billion-plus investment in real estate and related assets during 18 year tenure as CFO of Target.

Talent Management: Experience leading and developing a multidisciplinary team of 3,000 employees at Target.

16  Notice of Annual Meeting of Shareholders and 2014 Proxy Statement


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Item 1—Election of DirectorsDirectors:Director Nominees (continued)

 

 

 
    LOGO

 

 

JOHN R. STRANGFELD

Age:5960

Director Since:January 2008

(Elected Chairman May 2008)

  

Prudential Committees:            

 

  Executive

    

Mr. Strangfeld has served as CEO and President of Prudential Financial since January 2008 and Chairman of the Board since May 2008. Mr. Strangfeld is a Member of the Office of the Chairman of Prudential Financial and served as Vice Chairman of Prudential Financial from 2002 through 2007, overseeing the U.S. Insurance and Investments divisions. Prior to his position as Vice Chairman, Mr. Strangfeld held a variety of senior investment positions at Prudential, both within the U.S. and abroad.

 

 

Skills and Qualifications

 

 

 

Business Head/Administration: Held a variety of executive management positions at Prudential, including oversight responsibility for the U.S. Insurance and Investments divisions.

Business Operations: Mr. Strangfeld is responsibleResponsible for developing, implementing and assessing Prudential’s operating plan.

Corporate Governance: Mr. Strangfeld has developedDeveloped corporate governance expertise through his leadership on Prudential’s Board.

Environmental/Sustainability/Corporate Responsibility: As CEO of Prudential, Mr. Strangfeld has addressed social, sustainability and environmental concerns and has ensured that the company’s corporate citizenship reflects its core values, through such activities as the company’s efforts to revitalize its home city of Newark, as well as its philanthropic, employee-volunteer and educational initiatives within the country and the international community.

Finance/Capital Allocation: Over a decade of financial experience through various roles at PrudentialPrudential.

Financial Services:Services Industry:Over three decades in the financial services industry.

Insurance Industry: Mr. Strangfeld previouslyPreviously oversaw the U.S. Insurance and Investments divisions.

International:Held a variety of executive positions at Prudential, both within the U.S. and abroad.

Investments: Held a variety of senior investment positions at Prudential, including oversight responsibility for the U.S. Insurance and Investments divisions.

Risk Management: Mr. Strangfeld is ultimatelyUltimately responsible for developing and implementing Prudential’s risk management policies and procedures.

Talent Management: Advocates talent management as key component of Prudential'sPrudential’s corporate strategy. Actively engages the Board of Directors on talent management strategy and succession planning for senior leadership.

Technology/Systems: Mr. Strangfeld has oversightOversight and responsibility for Prudential’s Operations and Systems function.

 

Notice of Annual Meeting of Shareholders and 2014 Proxy Statement     17


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Item 1—Election of Directors:Director Nominees

 

 
    LOGO

 

 

JAMES A. UNRUH

Age:7172

Director Since:January 2001

(Director of Prudential Insurancesince April 1996)

  

Prudential Committees:

 

  Audit (Chair)

 

 Executive

 

 

Former Directorships Held During the Past Five Years:

 

  Qwest Communications International, Inc. (March 2011)

 

 CenturyLink, Inc. (May 2012)

 

  

Public Directorships:

 

  CSG Systems International, Inc.

 

  Tenet Healthcare Corporation

 

  

Mr. Unruh became a founding Member of Alerion Capital Group, LLC (a private equity investment group) in 1998. Mr. Unruh was with Unisys Corporation from 1987 to 1997, serving as its Chairman and CEO from 1990 to 1997. He also held executive positions with financial management responsibility, including serving as Senior Vice President, Finance, Burroughs Corporation from 1982 to 1987. In addition, Mr. Unruh serves as a director of several privately held companies in connection with his position at Alerion Capital Group, LLC.

 

 

Skills and Qualifications

 

 

 

Business Head/AdministrationAdministration:: Served as Chairman and CEO of Unisys Corporation.

Business Operations:As the CEO of Unisys, Mr. Unruh was responsible for developing, implementing and assessing the company’s operating plan.

Corporate Governance:Experience serving as a director of public and private companies.

Finance/Capital Allocation:Founding member of Alerion Capital Group, a private equity investment group; former executive with responsibility for financial management at Burroughs Corporation.

International:Former Chairman and CEO of Unisys and current director of several public companies with global operations.

Investments:Experience overseeing financial management at Burroughs Corporation.

Marketing/Sales:Extensive experience in marketing at several large public companies.

Risk Management:As Chairman and CEO of Unisys, he was responsible for the company’s risk management initiatives.

Technology/Systems: Former Chairman and CEO of Unisys and currently at Alerion Capital Group, where he oversees private equity investments in later-stage technology and technology-enabled companies.

 

 

 
18      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


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Item 1—Election of DirectorsDirectors:Director Nominees (continued)

LOGO       

 

LOGOLOGO

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       19  


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Corporate Governance

 

The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company is governed by a Board of Directors and committees of the Board that meet throughout the year. Directors discharge their responsibilities at Board and committee meetings and also through other communications with management.

 

The Board has adopted Corporate Governance Principles and Practices to provide a framework for the effective governance of the Company. The Corporate Governance Principles and Practices are reviewed regularly and updated as appropriate. The full text of the Corporate Governance Principles, which includes the definition of independence adopted by the Board, the charters of the Corporate Governance and Business Ethics, Compensation and Audit Committees, the Lead Independent Director Charter, the Code of Business Conduct and Ethics and the Related Party Transaction Approval Policy can be found at www.prudential.com/governance. Copies of these documents also may be obtained from the Chief Governance Officer and Corporate Secretary.

Governance is a continuing focus at the Company, starting with the Board and extending to management and all employees. Therefore, the Board reviews the Company’s policies and business strategies and advises and counsels the Chief Executive Officer (“CEO”)CEO and the other executive officers who manage the Company’s businesses.

In addition, we solicit feedback from shareholders on governance and executive compensation practices and engage in discussions with various groups and individuals on governance issues and improvements.

PROCESS FOR SELECTING DIRECTORSProcess for Selecting Directors

The Corporate Governance and Business Ethics Committee screens candidates and recommends candidates for nomination by the full Board. The Company’s By-laws provide that the size of the Board may range from 10 to 24 members. The Board’s current view is that the optimal size is between 10 and 15 members. In anticipation of retirements over the next several years, the Committee is seeking one or more candidates who meet the criteria described under “Director Criteria, Qualifications and Experience.” The Committee is being assisted with its recruitment efforts by an independent search firm to recommend candidates who satisfy the Board’s criteria. The search firm also provides research and pertinent information regarding candidates, as requested. Mr. Scovanner, who was elected to the Board in November 2013, was recommended for the Committee’s consideration by a third party search firm, the directors and the CEO.

SHAREHOLDER-RECOMMENDED DIRECTOR CANDIDATESShareholder-Recommended Director Candidates

The Committee will consider director candidates recommended by shareholders in accordance with the criteria for director

selection described under “Director Criteria, Qualifications and Experience.” Shareholders recommending candidates for consideration should send their recommendations to the attention of theMargaret M. Foran, Chief Governance Officer and Corporate Secretary, at 751 Broad Street, Newark, NJ 07102. Shareholders who wish to nominate directors directly at an Annual Meeting in accordance with the procedures in ourBy-laws should follow the instructions under “Submission of Shareholder Proposals” in this Proxy Statement.

DIRECTOR ATTENDANCEDirector Attendance

During 2012,2013, the Board of Directors held 1110 meetings. All directors have attended at least 75%100% of the combined total meetings of the full Board and the committees on which he or she served in 2012. The average attendance of all directors in 2012 was approximately 97%2013 (held during the period they served).

DIRECTOR INDEPENDENCEDirector Independence

The current Board consists of 13 directors, two of whom are currently employed by the Company (Messrs. Strangfeld and Grier). The Board conducted an annual review and affirmatively determined that all of the non-employee directors (Ms. Horner, Ms. Hund-Mejean and Ms. Poon and Messrs. Baltimore, Bethune, Caperton, Casellas, Cullen, Gray, Krapek, Scovanner and Unruh) are “independent” as that term is defined in the listing standards of the NYSE and in Prudential Financial’s Corporate Governance Principles. In addition, the Board previously determined that Mr. Gray was an “independent” director.

INDEPENDENT DIRECTOR MEETINGSIndependent Director Meetings

The independent directors generally meet in executive session at both the beginning and the end of each regularly scheduled Board meeting, with the Lead Independent Director serving as Chair.

BOARD LEADERSHIPBoard Leadership

Currently, our Board leadership structure consists of a Chairman (who is also our CEO), a Lead Independent Director, and strong committee chairs. The Board believes that our structure provides independent Board leadership and engagement while providing the benefit of having our CEO, the individual with primary responsibility for managing the Company’s day-to-day operations, chair regular Board meetings as key business and strategic issues are discussed. At this time, the Board believes that the Company is best served by having the same individual as both Chairman of the Board and CEO, but considers the continued appropriateness of this structure at least annually.

 

 

 
20      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


Corporate Governance(continued)

LOGO
 

LOGO       Corporate Governance:Letter from the Lead Independent Director

 

Letter from the Lead Independent Director

 

LOGO  

James G. Cullen

Lead Independent
Director

Currently,Under our Board leadership structure consists of a Chairman (who is also our CEO), a Lead Independent Director and strong committee chairs. Our Corporate Governance Principles, require that thePrudential’s independent directors annually elect an independent director to serve as Lead Independent Director for a term of at least one year, but for no more than three years. I am honored that my fellow independent directors have elected me for the past three years. This May ends my term, and I will step down from the role of Lead Independent Director at our Annual Meeting.

Over the past three years, this Board presided over a period of tremendous change and growth, in which we have entered new businesses. The completion of two years.landmark pension risk transfer transactions in Retirement redefined the conversation about the pension market, and our acquisition of the Hartford’s Individual Life Insurance business reaffirmed our commitment to the Life business, while bringing Hartford’s spirit of innovation and creativity to Prudential.

 

The Board believes that our structure provides independent Board leadership and engagement while providing the benefit of having our CEO, the individualIn conjunction with primary responsibility for managing the Company’s day-to-day operations, chair regular Board meetings as we discuss keythese business and strategic issues. At this time,achievements, the Board believes that the Company is best served by having the same individual as both Chairmanhas focused on a number of the Board and CEO, but considers the continued appropriateness of this structure at least annually.key initiatives, including:

BothTalent Management Talent management and succession planning are critical to excellent performance and achieving shareholder value. Recognizing that talent of all employees is key to the Company’s success, the Board actively engages in discussions with senior management about key talent indicators for the overall workforce, including climate, diversity, recruiting and development programs.

Risk Oversight While the Board is proud of Prudential’s business growth over the past three years, we are cognizant of the complex regulatory environment under which we operate, including our designations as a SIFI and a GSII. This environment challenges the Board and Management believe that strong, independent Board leadership is a critical aspect of effective corporate governance. As the Lead Independent Director, I workmanagement to be vigilant in identifying and assessing risk, and balancing this with the other independent directorsCompany’s long-term business objectives.

Engagement and Outreach Our proactive shareholder engagement program provides the Board and management with knowledge about the issues that are important to ensure that strongour shareholders. We consider your opinions seriously and we use your feedback to inform our governance and executive compensation policies. This is reflected in the changes we made to our executive compensation program for 2014.

Sustainability The Board’s commitment to sustainability is evident in the Charter of the Corporate Governance and Business Ethics Committee, which includes oversight of managementenvironmental, social and governance (“ESG”) related issues, and ESG skills and expertise are considered a core competency for our Board members. Our annual Sustainability Report articulates, measures and reports our environmental, social and governance activities. In 2013, our pledge to sustainability resulted in Prudential receiving the prestigious New Jersey Governor’s Environmental Excellence Award in the Healthy and Sustainable Businesses category.

To stay competitive in a business and regulatory environment that is provided.

In order to provide that independent oversight, the independent directors generally meet in executive session at both the beginning and the end of each regularly scheduled Board meeting, and I serve as Chair. I also serve as a liaison between the Chairman and the independent directors. I approve information sent toundergoing historic changes, the Board includingcontinually evaluates and adjusts our governance and oversight processes. The combined skills of our directors create a multi-faceted Board that is dedicated to serving the quality, quantity, appropriateness and timelinessbest interests of such information, as well as the meeting agendas for the Board. It’s important that there is sufficient time for discussion of all agenda items, so I approve meeting schedules and make changes if needed.Company. I am also authorizedproud to retain outside advisorswork side-by-side with my fellow directors on your behalf and consultantslook forward to report directlycontinuing to the Board of Directors on Board issues.serve you as an independent director.

Engagement and close attention to your perspectivesWe remain focused on the Company are important componentsneeds of fosteringour clients, committed to prudent risk management, disciplined about talent management, and determined to build on our leading competitive position. Our people and culture have positioned us to meet these objectives, and we have never been more confident in our ability to create long-term relationships withvalue for our shareholders. As your representative, I am available if requested by shareholders, when appropriate, for consultation and direct communication. I encourage you to review

On behalf of the charter for the Lead Independent Director at www.prudential.com/governance for additional insight.

Thankentire Board, thank you for your past support and vote of our leadership. On behalf of all of the independent directors we look forward to working with Management to achieve long-term performance and value.confidence.

LOGO

LOGO

James G. Cullen

Lead Independent Director

Notice of Annual Meeting of Shareholders and 2014 Proxy Statement     21


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Corporate Governance

 

BOARD RISK OVERSIGHTBoard Risk Oversight

The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. At least annually, the Board reviews strategic risks and opportunities facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees (which are comprised solely of independent directors) that report back to the full Board. In general, the committees oversee the following risks:

 

Audit Committee:risks related to financial controls, legal, regulatory and compliance functions,issues, and the overall risk management governance structure and risk management function;

 

Finance Committee:Committee:risks involving the capital structure of the enterprise, including borrowing, liquidity, allocation of capital, major capital transactions and expenditures, funding of benefit plans, statutory insurance reserves and policyholder dividends, and the strength of the finance function;

Investment Committee:Committee:investment risk, and the strength of the investment function;

 

Compensation Committee:Committee:the Company’s compensation programs so that they do not encourage unnecessary or excessive risk-taking; and

 

Corporate Governance and Business Ethics Committee:the Company’s political contributions, lobbying expenses and overall political strategy, as well as the Company’s environmental, sustainability and corporate social responsibility to minimize reputational risk and focus on future sustainability.

In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, committees hold joint meetings when appropriate and address certain issues at the full Board level.

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Corporate Governance(continued)

In addition, the Board and committees review the performance and functioning of the Company’s overall risk management function and management’s establishment of appropriate systems for managing risk (including brand and reputational risk), credit/counterparty risk, market risk (including interest rate and asset/liability matching risk), insurance risk, product risk, operational risk, legal and regulatory/compliance risk, liquidity and capital risk, and emerging risk/event risk.

During 2012,2013, the full Board received reports on the most important strategic issues and risks facing the Company. The

Board and committees also received reports from the Company’s Chief Risk Officer and other senior management regarding compliance with applicable risk-related policies, procedures and limits.

RiskThe Company, under the Board’s oversight, is organized to promote a strong risk awareness and management is an integral part of the Company’s culture: theculture. The Chief Risk Officer sits on many management committees and heads an independent enterprise risk management department; employee appraisals take into consideration sound risk management;the General Counsel and Chief Compliance Officer also sit on key management committees and the legal and compliance functions they oversee operate independently of the business to separate management and oversight. Employee appraisals evaluate employees with respect to risk and ethics.

In addition, weWe monitor the risks associated with our executive compensation program as well as the components of our program and individual compensation decisions, on an ongoing basis. EveryEach year since 2009, management has undertaken a review of the Company’s various compensation programs to assess the risks arising from our compensation policies and practices. Management has presented these risk assessments to the Compensation Committee. The risk assessments have included a review of the primary design features of the Company’s compensation plans and the process to determine compensation pools and awards for employees and analyzed how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s compensation plans allow for discretionary adjustments to the ultimate outcomes, which serves to mitigate risk-taking.

Moreover, senior management is subject to a share retention policy, and historically a large percentage of senior management compensation has been paid in the form of long-term grants.equity awards. In addition, senior management compensation is paid over a multiple-year cycle, a compensation structure that is intended to align incentives with appropriate risk-taking. The Company’s general risk management controls also serve to preclude decision-makers from taking excessive risk in order to achieveearn the incentives provided under theour compensation plans. The Compensation Committee agreed with the conclusion that the identified risks were within our ability to effectively monitor and manage and that our compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company.

In 2012,2013, the Compensation Committee again received an updated risk assessment of our compensation program to supplement and expand on the studies conducted each year since 2009.

22  Notice of Annual Meeting of Shareholders and 2014 Proxy Statement


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Corporate Governance

SUCCESSION PLANNINGSuccession Planning

The Company’s Board is actively engaged and involved in talent management. The Board reviews the Company’s “people strategy” in support of its business strategy at least annually. This includes a detailed discussion of the Company’s global leadership bench and succession plans with a focus on key positions at the senior officer level.

In addition, the committees of the Board regularly discuss the talent pipeline for specific critical roles. High potential leaders are given exposure and visibility to Board members through formal presentations and informal events. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs.

COMMUNICATION WITH DIRECTORSCommunication with Directors

Shareholders and other interested parties may communicate with any of the independent directors, including Committee Chairs and the Lead Independent Director, by using the following address:

Prudential Financial, Inc.

Board of Directors

c/o Margaret M. Foran, Chief Governance Officer,

Vice President and Corporate Secretary

751 Broad Street

Newark, NJ 07102

Email: independentdirectors@ prudential.com

Feedback on Executive Compensation:You can also provide feedback on executive compensation at the following website www.prudential.com/executivecomp.

The Chief Governance Officer and Corporate Secretary of the Company reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Corporate Chief Ethics Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain to non-financial matters will be forwarded promptly. Certain items that are unrelated to the duties and responsibilities of the Board will not be forwarded such as: business solicitation or advertisements; product-related inquiries; junk mail or mass mailings; resumes or other job-related inquiries; spam and overly hostile, threatening, potentially illegal or similarly unsuitable communications.

22  Notice of Annual Meeting of Shareholders and 2013 Proxy Statement


Corporate Governance(continued)

LOGO       

SHAREHOLDER ENGAGEMENT

In 2012,2013, we extendedcontinued our philosophy of engagement, communication, and transparency in a variety of ways, such as:including the following:

 

  

Providing multiple avenues for shareholders to communicate with the Company and the Board. Over 8,000Each of the over 10,000 comments have been received from shareholders in the last threefour years each receivinghas received a written response. Shareholders also continued to also use the mechanisms available through www.prudential.com/governance to provide input.

 

 

  

ContinuingKeeping with our successful vote incentive programcommitment to registered shareholders with over 200,000 shareholders participating again this year. During the past three years, over 342,000 trees have been planted as part of this program.

Instituting a new program forsustainable practices, we asked shareholders to communicate howtell us if they want to receiveprefer paper or electronic delivery for their annual proxy materials. Over 340,000 shareholders informed usAs a result we increased shareholder participation in our Annual Meeting of their preference.Shareholders via electronic delivery by almost 150%

 

 

  

Continuing our philosophy of promoting greater communication with our institutional shareholders on corporate governance issues. In 2013, we engaged with shareholders representing over a majority of our stock ownership. Our shareholders’ feedback is directly reflected in the modifications made to this year’s executive compensation program including more performance related compensation, more pay for performance correlation and reducing long-term disability payments by any non-qualified pension benefit payments.

 

Shareholder engagement through participation in our annual meeting is important to us. In 2012, quorum at our annual meeting exceeded 70% forCommittees of the first time in our history as a public company.

COMMITTEES OF THE BOARD OF DIRECTORSBoard of Directors

The Board has established various committees to assist in discharging its duties, including: Audit, Compensation, Corporate Governance and Business Ethics, Finance and Investment. The primary responsibilities of each of the committees are set forth below, together with their current membership and number of meetings. The committee charters can be found on our website at www.prudential.com/governance. Each member of the Audit, Compensation, and Corporate Governance and Business Ethics Committees has been determined by the Board to be independent for purposes of the NYSE Corporate Governance listing standards.

Audit Committee

The Audit Committee provides oversight of the Company’s accounting and financial reporting and disclosure processes;processes, the adequacy of the systems of disclosure and internal control established by management;management, and the audit of the Company’s financial statements. The Audit Committee oversees

Notice of Annual Meeting of Shareholders and 2014 Proxy Statement     23


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Corporate Governance

risks related to financial controls and legal, regulatory and compliance matters, and oversees the overall risk

management governance structure and risk management function. Among other things, the Audit Committee: (1) appoints the independent auditor and evaluates its independence and performance; (2) reviews the audit plans for and results of the independent audit and internal audits; and (3) reviews reports related to processes established by management to provide compliance with legal and regulatory requirements. The Board of Directors has determined that all of our Audit Committee members, Messrs. Unruh, Casellas and CasellasScovanner and Ms. Hund-Mejean, are audit committee financial experts as defined by the SEC.

Compensation Committee

The Compensation Committee oversees the development and administration of the Company’s compensation and benefits policies and programs. For more information on the responsibilities and activities of the Compensation Committee, including the Committee’s processes for determining executive compensation, see the “Compensation Discussion and Analysis” section.section of this Proxy Statement.

Corporate Governance and Business Ethics Committee

The Corporate Governance and Business Ethics Committee oversees the Board’s corporate governance procedures and practices, including the recommendations of individuals for the Board, making recommendations to the Board regarding director compensation and overseeing the Company’s ethics and conflict of interest policies, its political contributions and lobbying expenses policy, and its strategy and reputation regarding environmental stewardship and sustainability responsibility throughout the Company’s global businesses.

Executive Committee

The Executive Committee is authorized to exercise the corporate powers of the Company between meetings of the Board, except for those powers reserved to the Board of Directors by theour By-laws or otherwise.

Finance Committee

The Finance Committee oversees, takes actions, and approves policies with respect to capital, liquidity, borrowing levels, reserves, subsidiary structure and major capital expenditures.

Investment Committee

The Investment Committee oversees and takes actions with respect to the acquisition, management and disposition of invested assets; reviews the investment performance of the pension plan and funded employee benefit plans; and reviews investment risks and exposures, as well as the investment performance of products and accounts managed on behalf of third parties.

Notice of Annual Meeting of Shareholders and 2013 Proxy Statement     23


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Corporate Governance(continued)

POLICIES AND PROCEDURES FOR APPROVAL OF RELATED PERSON TRANSACTIONSCertain Relationships and Related Person Transactions

The Company has adopted a written Related Party Transaction Approval Policy that applies when:

 

any transaction or series of transactions in which the Company or a subsidiary is a participant;

 

the amount involved exceeds $120,000; and

 

a related party (a director or executive officer of the Company, any nominee for director, any shareholder owning an excess of 5% of the total equity of the Company and any immediate family member of any such person) has a direct or indirect material interest.

The policy is administered by the Corporate Governance and Business Ethics Committee. The Committee will consider relevant facts and circumstances in determining whether or not to approve or ratify such a transaction, and will approve or ratify only those transactions that are, in the Committee’s judgment, appropriate or desirable under the circumstances.

Pursuant to our policy, the Corporate Governance and Business Ethics Committee determined that nothere was one reported transaction that qualified as a related party transaction during 2012.2013. Mr. Falzon became Chief Financial Officer and an executive officer of the Company effective March 4, 2013. His brother, Michael Falzon, has been an employee of the Company since 1996. Michael Falzon is currently a Vice President for Information Systems. In 2013, the total compensation paid to Michael Falzon, including salary, bonus and the grant date value of long-term incentive awards, was less than $300,000. His compensation is similar to the compensation of other employees holding equivalent positions.

24  Notice of Annual Meeting of Shareholders and 2014 Proxy Statement


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Corporate Governance

ENVIRONMENT AND SUSTAINABILITY

The Board of Directors made clearformalized its oversight of Prudential’s commitment to the environment and sustainability in 2011 by formalizing its2011. The Governance and Business Ethics Committee added oversight of environmental and sustainability areas to its charter and included these skills among the functionqualifications and including related skills and experience in qualifications for service onexperiences needed to oversee the Board. Company.

In 2012,2013, the Company made significant progress in this area, including:

 

  

Hosting its first formal stakeholder engagement on sustainability facilitated by Ceres, a nonprofit focused on corporate sustainability and environmental performance. Feedback from the group has guided the company’s efforts in continuous improvement.

Releasing Prudential’s first consolidated Sustainability Report,second sustainability report — “A Commitment to ProgressKeeping Our Promises” —. with stakeholder feedback shaping the content. It is available at www.prudential.com/sustainability.

Energizing a second set of solar arrays at the company’s Roseland, NJ facilities.

 

 

  

Participating in the International Integrated Reporting Pilot by beginning to createcreating frameworks that communicate the full story of Prudential’s long-term shared value creation. See the back cover of this Proxy Statement for more information.

 

 

  

Becoming a Ceres Network Company. This prestigious affiliation will provideEngaging with industry groups, advocates and shareholders on our efforts. Notably, Prudential executives served on the Company accessInvestor Working Group helping to a broader array of influential stakeholders and engagement opportunities.developThe 21st Century Investor: A Blueprint for Sustainable Investing.

 

 

  

EnergizingIn recognition of its sixth solar project, this one located in its serviceenvironmental commitment and data center in Ft. Washington, PA. As a result, Prudential reached its 2013 carbon reduction goal six months early.

Adopting a new diversity strategy that integrates corporate social responsibility, Prudential received the prestigious New Jersey “Governor’s Environmental Excellence Award for Healthy and sourcing with updated approaches to leadership, talent and inclusion.

Continuing to engage with industry groups, advocates and shareholders on our efforts.Sustainable Business.”

 
 

 

LOGOLOGO

 

24 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement  25


Corporate Governance(continued)

LOGO
 

LOGO       

Corporate Governance

 

POLICY ON SHAREHOLDER RIGHTS PLANPolicy on Shareholder Rights Plan

We do not have a shareholder rights plan. The Board will obtain shareholder approval prior to adopting a future shareholder rights plan unless the Board, in the exercise of its fiduciary duties, determines that under the circumstances then existing, it would be in the best interests of the Company and our shareholders to adopt a rights plan without prior shareholder approval. If a rights plan is adopted by the Board without prior shareholder approval, the plan must provide that it will expire within one year of adoption unless ratified by shareholders.

POLITICAL CONTRIBUTIONS AND LOBBYING EXPENDITURE OVERSIGHT AND DISCLOSUREPolitical Contributions and Lobbying Expenditure Oversight and Disclosure

The Corporate Governance and Business Ethics Committee oversees the Company’sreviews and approves an annual report on political strategy, politicalactivities, contributions and lobbying expenses. It presentsmonitors and evaluates the Company’s ongoing political strategy as it relates to overall public policy objectives for the next year and the contributions/expenditure reportprovides guidance to the Board. We provide on our website a description of our oversight process for political contributions and a summary of PAC contributions, including those from the federal PAC and threetwo state PACs. We also include information on annual dues, assessments and contributions of $50,000 or more to trade associations and tax-exempt groups and a summary of Company policies and procedures for political activity. This disclosure is available at www.prudential.com/governance under the heading “Political Activity & Contributions.”

ENVIRONMENTAL AND SUSTAINABILITYEnvironmental, Sustainability and Corporate Social Responsibility

The Corporate Governance and Business Ethics Committee has oversight of environmental issues and policies. In addition, three of our Board members traditionally sit on the Community Resources Oversight Committee, which oversees

Prudential’s corporate social responsibility work. These directors inform the Company’s social responsibility efforts in strategic philanthropy, employee engagement, corporate community involvement and investing for social return.

CORPORATE COMMUNITY INITIATIVES

The Prudential Foundation contributed $29 million to non-profit organizations focused on improving education outcomes for children and transforming neighborhoods into thriving economically diverse communities.

Prudential’s Social Investment program committed $100 million to non-profits and businesses creating opportunities for disadvantaged communities.

Prudential donated nearly $14 million in corporate contributions to nonprofit and non-governmental organizations across the globe, including $2.7 million to projects serving U.S. veterans.

Prudential employees continued the Company’s long tradition of corporate community involvement donating countless hours of their time and talent.

GOOD GOVERNANCE PRACTICES

A commitment to strong and sustainable corporate governance practices are hallmarksis a hallmark of the Board’s stewardship on behalf of shareholders and other stakeholders. As such, we continuously review our practices to ensure effective collaboration of management and ourthe Board.

 

  

Of the Board’s 13 Directors, 11 are independent, including ana Lead Independent Lead Director.

 

 

  

Directors are elected annually by a majority of votes cast in an uncontested election.

 

 

  

The Board has adopted and published committee charters and a charter for its Lead Independent Director to guide its oversight and independent governance leadership (www.prudential.com/(these charters are available at www.prudential.com/governance).

 

 

  

Annually theThe Board conducts an annual self-evaluation, a self-evaluation, review of Board independence and key committee self-evaluations.

 

 

  

New Directors receive an orientation.

All Directorsorientation and participate in continuing education.education on critical topics and issues.

 

 

  

We have stock ownership and stock retention guidelines for our executives and Directors.

 

 

  

We have specific policies and practices to align executive compensation with long-term shareholder interests.

We have a derivatives, hedging and pledging policy for Section 16 officers and Directors.

 

 

  

An executive compensation clawback policy has been included in the Book Value Performance Program.

 

 

  

The Board reviews management talent and succession at least annually.

 

 

  

There is no shareholder rights plan or “poison pill”.pill.”

 

 

  

The threshold to call a special meeting is 10% of shareholders.

 

There is no automatic enhancement of executive incentive compensation upon a change in control.

 

 

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Item 2—Ratification of the Appointment of the

Independent Registered Public Accounting Firm

 

The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as the Company’s independent registered public accounting firm (independent auditor) for 2013.2014. We are not required to have the shareholders ratify the selection of PricewaterhouseCoopers as our independent auditor. We nonetheless are doing so because we believe it is a matter of good corporate practice.

 

If the shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers, but may retain such independent auditor. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of Prudential Financial and its shareholders. Representatives of PricewaterhouseCoopers will be present at the Annual Meeting and will have the opportunity to make a statement and be available to respond to appropriate questions by shareholders.

FEES PAID TO PRICEWATERHOUSECOOPERSFees Paid To PricewaterhouseCoopers LLP

The following is a summary and description of fees billed for services provided by PricewaterhouseCoopers in 20122013 and 2011.2012.

WORLDWIDE FEES (IN MILLIONS)Worldwide Fees (In Millions)

 

Service  2012     2011     2013     2012 
Audit(A)  $43      $42  
Audit-Related(B)  $4      $6  
Tax(C)  $2      $2  
Audit(A)    $45      $43  
Audit-Related(B)    $4      $4  
Tax(C)    $1      $2  
All Other                          
Total  $49      $50      $50      $49  

 

(A)The aggregate fees for professional services rendered for the integrated audit of the consolidated financial statements of Prudential Financial and, as required, audits of various domestic and international subsidiaries, the issuance of comfort letters, agreed-upon procedures required by regulation, consents and assistance with review of documents filed with the SEC.

 

(B)The aggregate fees for assurance and related services including internal control and financial compliance reports, agreed-upon procedures not required by regulation, and accounting consultation on new accounting standards, acquisitions and International Financial Reporting Standards (IFRS).

 

(C)The aggregate fees for services rendered by PricewaterhouseCoopers’ tax department for tax return preparation, tax advice related to mergers and acquisitions and other international, federal and state projects, and requests for rulings. In 2013, tax compliance and preparation fees total $1.3M and tax advisory fees total $0.1M and in 2012, tax compliance and preparation fees total $1.4M and tax advisory fees total $0.9M and in 2011, tax compliance and preparation fees total $1.7M and tax advisory fees total $0.3M.$0.9M.

PricewaterhouseCoopers also provides services to domestic and international mutual funds and limited partnerships not consolidated by Prudential Financial, but which are managed by Prudential Financial. PricewaterhouseCoopers identified fees paid by these entities of $12M in 2013 and $12M in 2012 and $10M in 2011 and that all of these fees relate to audit audit-related and tax services.

The Audit Committee has advised the Board of Directors that in its opinion the non-audit services rendered by PricewaterhouseCoopers during the most recent fiscal year are compatible with maintaining their independence.

PricewaterhouseCoopers has been the Company’s independent auditor since 1996.

A new Lead Audit Partner is designated at least every five years to provide a fresh perspective. Consistent with this practice, a new Lead Audit Partner was designated for 2012.2012, in consultation with the Audit Committee.

In determining whether to reappoint the independent auditor, the Audit Committee considers the length of time the firm has been engaged, in addition to considering the quality of the discussions with the independent auditor and an assessment of the past performance of both the Lead Audit Partner and PricewaterhouseCoopers.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURESAudit Committee Pre-Approval Policies and Procedures

The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the independent auditor. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensure that the independent auditor’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and the non-audit services that may not be performed; and sets forth the pre-approval requirements for all permitted services. The policy provides for the general pre-approval of specific types of Audit, Audit-Related and Tax services and a limited fee estimate range for such services on an annual basis. The policy requires specific pre-approval of all other permitted services. The independent auditor is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with their pre-approval and the fees for the services performed to date. The Audit Committee’s policy delegates to its Chairman the authority to address requests for pre-approval of services with fees up to a maximum of $100,000$250,000 between Audit Committee meetings if the Chief Auditor deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee, and the Chairman must

26  Notice of Annual Meeting of Shareholders and 2013 Proxy Statement


Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm(continued)

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report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of the independent auditor.

All Audit, Audit-Related, Tax and All Other feesservices described above were approved by the Audit Committee before services were rendered.

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Item 2—Ratification of the Appointment of the Independent Registered Public Accounting Firm

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS AS THE COMPANY’S INDEPENDENT AUDITOR FOR 2013.The board of directors recommends that shareholders vote“FOR” ratification of the appointment of PricewaterhouseCoopers as the Company’s Independent Auditor for 2014.

ENHANCING COMMUNICATION THROUGH

AUDIT COMMITTEE REPORTING

In 2013, The Center for Audit Quality and a group of nationally recognized U.S. corporate governance and policy organizations, jointly released a paper entitled “Enhancing the Audit Committee Report: A Call to Action,” which encouraged audit committees of public companies to proactively consider strengthening their public disclosures to more effectively convey the critical work of audit committees to investors and stakeholders. Prudential was featured as an example of a company exhibiting voluntary practices of strengthened audit committee disclosures.

REPORT OF THE AUDIT COMMITTEEReport of the Audit Committee

ThreeFour non-management directors comprise the Audit Committee. The Committee operates under a written charter adopted by the Board. The Board has determined that each member of the Committee has no material relationship with the Company under the Board’s independence standards and that each is independent and financially literate under the listing standards of the NYSE and under the SEC’s standards relating to independence of audit committees.

In addition, the Board of Directors has determined that all of our Audit Committee members: Messrs. Unruh, Casellas and CasellasScovanner and Ms. Hund-Mejean satisfy the financial expertise requirements of the NYSE and have the requisite experience to be designated an audit committee financial expert as that term is defined by rules of the SEC.

Management is responsible for the preparation, presentation and integrity of the financial statements of Prudential Financial and for maintaining appropriate accounting and financial reporting policies and practices, and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Prudential Financial’s independent registered public accounting firm (independent auditor), PricewaterhouseCoopers, is responsible for auditing the consolidated financial statements of Prudential Financial and expressing an opinion as to their conformity with generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting in accordance with the requirements of the Public Company Accounting Oversight Board (“PCAOB”).

In performing its oversight function, the Audit Committee reviewed and discussed the audited consolidated financial statements of Prudential Financial as of and for the year ended December 31, 20122013 and Management’s Annual Report on Internal Control Over Financial Reporting with

management and Prudential Financial’s independent auditor. The Audit Committee also discussed with Prudential Financial’s independent auditor the matters required to be discussed by the independent auditor with the Audit Committee under the rules adopted by the PCAOB.

The Audit Committee received from the independent auditor the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence, and has discussed with the independent auditor its independence.

The Audit Committee has discussed with, and received regular status reports from, Prudential Financial’s Chief Auditor and independent auditor on the overall scope and plans for their audits of Prudential Financial, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. The Audit Committee meets with the Chief Auditor and the independent auditor, with and without management present, to discuss the results of their respective audits, in addition to private meetings with the Chief Financial Officer, Chief Risk Officer, General Counsel and Chief Compliance Officer. In determining whether to reappoint PricewaterhouseCoopers as Prudential Financial’s independent auditor, the Audit Committee took into consideration a number of factors, including the length of time the firm has been engaged, the quality of the Audit Committee’s ongoing discussions with PricewaterhouseCoopers and an assessment of the professional qualifications and past performance of the Lead Audit Partner and PricewaterhouseCoopers.

In addition, the Audit Committee reviewed and amended its Charter and received reports as required by its policy for the receipt, retention and treatment of financial reporting concerns received from external and internal sources.

Based on the reports and discussions described in this report and subject to the limitations on the roles and responsibilities of the Audit Committee referred to above and in its Charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of Prudential Financial and Management’s Annual Report on Internal Control Over Financial Reporting be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20122013 for filing with the SEC.

THE AUDIT COMMITTEE

James A. Unruh (Chairman)

Gilbert F. Casellas

Martina Hund-Mejean

Douglas A. Scovanner

 

 

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Item 3—Advisory Vote to Approve

Named Executive Officer Compensation

 

The Board is committed to excellence in governance and recognizes the interest our shareholders have in our executive compensation program. As a part of that commitment, and in accordance with SEC rules, our shareholders are being asked to approve an advisory resolution on the compensation of the named executive officers, as reported in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to endorse or not endorse our fiscal 20122013 executive compensation program and policies for the named executive officers through the following resolution:

 

RESOLVED, that the shareholders of Prudential approve, on an advisory basis, the compensation of the Company’s named executive officers set forth in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in this Proxy Statement.

This vote is not intended to address any specific item of compensation, but rather our overall compensation policies and procedurespractices relating to the named executive officers. Accordingly, your vote will not directly affect or otherwise limit any existing

any existing compensation or award arrangement of any of the named executive officers. Because your vote is advisory, it will not be binding upon the Board. The Board will, however, as it has done in prior years, take into account the outcome of the “Say on Pay” vote when considering future compensation arrangements.

The Board has adopted a policy providing for annual “Say on Pay” advisory votes. Accordingly, the next “Say on Pay” vote will occur in 2014.2015.

 

 

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Item 4 –Shareholder 4—Shareholder Proposal Regarding Written Consent

Executive Stock Ownership

 

In accordance with SEC rules, we have set forth below a shareholder proposal, along with the supporting statement of the shareholder proponent. The Company is not responsible for any inaccuracies it may contain. The shareholder proposal is required to be voted on at our Annual Meeting only if properly presented. As explained below, our Board unanimously recommends that you vote“AGAINST”the shareholder proposal.

 

John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, beneficial owner of 80 shares of Common Stock, is the proponent of the following shareholder proposal. The proponent has advised us that a representative will present the proposal and related supporting statement at the Annual Meeting.

Proposal 4—Right to Act by Written ConsentItem 4 – Executives To Retain Significant Stock

Resolved,Resolved: Shareholders requesturge that our boardexecutive pay committee adopt a policy requiring senior executives to retain a significant percentage of directors undertake such steps as may be necessaryshares acquired through equity pay programs until reaching normal retirement age and to permit written consent byreport to shareholders entitled to castregarding the minimum numberpolicy before our Company’s next annual meeting. For the purpose of votes thatthis policy, normal retirement age would be necessaryan age of at least 60 and determined by our executive pay committee. Shareholders recommend that the committee adopt a share retention percentage requirement of 50% of net after-tax shares.

This single unified policy shall prohibit hedging transactions for shares subject to authorizethis policy which are not sales but reduce the action at a meeting at which all shareholders entitledrisk of loss to vote thereon were present and voting. This written consent includes all issues that shareholders may propose. This written consent is to be consistent with applicable law and consistent with giving shareholders the fullest power to act by written consent consistent with applicable law.

Supporting Statement of Shareholder Proponent

The shareholders of Wet Seal (WTSLA) successfully used written consent to replace certain underperformingexecutive. Otherwise our directors would

be able to avoid the impact of this proposal. This policy shall supplement any other share ownership requirements that have been established for senior executives, and should be implemented so as not to violate our Company’s existing contractual obligations or the terms of any pay or benefit plan currently in October 2012. This proposal topic won majority shareholder support at 13 major companies ineffect.

Requiring senior executives to hold a single year. This included 67%-support at both Allstate and Sprint. Hundredssignificant portion of major companies enable shareholder action by written consent.stock obtained through executive pay plans would focus our executives on our company’s long-term success. A Conference Board Task Force report stated that hold-to-retirement requirements give executives “an ever-growing incentive to focus on long-term stock price performance.”

This proposal should also be more favorably evaluated in the context ofdue to our Company’s overallclearly improvable environmental, social and corporate governance performance as reported in 2012: GMI/The Corporate Library,2013:

GMI Ratings, an independent investment research firm, rated our company “D”D for executive pay with “High Governance Risk.” Also “High Concern” in Executive Pay — $23$33 million for our CEO John Strangfeld $13 million for Mark Grier, $10 million for Edward Baird and $9 million for Charles Lowrey. GMI said it was troubling because individual bonuses for our highest paid executives were determined subjectively. John Strangfeld also hadshareholders faced a potential $47 million entitlement for a change in control.

Five of13% dilution. Unvested equity pay would not lapse upon CEO termination. Our company could give long-term incentive pay to our directors had 11-year long-tenure. Plus these long-tenured directors controlled the majority of our 3 most important board committees. GMI said such long-tenured directors can form relationships that could compromise their independence and therefore hinder their ability to provide effective oversight. An independent perspective is so valuedCEO

 

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Item 4 – Shareholder Proposal Regarding Written Consent (continued)

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for a board of directors. Directors Constance Horner and William Gray were together on the Pfizer board and they were also 67% of our nomination committee. Intra-board relationships of the Pfizer kind can compromise a director’s ability to act independently. William Gray and Karl Krapek were negatively flagged by GMI for their involvement with the Visteon Corporation bankruptcy. Gaston Caperton was negatively flagged for his involvement with the Owens Corning bankruptcy or reorganization.

It got worse with the potentially compromised Directors Horner and Gray controlling the majority of our nomination committee because 4 of our directors were beyond age 70 and it will be important to find qualified replacements. Thomas Baltimore, our youngest director, received a whopping 30% in negative votes. This compared to less than 1% in negative votes for some of his Prudential peers. And Mr. Baltimore showed he could do worse by getting 41% in negative votes at Duke Realty.

Please encourage our board to respond positively to this proposal to protect shareholder value:

Right to Act by Written Consent – Proposal 4

Board of Directors’ Statement in Opposition to the Proposal

Your Board recommends a vote against this proposal because it believes that the written consent process, as required by the proposal, is less transparent, less democratic and deprives shareholders of a forum for discussion or opportunity for shareholders to make inquiries about proposed actions. Matters that are sufficiently important to require shareholder approval should be communicated in advance so they can be considered and voted upon by all shareholders. This proposal would allow a group of shareholders to take action by written consent without prior communication to all shareholders of the proposed action or the reasons for the action. We believe this proposal disenfranchises shareholders who do not have the opportunity to participate in the process. Permitting shareholder action by written consent has the potential to create confusion and the Board does not believe it is appropriate for a widely-held public company.

Our Board believes that every shareholder should have the opportunity to consider and vote upon shareholder actions.

Our shareholders have the right to call a special meeting at a ten-percent threshold. This right, as well as our established shareholder communication and engagement mechanisms, provides shareholders the opportunity to raise important matters outside the annual meeting process.

The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company has a strong governance structure in place and the Board’s philosophy and policies are responsive to shareholders. In addition to the unrestricted right for shareholders to call special meetings at a ten-percent threshold, the Company has many other governance provisions in place that empower shareholders including:

a majority voting standard in uncontested director elections;

no shareholder rights plan;

an annually elected Board;

no supermajority voting provisions; and

independent board leadership, including a Lead Independent Director and strong committee chairs.

Requiring that all shareholder business be acted upon at a meeting helps to ensure complete information is presented to shareholders to obtain their approval and is more democratic. The Board believes that the risk of abuse associated with the right to act by written consent, including bypassing procedural protections that offer transparency and advance notice, both of which are afforded with a shareholder meeting, make this proposal not in the best interest of all shareholders.

In summary, the Board believes the adoption of this proposal is unnecessary because of our commitment to good corporate governance and the right of shareholders to call a special meeting. Furthermore, the Board believes that the written consent proposal would circumvent the protections, procedural safeguards and advantages provided to all shareholders by shareholder meetings.

THEREFORE, YOUR BOARD RECOMMENDS THAT YOU VOTE “AGAINST” THIS PROPOSAL.

 

 
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Item 4—Shareholder Proposal Regarding Executive Stock Ownership

for below-median performance. Prudential had not linked environmental or social performance to its incentive pay policies. There was a 23% vote against our executive pay in 2013.

GMI rated our board D. Executive Mark Grier (paid $13 million) was on our board in addition to our CEO. Director Karl Krapek was negatively flagged by GMI for his involvement with the Visteon Corporation bankruptcy. James Cullen, our Lead Director, was overcommitted with seats on a total of 4 company boards. All the directors on our executive pay committee were over age 70. Not one member of our audit committee had substantial industry knowledge and not one independent director had expertise in risk management.

Prudential had not yet implemented OSHAS 18001 as its occupational health and safety management system, nor did it disclose its workplace safety record in its annual report. Prudential was rated as having Very Aggressive Accounting & Governance Risk—higher than 99% of companies. Prudential also had higher shareholder class action litigation risk than 98% of all rated companies.

Returning to the core topic of this proposal from the context of our clearly improvable corporate performance, please vote to protect shareholder value: Executives to Retain Significant Stock – Item 4

Board of Directors’ Statement in Opposition to the Proposal

Our Board of Directors has carefully considered this proposal. While we agree that senior executives should own a significant amount of company stock to align their interests with those of our shareholders, the Board believes the proposal is unnecessary. Our current stock ownership guidelines, stock retention requirements and prohibition on derivative trading, hedging and pledging already accomplish the goal of the proposal. In addition, the anti-diversification strategy of the proposal would not be considered prudent investment advice for any investors including our senior executives.

Stock Ownership Guidelines

Consistent with our belief in the value and importance oflong-term retention of equity compensation, we have stock

ownership guidelines that encourage our executives to build their ownership position over time. The ownership guidelines range from two times a senior vice president’s salary, to three times a vice chairman and executive vice president’s salary and five times the CEO’s salary. All of our current NEOs, with the exception of Mr. Falzon, who was promoted to CFO and Executive Vice President in March 2013, meet and will exceed individual stock ownership levels. John Strangfeld holds 21 times and Mark Grier holds 20 times their respective base salaries.

Stock Retention Requirements

We also have stock retention requirements for our executive officers that require them to retain 50% of net shares (after payment of the exercise price and taxes) acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. The executive officer is required to hold these shares until the later of one year following the date of acquisition (even if this one-year holding period extends beyond termination of employment) or the date the executive satisfies our stock ownership guidelines.

Prohibition of Derivative Trading and Hedging and Pledging

In addition, we prohibit all employees, including the NEOs, as well as Board members, from engaging in any hedging transactions with respect to any equity securities of the Company. We also prohibit our Section 16 officers and Board members from pledging or using the Company’s securities as collateral to secure personal loans or other obligations, which includes holding shares of common stock in a margin account.

The Board believes that, contrary to the proposal, our current executive compensation programs coupled with our policies on stock ownership, stock retention and our prohibition on derivatives trading and hedging and pledging our securities, effectively balance the goals of providing executive officers with a focus on long-term stockholder value, creating meaningful retention incentives, permitting for recruitment of executive talent and allowing our executives to prudently manage their personal financial affairs.

Therefore, your board recommends that you vote“AGAINST” this proposal.

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Voting Securities and Principal Holders

 

BENEFICIAL OWNERSHIP

The following table shows all entities that are the beneficial owners of more than 5% of any class of the Company’s voting securities:

 

Title of Class Name and Address of Beneficial Owner    Amount and Nature     Percent of Class 
Common Stock 

BlackRock, Inc.

40 East 52nd Street, New York, NY 10022

     33,453,78136,143,616(1)      7.24%7.8%  
Class B Stock 

National Union Fire Insurance Company of Pittsburgh, PA

c/o AIG Asset Management (U.S.), LLC

2929 Allen Parkway, Suite A-36-04, Houston, TX 77019

     885,714(2)      44.3%  
Class B Stock 

Lexington Insurance Company, c/o AIG Asset Management (U.S.), LLC

2929 Allen Parkway, Suite A-36-04, Houston, TX 77019

Lexington Insurance Company

     914,286(2)      45.7%  
Class B Stock 

Pacific Life Corp.

700 Newport Center Drive, Newport Beach, CA 92660

     200,000(3)      10.0%  

 

(1)

Based on information as of December 31, 20122013 contained in a Schedule 13G13 G/A filed with the SEC on February 8, 201310, 2014 by BlackRock, Inc. The Schedule 13G13 G/A indicates that BlackRock, Inc. has sole voting and dispositive power with respect to all of these shares and sole voting power with respect to 30,262,778 of these shares.

(2)

National Union Fire Insurance Company of Pittsburgh, PA, and Lexington Insurance Company are subsidiaries of American International Group, Inc. (“AIG”), resulting in AIG beneficially owning 90% of the Class B Stock. AIG has informed us that its subsidiaries have sole voting and dispositive power with respect to these shares.

(3)

Pacific Life Corp. has informed us that it has sole voting and dispositive power with respect to these shares.

To our knowledge, except as noted above, no person or entity is the beneficial owner of more than 5% of our Common Stock or more than 5% of the voting power of the combined Common Stock and Class B Stock.

The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 15, 2013,14, 2014, by:

 

each Director and Named Executive Officer; and

 

all Directors and Executive Officers of the Company as a group:group.

None of our Directors or executive officers own Class B Stock.

Name of Beneficial
Owner
 Shares of
Common Stock
 Number of Shares
Subject to
Exercisable  Options
 Total Number of Shares
Beneficially Owned(1)
 

Director Deferred Stock

Units / Additional
Underlying Units(2)(3)(4)

 Total Shares
Beneficially Owned
Plus Underlying  Units
   Common Stock Number of shares
Subject to
Exercisable Options
   Total Number of Shares
Beneficially Owned(1)
   Director Deferred Stock
Units / Additional
Underlying Units(2),(3),(4),
   Total Shares
Beneficially Owned
Plus Underlying Units
 
Thomas J. Baltimore, Jr.  250    250    20,273    20,523     250      250     23,971     24,221  
Gordon M. Bethune  13,935    13,935    2,399    16,334     13,935      13,935     1,831     15,766  
Gaston Caperton  8,648    8,648    12,756    21,404     8,648      8,648     13,892     22,540  
Gilbert F. Casellas  500    500    27,228    27,728     500      500     27,245     27,745  
James G. Cullen  2,033    2,033    39,890    41,923     2,033      2,033     40,206     42,239  
William H. Gray III  1,013    1,013    27,043    28,056  
Constance J. Horner  11,720    11,720    2,399    14,119     6,720      6,720     4,287     11,007  
Martina Hund-Mejean  128    128    6,928    7,056     128      128     8,923     9,051  
Karl J. Krapek  1,000    1,000    39,844    40,844     1,007      1,007     39,883     40,890  
Christine A. Poon  6,125    6,125    10,216    16,341     6,125      6,125     12,289     18,414  
Douglas A. Scovanner   4,600      4,600     1,611     6,211  
James A. Unruh  20,154    20,154    13,503    33,657     27,814      27,814     7,534     35,348  
John R. Strangfeld  318,779(5)   845,931    1,164,710    577,298    1,742,008     321,568(5)   964,720     1,286,288     440,299     1,726,587  
Mark B. Grier  226,969    705,865    932,834    431,868    1,364,702     271,147    566,671     837,818     326,177     1,163,995  
Robert M. Falzon   21,745    0     44,675     83,254     104,999  
Richard J. Carbone  87,635    236,881    324,516    121,956    446,472     4,715    119,442     124,157     70,502     194,659  
Edward P. Baird  64,647    312,290    376,937    219,131    596,068     73,238    379,897     453,135     165,568     618,703  
Charles F. Lowrey  46,078    295,168    341,246    267,449    608,695     51,365    368,773     420,138     206,676     626,814  
All directors and executive officers as a group (22 persons)  874,903    2,732,137    3,607,040    2,182,952    5,789,992  
All directors and executive officers as a group (23 persons)   970,175    2,899,713     3,869,888     1,803,803     5,673,691  

 

(1)

Individual directors and executive officers as well as all directors and executive officers as a group beneficially own less than 1% of the shares of Common Stock outstanding, as of March 15, 2013.

14, 2014.

(2)

Includes the following number of shares or share equivalents in deferred units through the Deferred Compensation Plan for Non-Employee Directors and the Prudential Insurance Company of America Deferred Compensation Plan, as to which no voting or investment power exists: Mr. Baltimore, 20,273;23,971; Mr. Bethune, 2,399;1,831; Mr. Caperton, 12,756;13,892; Mr. Casellas, 27,228;27,245; Mr. Cullen, 39,890; Mr. Gray, 27,043;40,206; Ms. Horner, 2,399;4,287; Ms. Hund-Mejean 6,928;8,923; Mr. Krapek, 39,844;39,883; Ms. Poon, 10,216;12,289; Mr. Scovanner, 1,611; Mr. Unruh, 13,503;7,534; and Mr. Strangfeld, 37,714.

38,209.

(3)

Includes the following shares representing the target number of shares to be received upon the attainment of ROE and EPS goals under the performance share program described under “Compensation Discussion and Analysis”: Mr. Strangfeld, 86,477;89,204; Mr. Grier, 68,500;72,015; Mr. Falzon, 17,597; Mr. Carbone, 18,772;14,198; Mr. Baird, 34,648;36,732; and Mr. Lowrey, 41,570.

45,416.

(4)

Includes the following unvested stock options: Mr. Strangfeld, 453,107;312,886; Mr. Grier, 363,368;254,162; Mr. Falzon, 65,657; Mr. Carbone, 103,184;56,304; Mr. Baird, 184,483;128,836; and Mr. Lowrey, 225,879.

161,260.

(5)

Includes 4,400 shares held by the John and Mary K. Strangfeld Foundation.

COMPLIANCE WITH SECTION 16(a)16(A) OF THE EXCHANGE ACT

Each Director, certain officersexecutive officer of the Company and greater than 10% beneficial ownersowner of Common Stock areis required to report to the SEC, by a specified date, his or her transactions involving our Common Stock. Based solely on a review of the copies of reports furnished to the Company orand written representations that no other reports were required to be filed, the Company believes that during 20122013 our Directors, executive officers and officersgreater than 10% beneficial owners of Common Stock timely filed all reports required by Section 16(a), except that a Form 4report for Nicholas Silitch, an officer, reporting the off-cycle vesting of previously awarded Restricted Stock Units was not timely filed due to an inadvertent non-directed purchase of 430 shares through an automatic-broker-administered dividend reinvestment plan was filed late by Scott Sleyster, an officer.administrative oversight.

 

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Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement  31


LOGO

Compensation of Directors

LOGO       

 

The Corporate Governance and Business Ethics Committee reviews the compensation of ourthe non-employee Directors periodically (generally every three years) and recommends changes to the Board, when it deems appropriate. In 2013, the Committee engaged an independent compensation consultant, James F. Reda & Associates, LLC, to review the existing Director compensation program as the program had last been evaluated in 2011. As a result of this review, the Committee recommended to the Board, and the full Board approved, a new compensation program for non-employee Directors which became effective on January 1, 2014. This program is intended to bring the compensation of the non-employee Directors in line with market practice and it is expected to remain in place for approximately three years.

The following table describes the components of the non-employee Director compensation program for 2012:in effect during 2013 and the new compensation program that became effective January 1, 2014:

 

*Compensation ElementDirector Compensation Program
Annual Retainer$120,000, which may be deferred, at the Director’s option
Annual Equity Retainer$120,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting)
Board and Committee FeesNone
Chair Fee

$25,000 for the Audit Committee

$20,000 for the Compensation Committee

$15,000 for all other committees*

Lead Director Fee$50,000
Meeting Fee for members of the Company’s Community Resources Oversight Committee**$1,250 per meeting
New Director Award (one-time grant)$120,000 in restricted stock units that vest after one year
Stock Ownership GuidelineOwnership of Common Stock or deferred stock units that has a value equivalent to six times the annual cash retainer within six years of joining the Board***
*Compensation Element  2013 Compensation Program  2014 Compensation Program
Annual Retainer  $120,000, which may be deferred, at the Director’s option  $150,000, which may be deferred, at the Director’s option
Annual Equity Retainer  $120,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting)  $150,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting)
Board and Committee Fees  None  None
Chair Fee  

$25,000 for the Audit Committee

$20,000 for the Compensation Committee

$15,000 for all other committees*

  

$35,000 for the Audit Committee

$30,000 for the Compensation Committee

$20,000 for all other committees*

Lead Director Fee  $50,000  $50,000
Meeting Fee for members of the Company’s Community Resources Oversight Committee**  $1,250 per meeting  $1,250 per meeting
New Director Equity Award (one-time grant)  $120,000 in restricted stock units that vest after one year  $150,000 in restricted stock units that vest after one year
Stock Ownership Guidelines  Ownership of Common Stock or deferred stock units that has a value equivalent to six times the annual cash retainer within six years of joining the Board***  Ownership of Common Stock or deferred stock units that has a value equivalent to six times the annual cash retainer within six years of joining the Board***

 

*Includes any non-standing committee of the Board that may be established from time to time, but excluding the Executive Committee.

 

**This is a committee composed of members of management and the Board. This Committee typically meets on a separate day following the Board and Board committee meetings. The non-employee Directors on this committee currently consist of Messrs. Casellas and Caperton and Ms. Horner. The Community Resources Oversight Committee met three times in 2012.2013.

 

***EachAs of December 31, 2013, each of our non-employee Directors metsatisfied this guideline, as of December 31, 2012, with the exception of our newest Director, Martina Hund-Mejean,Mr. Scovanner, who joined the Board in October 2010.November 2013. For purposes of the stock ownership guidelines, once a non-employee Director satisfies thehis or her stock ownership guidelines,level, the Director will be deemed to continue to satisfy the guidelines without regard to fluctuation in the value of the equity interestssecurities owned by the Director.

 

The Company maintains a Deferred Compensation Plan for Non-Employee Directors (the “Plan”). Prior to 2011, 50% of the annual Board and committee retainer was deferred in a notional account that replicates the performance of our Common Stock. Since 2011, 50% of the annual Board and committee retainer was awarded in restricted stock units that vest after one year (or if earlier, on the date of the next Annual Meeting of Shareholders)Meeting). In addition, a non-employee Director can elect to invest the cash portion of his or her retainer and fees in accounts that replicate investments in either shares of our Common Stock or the Fixed Rate Fund, which accrues interest in the same manner as funds invested in the Fixed Rate Fund offered under the Prudential Employee Savings Plan (“PESP”). Prior to 2011, the Plan required that distributions begin in the year a Director reaches the age of 70 1/2. Beginning in 2011, the Plan does not require distributions of fees earned after 2010 to commence when a Director reaches the age of 70 1/2. Instead, the Plan provides for distributions to commence upon termination of Board service or retirement or while a Director remains on the Board. Each Director receives dividend equivalents on the share units

restricted stock units contained in his or her deferral account, which are equal in value to dividends paid on our Common Stock. The dividend equivalents credited to the account are then reinvested in the form of additional share units.

Under the Director compensation program, if a non-employee Director satisfies the stock ownership guidelines, the restricted stock units granted as the annual equity retainer are payable upon vesting in cash or shares of our Common Stock (at the Director’s option), and may be deferred beyond vesting at the Director’s election. If a Director does not satisfy the stock ownership guidelines, the restricted stock units are automatically deferred until termination of Board service.

 

DIRECTOR STOCK

OWNERSHIP GUIDELINES

Each director is expected, within six years of joining the Board, to own Common Stock or deferred stock units that have a value equivalent to six times his or her annual cash retainer.

 

 

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Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement  31


LOGO

LOGO
 

Compensation of Directors (continued)

 

20122013 DIRECTOR COMPENSATION

 

     Fees Earned or Paid in       Stock
Awards($)(1)
   Total($)   Fees Earned or Paid in       
Name  Stock($)  Cash($)     Cash($)     

Stock

Awards($)(1)

     Total($) 
Thomas J. Baltimore, Jr.      135,000     120,000     255,000     135,000       120,000       255,000  
Gordon M. Bethune      120,000     120,000     240,000     120,000       120,000       240,000  
Gaston Caperton      122,500     120,000     242,500     123,750       120,000       243,750  
Gilbert F. Casellas      123,750     120,000     243,750     123,750       120,000       243,750  
James G. Cullen      190,000     120,000     310,000     190,000       120,000       310,000  
William H. Gray III(2)      126,250     120,000     246,250     60,000       120,000       180,000  
Constance J. Horner      132,500     120,000     252,500     138,750       120,000       258,750  
Martina Hund-Mejean      120,000     120,000     240,000     120,000       120,000       240,000  
Karl J. Krapek      135,000     120,000     255,000     135,000       120,000       255,000  
Christine A. Poon      120,000     120,000     240,000     131,250       120,000       251,250  
Douglas A. Scovanner   20,000       120,000       140,000  
James A. Unruh      145,000     120,000     265,000     145,000       120,000       265,000  

 

(1)Represents amounts that are in units of our Common Stock. The amounts reported represent the aggregate grant date fair value forof the restricted stock units granted during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Stock on the date of grant, which is then recognized, subject to market value changes, over the requisite service period of the award. As of December 31, 2012,2013, the aggregate balance in each of the non-employee Directors’ accounts in the Deferred Compensation Plan denominated in units (which includes all deferrals from prior years) and the year-end values were as follows: Mr. Baltimore: 20,27323,971 and $1,081,159;$2,210,605; Mr. Bethune: 2,3991,831 and $127,938;$168,854; Mr. Caperton: 10,95014,004 and $583,963;$1,291,448; Mr. Casellas: 27,22827,245 and $1,452,069;$2,512,533; Mr. Cullen: 39,89040,206 and $2,127,333; Mr. Gray: 27,043 and $1,442,203;$3,707,797; Ms. Horner: 2,3994,287 and $127,938;$395,347; Ms. Hund-Mejean: 6,9288,923 and $369,470;$822,879; Mr. Krapek: 39,84444,466 and $2,124,880;$4,100,654; Ms. Poon: 10,21612,289 and $544,819;$1,133,291; Mr. Scovanner: 1,611 and $148,566 and Mr. Unruh: 13,56510,250 and $723,421.$945,255.

(2)Mr. Gray passed away on July 1, 2013 and his deferred compensation account was paid out to his beneficiary in accordance with the Prudential Non-Employee Deferred Compensation Plan.

 

32 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement  33


LOGO

Compensation Discussion and Analysis

LOGO       

 

In this section, we describe the material components of our executive compensation program for our Named Executive Officers, or “NEOs,”NEOs, whose compensation is set forth in the 20122013 Summary Compensation Table and other compensation tables contained in this Proxy Statement:

 

NAMED EXECUTIVE OFFICERS (NEOS)

John R. Strangfeld, our Chairman and Chief Executive Officer;

 

Richard J. Carbone,Robert M. Falzon, our Executive Vice President and Chief Financial Officer;Officer (effective March 4, 2013);

 

Richard J. Carbone, our former Executive Vice President and Chief Financial Officer (through March 4, 2013);

Mark B. Grier,, our Vice Chairman;

 

Edward P. Baird, our Executive Vice President and Chief Operating Officer, International Businesses; and

Edward P. Baird, our Executive Vice President and Chief Operating Officer, International Businesses; and

 

Charles F. Lowrey, our Executive Vice President and Chief Operating Officer, U.S. Businesses.

Charles F. Lowrey, our Executive Vice President and Chief Operating Officer, U.S. Businesses.

 

 

We also provide an overview of our executive compensation philosophy and our executive compensation program. In addition, we explain how and why the Compensation Committee of our Board (the “Committee”) arrivesarrived at the specific compensation policies and decisions involving the NEOs.NEOs for fiscal year 2013.

Executive Summary

 

BUSINESS HIGHLIGHTS

OUR BUSINESSOur Business

We are a global financial services business with approximately$1.06$1.107 trillion of assets under management as of December 31, 20122013, with operations in the United States, Asia, Europe, and Latin America. Through our subsidiaries and affiliates, we offer a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. For more information about our business, please see “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on February 22, 2013.27, 2014.

2012 BUSINESS HIGHLIGHTS2013 Business Highlights

2012 was another yearWhile financial markets showed signs of recovery over the past 12 months, uncertainty and challenges remain in the global economy and financial markets. Throughout this period, as a result of our steady leadership, we continued to seize opportunities and further differentiate ourselves from the competition. Our performance in 20122013 was solidstrong and continued to reflect our attention to capital deployment, balanced business mix, and effective execution of our individual business strategies.

Consequently, as in 2011, we were able to deliver strong

results for our shareholders in a challenging environment of continued low interest rates andfar-reaching regulation of the financial services industry.

We recorded the following significant accomplishments in 2012:2013:

 

Our Financial Services Businesses reported after-tax adjusted operating income of$3.0 billion and posted earnings per share of Common Stock of $6.27, compared to $2.8 billion, and$5.83 per share, in 2011;

Our Financial Services Businesses reported after-tax adjusted operating income of $4.6 billion and posted earnings per share of Common Stock of $9.67, compared to $3.0 billion, and $6.40 per share, for 2012.

LOGOLOGO

 

 

34  
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement  33


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LOGO
 

Compensation Discussion and AnalysisAnalysis:Executive Summary (continued)

 

 

Our Financial Services Businesses reported operating return on average equity based on after-tax adjusted operating income of 16.4% for 2013 compared to 11.3% for 2012(1).

LOGO

OurBased on U.S. generally accepted accounting principles, our Financial Services Businesses reported operating return on average equity based on after-tax adjusted operating incomea net loss of 10.8% for 2012 compared to 10.6% for 2011.

LOGO

Our Financial Services Businesses reported net income of $428$713 million, or $0.94$1.55 per share of Common Stock, for 2013, compared to$3.4 billion, or$6.99to net income of $479 million, or $1.05 per share, in 2011;2012.

 

We reported book value for our Financial Services Businesses, excluding accumulated other comprehensive income and the impact of $57.86foreign currency exchange rate remeasurement on net income or loss, of $59.99 per share of Common Stock as of year-end 2012December 31, 2013, compared to $58.39$58.08 as ofyear-end 2011. 2012. Based on U.S. generally accepted accounting principles as of year-end 2012,December 31, 2013, we reported book value for our Financial Services Businesses of$79.19of $72.30 per share of Common Stock, compared to $69.07$79.04 per share as of year-end 2011.2012.

 

LOGO

LOGO

LOGO

 

Assets under management surpassed, for the first time, the $1 trillion milestone reaching $1.06reached $1.107 trillion at December 31, 2012,2013, an increase of 18%4% from a year earlier.

 

LOGOLOGO

 

In November, we declared an annual dividend of $1.60 per share of Common Stock for 2012, an increase of 10% from the 2011 Common Stock dividend, and announced that we will moveWe moved to a quarterly Common Stock dividend schedule beginning in the first quarter of 2013.2013 and declared quarterly dividends totaling $1.73 per share during the year, with our fourth quarter dividend representing a 32.5% increase from prior quarters.

 

LOGO

LOGO

We solidified our position as the preferred provider of pension risk transfer strategies by entering into and completing landmark agreements to take on retiree pension obligations from General Motors Co., and Verizon Communications, Inc., which together brought us over $33 billion in group annuity account values.

 

 

In September 2012,January 2013, we announced an agreement to acquireacquired The Hartford’s Individual Life Insurance business, including approximately 700,000 life insurance policies with a net retained face amount in force of approximately $135$141 billion, through a reinsurance transaction for cash consideration of $615 million, which was completed in January 2013.million.

 

 

 

We successfully completed financing transactions valued atissuances of long-term debt totaling $2.3 billion for general corporate purposes and repaid $1.5 billion of high coupon debt prior to maturity, including $920 million of 9% junior subordinated debt and $615 million of senior debt with a weighted average interest rate of approximately $4.1 billion.6%.

 

 

 

We repurchased $650$750 million of our outstanding shares of Common Stock, including $150$500 million under a program announced in June 20122013 to repurchase up to $1 billion of our outstanding shares of Common Stock through June 2013.2014.

We enhanced our financial flexibility through a ground-breaking transaction in November providing a $1.5 billion source of liquidity to Prudential Financial, Inc. through rights to issue senior debt in exchange for U.S. Treasury securities held by a trust.

 

In 2012,2013, we also continued to benefit from effective capital management, which remains a significant priority. We believe that maintaining robust capital and liquidity positions provides us with a protective cushion during difficult periods, as well as the ability to pursue new opportunities.

 

34  Notice of Annual Meeting of Shareholders and 2013 Proxy Statement


Compensation Discussion and Analysis (continued)

LOGO       

EXECUTIVE COMPENSATION HIGHLIGHTS

The Committee has increased the rigor of the performance goals and payout scales under our incentive programs with respect to 2012 performance:

There was no increase in base salaries for any of the NEOs, which were kept at their 2012 levels;

The Committee increased the rigor of the annual incentive program by setting target and maximum awards for senior executives, including the NEOs, and requiring achievement of at least the midpoint of EPS guidance to maintain the same level of funding as in 2011;

Consistent with its 2011 decision to rebalance the compensation arrangements of the NEOs, the mandatory deferral of each NEO’s 2012 annual incentive award into our Book Value Performance Program was increased from 20% to 30%;

The Annual Incentive Award earned by our CEO decreased by approximately 11% on a year-over-year basis while his long-term incentive awards are unchanged resulting in a decrease of approximately 4% in his total direct compensation;

CEO Total Direct Compensation

2011 Total Direct = $16.2 million
SalaryAnnual Incentive AwardLong-Term Award
$1,400,000Cash(1) $5,040,000$8,500,000(3)
Deferred(1) $1,260,000
Total $6,300,000

2012 Total Direct = $15.53 million
SalaryAnnual Incentive AwardLong-Term Award
$1,400,000Cash(2) $3,941,000$8,500,000(3)
Deferred(2) $1,689,000
Total $5,630,000

 

 (1)20%Excludes impact on attributed equity of the 2011 Annual Incentive Award was mandatorily deferred into the Long-Term Book Value Performance Program.accumulated other comprehensive income and foreign currency exchange rate remeasurement included in net income or loss. 
(2)30% of the 2012 Annual Incentive Award was mandatorily deferred into the Long-Term Book Value Performance Program.
(3)Represents long-term awards granted in 2012 and 2013 for 2011 and 2012 performance, respectively.

As a result of these actions, and consistent with our compensation philosophy, approximately 90% of our NEOs’ total direct compensation for 2012 was performance-based.

LOGO

Long-termincentive compensation consists of a combination of options to purchase shares of Common Stock, performance share and unit awards, and book value units. Each of these award arrangements are performance-based and, thus, aligned with the long-term interests of our shareholders because the value realized from the stock options is tied to the appreciation in the market value of Common Stock and the value realized from the performance awards is dependent on our return on equity performance. In addition, the value of the book value awards fluctuates based on our net income (or loss) from year to year.

In addition, the Committee made the following changes which will be effective for our 2013 incentive programs:

Long-Term Incentive Program. Increased the rigor of the performance share program by requiring achievement of average ROE (AOI basis, subject to certain adjustments) of 13.5% over the 2013 through 2015 performance period to receive a target award; and

Annual Incentive Program. Introduced a relative performance modifier to the 2013 annual incentive program to balance reliance on absolute performance based on a single metric (EPS) with an assessment of relative performance to reward peer outperformance and penalize underperformance.

ConsiderationofLast Year’s“Say on Pay” Vote

Following our 2012 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on executive compensation (‘Say on Pay”) that was held at the meeting with respect to the 2011 compensation actions and decisions for Mr. Strangfeld and the other NEOs. Approximately 96% of the votes cast on the proposal were voted in support of the compensation of our NEOs. This compares with 86.5% of the votes cast in support of the “Say on Pay” proposal submitted for shareholder consideration at the 2011 Annual Meeting of Shareholders. We believe the increase in support from 2011 to 2012 reflects the actions taken by the Committee in response to the 2011 vote.

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       35  


LOGO

LOGO
 

Compensation Discussion and AnalysisAnalysis:Executive Summary (continued)

 

EXECUTIVE COMPENSATION HIGHLIGHTS

 

WhileThe Compensation Committee took the following actions to improve and maintain the rigor of our executive compensation program:

Modified the mix of our long-term incentive program so that plan participants receive a greater portion of their long-term incentive awards in the form of performance shares and units, resulting in a more strongly performance-oriented program.

Required achievement of the midpoint of EPS guidance in 2014 to earn target annual incentive award funding, instead of the low point of the guidance range as in prior years.

Increased the rigor of the performance share program by requiring an average ROE of 13.5% over the 2013 through 2015 and 2014 through 2016 performance periods to earn a target award. For the 2014 through 2016 performance period, the Committee reduced the maximum award payment from 150% to 125% of the target award level.

Implemented a relative performance modifier for 2013 to balance reliance on absolute performance based on a single measure (EPS) with an assessment of performance relative to peers under our annual incentive program.

Provided a one-time cash associates award to the broad base of global employees who do not participate in our long-term incentive program to recognize the achievement of our 13% to 14% ROE objective in 2013. These awards were primarily funded from the relative performance modifier under our annual incentive program thereby moderating the annual incentive funding available to other executives, including the NEOs.

Reduced long-term disability payments by anynon-qualified pension plan payments similar to the treatment of qualified pension plan payments.

Held base salaries flat in 2014 for all of the NEOs.

CEO Total Direct Compensation

LOGO

(1)30% of the Annual Incentive Awards were mandatorily deferred into the Long-Term Book Value Performance Program.
(2)Represents long-term awards granted in 2014 and 2013 for 2013 and 2012 performance, respectively.

As a result of these actions, and consistent with our compensation philosophy, approximately 92% of our CEO’s total direct compensation for 2013 was performance-based.

LOGO

Long-term Incentives consist of a combination of performance share and unit awards, options to purchase shares of Common Stock and book value units. Each of these award arrangements are performance-based and, thus, aligned with thelong-term interests of our shareholders because the value realized from the performance awards is dependent on our return on equity performance and the value realized from the stock options is tied to the appreciation in the market value of Common Stock. In addition, the value of the book value awards fluctuates based on our net income (or loss), as adjusted to exclude certain items, from year to year.

36  Notice of Annual Meeting of Shareholders and 2014 Proxy Statement


LOGO

Compensation Discussion and Analysis:Executive Summary

CONSIDERATION OF LAST YEAR’S “SAY ON PAY” VOTE

Following our 2013 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on executive compensation (“Say on Pay”) that was held at the meeting with respect to the 2012 compensation actions and decisions for Mr. Strangfeld and the other NEOs. Approximately 78% of the votes cast on the proposal were voted in support of the compensation of our Board believe thatNEOs. This compares with approximately 96% of the votes cast in support of the “Say on Pay” proposal submitted for shareholder consideration at the 2012 Annual Meeting of Shareholders. In response to the 2013 vote, as well as our other ongoing shareholder engagement activities, provide effective means for usthe Committee took several actions to monitorimprove and maintain the viewsrigor of our shareholders

on our overall executive compensation policies and practices, we did not make any significant changes to our executive compensation program in 2012 as a direct resultprogram. See “Executive Compensation Highlights” above.

OUR COMMITMENT TO SHAREHOLDER ENGAGEMENT

In 2013, we again demonstrated our commitment to shareholder engagement, communication and transparency. During the year, representatives of the outcomeCompany met with holders of more than a majority of the 2012 “Say on Pay” vote.total number of shares of Common Stock outstanding.

 

ONGOING CORPORATE GOVERNANCE POLICIES

We endeavor to maintain good corporate governance standards, including those which impact the oversight of our executive compensation policies and practices. The following policies and practices were in effect during 2012:2013:

 

We maintain a majority vote for the election of directors in uncontested elections (and require an offer to resign by any incumbent director who is not re-elected by a majority vote) and plurality voting in any election that is contested.

We maintain a majority vote for the election of directors in uncontested elections (and require an offer to resign by any incumbent director who is not re-elected by a majority vote) and plurality voting in any election that is contested.

 

The leadership structure of our Board consists of a Chairman (who is also our CEO), a Lead Independent Director, who is elected by the independent directors, and strong Board committee chairs.

The leadership structure of our Board consists of a Chairman (who is also our CEO), a Lead Independent Director, who is elected by the independent Directors, and strong Board committee chairs.

 

The Compensation Committee is composed solely of independent directors who have established methods to

The Committee is composed solely of independent Directors who have established methods to

 

communicate with shareholders regarding their views on executive compensation ideas and concerns.compensation.

 

The Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc., is retained directly by the Committee and performs no other consulting or other services for us.

The Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc., is retained directly by the Committee and performs no other consulting or other services for the Company.

 

 

The Committee conducts an annual review and approval of our compensation strategy, including a review of our compensation-related risk profile, to ensure that our compensation-related risks are not reasonably likely to have a material adverse effect on the Company.

 
 

 

OPPORTUNITY FOR SHAREHOLDER FEEDBACK

The Committee carefully considers feedback from our shareholders regarding our executive compensation program. Shareholders are invited to express their views to the Committee as described under “Communication with Directors” in this Proxy Statement. In addition, the advisory vote on the compensation of the NEOs provides shareholders with an opportunity to communicate their views on our executive compensation program.

You should read this CD&A in conjunction with the advisory vote that we are conducting on the compensation of the NEOs (see “Item 3—3 — Advisory Vote to Approve Named Executive Officer Compensation”). This CD&A, as well as the accompanying compensation tables, contains information that is relevant to your voting decision.

 

Notice of Annual Meeting of Shareholders and 2014 Proxy Statement     37


LOGO

Compensation Discussion and Analysis:Philosophy and Objectives of Our Executive Compensation Program

 

SPECIFIC COMPENSATION AND CORPORATE GOVERNANCE POLICIES AND PRACTICES

Our compensation philosophy and related governance features are complemented by several specific policies and practices that are designed to align our executive compensation with long-term shareholder interests, including:

 

  

Stock Ownership Policy.We have stock ownership guidelines for our executive officers, including the NEOs. EachWith the exception of our new CFO, each of the NEOs has met his individual stock ownership level under the current program.this policy.

 

 

  

Stock Retention Policy.We have stock retention requirements for our executive officers, including the NEOs, that require retention of 50% of the net shares acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units until the later of (i) one year following the date of acquisition of such shares or (ii) the date that the executive officer satisfies our stock ownership guidelines.

 

 

  

Hedging Prohibition: Anti-Pledging Policy.We have a policy prohibiting all employees, including the NEOs and members of our Board, from engaging in any hedging transactions with respect to our equity securities held by them, which includes the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps, collars and

exchange funds) designed to hedge or offset any decrease in the market value of such equity securities. We also have a policy prohibiting our Section 16 officers and members of our Board from pledging, or using as collateral, the Company’s securities to secure personal loans or other obligations, which includes holding shares of our Common Stock in a margin account.

 

Limited Perquisites.Our executive officers, including the NEOs, receive no perquisites or other personal benefits, unless such benefits serve a reasonable business purpose, such as the use of a Company aircraft,Company-provided vehicles and drivers, and, in the case of our CEO and Vice Chairman, security services.

 

“Clawback” Provision.Currently, we maintain a compensation recovery (“clawback”) provision in our Book Value Performance Program. We intend to adopt a general clawback policy covering our annual andlong-term incentive award programs and arrangements once the SEC adopts final rules implementing the “clawback” provisions of the Dodd-Frank Act.

 

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Compensation Discussion and Analysis (continued)

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Limited Perquisites. Our executive officers, including the NEOs, receive no perquisites or other personal benefits, unless such benefits serve a reasonable business purpose, such as the use of a Company aircraft, Company-provided vehicles and drivers, and, in the case of our CEO and Vice Chairman, security services.

“Clawback” Provision. Currently, we maintain a compensation recovery (“clawback”) provision in our Book Value Performance Program. We intend to adopt a general clawback policy covering our annual and long-term incentive award programs and arrangements once the SEC adopts final rules implementing the “clawback” provisions of the Dodd-Frank Act.

 

PHILOSOPHY AND OBJECTIVES OF OUR EXECUTIVE COMPENSATION PROGRAM

The philosophy underlying our executive compensation program is to provide an attractive, flexible and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of executive officers and other key employees necessary to deliver sustained high performance to our shareholders, customers, and communities where we have a strong presence. Our executive compensation program is an important component of these overall human resources policies. Equally important, we view compensation practices as a means for communicating our goals and standards of conduct and performance and for motivating and rewarding employees in relation to their achievements.

Overall, the same principles that govern the compensation of all our salaried employees apply to the compensation of our executive officers. Within this framework, we observe the following principles:

 

Retain and hire top-caliber executives:Executive officers should have base salaries and employee benefits that are market competitive and that permit us to hire and retain high-caliber individuals at all levels;

Pay for performance:A significant portion of the annual compensation of our executive officers should vary with annual business performance and each individual’s contribution to that performance;

 

Reward long-term growth and profitability:Executive officers should be rewarded for achieving long-term results, and such rewards should be aligned with the interests of our shareholders;

 

Tie compensation to performance of our core business:A significant portion of our executive officers’ compensation should be tied to measures of performance of our Financial Services Businesses;

 

Align compensation with shareholder interests:The interests of our executive officers should be linked with those of our shareholders through the risks and rewards of the ownership of our Common Stock;

 

Provide limited perquisites:Perquisites for our executive officers should be minimized and limited to items that serve a reasonable business purpose; and

Reinforce succession planning process:The overall compensation program for our executive officers should reinforce our robust succession planning process.

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Compensation Discussion and Analysis:Philosophy and Objectives of Our Executive Compensation Program

2012 INCENTIVE PROGRAMS2013 Incentive Programs

To ensure a solidstrong link between our incentive compensation awardsopportunities and our short-term and longer term objectives, we use two specific programs: our Annual Incentive Program and our Long-Term Incentive Program.

 

Annual Incentive Program.The Annual Incentive Program is designed to reward strong financial and operational performance that furthers our short-term strategic objectives. Financial performance is primarily determined based on EPS achievement relative to the Company’s externally disclosed EPS targets.

 

Long-Term Incentive Program.Our Long-Term Incentive Program consists of three parts that incentivize long-term value creation: stock options that reward increases in the market value of our Common Stock; performance shares and units that reward the achievement of our long-term ROE goals and increases in the market value of our Common Stock; stock options that reward increases in the market value of our Common Stock; and book value units that reward increases in book value per share.

 

ANNUAL COMPENSATION-RELATED

RISK EVALUATION

We monitor the risks associated with our executive compensation program, as well as the components of our program and individual compensation decisions, on an ongoing basis. In January 2013,2014, the Committee was presented with the results of a study reviewing our compensation programs, including our executive compensation programs,program, to assess the risks arising from our compensation policies and practices. The Committee agreed with the study’s findings that these risks were within our ability to effectively monitor and manage and that these compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company.

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Compensation Discussion and Analysis (continued)

HOW WE MAKE COMPENSATION DECISIONSHow We Make Compensation Decisions

Role of the Compensation Committee

The Committee is responsible to our Board for overseeing the development and administration of our compensation and benefits policies and programs. The Committee, which consists of three independent directors, is responsible for the review and approval of all aspects of our executive compensation program. Among its duties, the Committee is responsible for formulating the compensation recommendations for our CEO and approving all compensation recommendations for our officers at the senior vice president level and above, including:

 

Review and approval of corporate incentive goals and objectives relevant to compensation;

 

Evaluation of individual performance results in light of these goals and objectives;

 

Evaluation of the competitiveness of each executive officer’s total compensation package; and

 

Approval of any changes to the total compensation package, including, but not limited to, base salary, annual and long-term incentive award opportunities, and payouts and retention programs.

Following review and discussion, the Committee submits its recommendations for compensation for these executive officers to the non-employee members of our Board for approval.

The Committee is supported in its work by the head of the Human Resources Department, her staff, and an independentthe Committee’s executive compensation consultant, as described below.

The Committee’s charter, which sets out its duties and responsibilities and addresses other matters, can be found on our website at www.prudential.com/governance.

Role of the Chief Executive Officer

Within the framework of the compensation programs approved by the Committee and based on management’s review of market competitive positions, each year our CEO recommends the level of base salary increase (if any), the annual incentive award, and the long-term incentive award value for our officers at the senior vice president level and above, including the other NEOs. These recommendations are based upon his assessment of each executive officer’s performance, the performance of the individual’s respective business or function, and employee retention considerations. The Committee reviews our CEO’s recommendations and approves any compensation changes affecting our executive officers as it determines in its sole discretion.

Our CEO does not play any role with respect to any matter affecting his own compensation.

Role of the Compensation Consultant

The Committee has retained Frederic W. Cook & Co., Inc. as its executive Compensation Consultant. The Compensation Consultant reports directly to the Committee and the Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Committee, as requested, and communicates with the Committee Chair between meetings; however, the Committee makes all decisions regarding the compensation of our executive officers.meetings.

The Compensation Consultant provides various executive compensation services to the Committee pursuant to a written consulting agreement with the Committee. Generally, these

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Compensation Discussion and Analysis:Philosophy and Objectives of Our Executive Compensation Program

services include advising the Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program design and our award values in relationship to their performance.

During 2012,2013, the Compensation Consultant performed the following specific services:

 

Provided a presentation on executive compensation trends and external developments.

 

Provided an annual competitive evaluation of total compensation for the NEOs, as well as overall compensation program share usage, dilution, and fair value expense.

 

Provided recommendations on CEO total compensation to the Committee at its February meeting, without prior review by our CEO.

 

Reviewed with our CEO his compensation recommendations with respect to the other NEOs.

 

Reviewed Committee agendas and supporting materials in advance of each meeting, and raised questions/issues with management and the Committee Chair, as appropriate.

 

Reviewed drafts and commented on the CD&A and related compensation tables for the proxy statement.

 

Reviewed the peer group used for competitive analyses and recommended changes, if appropriate.

Attended executive sessions of the Committee.

The Compensation Consultant provided no services to management during 2012.2013.

The Committee retains sole authority to hire the Compensation Consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.

The total amount of fees paid to the Compensation Consultant for services to the Committee in 20122013 was $195,000.$153,015. The Compensation Consultant received no other fees or compensation from us, except for $3,400 to participate in a

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Compensation Discussion and Analysis (continued)

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general industry survey of long-term compensation. The Compensation Committee has assessed the independence of the Compensation ConsultantConsultants pursuant to SEC rules and concluded that no conflict of interest exists that would prevent the Compensation ConsultantConsultants from serving as an independent consultant to the Compensation Committee.

COMPENSATION PEER GROUPCompensation Peer Group

The Committee uses compensation data compiled from a group of peer companies in the insurance, asset management, and other diversified financial services

industries generally selected from the Standard & Poor’s 500 Financials Index (the “Peer Group”). The Committee periodically reviews and updates the Peer Group, as necessary, upon recommendation of the Compensation Consultant. We believe the Peer Group represents the industries with which we currently compete for executive talent, and also includes our principal business competitors.

 

Although included within the broad financial services sector, we exclude from the Peer Group companies such as property and casualty insurers and investment banking firms that predominantly offer different products, have substantially different business models and with whom we have less direct competition for executive talent.

For 2012,2013, the Peer Group consisted of the following 21 companies:

 

 

AFLAC, Incorporated

 

American Express Company

 

Ameriprise Financial, Inc.

 

Bank of America Corporation

 

The Bank of New York Mellon Corporation

 

BlackRock, Inc.

 

Capital One Financial Corporation

 

Citigroup Inc.

 

Franklin Resources, Inc.

 

The Hartford Financial Services Group, Inc.

 

 

 

JPMorgan Chase & Co.

 

Lincoln National

 

Manulife Financial Corporation

 

MetLife, Inc.

 

Northern Trust Corporation

 

PNC Financial Services Group, Inc.

 

Principal Financial Group

 

State Street Corporation

 

Sun Life Financial Inc.

 

U.S. Bancorp

 

Wells Fargo & Company

 

 

 

TheThere were no changes from 2011 to 2012 consisted of the elimination of four relatively smaller companies as measured by total assets and market capitalization, Genworth Financial, Inc., INVESCO, Legg Mason and the Unum Group, so thatin the Peer Group better reflected our size based on these two measures.from 2012 to 2013. For the 2014 performance period, the Committee has determined to eliminate The Hartford Financial Services Group, Inc. from the Peer Group as its business mix has shifted significantly to property and casualty insurance.

USE OF COMPETITIVE DATAUse of Competitive Data

We compete in several different businesses, most of which are involved in helping individuals and institutions grow and protect their assets. These businesses draw their key employees from different segments of the marketplace. Our executive compensation program is designed with the flexibility to be competitive and motivational within the various marketplaces in which we compete for executive talent, while being subject to centralized design, approval, and control.

The Committee relies on various sources of compensation information to ascertain the competitive market for our executive officers, including the NEOs.

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Compensation Discussion and Analysis:Components of Our Executive Compensation Program

To assess the competitiveness of our executive compensation program, we analyze Peer Group proxy compensation data obtained from peer company proxy materials as well as compensation and benefits survey data provided by national compensation consulting firms, such as Towers Watson, McLagan Partners, and Mercer. As part of this process, we measure actual pay levels within each compensation component and in the aggregate. We also review the mix of our compensation components with respect to fixed versus variable, short-term versus long-term, and cash versus equity-based pay. This information is then presented to the Committee for its review and use.

The Committee generally compares the compensation of each NEO in relation to both the 50th and the 75th percentiles of the Peer Group for similar positions, as we are significantly above the median of the Peer Group in terms of size. In addition, the Committee takes into account various factors such as our performance within the Peer Group, the unique characteristics of the individual’s position, and any succession and retention considerations. In general, compensation levels

for an executive officer who is new to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance who are viewed as critical to retain would be positioned at the higher end of the competitive range.

Generally, differences in the levels of total direct compensation among the NEOs are primarily driven by the scope of their responsibilities, market data for similar positions, and considerations of internal equity.

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Compensation Discussion and Analysis (continued)

COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM

The principal components of our executive compensation program and the purpose of each component are presented in the following table. We measure the program’s

competitiveness both by comparing relevant market data against the amounts paid at each executive officer position as well as by salary grades, which are composed of many positions that we consider to have similar responsibilities.

 

 

Compensation Component Key Characteristics Purpose Principal 20122013 Actions
Base Salary Fixed compensation component. Reviewed annually and adjusted if and when appropriate. Intended to compensate executive officers fairly for the responsibility level of the position held. The NEOs received no base salary increases in 2012.2013. Mr. Falzon received a salary increase upon his promotion to Executive Vice President and Chief Financial Officer in March 2013.
Annual Incentive Awards Variable compensation component. Performance-based award opportunity. Payable based on corporate and business unit performance and level of individual contributions to that performance. Intended to motivate and reward executive officers for achieving ourshort-term (annual) business objectives; intended to encourage accountability by rewarding based on performance.absolute performance and performance relative to life insurance peers. The NEOs received annual incentive awards ranging from $2,475,000$1,990,000 to $5,630,000$7,800,000 in February 2014 (with 30% of these amounts being mandatorily deferred into the Book Value Performance Program)Program, except for Mr. Carbone).
Long-Term Incentive Awards Variable compensation component. Performance-based award opportunity, generally granted annually as a combination of stock options, performance shares and units, stock options and book value units. Amounts actually earned will vary based on stock price appreciation and corporate performance. Intended to motivate executive officers to achieve our business objectives by tying incentives to the achievement of our multi-year financial goals and the performance of our Common Stock and book value over the long-term and to reinforce the link between the interests of our executive officers and our shareholders, and intended to motivate executive officers to improve multi-year financial performance.shareholders. The NEOs received long-term incentive awards with aggregate values ranging from$2,000,000from $2,600,000 to $8,500,000 in February 20132014 (not including the mandatory deferral of 30% of the annual incentive awards into the Book Value Performance Program)Program, except for Mr. Carbone).
Health, Welfare, and Retirement Plans Fixed compensation component. Intended to provide benefits that promote employee health and support employees in attaining financial security. No significant changes to programs in 20122013 that affected the NEOs.NEOs except that going forward we will reduce long-term disability payments by any non-qualified pension benefit payments.
Perquisites and Other Personal Benefits Fixed compensation component. Intended to provide a business-related benefit to our Company, and to assist in attracting and retaining executive officers. No changes to benefits in 20122013 that affected the NEOs.
Post-Employment Compensation Fixed compensation component. Intended to provide temporary income following an executive officer’s involuntary termination of employment and, in the case of a change of control, to also provide continuity of management. No changes to programs in 20122013 that affected the NEOs.

 

The following discussion contains information regarding certain performance measures and goals. These measures and goals are disclosed in the limited context of our executive compensation program. Investors should not apply these performance measures and goals to other contexts.

DIRECT COMPENSATION COMPONENTSDirect Compensation Components

Base Salary

Base salary is the principal fixed component of the total direct compensation of our executive officers, including the NEOs, and is determined by considering the relative importance of the position, the competitive marketplace, and the individual’s

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Compensation Discussion and Analysis:Components of Our Executive Compensation Program

performance and contributions. Base salaries are reviewed annually and, typically, are increased infrequently and then mostly at the time of a change in position or assumption of new responsibilities.

Salary Decisions for 20122013

None of the NEOs received an increase to base salary during the Committee’s annual review of our executive compensation program in February 2012.2013. Mr. Falzon received a salary increase upon his promotion to Executive Vice President and Chief Financial Officer in March 2013.

Formulaic Framework for Incentive Programs

Funding for our annual and long-term incentive programs is based on formulas tied to our financial results. For the annual incentive program, we measure EPS results relative to our externally disclosed EPS targets based on a performance scale. Similarly, under our performance shares program, payments are determined based on our average ROE results over the three-year performance period based on a performance scale set at the start of the period. The Book Value Performance Program tracks the book value per share, excluding impact on attributed equity of accumulated other comprehensive income and of foreign currency exchange rate remeasurement included in net income or loss, as disclosed in our Quarterly Financial Supplements.

To accurately reflect the operating performance of our business, the Committee has approved a pre-determined framework of adjustments to our reported financial results for incentive program purposes. Generally, these adjustments exclude one-time or unusual items and external factors that are inconsistent with the assumptions reflected in our financial plans. The standard adjustments to reported EPS under our formulaic framework may vary from year to year and may have either a favorable or unfavorable impact on the funding of the Annual Incentive Award Pool.

Standard adjustments to reported financial results are made:

for the actual performance of the Standard & Poor’s 500 relative to the growth assumption incorporated into our annual operating plan (6% in the case of 2013);

to exclude the impact of changes in our assumptions for investment returns and customer behavioral expectations (mortality, morbidity, lapse, and similar factors);

to exclude one-time costs associated with merger and acquisition activity (for 2013, principally the Hartford and AIG Star and Edison acquisitions);

for accounting changes not included in our annual operating plan (for 2013, adjustments were made for accounting changes with respect to Asset Management incentive fees and investment earnings on temporary capital supporting Long-Term Care reserves); and

for other items not considered representative of the results of operations for the period, as approved by the Committee (inapplicable for 2013).

Annual Incentive Awards

For 2012,2013, the Committee, in consultation with our management and the Compensation Consultant, undertook to

reevaluate the design of our annual cash incentive award program. Following extensive discussions with management, in March 2012,In February 2013, the Committee approved the 20122013 Annual Incentive Program for our most senior executives, including the NEOs, on the following terms and conditions.

Target Award Opportunities

The Committee established aleft unchanged the target and maximum annual incentive award opportunity for each senior executive, including each of the NEOs for 2012.2013, except to reflect Mr. Falzon’s promotion to Executive Vice President and Chief Financial Officer and Mr. Carbone’s resignation as Chief Financial Officer. These target and maximum award levels were established in 2012 based on itsthe Committee’s assessment of the scope of each senior executive’s job responsibilities, competitive market data, and our past payment history. Generally, the targets were set at a level approximately 10% below the level of their actual 2011 awards. The specific target and maximum annual incentive award opportunities for each NEO for 20122013 were as follows:

 

Named Executive Officers  

Target Annual

Incentive Award
Opportunity

  

Maximum

Annual Incentive

Award Opportunity

   

Target Annual

Incentive Award
Opportunity

     

Maximum

Annual Incentive

Award Opportunity

 
John R. Strangfeld  $5,600,000  $11,200,000     $5,600,000      $11,200,000  
Robert M. Falzon  $1,450,000       $2,900,000  
Richard Carbone  $2,300,000  $4,600,000     $1,750,000       $3,500,000  
Mark B. Grier  $4,800,000  $9,600,000     $4,800,000       $9,600,000  
Edward P. Baird  $3,000,000  $6,000,000     $3,000,000       $6,000,000  
Charles F. Lowrey  $4,000,000  $8,000,000     $4,000,000       $8,000,000  
 

 

 
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Compensation Discussion and AnalysisAnalysis:Components of Our Executive Compensation Program (continued)

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Performance DeterminationAward Formula

Each year we establish an annual performance factor that is the main driver in determining the amount of annual incentive awards to our NEOs. For 2012,2013, we used the following process to establish this Performance Factor:

Step 1. Established Initial Performance Factor Based on EPS. Consistent with the formulaic framework for our annual incentive award program, for 2013, the Committee established an Initial Performance Factor based on our earnings-per-share (“EPS”)EPS on an adjusted operating income (“AOI”)AOI basis subject to certain adjustments, assessed relative to our EPS target range. For 2012, the Committee determined that this Initial Performance Factor could range between 0.5 and 1.5. The Initial Performance Factor was to be applied to the sum of the target annual incentive award opportunities for the NEOs to determine their funding contribution toannual incentive funding. For purposes of the Annual Incentive Award Pool.annual incentive award program, EPS and AOI were calculated as follows:

 

EPS, which is based on AOI, is “Earnings Per Share of Common Stock (diluted): Financial Services Businesses after-tax adjusted operating income,” as publicly disclosed in our Quarterly Financial Supplements, available on our website.

 

AOI is a non-GAAP measure of the performance of our Financial Services Businesses. For a description of how we calculate pre-tax AOI and for a reconciliation of pre-tax AOI to the nearest comparable GAAP measure, see the notes to the consolidated financial statements included in our Annual Report to Shareholders, which can be found on our website at www.prudential.com/governance. After-tax AOI is adjusted operating income before taxes, less the income tax effect applicable to pre-tax AOI, as publicly disclosed in our Quarterly Financial Supplements, also available on our website.

The following table depicts the EPS scale target range for 2012.2013 as established in February 2013. The target range wasis aligned withinto our publicly disclosed EPS guidance range.

 

      2012 EPS(1) 

    Initial Performance     

Factor(2)

  
      $5.50 or below .50  
      $5.70 .60  
      $6.10 .80  
       $6.50 1.00   
Target Range     $6.70 1.10   
       $6.90 1.20   
      $7.10 1.35  
      $7.30 or above 1.50  
   2013 EPS(1) 

Initial Performance

Factor(2)

  $5.39 or below .50
  $5.85 .60
   $6.78 .80
  $7.70 1.00
Target Range $7.90 1.10
   $8.10 1.20
  $8.67 1.35
   $9.24 or above 1.50

 

(1)

Determined on an AOI basis, subject to certain adjustments

adjustments.

(2)

The Initial Performance Factor is interpolated on a straight line basis between the EPS data points.

For purposesWe applied our pre-set formulaic framework to our January 2014 estimate of determining the size of the 2012 Annual Incentive Award Pool, the Committee adjustedour 2013 reported EPS, of $6.27or $9.61 per share of Common Stock:common share. Our final 2013 reported EPS was $9.67 per common share.

for the actual performance of the Standard & Poor’s 500 relative to our 8% growth assumption (as incorporated into our annual operating plan);

to exclude the impact of changes in our assumptions for investment returns and customer behavioral expectations (morbidity, lapse, and similar factors);

to exclude one-time costs associated with merger and acquisition activity, principally the AIG Star and Edison acquisitions; and

for accounting changes not included in our annual operating plan, principally a discretionary change in accounting principles related to our own pension plan.

The permittedstandard adjustments to reported EPS under our formulaic framework may vary from year to year and may have either a favorable or unfavorable impact on the funding of the Annual Incentive Award Pool. The impact was favorable in two ofFor 2013, the four preceding years and unfavorable in the other two of those years. For 2012, thesestandard adjustments resulted in adjusted EPS of $6.51$8.78 per share of Common Stock, an increasea decrease of $0.24$0.83 per share from our reportedestimated EPS of $6.27.$9.61. This adjusted EPS amount correspondscorresponded to an Initial Performance Factor of 1.005, which resulted1.38.

Step 2. Computed Relative Performance Modifier.To balance absolute and relative performance, the Committee implemented a relative performance modifier in an approximately2013. This modifier may increase or decrease the Initial Performance Factor by up to 10% reductionwithin the 0.5 – 1.5 payment range, based on the Company’s one and three-year performance against certain quantitative measures relative to the North American Life Insurance subset of the Peer Group.

North American Life Insurance Peer Group

AFLAC, IncorporatedMetLife, Inc.

The Hartford Financial Services Group, Inc.

Principal Financial Group
Sun Life Financial, Inc.
Lincoln National
Manulife Financial Corporation

The graphic below shows how we arrived at the relative performance modifier for 2013. We first assessed our performance relative to the Peer Group under three different quantitative measures. Our overall weighted rank on these measures was 2.25, and this result put us at the #1 overall ranking in the sizePeer Group. Under our pre-set scale, the #1 ranking produced a relative performance modifier of +10%.

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*Measures are based on trailing four quarters ended September 30, 2013 and are normalized for unusual and non-recurring items that are publicly disclosed by each peer company.

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Step 3. Determined Final Performance Factor. As shown above, we determined that, based on disclosed financial results, we ranked first relative to the North American Life Insurance subset of the Annual IncentivePeer Group. As a result, the Committee could have adjusted the Initial Performance Factor by up to 10% from 1.38 to 1.50 (representing the maximum performance factor). Instead, the Committee decided to apply all of the additional funding generated by the relative performance modifier towards funding a one-time cash Associates Award pool when compared to the 2011 Annual Incentive Award pool.broad base of global employees who do not participate in our long-term incentive program to recognize the achievement of our 13% to 14% ROE objective in 2013.

This action moderated the Initial Performance Factor otherwise applicable to the NEOs (and other employees) from 1.50 to 1.38, a reduction of 8%. None of the NEOs or other executive officers received an Associates Award.

Once the Initial Performance Factor has beenis determined, the Committee may exercise its discretion to take into account strategic considerations to determine the final performance factor.Final Performance Factor. These considerations include capital and liquidity management, risk management, competitive performance, and employee measures (such as employee opinion survey results, talent management and diversity).

Following this preliminary calculation, For 2013, the Committee may exercise its discretiondetermined not to further increase or decreasemake any discretionary adjustments based on these considerations.

Based on the size offoregoing, the Annual Incentive Award PoolFinal Performance Factor for 2013 was determined to reflect additional strategic factors. For purposes ofbe 1.38.

The following table summarizes the 2012 Annual Incentive Award Pool, the Committee considered the following strategic accomplishments during the year not otherwise reflected in special awards to certain employees (excluding the NEOs):

the establishment of a leadership position in the pension risk transfer business through two landmark transactions, including the largest transactioncalculation of this type ever, which brought over $33 billionFinal Performance Factor.

Summary of pension values to Prudential;2013 Performance Factor Mechanics

the acquisition of The Hartford’s Individual Life Insurance business, including approximately 700,000 life insurance policies with face amount in force of approximately $135 billion; and

the successful transition of the leadership of our Individual Life, Group Insurance, and Individual Annuities businesses and continued progress in talent management.

 

Step 1: Establish Initial Performance Factor

Start with reported 2013 EPS (on AOI basis)

$9.61(1)

Standard adjustments

(.83)(1)

EPS under Annual Incentive Award Program

$8.78 

EPS of $8.78 translates to an Initial Performance Factor of

1.38(2)
Step 2: Compute Relative Performance Modifier

Determine Prudential ranking in peer group based on ROE, EPS Growth and BVPS Growth

#1 

#1 ranking translates to a modifier of

+10% 
Step 3: Determine Initial Performance Factor

Apply modifier to increase Initial Performance Factor to

1.50(3)

Funding towards one-time Associates Award reduces initial Performance Factor to

1.38 

Discretionary adjustments made by Committee for 2013

none 
Final Performance Factor1.38 

(1)Based on January 2014 estimate. Final reported EPS was $9.67.

(2)Based on interpolation on the EPS scale above.

(3)Adjusted down to cap of 1.50 on the EPS scale.

ASSOCIATES AWARD

The Board of Directors approved a special one-time cash award, allocated from a portion of the 2013 Annual Incentive Award Pool, of $1,300 (or the local currency equivalent) per person to associates around the world who do not participate in our long-term incentive program, to acknowledge achievement of our objective of a ROE of between 13% and 14% and to recognize the significant contribution of our associates in helping to achieve this objective. No NEO or executive officer received this award.

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Compensation Discussion and AnalysisAnalysis:Components of Our Executive Compensation Program (continued)

 

The Committee also carefully considered the Company’s absolute and relative total shareholder return, or TSR. The Company’s TSR was approximately 10% on a one-year basis and approximately 16% on a three-year average basis. On a relative basis, the Company’s one-year TSR was significantly below the median of the Peer Group while, on a three-year average basis, it was slightly above the median of the Peer Group. In evaluating the Company’s one-year relative TSR, the Committee noted that several of the peer companies had experienced partial recoveries from low bases.

Considering both the Company’s strategic accomplishments and its absolute and relative TSR, the Committee determined not to exercise its discretion to increase or decrease the Initial Performance Factor of 1.005.

2013 Annual Incentive Program. The Annual Incentive Award Program is expected to operate in substantially the same manner for 2013. In addition, in February 2013, the Committee approved the use of a relative performance modifier in arriving at the final performance factor. Accordingly, for 2013, the Initial Performance Factor may be increased or decreased by up to 10% within the 0.5-1.5 minimum to maximum range based on the Company’s performance against certain quantitative measures (ROE, EPS Growth and Book Value Per Share Growth) relative to the North American life insurance subset of our compensation peer group consisting of the following seven companies: AFLAC Incorporated, The Hartford Financial Services Group, Inc., Lincoln National, Manulife Financial Corporation, MetLife, Inc., Principal Financial Group and Sun Life Financial Inc. This enhancement is intended to balance reliance on absolute performance based on a single metric (EPS) with an assessment of relative performance and to motivate and reward peer outperformance and penalize underperformance.

Decisions for Executive Officers for 20122013

Once the size of the Annual Incentive Award Pool is set, the Committee allocates the pool among eligible executive officers and other employees, including the NEOs. While individual performance and contributions are considered, the quantitative and qualitative performance criteria used to determine the sizemain driver of the incentive pool guide the Committee in this process, they are not determinative of the amount of an individual executive officer’sactual annual incentive award in a given year.awards made to the NEOs is generally the Final Performance Factor.

The Committee determines the amount of an individual executive officer’s annual incentive award, including the awards of the NEOs, based on its evaluation of his or hertheir individual contributions during the year with reference to

market data for the individual’s position in the Peer Group.year. In determining the 20122013 annual incentive awards for our executive officers, including the NEOs, the key drivers considered by the Committee were:

 

the Final Performance Factor based on our financial results;

their collective performance in managing our business during challenging market conditions;

their management of specific business or functional units;business; and

our financial performance.

their management of specific business or functional units.

While the Committee did not establish specific individual performance metricsgoals for the NEOs, at the beginning of 20122013 our CEO met with each of the other NEOs to outline and discuss with himthem the key financial factors that the Committee would consider when assessingfor determining awards under our performance at the end of the year, hisannual incentive program, their expected contributions to that performance, and how histheir performance might influence histheir annual incentive award opportunity.

While the key drivers and related individual performance factors described below were relatively more important than other factors in determining the 2013 annual incentive awards for the NEOs, the Committee did not assign a specific weight to any factor, but, rather, evaluated the totality of the factors in making each award determination.

MR. STRANGFELD

Mr. StrangfeldPerformance assessment

In assessing the individual performance of Mr. Strangfeld, our CEO, the Committee, and the independent members of our Board, of Directors, considered the evaluation of his performance that was conducted by the Lead Director of our Board and the Committee Chair. This evaluation identified and examined a broad range of corporate and individual performance factors, including:

 

After-tax AOI for our Financial Services Businesses of $4.6 billion for 2013, compared to $3.0 billion for 2012, compared to $2.8 billion for 2011;2012;

 

Growth in book value per share of Common Stock, basedexcluding accumulated other comprehensive income and the impact of foreign currency exchange rate remeasurement on U.S. generally accepted accounting principles,net income or loss, to $79.19$59.99 at December 31, 2013 versus $58.08 at December 31, 2012, versus $69.07 a year earlier;

The announcementan increase of landmark pension risk transfer transactions with General Motors Co. and Verizon Communications, Inc., resulting in the transfer$1.91 after payment of over $33 billion of pension values to Prudential;four quarterly dividends totaling $1.73 per share;

 

The acquisition of The Hartford’s Individual Life Insurance business, completed in January 2013, which strengthened our Individual Life insuranceInsurance business with the addition of approximately 700,000 policies with net retained face amountsamount in force of approximately $135$141 billion;

Individual Life Insurance annualized new business premiums of $731 million for 2013, compared to $412 million for 2012, reflecting the benefits of expanded distribution that came to us with the Hartford acquisition;

 

Retirement account values reached a record high $289.8 billion at December 31, 2012, up 26% from a year earlier;

Retirement account values surpassed the $300 billion milestone, reaching a record-high $323 billion at December 31, 2013;

 

Assets under management reached a record-high $1.107 trillion at December 31, 2013, up 4% from a year earlier;

Assets under management surpassed the $1 trillion milestone, reaching $1.06 trillion at December 31, 2012, up 18% from a year earlier;

International Insurance pre-tax adjusted operating income of $3.2 billion for 2013, up 17% from 2012;

Exceeded the 13%-14% ROE goal by a significant margin; and

Meaningful progress in our short and long-term leadership, talent and succession planning priorities.

 

 

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International Insurance annualized new business premiums of $4.1 billion in constant dollars for 2012, up 28% from 2011; and

Mr. Strangfeld’s involvement in the successful transition of leadership of our Individual Life, Group Insurance and Individual Annuities businesses.

Based on these factors, including its own evaluation of his performance, in February 2013,2014, the Committee recommended, and the independent members of our Board approved, an annual incentive award of$5,630,000of $7,800,000 for Mr. Strangfeld for 2012,2013, or approximately 1.0051.39 times his target award amount. This award compares to an annual incentive award of $6,300,000$5,630,000 for 2011,2012, representing an 11% decrease.a 39% increase. Of the $5,630,000, $1,689,000$7,800,000, $2,340,000 was mandatorily deferred into the Book Value Performance Program.

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Compensation Discussion and Analysis:Components of Our Executive Compensation Program

Other NEOs

In the case of the other NEOs, Mr. Strangfeld formulated recommendations for each individual based on his assessment of their performance and presented these recommendations to the Committee for its consideration. Based on these recommendations, as well as the key drivers previously described and its own evaluation of their performance, the Committee recommended, and the independent members of our Board of Directors approved, the following annual incentive awards for each of the other NEOs:

MR. FALZON

Mr. CarbonePerformance assessment

Mr. Carbone’s annual incentive award was$2,475,000 or approximately 1.08 times his target award amount. This award compares to an annual incentive award of $2,750,000 for 2011,representing a decrease of 10%. Of the $2,475,000, $742,500 was mandatorily deferred into the Book Value Performance Program. Among the factors the Committee considered in determining the amount of hisMr. Falzon’s award were:

 

His leadership in corporate financing activities, including the issuance of long-term debt totaling $4.1$2.3 billion for general corporate purposes such asand the refinancingrepayment, prior to maturity, of existinghigh coupon debt for securities expected to receive more favorable rating agency treatment;totaling $1.5 billion;

 

His acumen in capital management and cash flow planning, including the return of $650$750 million to shareholders during 20122013 through our share repurchase program;

His key roleprogram, transition to a quarterly Common Stock dividend schedule, and a 32.5% increase in management of the statutory capital position of our insurance companies, resultingquarterly dividend in a risk-based capital ratio over 400% for Prudential Insurance as of December 31, 2012 and strong solvency margins at our international insurance subsidiaries as of that date, under recently implemented regulatory requirements;

His effective oversight of our liquidity position, resulting in over $8.6 billion of cash and short-term investments at the parent company level at December 31, 2012;fourth quarter;

 

His instrumental role in the enhancement of our agreementfinancial flexibility through a ground-breaking transaction in November providing a $1.5 billion source of liquidity to acquirePrudential Financial, Inc. through

rights to issue senior debt in exchange for U.S. Treasury Securities held in a trust;

His key role in management of the statutory capital position of our insurance companies, resulting in a risk-based capital ratio over 450% for Prudential Insurance as of December 31, 2013 and strong solvency margins at our international insurance subsidiaries as of that date;

His effective oversight of our liquidity position, resulting in $4.2 billion* in cash and short-term investments at the parent company level at December 31, 2013;

His instrumental role in our completion of the acquisition of The Hartford’s Individual Life Insurance business;

His effective supervision of internal financial and accounting functions; and

His leadership role in our SIFI analysis.

 

His effective supervision of internal financial and accounting functions including adaptation to emerging accounting and financial reporting standards.

Mr. GrierAnnual incentive award decision

Mr. Grier’sFalzon’s annual incentive award was$4,825,000was $1,990,000 or approximately 1.0051.37 times his target award amount. This award compares to an annual incentive award of $5,350,000$910,000 for 2011,2012, representing a decreasean increase of 10%119%. Of the $4,825,000, $1,447,500$1,990,000, $597,000 was mandatorily deferred into the Book Value Performance Program.

*Net of outstanding commercial paper and cash held in an intra-company liquidity account at Prudential Financial, Inc.

MR. CARBONE

Performance Assessment

Mr. Carbone resigned as Chief Financial Officer effective March 4, 2013 and was succeeded in this position by Mr. Falzon. In determining Mr. Carbone’s annual incentive award the Committee considered Mr. Carbone’s contributions as Chief Financial Officer early in 2013, including in many of the areas noted above with respect to Mr. Falzon, his assistance with the transition of his responsibilities as Chief Financial Officer to Mr. Falzon and his effective performance on certain projects subsequent to his resignation as Chief Financial Officer.

Annual incentive award decision

Mr. Carbone’s annual incentive award was $2,500,000 or approximately 1.43 times his target award amount. The award compares to an annual incentive award of $2,475,000 for 2012, representing an increase of 1%.

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MR. GRIER

Performance assessment

Among the factors the Committee considered in determining the amount of hisMr. Grier’s award were:

 

His leadership in enhanced capital management, including a 10% increase in the annual Common Stock dividend, our announced movetransition to a quarterly Common Stock dividend schedule, beginninga 32.5% increase in the firstquarterly dividend in the fourth quarter, of 2013, and the return of $650$750 million to shareholders under our share repurchase program during 2012;2013;

 

His acumen in capital deployment and business development, including a key role in our agreement to acquirecompletion of the acquisition of The Hartford’s Individual Life Insurance Business;

His oversight of risk management, including assimilation of assets and obligations associated with the substantial expansion of Prudential Retirement’s pension risk transfer business and our acquisition of The Hartford’s Individual Life Insurance business;

 

His successful service as our Company’s and an industry spokesperson through the process of ongoing emerging financial market regulatory reform;

His oversight of our business expansion in China; and

His leadership role in our SIFI and GSII analysis.

His key role in transitioning our federal thrift to a trust-only operation, enabling our deregistration as a savings and loan holding company and facilitating continuation of coinvestment activities supporting our asset management business;

 

His instrumental role in two major ground-breaking pension risk transfer transactions which brought over $33 billion of pension values to Prudential;

His leadership in the Company’s initial steps to expand into China, including the establishment of a life insurance joint venture; and

His successful service as our Company’s and an industry spokesperson through the process of emerging financial market regulatory reform.

Mr. BairdAnnual incentive award decision

Mr. Baird’sGrier’s annual incentive award was $3,300,000$6,500,000 or approximately 1.11.35 times his target award amount. This award compares to an annual incentive award of $3,200,000$4,825,000 for 2011 (excluding a special one-time recognition award2012, representing an increase of $800,000 in 2011 for his leadership in connection with the acquisition and integration of Star and Edison and the

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Compensation Discussion and Analysis (continued)

disposition of the Global Commodities business), representing anincrease of 3%35%. Of the $3,300,000, $990,000$6,500,000, $1,950,000 was mandatorily deferred into the Book Value Performance Program.

MR. BAIRD

Performance assessment

Among the factors the Committee considered in determining the amount of Mr. Baird’s award were:

 

His efforts in leading our International businesses to a 19%17% increase in pre-tax AOI for 2012,2013, compared to 2011;2012;

 

His leadership in the business integration of the acquired AIG Star Life Insurance Co., Ltd. and AIG Edison Life Insurance Company, resulting in realization of substantially all of the targeted $250 million in annualized cost savings of approximately $200 million as of the fourth quarter of 2012;December 31, 2013;

 

His contributions to the successful adaptation to current market conditions of major product lines serving death protection and retirement needs in our key international markets;

His key role in expansion of our international insurance distribution channels, contributing to a 28% increase in constant dollar annualized new business premiums for 2012, compared to 2011;

His key role in the successful implementation of enhanced productivity standards among the distribution forces of the acquired Star and Edison companies; and

His role in helping drive expansion into new markets outside of Japan.

 

His contributions to the successful adaptation to current market conditions of major product lines serving death protection and retirement needs in our key international markets.

Mr. LowreyAnnual incentive award decision

Mr. Lowrey’sBaird’s annual incentive award was $4,050,000 or approximately 1.011.35 times his target award amount. This award compares to an annual incentive award of $4,500,000$3,300,000 for 2011,2012, representing a decreasean increase of 10%23%. Of the $4,050,000, $1,215,000 was mandatorily deferred into the Book Value Performance Program.

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Compensation Discussion and Analysis:Components of Our Executive Compensation Program

MR. LOWREY

Performance assessment

Among the factors the Committee considered in determining the amount of hisMr. Lowrey’s award were:

 

His efforts in leading our U.S. Retirement and Annuities businessesbusiness to achievement of record-high pretax adjusted operating income of $1,039 million for 2013 and strong sales and net flows, resulting in record-high Retirement account values of approximately $290 billion and Annuities account values of approximately $135$323 billion as of December 31, 2012;

His contributions to the success of our Asset Management business, which recorded a 15% increase in assets under management as of December 31, 2012 compared to a year earlier;

His key role in the success of our Retirement business in winning two landmark pension risk transfer transactions which brought over $33 billion of pension values to Prudential;2013;

 

His instrumental role in the successful adaptation of key products in our acquisitionAnnuities business to the current market environment, with the Annuities business surpassing the $150 billion milestone in account values as of The Hartford’s Individual Life Insurance business, which strengthened our Individual Life business by adding approximately 700,000 life insurance policies with face amount of approximately $135 billion as well as enhanced distribution and a strong pool of talent;December 31, 2013;

His contributions to the success of our Asset Management business, which recorded a 5% increase in assets under management as of December 31, 2013 compared to a year earlier;

His instrumental role in our acquisition of The Hartford’s Individual Life Insurance business and the successful execution of key initial steps in the business integration, resulting in realization of annualized cost savings of approximately $60 million as of December 31, 2013; and

His prudent oversight of our Group Insurance business, including strategic actions to reprice or allow termination of cases failing to meet profitability objectives.

Annual incentive award decision

Mr. Lowrey’s annual incentive award was $5,600,000 or approximately 1.40 times his target award amount. This award compares to an annual incentive award of our Group Insurance business, including strategic actions to discontinue sales$4,050,000 for 2012, representing an increase of long-term care insurance and focus on our core group life and disability coverages; and38%. Of the $5,600,000, $1,680,000 was mandatorily deferred into the Book Value Performance Program.

 

His strength in talent management, including the successful transition of leadership of our Individual Life, Group Insurance, and Individual Annuities businesses.

While the key drivers and related individual performance factors described above were relatively more important than other factors in determining the 2012 annual incentive awards for the NEOs, the Committee did not assign a specific weight to any factor, but, rather, evaluated the totality of the factors in making each award determination.

Long-Term Incentive Program

We provide a long-term incentive opportunity to motivate and reward our executive officers for their contributions toward achieving our business objectives by tying these incentives to the performance of our Common Stock and book value over the long term, to further reinforce the link between the interests of our executive officers and our shareholders, and to motivate our executive officers to improve our multi-year financial performance. Our practice is to grant long-term incentive awards annually in the form of a balanced mix of performance shares and units, stock options, and book value units to our officers at the level of senior vice president and above, including the NEOs, in amounts that are consistent with competitive practice.

TheIn February 2014, to align to changes in market practice and to achieve a more strongly performance-based program, the Committee changed the long-term incentive mix to provide a greater portion in performance shares and units and less in stock options for awards grantedmade with respect to our executive officers are allocated as follows:2013 performance. The shift in this mix is shown in the table below:

 

    For Awards
in 2013
  For Awards
in 2014
 
Performance Shares and Units   40  60
Stock Options   40  20
Book Value Units   20  20

Performance Shares and Units

40%

Stock Options

40%

Book Value Units

20%

These awards are made shortly after the end of our fiscal year. In determining the amount of individual long-term incentive awards, the Committee considers a senior executive’s individual performance during the immediately preceding year, potential future contributions, his or her prior year’s award value, and retention considerations, as well as market data for the executive officer’s position at the companies in the Peer Group. In addition, in the case of long-term incentive awards to any NEO who is subject to Section 162(m), the total amount of performance shares and units, restricted stock units, and book value units, as well as the annual incentive payment in any tax year, may not exceed 0.6% of our pre-tax AOI for the prior year.

Long-term incentive awards may also be granted when an individual is promoted to, or within, a senior executive position to recognize the increase in the scope of his or her role and responsibilities. From time to time, we may make special

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awards in the form of restricted stock units, to recognize major milestones, or selective awards in situations involving a leadership transition.

Performance Shares and Units

Performance shares and units align a portion of our long-term incentive values to the achievement of our key ROE goals over a three-year performance period. Award payouts generally range from 0% to 150% of the target number of shares and units. However, for the February 2014 awards, the Committee

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Compensation Discussion and Analysis:Components of Our Executive Compensation Program

limited the maximum award to 125% of target consistent with the Company’s publicly disclosed sustainable ROE objective of 13% to 14%. The preliminary payout is based on the average ROE achievement over the three-year performance period relative to the goals set at the start of the period as established by the Committee. Performance unit awards are denominated in share equivalents and have the same value as the performance share awards on the award payment date. Dividend equivalents are paid retroactively on the final number of performance shares and units paid out, up to the target number of shares and units. The ROE figures are subject to the samestandard adjustments for one-time items and Standard & Poor’s 500 performance as under the 2012 annual incentive program.part of our pre-set formulaic framework.

For awards commencing in 2013 and subsequentlythereafter and payouts in respect of certain years within the performance periods of outstanding awards, ROE will also be adjusted to exclude the non-economic effects as of December 31, 2012 and for subsequent periods of foreign exchange remeasurementsremeasurement of non-yen liabilities and assets.

The preliminary payout also may be adjusted byWhile the program allows the Committee in its discretion,to make a discretionary adjustment by up to 15% of the earned sharesawards and units based on its evaluation of other quantitative and qualitative factors, including, butthe Committee generally has chosen not limited to exchange-rate variations, a review of net income, our performance relative to the Peer Group, our credit ratings,exercise this discretion and other strategic development factors.did not exercise discretion for 2013 awards. In the event of any extraordinary circumstances that it determines in its sole discretion, the Committee may make additional adjustments to the final award values, either collectively or on an individual basis.

Stock Options

Stock options provide value based solely on stock price appreciation. Options haveStock options are granted with a maximum term of ten years andyears. One-third of the option grants vest one-third on each of the first three anniversaries of the date of grant. The exercise price is based on the closing market price of a share of our Common Stock on the New York Stock Exchange on the date of grant.

Book Value Performance Program

Our Book Value Performance Program is part of our long-term incentive program. This program is intended to link payments to a measure of book value per share a key metric in valuing insurance companies, banks, and investment firms

that is closely followed by investors. Book value per share is calculated by dividing our book value by the number of shares of our Common Stock outstanding. BookOur calculations of book value and book value per share exclude certain balance sheet items that do not, and may never, flow through the income statement. Unlike the financial measures based on AOI that are used in other aspects of our executive compensation program, the book value per share metric takes into consideration realized gains and losses in our investment portfolio. The key features of the Book Value Performance Program are:

 

Awards are granted and denominated in book value units that are funded from two sources:

 

the allocation of 20% of a participant’s long-term incentive award value for the year as determined by the Committee; and

the allocation of 20% of a participant’s long-term incentive award value for the year as determined by the Committee; and

 

for the NEOs, a mandatory deferral of 30% of their 2012 annual incentive award.

for the NEOs, a mandatory deferral of 30% of their annual incentive award.

 

Once granted, the value of these book value units then tracks changes in book value per share for each participant.

 

For purposes of the Book Value Performance Program, book value units are based on the equity attributable to our Financial Services Businesses divided by the number of shares of our Common Stock outstanding at the end of the period, on a fully diluted basis. For 2012,2013 and thereafter, these units track the value of “book value per share of Common Stock, excluding total accumulated other comprehensive income” as noted in our Quarterly Financial Supplements, excluding and the non-economic effects as of December 31, 2012 and for subsequent periods of foreign exchange remeasurement of non-yen liabilities and assets.assets,” as noted in our Quarterly Financial Supplements.

 

One-third of a participant’s annual award of book value units is distributed in cash in each of the three years following the year of grant.

 

The book value units of participants, including the NEOs, are subject to forfeiture (or “clawback”) in the event that the Committee determines, in its discretion, that a participant has engaged in conduct, or omitted taking appropriate action, which was a contributing factor to any material restatement of our consolidated annual financial statements.

 

 

 
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Compensation Discussion and AnalysisAnalysis:Components of Our Executive Compensation Program (continued)

 

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(1)

Excluding total accumulated other comprehensive income.

(2)

Reflects book value per share as originally reported of $66.63, adjusted to exclude total accumulated other comprehensive income and restated to reflectthe cumulative impact of gains and losses resulting from foreign currency exchange rate remeasurement included in net income (loss).

(2)Does not include the impact fromof changes in accounting related to the deferral of acquisition costs and the Company’s pension plans.

share count.

(3)

IncludingIncludes realized investment gains and losses and related charges and adjustments, and results from divested businesses.

(4)Excluding current year impact of gains and losses resulting from foreign currency exchange rate remeasurement.

(5)Includes change in share count other than through share repurchases.

(5)

For compensation purposes, book value units as of December 31, 2012 are valued at $58.12 per unit reflecting the adjustment to exclude the non-economic effects as of December 31, 2012 of foreign exchange remeasurement of non-yen liabilities and assets.

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The NEO’s awards, distributions and accumulated holdings under the Book Value Performance Program are as follows:

 

Named Executive
Officer
 

Number of
Book Value
Units Held at
January 1, 2012

(#)

 

Value of Book
Value Units Held  at
January 1, 2012(1)

($)

 

Value of Book
Value Units
Distributed in 2012(2)

($)

 

Value of Book
Value Units
Awarded in 2012(3)

($)

 

Number of Book
Value Units Held  at
December 31,  2012(4)

(#)

 

Value of Book
Value Units Held at
December 31,
2012(5)

($)

  

Number of

Book Value
Units Held at

January 1, 2013
(#)

   Value of Book
Value Units Held at
January 1, 2013(1)
($)
   

Value of Book

Value Units
Distributed in 2013(2)
($)

   

Value of Book

Value Units
Awarded in 2013(3)
($)

   Number of Book
Value Units Held at
December 31,  2013
(#)
   Value of Book
Value Units Held at
December 31,
2013(4)
 
John R. Strangfeld  53,153    3,541,584    1,358,054    2,960,064    88,655    5,152,629    88,655     5,152,629     2,349,097     3,389,035     106,548     6,391,815  
Robert M. Falzon  6,574     382,081     178,139     491,056     11,958     717,360  
Richard J. Carbone  12,196    812,619    306,366    950,078    25,103    1,458,986    25,103     1,458,986     624,212     1,142,581     34,022     2,040,980  
Mark B. Grier  42,389    2,824,379    1,083,538    2,390,018    71,200    4,138,144    71,200     4,138,144     1,883,496     2,847,589     87,788     5,266,402  
Edward P. Baird  19,382    1,291,423    485,068    1,340,030    36,998    2,150,324    36,998     2,150,324     933,526     1,690,071     50,015     3,000,400  
Charles F. Lowrey  23,416    1,560,208    574,685    1,700,044    46,290    2,690,375    46,290     2,690,375     1,143,455     2,115,103     63,008     3,779,850  

 

(1)Represents the aggregate market value of the number of book value units held at January 1, 20122013 obtained by multiplying the book value per share of $66.63$58.12 as originally reported as of December 31, 20112012 by the number of book value units outstanding.

(2)Represents the aggregate market value of the book value units distributed on February 24, 2012.22, 2013.

(3)Represents the aggregate market value of the book value units awarded on February 14, 2012.12, 2013.

(4)In 2012 the number of book value units were adjusted with no material change in the value of such units awarded or outstanding due to a change in financial accounting and a change in how units are tracked.
(5)Represents the aggregate market value of the book value units held at December 31, 20122013 obtained by multiplying the book value per share of $58.12$59.99 as of December 31, 20122013 by the number of book value units outstanding.

 

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Compensation Discussion and Analysis:Components of Our Executive Compensation Program

Long-Term Incentive Award Decisions for 20122013

In February 2013,2014, the Committee granted long-term incentive awards to the NEOs based on its assessment of their individual performance during 2012.2013. These awards were granted in the form of stock options (40%), performance shares (20%(30%), performance units (30%), stock options (20%), and book value units (20%) under the Book Value Performance Program (in addition to the mandatory deferral of 30% of each NEO’s annual cash incentive award). The Committee determined that this long-term incentive mix would appropriately reward the NEOs for their 20122013 performance, motivate them to work towards achieving our long-term objectives, further reinforce the link between their interests and the interests of our shareholders, and provide a balanced portfolio composed of performance

shares and units (which provide value based upon attainment of specific performance goals), stock options (which provide value based solely on stock price

appreciation) and performance awardsbook value units (which provide value based upon attainment of specific performance goals)on changes in book value per share).

The following table presents the long-term incentive awards granted to each NEO in February 2013,2014, including our Book Value Performance Program, and includes the mandatory deferrals of 30% of the annual cash incentive award. Awards are expressed as dollar compensation values in the table. Awards under the Long-Term Incentive Program are granted as book value units under the Book Value Performance Program, and as stock options, performance shares, and performance units. These awards generally will not be reported in the Summary Compensation Table until next year.2015. For discussion of the long-term incentive awards granted in February 20122013 for 20112012 performance and included in this year’s Summary Compensation Table, see our 20122013 Proxy Statement.

 

 

Named Executive Officer 

Long-Term Incentive
Compensation

Program

Compensation

Value of

Book Value Units(1)

($)

 

Long-Term Incentive
Compensation

Program

Compensation

Value of

Stock Options

($)

 

Long-Term Incentive
Compensation

Program

Compensation

Value of

Performance Shares

($)

 

Long-Term Incentive
Compensation

Program

Compensation

Value of

Performance Units

($)

 

Total

($)

Named Executive��Officer  
 
Compensation Value of
Book Value Units
  
(1) 
  
 
Compensation Value of
Stock Options
  
  
  
 
Compensation Value of
Performance Shares
  
  
  
 
Compensation Value of
Performance Units
  
  
   Total  
John R. Strangfeld 3,389,000 3,400,000 1,700,000 1,700,000 10,189,000 $4,040,000   $1,700,000   $2,550,000   $2,550,000    $10,840,000  
Robert M. Falzon $1,117,000   $520,000   $780,000   $780,000    $3,197,000  
Richard J. Carbone 1,142,500 800,000 400,000 400,000 2,742,500 $0   $0   $0   $0    $0  
Mark B. Grier 2,847,500 2,800,000 1,400,000 1,400,000 8,447,500 $3,350,000   $1,400,000   $2,100,000   $2,100,000    $8,950,000  
Edward P. Baird 1,690,000 1,400,000 700,000 700,000 4,490,000 $1,915,000(2)  $700,000   $1,050,000(2)  $1,050,000(2)   $4,715,000  
Charles F. Lowrey 2,115,000 1,800,000 900,000 900,000 5,715,000 $2,580,000   $900,000   $1,350,000   $1,350,000    $6,180,000  

 

(1)Includes amounts that were mandatorily deferred from the 2012 Annual Incentive Plan (30%) that total $1,689,000$2,340,000 for Mr. Strangfeld; $742,500$597,000 for Mr. Carbone; $1,447,500Falzon; $1,950,000 for Mr. Grier; $990,000$1,215,000 for Mr. BairdBaird; and $1,215,000$1,680,000 for Mr. Lowrey.

(2)
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Compensation Discussion and Analysis (continued)

Performance Share Awards

The NEOs currently have three performance share awards outstanding. In February 2013,2014, the Committee granted the 20132014 performance share awards. The key features of these awards are as follows:

 

Performance
Period
 

Performance

Measures

 

Performance Measure

Target Levels

 Target Number of Shares
to be Awarded
 Actual Number of Shares

2011 – 2013

- Return on equity

- Earnings per share

With respect to one-third of the award shares for 2011 – ROE within range of 9% to 11% and EPS of $6.15. With respect to one-third of the award shares for 2012 – ROE within range of 10.9% to 11.9% and EPS of $6.50. With respect to one-third of the award shares for 2013 – ROE within range of 12.7% to 13.7% and EPS of $7.70. The EPS and ROE figures will be subject to adjustments for one-time items and Standard & Poor’s 500 performance as under the Annual Incentive Program.

For 2011:

- 100% at target level.

For 2012:

- 100% at target level.

For 2013:

- 100% at target level.

To be determined between 0% and 150% of target number by the Committee in February 2014 based on actual performance compared to annual targets for ROE and EPS.
2012 – 2014 - Return on equity Average ROE of 12% for the 2012 through 2014 performance period. 

100% at target level.

150% if average ROE is 13% or moremore.

 To be determined between 0% and 150% of target number by the Committee in February 2015 based on average ROE over the 2012-2014 performance period compared to the Company’s ROE targets.
2013 – 2015 - Return on equity Average ROE of 13.5% for the 2013 through 2015 performance period. 

100% at target levellevel.

150% if average ROE is 14.5% or moremore.

 To be determined between 0% and 150% of target number by the Committee in February 2016 based on average ROE over the 2013-2015 performance period compared to the Company’s ROE targets.
2014 – 2016- Return on equityAverage ROE of 13.5% for the 2014 through 2016 performance period.

100% at target level.

125% if average ROE is 14% or more.

To be determined between 0% and 125% of the target number by the Committee in February 2017 based on average ROE over the 2014-2016 performance period compared to the Company’s ROE targets.

In February 2013,2014, the NEOs received payouts with respect to the performance share and unit awards that were granted in February 20102011 for the three-year performance period ended December 31, 2012.2013. These awards were paid at 112.63%126.55% of the target number of shares and units initially awarded based on our actual performance relative to the annual goals for ROE and EPS during the three-year performance period.

 

  2010   2011   2012  2011     2012     2013 
  EPS   ROE   EPS   ROE   EPS   ROE  EPS     ROE     EPS     ROE     EPS     ROE 
Goal(1):   $5.40     9-11%     $6.15     9-11%     $6.50     10.9-11.9%   $6.15       9-11%      $6.50       10.9-11.9%      $7.70       12.7-13.7%  
Actual(2):   $5.73     10.1%     $7.12     11.39%     $6.54     11.26%   $7.12       11.39%      $6.54       11.26%      $8.80       14.9%  
Annual Earnout   1.165     1.0     1.3674     1.195     1.0303     1.0    1.3674       1.1951       1.0303       1.0       1.5000       1.5  
Annual Blended Earnout   1.0825     1.2812     1.0152    1.2812       1.0152       1.5000  

 

(1)Goal for a target payment with respect to one-third of the award shares.

(2)Actual figures adjusted for one-time items and Standard & Poor’s 500 performance as under the Annual Incentive Program for each year.

The final award payments to the NEOs were:

Named Executive Officers  Target Number
of Shares/
Units  Awarded
     Actual Number
of Shares/
Units  Awarded
 
John R. Strangfeld   49,752       56,040  
Richard J. Carbone   9,952       11,212  
Mark B. Grier   39,802       44,832  
Edward P. Baird   15,310       17,248  
Charles F. Lowrey   15,310       17,248  

 

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Compensation Discussion and AnalysisAnalysis:Components of Our Executive Compensation Program(continued)

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The final award payments to the NEOs were:

Named Executive Officer  

Target Number of

Shares/Units Awarded

     

Actual Number of

Shares/Units Awarded

 

John R. Strangfeld

   52,272       66,150  

Robert M. Falzon

   3,268       4,136  

Richard J. Carbone

   9,148       11,578  

Mark B. Grier

   40,510       51,268  

Edward P. Baird

   19,602       24,808  

Charles F. Lowrey

   22,870       28,944  

 

SUPPLEMENTAL COMPENSATION ANALYSIS

TOTAL DIRECT COMPENSATIONTotal Direct Compensation

The following table illustrates the Committee’s perspective on the total direct compensation (base salary, annual incentive award, and long-term incentives) of the NEOs for the 20112012 and 20122013 performance years. This table is not a substitute for the compensation tables required by the SEC and included under “Compensation of Named Executive Officers” contained in this Proxy Statement. However, we believe it provides a more accurate picture of how the Committee viewed its compensation actions for the NEOs based on our performance for each of these two years:

 

Named

Executive Officer

 

2011

Compensation

 

2012

Compensation

 Percentage
Change
   

2012

Compensation

 2013
Compensation
 Percentage
Change
 

John R. Strangfeld

       

Base Salary

 $1,400,000   $1,400,000    0%    $1,400,000   $1,400,000    0%  

Annual Incentive

 $6,300,000 (1)  $5,630,000 (2)   (11%  $5,630,000(1)  $7,800,000(3)   39%  

Long-Term Incentive(3)

 $8,500,000   $8,500,000    0%  

Long-Term Incentive(4)

  $8,500,000   $8,500,000    0%  

Total

  $15,530,000   $17,700,000    14%  

Robert M. Falzon

    

Base Salary

  $330,000   $650,000    97%  

Annual Incentive

  $910,000(2)  $1,990,000(3)   119%  

Long-Term Incentive(4)

  $2,000,000   $2,600,000    30%  

Total

 $16,200,000   $15,530,000    (4%  $3,240,000   $5,240,000    62%  

Richard J. Carbone

       

Base Salary

 $700,000   $700,000    0%    $700,000   $700,000    0%  

Annual Incentive

 $2,750,000 (1)  $2,475,000 (2)   (10%  $2,475,000(1)  $2,500,000    1%  

Long-Term Incentive(3)

 $2,000,000   $2,000,000    0%  

Long-Term Incentive(4)

  $2,000,000   $0    -100%  

Total

 $5,450,000   $5,175,000    (5%  $5,175,000   $3,200,000    -38%  

Mark B. Grier

       

Base Salary

 $1,190,000   $1,190,000    0%    $1,190,000   $1,190,000    0%  

Annual Incentive

 $5,350,000 (1)  $4,825,000 (2)   (10%  $4,825,000(1)  $6,500,000(3)   35%  

Long-Term Incentive(3)

 $6,600,000   $7,000,000    6%  

Long-Term Incentive(4)

  $7,000,000   $7,000,000    0%  

Total

 $13,140,000   $13,015,000    (1%  $13,015,000   $14,690,000    13%  

Edward P. Baird

       

Base Salary

 $770,000   $770,000    0%    $770,000   $770,000    0%  

Annual Incentive

 $4,000,000 (1,4)  $3,300,000 (2)   (18%  $3,300,000(1)  $4,050,000(3)   23%  

Long-Term Incentive(3)

 $3,500,000   $3,500,000    0%  

Long-Term Incentive(4)

  $3,500,000   $3,500,000    0%  

Total

 $8,270,000   $7,570,000    (8%  $7,570,000   $8,320,000    10%  

Charles F. Lowrey

       

Base Salary

 $770,000   $770,000    0%    $770,000   $770,000    0%  

Annual Incentive

 $4,500,000 (1)  $4,050,000 (2)   (10%  $4,050,000(1)  $5,600,000(3)   38%  

Long-Term Incentive(3)

 $4,000,000   $4,500,000    13%  

Long-Term Incentive(4)

  $4,500,000   $4,500,000    0%  

Total

 $9,270,000   $9,320,000    1%    $9,320,000   $10,870,000    17%  

 

 (1)TwentyThirty percent of this amount was mandatorily deferred into the Book Value Performance Program, which is part of the Long-Term Incentive Program. These amounts total $1,260,000$1,689,000 for Mr. Strangfeld; $550,000$742,500 for Mr. Carbone; $1,070,000$1,447,500 for Mr. Grier; $640,000$990,000 for Mr. Baird (20% of his regular annual incentive award of $3.2 million);Baird; and $900,000$1,215,000 for Mr. Lowrey.

 (2)Ten percent of this amount was mandatorily deferred into the Book Value Performance Program, which is part of the Long-Term Incentive Program. This amount totals $91,000 for Mr. Falzon who was not a Named Executive Officer in February 2013.
(3)Thirty percent of this amount was mandatorily deferred into the Book Value Performance Program, which is part of the Long-Term Incentive Program. ThoseThese amounts total $1,689,000$2,340,000 for Mr. Strangfeld, $742,500Strangfeld; $597,000 for Mr. Carbone, $1,447,500Falzon; $1,950,000 for Mr. Grier, $990,000 for Mr. Baird andGrier; $1,215,000 for Mr. Baird; and $1,680,000 for Mr. Lowrey.

(3)(4)Represents the compensation value of long-term awards for each performance year. For example, the long-term values under the “2012“2013 Compensation” column represent awards made in February 20132014 for the 20122013 performance year, excluding amounts mandatorily deferred from the annual incentive awards.
(4)Annual Incentive for Mr. Baird of $4,000,000 for 2011 includes a one-time special award of $800,000.

REPORTING CHANGES IN PENSION VALUESTotal Shareholder Return

Retirement benefits are a key component of our executive compensation program. We offer our employees, includingThe Company’s absolute and relative Total Shareholder Return (TSR) was very strong over the NEOs, a comprehensive benefits program that provides the opportunity to accumulate retirement income. In accordance with SEC rules, the 2012 Summary Compensation Table includes the aggregate increase in the actuarial value of the potential pension benefits that accrued during the year to our NEOs. Because this amount is based on an actuarial computation, it may fluctuate from year to year based on factors that are a function of the plan’s designlast one, three and assumptions used in the computation.

A significant portion of the 2012 total reported compensation of Mr. Strangfeld, our CEO, is based on the increase in his potential pension value as calculated on an actuarial basis for the year. As part of its compensation review, the Compensation Committee considered the dollar amount change in pension value for Mr. Strangfeld and the other NEOs. The change in the present value of Mr. Strangfeld’s pension for 2012five-year time periods. It reflects a number of factors,rise in our valuation due to earnings growth, expansion in our price to book multiple and dividend increases, including his 35 years of service, his age, his average earningsa 32.5% quarterly dividend increase announced in late 2013. The chart below shows our absolute TSR and historically low interest rates, which together resultedpercentile ranking relative to the 21 companies in a significant increase in pension value.our compensation peer group over multiple time periods.

Potential pension values may fluctuate significantly from year to year and it is expected that in 2013, even if the discount rate is unchanged, Mr. Strangfeld’s pension accrual will be substantially reduced. Furthermore, if the discount rate were to rise, it is possible that Mr. Strangfeld’s change in pension value in subsequent years could be a negative amount. Given this inherent volatility, the Committee will continue to monitor future accruals for Mr. Strangfeld and the other NEOs. The Traditional Pension Formula that applies to Mr. Strangfeld was closed to employees hired on or after January 1, 2001.

   Total Shareholder Return 
    1-Year   3-Year   5-Year 
Cumulative TSR   77.17%     70.62%     243.30%  
Annualized TSR   77.17%     19.49%     27.98%  
Percentile Rank   90th     76th     91st  

CEO REALIZED AND REALIZABLE PAY ANALYSISRealized and Realizable Pay Analysis

The total compensation shownof our NEOs as reported in the 2013 Summary Compensation Table is calculated in accordance with the rules promulgated by the SEC.SEC rules. Under these rules, we are required to show the grant date fair value of certain equity and equity-based awards, even though the ability of our executives to realize value from suchthese awards is contingent on the achievement of certain performance conditions (such as the requirement that(for example, our stock price must appreciate for any value to be realized with respect tofrom stock options). The accompanying chart illustrates how thecharts compare our CEO’s total compensation, whenas measured based on actual compensation received (or, with regard to pending awards, realizable pay based on the applicable performance elements and stock value at a relatively current time), compares to the amount shownreported for him in the 2013 Summary Compensation Table.Table for the periods shown.

 

 

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Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement  49


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Compensation Discussion and AnalysisAnalysis:Components of Our Executive Compensation Program(continued)

 

 

This chart illustratesThese charts illustrate that our programs areexecutive compensation program is designed so that the amount of compensation that isour CEO actually receives, or is expected to receive, may be made available to our CEO declines fromhigher or lower than the valueamount we are required to be reportedreport in the Summary Compensation Table, ifdepending on the valueperformance of our Common Stock is not performing favorably.

The chart showsStock. They demonstrate the strong alignment of the interests of our executives with those of our shareholders.

CEO realizedTotal Compensation

Grant Date Fair Value vs. Realized and realizable pay with share price performance. The primary reason for the difference between grant date and realized/realizable pay is that the intrinsic value of the stock options awarded in each year is either a fraction of the grant date value (2010) or zero (2011 and 2012) as of December 31, 2012.Realizable Gains (in thousands)

 

LOGOLOGO

 

The totalTotal compensation values based on grant date fair value areis the sum ofof: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); and the grant date fair values of the performance shares and units, RSUs, book value units and stock options awarded each year.

 

 

 

The totalTotal compensation values based on realized and realizable pay aregains is the sum ofof: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2010 and paid in February 2013 valued at the December 31, 2012 share price of $53.33; performance shares and units awarded in 2011 and 2012 valued at target based on the $53.33 share price; RSUs awarded (and shown) in 2010 but paid in three annual tranches valued at the share price on the vestvesting date, except for the last tranche valued at the year-end $53.33 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2012 at $58.12 per unit; and the intrinsic value of stock options based on the $53.33 share price.

 

The primary reason why grant date and realized/realizable pay differ is that the intrinsic value of the stock options awarded in each year, when valued as of December 31, 2012, is either a fraction of the grant date fair value (2010) or zero (2011 and 2012).

Total compensation based on grant date fair value is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); and the grant date fair values of the performance shares and units, book value units and stock options awarded each year.

Total compensation based on realized and realizable gains is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2011 and paid in February 2014 valued at the December 31, 2013 share price of $92.22; performance shares and units awarded in 2012 and 2013 valued at target based on the $92.22 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2013 at $59.99 per unit; and the intrinsic value of stock options based on the $92.22 share price.

The primary reason why grant date and realized/realizable pay differ is that the intrinsic value of the stock options awarded in each year is significantly higher when valued as of December 31, 2013, as is the value of the performance shares and units.

 

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Compensation Discussion and Analysis:Components of Our Executive Compensation Program

 

POST-EMPLOYMENT COMPENSATIONPost-Employment Compensation

Retirement Plans

We view retirement benefits as a key component of our executive compensation program because they encourage long-term service. Accordingly, we offer our employees, including the NEOs, a comprehensive benefits program that provides the opportunity to accumulate adequate retirement income. This program includes both defined benefit and defined contribution plans, as well as two supplemental retirement plans which allow highly compensated employees (that is employees whose compensation exceeds the limits established by the Internal Revenue Code for covered compensation and benefit levels) to receive the same benefits they would have earned but for these limitations. Further, we sponsor two supplemental executive retirement plans (SERPs) for certain eligible executive officers, including the NEOs, to offset the potential loss or forfeiture of retirement benefits under certain limited circumstances. For descriptions of these plans, including their titles, see “Pension Benefits.”

We also maintain the Prudential Insurance Company of America Deferred Compensation Plan (the “Deferred Compensation Plan”). We offer this plan to our executive officers, including the NEOs, as a competitive practice.

For a description of this plan, see “Nonqualified Deferred Compensation.”

We periodically compare the competitiveness of our benefits programs for our employees, including retirement benefits, against other employers with whom we broadly compete for talent. It is our objective to provide our employees with a benefits package that is at or around the median of the competitive market when compared to other employers.

Severance and Change in Control Arrangements

 

Our Board has adopted a policy prohibiting us from entering into any severance or change in control agreement with any of our executive officers, including the NEOs, that provides for payments and benefits that exceed 2.99 times the sum of the executive officer’s base salary and most recently earned cash bonus, without shareholder approval or ratification. We do not provide excise tax reimbursements to any of our executive officers.

While our other executive officers are eligible for severance payments in the event of involuntary termination of employment without “cause,” our CEO is not a participant in the severance program providing this benefit.

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Compensation Discussion and Analysis(continued)

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To enable us to offer competitive total compensation packages to our executive officers, as well as to ensure the ongoing retention of these individuals when considering potential takeovers that

may create uncertainty as to their future employment with us, we

offer certain post-employment payments and benefits to our executive officers, including the NEOs, upon the occurrence of several specified events. These payments and benefits are provided under two separate programs:

 

the Prudential Severance Plan for Senior Executives (the “Severance Plan”); and

 

the Prudential Financial Executive Change in Control Severance Program.

We have not entered into individual employment agreements with our executive officers. Instead, the rights of our executive officers with respect to post-employment compensation upon specific events, including death, disability, severance or retirement, or a change in control of the Company, are covered by these two programs.

We use plans, rather than individually negotiated agreements, to provide severance and change in control payments and benefits for several reasons. First, a “plan” approach provides us with the flexibility to change the terms of these arrangements from time to time. An employment agreement would require that the affected executive officer consent to any changes. Second, this approach is more transparent, both internally and externally. Internal transparency eliminates the need to negotiate severance or other employment separation payments and benefits on a case-by-case basis. In addition, it assures each of our executive officers that his or her severance payments and benefits are comparable to those of other executive officers with similar levels of responsibility and tenure.

Our executive officers, including the NEOs, except for our CEO, are eligible for severance payments and benefits in the event of an involuntary termination of employment without “cause.” These executive officers and our CEO are also eligible for “double trigger” severance payments and benefits in the event of an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a change in control of the Company. Our executive officersequity awards are also eligible for certain limited “single trigger” benefits upon a change in control, including equity acceleration whendesigned to be “double trigger,” so long as such awards are not honored, assumed, or replaced by a successor employer. Such equity acceleration not only provides our executive officers with the benefit of these outstanding awards, it may also allow themallowed to exercise the awards and possibly participatecontinue in theeffect following any change in control transaction for the consideration received.on substantially equivalent terms and conditions to those applicable prior to such transaction.

The payment of these awards at target achievement rewards the executive officer for his or her expected performance prior to the change in control transaction.

For detailed information on the estimated potential payments and benefits payable to the NEOs in the event of their

termination of employment, including following a change in control of the Company, see “Potential Payments Upon Termination or Change in Control.”

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Compensation Discussion and Analysis:Other Compensation Related Policies

PERQUISITES AND OTHER PERSONAL BENEFITSPerquisites and Other Personal Benefits

We do not provide our executive officers, including the NEOs, with perquisites or other personal benefits, except for the use of Company aircraft, Company-provided vehicles and drivers, and, in the case of our CEO and Vice Chairman, security services. These items are provided because we believe that they serve a necessary business purpose and represent an immaterial element of our executive compensation program. The cost allocated to the personal use of Company-provided vehicles and drivers, including commuting expenses, and the incremental cost associated with the security services, to the extent not reimbursed to us, are reported in the Summary Compensation Table. Our executive officers, including the NEOs, are required to reimburse us for the incremental cost of any personal use of Company aircraft.

We do not provide tax reimbursements or any other tax payments to any of our executive officers.

 

Perquisites and other personal benefits represent an immaterial element of our executive compensation program. In 2012,2013, the NEOs received perquisites with an average incremental cost to the Company of under $31,000.$21,000.

OTHER COMPENSATION RELATED POLICIES

In addition to the other components of our executive compensation program, we maintain the policies described below. These policies are consistent with evolving best practices and help ensure that our executive compensation program does not encourage our executive officers to engage in behaviors that are beyond our ability to effectively identify and manage risk.

Process for Approving Long-Term Incentive Awards

The Committee approves long-term incentive awards (including stock options, book value units, performance shares, performance units, and restricted stock units) on an annual basis at its regularly scheduled February meeting.

The Committee has delegated authority to management to approve long-term incentive awards for new hires, promotions, and retention purposes within specified limits below the level of senior vice president. These awards are effective on the 15th of the month following the applicable event. The Committee approves any long-term incentive awards to newly hired or promoted senior executives. The grant date for these awards is the applicable meeting date of the Committee at which the awards are approved.

Under the terms of our Omnibus Incentive Plan (the “Omnibus Plan”), which was approved by shareholders in 2003, stock options are required to be priced at the closing

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Compensation Discussion and Analysis(continued)

market price of our Common Stock on the date of grant. The number of shares of Common Stock subject to a stock options grantedoption grant to an individual is determined by dividing the compensation value by the fair value of each stock option based on the average closing market price of our Common Stock on the NYSE for the final 20-day trading period in the month prior to the grant date.

The number of performance shares and units or restricted stock units awarded to an individual is determined by a formula that divides the compensation value of the award by the average closing market price of our Common Stock on the NYSE for the final 20-day trading period in the month prior to the grant date.

Stock Ownership Guidelines

We have adopted stock ownership guidelines for our executive officers to encourage them to build their ownership position in our Common Stock over time by direct market purchases, making investments available through the PESP and the Deferred Compensation Plan, and retaining shares they earn under long-term incentive awards. These guidelines are presented asframed in terms of stock value as a percentage of base salary as follows:

 

Position Stock Value as
a Percentage
of Base Salary
 

Chief Executive Officer

  500%  

Vice Chairman and Executive Vice Presidents

  300%  

Senior Vice Presidents

  200%  

Each of the NEOs, with the exception of the new CFO, meets his individual stock ownership level. Under the current stock ownership guidelines, once an executive officer attains his or her individual ownership level, he or she will remain in compliance with the guidelines despite future changes in stock price and base salary, as long as his or her holdings do not decline below the number of shares at the time the stock ownership guidelines were met.

Stock Retention Requirements

We have adopted stock retention requirements for our executive officers. Each executive officer is required to retain 50% of the net shares (after payment of the applicable exercise price (if any), fees, and taxes) acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. The executive officer is required to hold such shares until the later of one year following the date of acquisition of such shares (even if this one-year holding period extends beyond termination of employment) or the date that he or she satisfies our stock ownership guidelines.

Prohibition of Derivatives Trading, and Hedging and Pledging of Our Securities

Our Board has adopted a policy prohibiting all employees, including the NEOs, and members of the Board from

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Compensation Discussion and Analysis:Other Compensation Related Policies

engaging in any hedging transactions with respect to any equity securities of the Company held by them, which includes the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) designed to hedge or offset any decrease in the market value of such equity securities.

Our Board has also adopted a policy prohibiting our Section 16 officers and members of the Board from pledging, or using as collateral, the Company’s securities in order to secure personal loans or other obligations, which includes holding shares of our Common Stock in a margin account.

 

POLICY ONRULE 10b5-110B5-1 TRADING PLANS

The Company hasWe have a policy governing the use by executive officers of pre-established trading plans for sales of our Common Stock and exercises of stock options for shares of our Common Stock options.Stock. We believe our Rule 10b5-1 policy reflects best practices and is effective in ensuring compliance with legal requirements. Under the policy:

 

  

All Rule 10b5-1 trading plans must be pre-cleared by law and compliance.

 

 

  

A trading plan may be entered into, modified or terminated only during an open trading window and while not in possession of material non-public information.

 

 

  

No trade may occur for the first 30 days.days after the trading plan is established. No modification or termination of a plan may affect any trade scheduled to occur within 30 days.

 

IMPACT OF TAX POLICIESImpact of Tax Policies

Deductibility of Executive Compensation

It is our policy to structure and administer our annual and long-term incentive compensation plans and stock option grants for our CEO and the other NEOs to maximize the tax deductibility of the payments as “performance-based compensation” under Section 162(m) to the extent practicable.In 2012,practicable. In 2013, all such performance-based compensation was deductible. The Committee may provide compensation that is not tax deductible if it determines that such action is appropriate.

The Omnibus Plan contains an overall limit on compensation paid to each executive officer to comply with the conditions for determining “performance-based compensation” under Section 162(m). Under the terms of the Omnibus Plan, the total amount of annual incentives, book value units, performance shares and units, and restricted stock units awarded to a NEO who is subject to Section 162(m) in a taxable year cannot exceed 0.6% of our pre-tax AOI for the prior year.

 

 

 
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Executive Compensation

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Executive Compensation

 

COMPENSATION COMMITTEE REPORT

The Compensation Committee of our Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on its review and these discussions, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2012.2013.

THE COMPENSATION COMMITTEE

James G. Cullen, Chair

Gordon M. Bethune

Constance J. Horner

 

 
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Executive Compensation(continued)

 

20122013 SUMMARY COMPENSATION TABLE

The following table presents, for the years ended December 31, 2012,2013, December 31, 2011,2012, and December 31, 2010,2011, the compensation of Mr. Strangfeld, our principal executive officer, Mr. Carbone,Falzon, our principal financial officer, Mr. Carbone, our former chief financial officer who stepped down in March 2013, and Messrs. Grier, Baird, and Lowrey, our three most highly compensated executive officers (other than the principal executive officer and principal financial officer) who were serving as executive officers as of December 31, 2012.2013.

For information on the role of each compensation component within the total compensation packages of the NEOs, please see the relevant description in the “Compensation Discussion and Analysis (“CD&A”).” The compensation data in this table is presented in accordance with the SEC disclosure rules. For the Compensation Committee’s view of 20122013 performance year compensation, see the “Supplemental Compensation Analysis” in the CD&A.

 

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(1)The amounts reported in theSalarycolumn for 2012,2013 include elective contributions of a portion of their base salary to the SESP by Messrs. Strangfeld, Falzon, Carbone, Grier, Baird, and Lowrey in the amounts of $46,000, $18,000, $37,600, $20,800$45,800, $13,585, $17,800, $37,400, $20,600 and $20,800,$20,600, respectively.

 

(2)The amounts reported in theBonuscolumn represent bonuses paid in February 2014 for performance in 2013, February 2013 for performance in 2012, and February 2012 for performance in 2011,2011. For 2013 and February 2011 for performance in 2010. For 2012, 2011, and 2010, this column does not include 30%, and for 2011 does not include 20%, and 10% respectively, of the total bonus carved out to the Book Value Performance Program, which will appear in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table, for the applicable fiscal year in which it was paid.

 

    The amounts excluded in the table above for 2013 are $2,340,000 for Mr. Strangfeld; $597,000 for Mr. Falzon; $1,950,000 for Mr. Grier; $1,215,000 for Mr. Baird; and $1,680,000 for Mr. Lowrey.

The amounts excluded in the table above for 2012 are $1,689,000 for Mr. Strangfeld; $742,500 for Mr. Carbone; $1,447,500

$1,447,500 for Mr. Grier; $990,000 for Mr. Baird,Baird; and $1,215,000 for Mr. Lowrey.

The amounts excluded in the table above for 2011 are $1,260,000 for Mr. Strangfeld; $550,000 for Mr. Carbone; $1,070,000 for Mr. Grier; $640,000 for Mr. Baird,Baird; and $900,000 for Mr. Lowrey. The amounts excluded for 2010 are $610,000 for Mr. Strangfeld; $255,000 for Mr. Carbone; $520,000 for Mr. Grier; and $260,000 for Mr. Baird.

 

(3)The amounts reported in theStock Awards column represent the aggregate grant date fair value for performance shares and performance units at target and restricted stock units granted in each respective year. The maximum number of performance shares and performance units payable for 2013, 2012, 2011 and 20102011 are 1.5 times the target amounts. For 2013, the maximum performance shares and units payable and valued at the grant date price of $57.00 to Messrs. Strangfeld, Falzon, Carbone, Grier, Baird and Lowrey are 88,713, or $5,056,641; 20,874 or $1,189,818; 20,874 or $1,189,818; 73,059 or $4,164,363; 36,531 or $2,082,267; and 46,965 or $2,677,005 respectively.

For 2012, the maximum performance shares and units payable and valued at the grant date price of $59.41 to Messrs. Strangfeld, Carbone, Grier, Baird and Lowrey are 92,310, or $5,484,137; 21,720 or $1,290,385; 71,676 or $4,258,271; 38,010 or $2,258,174$2,258,174; and 43,440 or $2,580,770 respectively.

For 2011, the maximum performance shares and units payable and valued at the grant date price of $64.01 to Messrs. Strangfeld, Carbone, Grier, Baird and Lowrey are 78,408, or $5,018,896; 13,722 or $878,345; 60,765 or $3,889,568; 29,403 or $1,882,086; and 34,305 or $2,195,863 respectively. For 2010, the maximum performance shares and units payable and valued at the grant date price of $48.36 to Messrs. Strangfeld, Carbone, Grier, and Baird are 74,628 or $3,609,010; 14,928 or $721,918; 59,703 or $2,887,237; and 22,965 or $1,110,587 respectively. In 2010, Messrs. Strangfeld, Carbone and Grier received a special one-time stock award related to the Wachovia transaction.

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Executive Compensation(continued)

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2012 SUMMARY COMPENSATION TABLE (continued)

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(4)The amounts reported in theOptions Awards column represent the aggregate grant date fair value for stock options granted in each respective year for the prior year’s performance as calculated under ASC Topic 718. The assumptions made in calculating the grant date fair value amounts for these stock options are incorporated herein by reference to the discussion of those assumptions and found below in the Grants of Plan-Based Awards Table. Note that the amounts reported in this column do not necessarily correspond to the actual economic value that will be received by the Named Executive Officers from the options.

 

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Executive Compensation

2013 Summary Compensation Table

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(5)The amounts reported in theNon-Equity Incentive Plan Compensation column for 2013 represent the value of the book value units paid in February 2014, for 2012 represent the value of the book value units paid in February 2013, and for 2011 represent the value of the book value units paid in February 2012, and for 2010 represent the value of the book value units paid in February 2011.2012.

 

    For Mr. Falzon, 2013 also includes the value of carried interest payments and distributions of $140,660. For Mr. Lowrey, 2013, 2012 and 2011 also include the value of carried interest payments and distributions of $423,192$232,360, $546,934 and $1,495,826 respectively, related$1,550,697 respectively. The carried interest payments and distributions relate to carried interest programs in which he participatesMr. Falzon and Mr. Lowrey participate as a result of histheir previous positions within the Company’s Asset Management Business. While Mr. Falzon and Mr. Lowrey isare no longer entitled to invest in or be granted new carried interests in these programs, hethey will continue to receive distributions if and when they are earned.

 

(6)The amounts reported in theChange in Pension Valuecolumn represent the change in the actuarial present value of each NEO’s accumulated benefit under the Merged Retirement Plan, the Supplemental Retirement Plan, and the SERPs, as applicable, determined using interest rate and mortality rate assumptions consistent with those used for our consolidated financial statements on December 31, 2009, December 31, 2010, December 31, 2011, December 31, 2012 and December 31, 2012,2013, as applicable; namely, the RP 2000 generational mortality table with white collar adjustments, an interest discount rate of 5.75% for 2009, 5.60% for 2010, 4.85% for 2011, and 4.05% for 2012 and 4.95% for 2013, a Cash Balance Formula interest crediting rate of 4.50% for 2009, 4.25% for 2010, 4.25% for 2011, 4.25% for 2012 and 4.25% for 2012.2013, and a PSI Cash Balance Formula interest crediting rate of 5.00% for 2012 and 5.00% for 2013. The amounts represented above may fluctuate significantly in a given year depending on a number of factors that affect the formula to determine pension benefits, including age, years of service, and the measurement of average annual earnings.

 

    Messrs. Strangfeld and Baird accrue pension benefits under the Traditional Pension Formula and Messrs. Carbone, Falzon, Grier, and Lowrey accrue pension benefits under the Cash Balance Formula (both formulas are described in the Pension Benefits section of this proxy statement)Proxy Statement). In accordance with the provisions of the Traditional Pension Formula, the years of earnings used for determining Average Eligible Earnings change every two years (most recently on January 1, 2012).

 

    The amounts reported in this column include payments from the Supplemental Retirement Plan of $2,286,774 for Mr. Carbone, $14,415 for Mr. Grier, and $9,399 for Mr. Lowrey in 20122012; $19,017 for Mr. Carbone, $485 for Mr. Falzon, $2,431 for Mr. Grier, $21,454,225 for Mr. Baird, and $1,395 for Mr. Lowrey in 2013; and above-market interest on the SESP;SESP of $4,854$2,451 for Mr. Strangfeld, $1,680$859 for Mr. Carbone, $3,140$79 for Mr. Falzon, $1,616 for Mr. Grier, $1,435$753 for Mr. Baird, and $1,183$635 for Mr. Lowrey.

The actual change in pension value for Mr. Strangfeld in 2013 was $(856,310). In accordance with SEC instructions, the amount included in this column for the change in pension value for 2013 is $0.

 

(7)The amounts reported in the All Other Compensation column are itemized in the supplemental “All Other Compensation” table below.

 

(8)Mr. LowreyFalzon was appointed an executive officer in February 2011.March 2013.

 

 
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Executive Compensation(continued)

 

All Other Compensation

 

     Year       Perquisites(1)      PESP Contributions(2)      SESP Contributions(2)      Total      Year     Perquisites(1)     PESP  Contributions(2)     SESP  Contributions(2)     Total 
John R. Strangfeld     2012      $50,691      $8,615      $46,000      $105,306       2013      $33,508      $8,615      $45,800      $87,923  
     2011      $40,380      $7,692      $46,200      $94,272       2012      $50,691      $8,615      $46,000      $105,306  
     2010      $40,764      $7,692      $30,200      $78,656       2011      $40,380      $7,692      $46,200      $94,272  
Robert M. Falzon     2013      $12,838      $7,785      $13,585      $34,208  
Richard J. Carbone     2012      $23,397      $10,000      $18,000      $51,397       2013      $3,841      $8,885      $17,800      $30,526  
     2011      $22,729      $9,800      $18,200      $50,729       2012      $23,397      $10,000      $18,000      $51,397  
     2010      $23,144      $9,800      $10,200      $43,144       2011      $22,729      $9,800      $18,200      $50,729  
Mark B. Grier     2012      $35,272      $10,000      $37,600      $82,872       2013      $36,292      $10,200      $37,400      $83,892  
     2011      $49,574      $9,800      $37,800      $97,174       2012      $35,272      $10,000      $37,600      $82,872  
     2010      $80,429      $9,800      $24,200      $114,429       2011      $49,574      $9,800      $37,800      $97,174  
Edward P. Baird     2012      $25,722      $10,000      $20,800      $56,522       2013      $21,613      $10,200      $20,600      $52,413  
     2011      $24,227      $9,800      $21,000      $55,027       2012      $25,722      $10,000      $20,800      $56,522  
     2010      $22,708      $9,800      $11,585      $44,093       2011      $24,227      $9,800      $21,000      $55,027  
Charles F. Lowrey     2012      $18,311      $9,892      $20,800      $49,003       2013      $17,577      $10,200      $20,600      $48,377  
     2011      $16,613      $9,800      $21,000      $47,413       2012      $18,311      $9,892      $20,800      $49,003  
     2011      $16,613      $9,800      $21,000      $47,413  

 

(1)For Messrs. Strangfeld and Grier, the amounts reported in thePerquisitescolumn for 20122013 represent the incremental cost for security services of $26,371$13,625 and $9,927,$8,321, respectively, and the costs associated with Company-provided vehicles for personal and commuting purposes of $24,320$19,883 and $25,345,$27,971, respectively. The amounts reported in thePerquisites column for Mr. Grier for 2010 represent the cost of one-time security installations of $38,949. We view the provision of security services for Messrs. Strangfeld and Grier as a necessary business expense given their positions as our CEO and our Vice Chairman. For Messrs. Carbone, Baird, Falzon and Lowrey, the amounts reported represent the costs of commuting and limited personal use of Company-provided vehicles. The amounts reported in the table for commuting and personal use of vehicles reflect our determination of the costs allocable to the actual commuting and personal use of each individual and are based on a formula that takes into account various expenses, including costs associated with the driver and fuel.

 

(2)The amounts reported in thePESPandSESP Contributionscolumns represent our contributions to the account of each NEO under (a) The Prudential Employee Savings Plan (the “PESP”), a defined contribution plan which provides employees with the opportunity to contribute up to 50% of eligible earnings in any combination of before-tax, Roth 401(k) and/or after-tax contributions (subject to Internal Revenue Code limits) and (b) the Prudential Supplemental Employee Savings Plan (the “SESP”), a non-qualified plan which provides employees who exceed the Internal Revenue Code earnings limit ($250,000255,000 in 2012)2013) with the opportunity to defer up to 4% of eligible earnings in excess of the earnings limit. We match 100% of the first 4% of an employee’s before-tax or Roth 401(k) deferrals under the PESP (after one year of service) and 100% of an employee’s deferrals under the SESP.

 

 
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Executive Compensation

 

GRANTS OF PLAN-BASED AWARDSGrants of Plan-based Awards

The following table presents, for each of the NEOs, information concerning awards under our Long-Term Incentive Program (including our Book Value Performance Plan) and grants of equity awards made during 20122013 for 20112012 performance.

20122013 Grants of Plan-based Awards Table

 

Name  Grant Date     
 
 
 
 
 

 

Estimated
Future Payouts
Under
Non-Equity
Incentive Plan
Awards

($)

  
  
  
  
  
  

(1) 

 

 

 
 

 

Estimated Future Payouts Under
Equity Incentive Plan Awards(2)

 

  
  

   
 
 
 
 
 
 

 

All Other
Option
Awards;
Number of
Securities
Underlying
Options

(#)

  
  
  
  
  
  
 

(3) 

  
 
 
 
 
 
Exercise
or Base
Price of
Option
Awards
($/Sh)
  
  
  
  
  
  
   
 
 
 
 

 

Grant Date
Fair Value
of Stock
and Option
Awards

($)

  
  
  
  
  

(4) 

 Grant Date   Estimated
Future Payouts
Under
Non-Equity
Incentive Plan
Awards ($) (1)
  Estimated Future Payouts Under Equity
Incentive Plan Awards (2)
   All Other
Option
Awards;
Number of
Securities
Underlying
Options
(#) (3)
   Exercise
or Base
Price of
Option
Awards
($/Sh)
   Grant Date
Fair Value
of Stock
and Option
Awards

($) (4)
 
    
 
Threshold
(#)
  
  
   
 
Target
(#)
  
  
   
 
Maximum
(#)
  
  
         Threshold
(#)
  Target
(#)
   Maximum
(#)
   
John R. Strangfeld  02/14/12        30,770     46,155        1,828,046    02/12/13        29,571     44,357           1,685,547  
  02/12/13        29,571     44,357         1,685,547  
  02/12/13            247,094     57.00     3,380,246  
  02/12/13     3,389,035                  
Robert M. Falzon  02/12/13        6,958     10,437         396,606  
  02/14/12        30,770     46,155        1,828,046    02/12/13        6,958     10,437         396,606  
  02/14/12            223,685    59.41     3,668,434    02/12/13            58,140     57.00     795,355  
  02/14/12     2,960,064                    02/12/13     491,056                  
Richard J. Carbone  02/14/12        7,240     10,860        430,128    02/12/13        6,958     10,437         396,606  
  02/14/12        7,240     10,860        430,128    02/12/13        6,958     10,437         396,606  
  02/14/12            52,632    59.41     863,165    02/12/13            58,140     57.00     795,355  
  02/14/12     950,078                    02/12/13     1,142,581                  
Mark B. Grier  02/14/12        23,892     35,838        1,419,424    02/12/13        24,353     36,530         1,388,121  
  02/14/12        23,892     35,838        1,419,424    02/12/13        24,353     36,530         1,388,121  
  02/14/12            173,685    59.41     2,848,434    02/12/13            203,489     57.00     2,783,730  
  02/14/12     2,390,018                    02/12/13     2,847,589                  
Edward P. Baird  02/14/12        12,670     19,005        752,725    02/12/13        12,177     18,266         694,089  
  02/14/12        12,670     19,005        752,725    02/12/13        12,177     18,266         694,089  
  02/14/12            92,106    59.41     1,510,538    02/12/13            101,745     57.00     1,391,872  
  02/14/12     1,340,030                    02/12/13     1,690,071                  
Charles F. Lowrey  02/14/12        14,480     21,720        860,257    02/12/13        15,655     23,483         892,335  
  02/14/12        14,480     21,720        860,257    02/12/13        15,655     23,483         892,335  
  02/14/12            105,264    59.41     1,726,330    02/12/13            130,814     57.00     1,789,536  
  02/14/12     1,700,044                    02/12/13     2,115,103                  

(1)The amounts reported in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards column represent the value of the book value units awarded to the NEOs under the Omnibus Plan in 2012 on February 14, 201212, 2013 based on the book value per share of the company of $58.02$58.12 as originally reported as of December 31, 2011, as restated.2012.

 

(2)The amounts reported in the Estimated Future Payouts Under Equity Incentive Plan Awards columns represent performance shares and performance units awarded to the NEOs under the Omnibus Plan in 2012.2013. Performance share and performance unit awards are granted for a three-year performance period with payout determined at the end of the period based on our performance against our ROE goals. The ROE goals for the 20122013 grant are within a range of 9%9.5% to 13%14.5%.

 

(3)The amounts reported in the All Other Option Awards column represent the number of stock options granted to Named Executive OfficerNEOs under the Omnibus Plan in 2012.2013. These stock options vest one-third each year on the anniversary of the grant date. These stock options expire 10 years from their respective grant date. dates.

The exercise price for these stock options is the closing price of our Common Stock on the grant datesdate of February 14, 201212, 2013 ($59.4157.00 per share).

 

(4)The amounts in the Grant Date Fair Value column have been calculated in the case of performance shares and performance units as the target number of performance shares and performance units multiplied by the closing price of our Common Stock on the grant date of February 14, 201212, 2013 ($59.4157.00 per share).

For stock options, the grant date fair values are hypothetical values developed under a binomial option pricing model, which is a complex, mathematical formula to determine fair value of stock options on the date of grant. The binomial option pricing model is a flexible, lattice-based valuation model that takes into consideration transferability, fixed estimate of volatility, and expected life of the options. As such, the amounts reported in the table are hypothetical values and may not reflect the actual economic value a Named Executive Officer would realize upon exercise.

We made the following assumptions when calculating the grant date fair value of the stock option grants: exercise price is equal to our share price on the grant date, 5.445.52 year life expected for each option, expected dividend yield is 3%, risk-free rate of return of 0.93%1.01%, and expected price volatility of 41.8%36.44%.

 

 
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Executive Compensation(continued)

 

OUTSTANDING EQUITY AWARDSOutstanding Equity Awards

The following table provides information on the NEOs’ outstanding equity awards as of December 31, 2012.2013. The equity awards reported in the Stock Awards columns consist of performance shares,share and performance units, and restricted stock unit awards. The equity awards reported in the Option Awards columns consist of non-qualified stock options.

20122013 Outstanding Equity Awards at Fiscal Year-end Table

 

   Option Awards(1)    Stock Awards  

Name

  Grant Date    
 
 
 
 
 
Number of
Securities
Underlying
Unexercised
Options
(# Exercisable)
  
  
  
  
  
  
  
 
 
 
 
 
Number of
Securities
Underlying
Unexercised
Options
(# Unexercisable)
  
  
  
  
  
  
  
 
 
Option
Exercise
Price ($)
  
  
  
   
 
 
Option
Expiration
Date
  
  
  
  
 
 
 
 
 
 
 
Number
of Shares
or Units
of Stock
That  Have
Not
Vested
(#)
  
  
  
  
  
  
  
(2) 
  
 
 
 
 
 
 

 

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested

($)

  
  
  
  
  
  
  

(2) 

  
 
 
 
 
 
 
 
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Rights That
Have Not
Vested (#)
  
  
  
  
  
  
  
(3) 
  
 
 
 
 
 
 
 
 
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units
or Rights That
Have Not
Vested ($)
  
  
  
  
  
  
  
  
(3) 
John R. Strangfeld  2/14/2012    0    223,685    59.41     2/14/2022      61,540    3,281,928  
  2/8/2011    56,889    113,778    64.01     2/8/2021      52,272    2,787,666  
  2/9/2010    90,090    45,046    48.36     2/9/2020    25,513    1,360,608    49,752    2,653,274  
  2/10/2009    242,312    0    25.30     2/10/2019      
  2/12/2008    146,315    0    69.03     2/12/2018      
  1/18/2008    143,177    0    80.00     1/18/2018      
  2/13/2007    66,310    0    91.73     2/13/2017      
  2/14/2006    71,628    0    76.15     2/14/2016      
  2/8/2005    95,026    0    55.75     2/8/2015      
   2/10/2004    111,810    0    45.00     2/10/2014                  
Richard J. Carbone  2/14/2012    0    52,632    59.41     2/14/2022      14,480    772,218  
  2/8/2011    9,955    19,912    64.01     2/8/2021      9,148    487,863  
  2/9/2010    18,018    9,010    48.36     2/9/2020    4,146    221,106    9,952    530,740  
  2/12/2008    29,263    0    69.03     2/12/2018      
  1/18/2008    45,393    0    80.00     1/18/2018      
  2/13/2007    27,169    0    91.73     2/13/2017      
  2/14/2006    29,348    0    76.15     2/14/2016      
   2/8/2005    41,225    0    55.75     2/8/2015                  
Mark B. Grier  2/14/2012    0    173,685    59.41     2/14/2022      47,784    2,548,321  
  2/8/2011    44,089    88,178    64.01     2/8/2021      40,510    2,160,398  
  2/9/2010    72,072    36,037    48.36     2/9/2020    25,513    1,360,608    39,802    2,122,641  
  2/12/2008    117,052    0    69.03     2/12/2018      
  1/18/2008    120,806    0    80.00     1/18/2018      
  2/13/2007    66,310    0    91.73     2/13/2017      
  2/14/2006    63,669    0    76.15     2/14/2016      
   2/8/2005    83,846    0    55.75     2/8/2015                  
Edward P. Baird  2/14/2012    0    92,106    59.41     2/14/2022      25,340    1,351,382  
  2/8/2011    21,333    42,667    64.01     2/8/2021      19,602    1,045,375  
  2/9/2010    27,720    13,861    48.36     2/9/2020      15,310    816,482  
  2/10/2009    55,918    0    25.30     2/10/2019      
  2/12/2008    33,765    0    69.03     2/12/2018      
  1/18/2008    44,743    0    80.00     1/18/2018      
  2/13/2007    12,895    0    91.73     2/13/2017      
  2/14/2006    13,928    0    76.15     2/14/2016      
  2/8/2005    17,748    0    55.75     2/8/2015      
   2/10/2004    18,344    0    45.00     2/10/2014                  
Charles F. Lowrey  2/14/2012    0    105,264    59.41     2/14/2022      28,960    1,544,437  
  2/8/2011    24,889    49,778    64.01     2/8/2021      22,870    1,219,657  
  2/9/2010    27,720    13,861    48.36     2/9/2020      15,310    816,482  
  2/10/2009    68,966    0    25.30     2/10/2019      
  2/12/2008    41,644    0    69.03     2/12/2018      
  1/18/2008    35,795    0    80.00     1/18/2018      
  2/13/2007    7,369    0    91.73     2/13/2017      
  2/14/2006    7,959    0    76.15     2/14/2016      
   2/8/2005    6,988    0    55.75     2/8/2015                  

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Executive Compensation(continued)

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    Option Awards (1)     Stock Awards  
Name  Grant Date     
 
 
 
 
 
Number of
Securities
Underlying
Unexercised
Options
(# Exercisable)
  
  
  
  
  
  
   
 
 
 
 
 
Number of
Securities
Underlying
Unexercised
Options (#
Unexercisable)
  
  
  
  
  
  
   
 
 

 

Option
Exercise
Price

($

  
  
  

  
 
 
Option
Expiration
Date
  
  
  
   
 
 
 
 
 
 

 

Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Rights That
Have Not Vested

(#) (2)

  
  
  
  
  
  
  

  

   
 
 
 
 
 
 
 
Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Rights That
Have Not Vested
($) (2)
  
  
  
  
  
  
  
  
John R. Strangfeld  2/12/2013     0     247,094     57.00    2/12/2023     59,142     5,454,075  
  2/14/2012     74,561     149,124     59.41    2/14/2022     61,540     5,675,219  
  2/8/2011     113,778     56,889     64.01    2/8/2021     52,272     4,820,524  
  2/9/2010     135,136     0     48.36    2/9/2020      
  2/12/2008     146,315     0     69.03    2/12/2018      
  1/18/2008     143,177     0     80.00    1/18/2018      
  2/13/2007     66,310     0     91.73    2/13/2017      
  2/14/2006     71,628     0     76.15    2/14/2016      
   2/8/2005     95,026     0     55.75    2/8/2015            
Robert M. Falzon  2/12/2013     0     58,140     57.00    2/12/2023     13,916     1,283,334  
  2/14/2012     0     8,772     59.41    2/14/2022     3,620     333,836  
   2/8/2011     0     3,556     64.01    2/8/2021     3,268     301,375  
Richard J. Carbone  2/12/2013     0     58,140     57.00    2/12/2023     13,916     1,283,334  
  2/14/2012     0     35,088     59.41    2/14/2022     14,480     1,335,346  
  2/8/2011     0     9,956     64.01    2/8/2021     9,148     843,629  
  1/18/2008     45,393     0     80.00    1/18/2018      
   2/13/2007     27,169     0     91.73    2/13/2017            
Mark B. Grier  2/12/2013     0     203,489     57.00    2/12/2023     48,706     4,491,667  
  2/14/2012     57,895     115,790     59.41    2/14/2022     47,784     4,406,640  
  2/8/2011     88,178     44,089     64.01    2/8/2021     40,510     3,735,832  
  1/18/2008     120,806     0     80.00    1/18/2018      
  2/13/2007     66,310     0     91.73    2/13/2017      
   2/14/2006     63,669     0     76.15    2/14/2016            
Edward P. Baird  2/12/2013     0     101,745     57.00    2/12/2023     24,354     2,245,926  
  2/14/2012     30,702     61,404     59.41    2/14/2022     25,340     2,336,855  
  2/8/2011     42,666     21,334     64.01    2/8/2021     19,602     1,807,696  
  2/9/2010     41,581     0     48.36    2/9/2020      
  2/10/2009     55,918     0     25.30    2/10/2019      
  2/12/2008     33,765     0     69.03    2/12/2018      
  1/18/2008     44,743     0     80.00    1/18/2018      
  2/13/2007     12,895     0     91.73    2/13/2017      
  2/14/2006     13,928     0     76.15    2/14/2016      
   2/8/2005     17,748     0     55.75    2/8/2015            
Charles F. Lowrey  2/12/2013     0     130,814     57.00    2/12/2023     31,310     2,887,408  
  2/14/2012     35,088     70,176     59.41    2/14/2022     28,960     2,670,691  
  2/8/2011     49,778     24,889     64.01    2/8/2021     22,870     2,109,071  
  2/9/2010     41,581     0     48.36    2/9/2020      
  2/10/2009     68,966     0     25.30    2/10/2019      
  2/12/2008     41,644     0     69.03    2/12/2018      
  1/18/2008     35,795     0     80.00    1/18/2018      
  2/13/2007     7,369     0     91.73    2/13/2017      
  2/14/2006     7,959     0     76.15    2/14/2016      
   2/8/2005     6,988     0     55.75    2/8/2015            

 

(1)The options reported in theOption Awards column vest at the rate of one-third per year on the anniversary of the date of grant, except for the options granted on January 18, 2008.

In the case of the options granted to Messrs. Strangfeld, Grier, Baird, and Lowrey on that date, these options vested as to one-half of the underlying shares after two years, and as to one-quarter of the underlying shares each after year three and four. In the case of the options granted to Mr. Carbone on that date, this option vested as to two-thirds of the underlying shares after two years, except as provided in the grant acceptance agreement related to this grant, thegrant. The remaining one-third of the underlying shares became exercisable three years from the date of grant.

 

(2)TheNumber of Shares or Units of Stock That Have Not Vested andMarket Value of Shares or Units of Stock That Have Not Vested columns reflect the number of restricted stock units outstanding, and corresponding market value based on the closing market price of our common stock on December 31, 2012 ($53.33 per share).

(3)TheEquity Incentive Plan Awards columns reflect the number of outstanding performance shares and performance units that would be received by each Named Executive Officer at the target payout level for the 2010, 2011, 2012, and 20122013 grants. The dollar values reported represent the estimated value of the outstanding performance shares and performance units at the target payout level for the 2010, 2011, 2012 and 20122013 grants, based on the closing market price for our Common Stock on December 31, 20122013 ($53.3392.22 per share). Grants were made for three-year performance cycles with the 2010 grant as the 2010-2012 performance cycle, the 2011 grant as the 2011-2013 performance cycle, and the 2012 grant as the 2012-2014 performance cycle.

Grants were made for three-year performance cycles with the 2011 grant as the 2011-2013 performance cycle, the 2012 grant as the 2012-2014 performance cycle, and the 2013 grant as the 2013-2015 performance cycle.

 

62  
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement  59


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Executive Compensation(continued)

 

OPTION EXERCISES AND STOCK VESTEDOption Exercises and Stock Vested

The following table provides information on the value realized by each of the NEOs as a result of the exercise of options and stock awards that vested from January 1, 20122013 through December 31, 2012.2013.

20122013 Option Exercises and Stock Vested Table

    Option Awards     Stock Awards 

Name

     
 
 
 
 
 
Number of
Shares
Acquired
on
Exercise
(#)
  
  
  
  
  
  
     
 
 
 

 

Value
Realized
On
Exercise

($)

  
  
  
  

  

     
 
 
 
 
 
Number of
Shares
Acquired
on
Vesting
(#)
  
  
  
  
  
(1) 
   
 

 

 

 

Value
Realized

On

Vesting

($)

  
  

  

  

(2) 

    Option Awards     Stock Awards 
    Number of Shares
Acquired on Exercise
(#)
     

Value Realized
On Exercise

($)

     

Number of Shares
Acquired on Vesting

(#)(1)

     

Value Realized
On Vesting

($)(2)

 
John R. Strangfeld     0       0       175,855     10,360,481       354,122       10,105,406       81,553       4,663,829  
Robert M. Falzon     21,893       743,165       4,314       245,898  
Richard J. Carbone     97,380       2,609,492       31,669     1,871,995       164,319       3,599,405       15,358       877,894  
Mark B. Grier     129,234       4,638,155       146,344     8,625,057       309,007       9,595,610       70,345       4,024,973  
Edward P. Baird     0       0       35,735     2,096,911       18,344       382,890       17,248       983,136  
Charles F. Lowrey     10,906       283,736       42,349     2,489,430       0       0       17,248       983,136  

 

(1)The amounts in theStock AwardsNumber of Shares Acquired on Vesting column represent the payout of shares of our Common Stock for the vesting of the 2009 restricted stock grants. For Messrs. Strangfeld, Grier, Baird2010 performance shares grants and Lowrey also represents the third vestingpayout of the 2008 restricted stock grants.2010 performance units grants in cash. For Messrs. Strangfeld, Carbone and Grier, also representrepresents the secondthird vesting of the 2010 special restricted stock grants.

 

(2)The amounts in theStock Awards — Value Realized on Vesting column represent the product of the number of restricted stock units, performance shares and performance units released and the closing sale price of our Common Stock ason February 8, 2013 for the vesting of February 9, 2013, $57.60 and on the date of vesting on January 18, 2012, $56.12, February 9, 2012, $59.85, and February  10, 2012, $59.00.12, 2013, $57.00.

PENSION BENEFITSPension Benefits

As part of its compensation review, the Compensation Committee considered the dollar amount change in pension value for Mr. Strangfeld and the other NEOs. The change in the present value of Mr. Strangfeld’s pension for 20122013 reflects a number of factors, including his 3536 years of service, his age, his average earnings and the increase in historically low interest rates, which together resulted in a significant increase in pension value.rates. Potential pension values may fluctuate significantly from year to year and it is expected that in 2013,2014, even if the discount rate is unchanged, Mr. Strangfeld’s pension accrual will be substantially reduced. Furthermore,increased. Alternatively, if the discount rate were to rise further, it is possible that Mr. Strangfeld’s change in pension value in subsequent years could again be a negative amount. Given this inherent volatility, the Committee will continue to monitor future accruals for Mr. Strangfeld and the other NEOs. The Traditional Pension Formula that applies to Mr. Strangfeld was closed to employees hired on or after January 1, 2001.

The following table provides information on the defined benefit retirement plans in which the NEOs participate, including the present value of accumulated benefits as of December 31, 2012,2013, except as noted, payable for each of the NEOs under each of these plans determined using interest rate and mortality rate assumptions consistent with those used in our consolidated financial statements; namely, the RP 2000 generational mortality table with white collar adjustments and an interest discount rate of 4.05%4.95%. Cash Balance Formula and PSI Cash Balance Formula accounts are assumed to grow with interest at 4.25% and 5.00%, respectively, until commencement of pension benefits. No additional earnings or service after December 31, 2012,2013 are included in the calculation of the accumulated benefits.

20122013 Pension Benefits Table

Name  Plan Name    Number
of Years
of
Credited
Service
(#)
   

Present

Value of
Accumulated
Benefit
($)

     

Payments

During

Last

Fiscal

Year
($)

 
John R. Strangfeld  

Merged

Retirement Plan—Traditional Benefit Formula

     35     2,736,171         
  Supplemental Retirement Plan—Traditional Pension Formula     35     53,706,221         
   Supplemental Retirement Plan—Cash Balance Formula     n/a(1)    31,082         
Richard J. Carbone  Merged Retirement Plan—Cash Balance Formula     15     2,432,366         
   Supplemental Retirement Plan—Cash Balance Formula     15     166,735       2,286,774(2) 
Mark B. Grier  Merged Retirement Plan—Cash Balance Formula     17     2,199,965         
   Supplemental Retirement Plan—Cash Balance Formula     17     5,319,143       14,415(3) 

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Executive Compensation(continued)

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Name  Plan Name    Number
of Years
of
Credited
Service
(#)
   

Present

Value of
Accumulated
Benefit
($)

     

Payments

During

Last

Fiscal

Year
($)

   Plan Name    Number of Years of
Credited Service
(#)
   Present Value of
Accumulated Benefit
($)
     

Payments During

Last Fiscal Year
($)

 
John R. Strangfeld  Merged Retirement Plan—Traditional Benefit Formula     36     2,642,496         
  Supplemental Retirement Plan—Traditional Pension Formula     36     52,943,479         
  Supplemental Retirement Plan—Cash Balance Formula     n/a(1)    31,189         
Robert M. Falzon  Merged Retirement Plan—Cash Balance Formula     30     1,055,679         
  Merged Retirement Plan—PSI Cash Balance Formula     n/a(2)    64,601         
  Supplemental Retirement Plan—Cash Balance Formula     30     136,392       485(3) 
Richard J. Carbone  Merged Retirement Plan—Cash Balance Formula     16     2,514,271         
  Supplemental Retirement Plan—Cash Balance Formula     16     431,128       19,017(4) 
Mark B. Grier  Merged Retirement Plan—Cash Balance Formula     18     2,020,105         
  Supplemental Retirement Plan—Cash Balance Formula     18     6,229,165       2,431(3) 
Edward P. Baird  Merged Retirement Plan—Traditional Benefit Formula     33     2,997,336           Merged Retirement Plan—Traditional Benefit Formula     34     2,886,748         
  Merged Retirement Plan—Cash Balance Formula     n/a(1)    3,840         
  Supplemental Retirement Plan—Traditional Pension Formula     33     17,788,514           Supplemental Retirement Plan—Traditional Pension Formula     34            21,426,564(5) 
  Supplemental Retirement Plan—Cash Balance Formula     n/a(1)    27,295           Supplemental Retirement Plan—Cash Balance Formula     n/a(1)           27,661(5) 
Charles F. Lowrey  Merged Retirement Plan—Cash Balance Formula     11     1,491,338           Merged Retirement Plan—Cash Balance Formula     12     1,496,442         
  Supplemental Retirement Plan—Cash Balance Formula     11     281,317       9,399(3)   Supplemental Retirement Plan—Cash Balance Formula     12     681,365       1,395(3) 
                

 

(1)This benefit is a result of an allocation of demutualization compensation distributed to all participants in the Merged Retirement Plan in 2002 (“Demutualization Credit”). Ongoing service is not a consideration in determining this benefit for the NEOs.

 

(2)

This amount represents two distributions fromMr. Falzon transferred to Prudential in 1998 and began accruing pension benefits under the Supplemental Retirement Plan Cash Balance Formula: (i) $10,243 was distributed in March 2012 to pay for FICA taxes due and accrued in 2011 on this benefit, and federal, state and local taxes onTraditional Pension Formula (and subsequently the distributed amount (the entire payment was withheld to pay these taxes); and (ii) $2,276,531 was distributed in December 2012 to distribute the entire Supplemental Retirement Plan Cash Balance Formula benefit accrued on November 1, 2012, the firstupon his election of the month following Mr. Carbone’s 65th birthday (a mandatory payment date under the terms of the Supplemental Retirement Plan)this formula in 2001).

As a result, ongoing service is not a consideration in determining this benefit.

 

(3)This payment was a distribution from the Supplemental Retirement Plan Cash Balance Formula to pay for FICA taxes due and accrued in 20112012 on this benefit, and federal, state and local taxes on the distributed amount. The entire payment was withheld to pay these taxes.

 

(4)This amount represents a distribution from the Supplemental Retirement Plan Cash Balance Formula to distribute the entire benefit accrued under this plan on January 1, 2013 (a mandatory payment date under the terms of the Supplemental Retirement Plan since he is over age 65).

(5)

This amount represents a distribution from the Supplemental Retirement Plan to distribute the entire benefit accrued under this plan on May 1, 2013, the first of the month following Mr. Baird’s 65th birthday (a mandatory payment date under the terms of the Supplemental Retirement Plan).

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       6163  


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Executive Compensation(continued)

 

The Merged Retirement Plan

Our indirect wholly owned subsidiary, Prudential Insurance, sponsors our tax-qualified defined benefit retirement plan, The Prudential Merged Retirement Plan (the “Merged Retirement Plan”), which is available to our executive officers, including the NEOs, and other salaried U.S. employees. The Merged Retirement Plan has two formulas under which participants may have their retirement benefits for ongoing service determined: the “Traditional Pension Formula” or the “Cash Balance Formula.” In addition, employees who previously worked for Prudential Securities Incorporated also have retirement benefits for their service with Prudential Securities Incorporated under a third component of the Merged Retirement Plan: the “PSI Cash Balance Formula.”

Traditional Pension FormulaTRADITIONAL PENSION FORMULA

Under the Traditional Pension Formula, employees are fully vested in their accrued benefits. These benefits (which are subject to Internal Revenue Code limits) are determined using the following formula, which is based on Average Eligible Earnings (as defined) and years of Credited Service (as defined):

 

 

(1.35% x Average Eligible Earnings up to Covered Compensation

+

2% x Average Eligible Earnings in excess of Covered Compensation)

×

Years of Credited Service up to 25 years

+

(0.75% x Average Eligible Earnings up to Covered Compensation

+

1.35% x Average Eligible Earnings in excess of Covered Compensation)

×

Years of Credited Service for the next 13 years

+

1% x Average Eligible Earnings

×

Years of Credited Service in excess of 38 years

 

For a separation from service in 2012,2013, Average Eligible Earnings are determined by taking the average of earnings (base salary plus annual incentive payment) over the period beginning January 1, 2005, and ending on the date of separation after dropping the lowest two years of earnings in that period. Under the Traditional Pension Formula, the starting point for the averaging period is moved forward two

years on January 1 of every even calendar year. “Covered Compensation” for a year is the average of the Social Security wage bases for the 35 years ending in the year the participant will reach Social Security normal retirement age. Benefits are payable as early as age 55 (with a reduction in benefits) as a

single life annuity if not married or an actuarially equivalent 50% joint and survivor annuity if married.

Generally, a participant’s benefit will be determined as the greater of:

 

the benefit as determined above calculated at the time of separation from service;

 

the benefit as determined above calculated as of January 1, 2002, plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2002; and

 

If the Supplemental Retirement Plan benefit is to be paid in the form of an annuity, the benefit as determined above calculated as of January 1, 2012 (including any adjustment in the benefit on January 1, 2002 as described in the previous bullet), plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2012. (Messrs. Strangfeld and Baird each elected to receive their Supplemental Retirement Plan benefit in the form of a lump sum; consequently, this provision does not apply to them.)

Additional benefits are provided to participants who are eligible to retire upon separation from service. A participant is eligible to retire if he or she separates from service either: (a) after attainment of age 55 (with 10 years of vesting service) or age 65 or (b) due to an involuntary termination (other than for cause or exhausting short-term disability benefits) after attainment of age 50 (with 20 years of continuous service).

If a participant is eligible to retire, he or she is eligible for survivor benefits (with no actuarial reduction), a lesser (or no) reduction in benefit for benefit commencement before age 65, and an additional benefit paid to age 65.

The benefits reported in the Pension Benefits Table above are assumed to commence in the form of a 50% joint and survivor annuity on the later of January 1, 20132014 and the date the participant is eligible for an unreduced benefit, i.e., the earlier of (i) the first of the month on or following the later of attainment of age 60 and 30 years of service and (ii) the first of the month on or following attainment of age 65 (“Normal Retirement Date”).

Cash Balance FormulaCASH BALANCE FORMULA

The Cash Balance Formula was added to the Merged Retirement Plan in 2001 for employees hired on or after January 1, 2001, except employees of Prudential

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Executive Compensation(continued)

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Securities Incorporated. At that time, we offered a one-time conversion election for the current Merged Retirement Plan participants with benefits under the Traditional Pension Formula to opt to have their individual retirement benefits determined under the Cash Balance Formula. Participants who made this election to use the Cash Balance Formula are fully vested in their Cash Balance Formula benefit. Otherwise, participants are generally vested in their Cash Balance Formula benefit after three years of service.

Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account which is allocated basic credits equal to 2% to 14% (depending on age and service) of base salary and annual incentive payments. Interest credits are made to the hypothetical account each month using an interest rate set each year based on the average yield on 30-year U.S. Treasury securities (constant maturities) for October of the prior year, with a minimum rate of 4.25%. The rate in effect for 20122013 was 4.25%.

64  Notice of Annual Meeting of Shareholders and 2014 Proxy Statement


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Executive Compensation

Active participants on June 30, 2003 received an additional credit equal to his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of January 1, 2002, if any. Active participants on June 30, 2012 received an additional credit of no more than his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of April 1, 2012, if any.

Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity, 50%, 75%, or 100% joint and survivor annuity or 50% contingent annuity. Employees who made the one-time conversion election to use the Cash Balance Formula (specifically, Messrs. Carbone, Falzon and Grier) have a frozen “Grandfathered Benefit” determined as the accrued benefit under the Traditional Pension Formula as of January 1, 2002. The value of the Grandfathered Benefit, and early retirement subsidies on this benefit, if applicable, are included in determining the payable benefit.

As reported in the Pension Benefits Table, cash balance accounts are assumed to grow with interest until (other than for Mr. Carbone) and benefits will commence on:

 

for Messrs. Strangfeld and Baird (whose Cash Balance Formula benefits are due only to the Demutualization Credit), the same date benefits are assumed to commence under the Traditional Pension Formula;

 

for Messrs. Falzon, Grier and Lowrey, the participant’s Normal Retirement Date; and

 

for Mr. Carbone, January 1, 2013.2014.

Benefits are assumed to commence in a form that is based on a value comparison between a lump sum and a 50% joint and survivor annuity.

PSI CASH BALANCE FORMULA

The PSI Cash Balance Formula applies only to employees who previously worked for Prudential Securities Incorporated. At this time, all participants are fully vested in their PSI Cash Balance Formula benefit. Mr. Falzon is the only NEO with a benefit under this formula.

PSI Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account. Prior to January 1, 2004, the hypothetical accounts were allocated basic credits equal to 1.7% to 7% (depending on age and service) of eligible earnings. Since then, interest credits only have been made to the hypothetical account each month using an interest rate set each year, with a minimum rate of 5.00%. The rate in effect for 2013 was 5.00%.

Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity, 50%, 75%, or 100% joint and survivor annuity, 50% or 100% contingent annuity, or single life annuity with 5 or 10 years guaranteed.

As reported in the Pension Benefits Table, PSI Cash Balance accounts are assumed to grow with interest until, and benefits will commence on, the participant’s Normal Retirement Date.

Benefits are assumed to commence with 90% of participants electing a lump sum and 10% electing a 50% joint and survivor annuity.

The Supplemental Retirement Plan and SERPs

The Supplemental Retirement Plan is a non-qualified retirement plan designed to complement the Merged Retirement Plan by providing benefits to all participants of the Merged Retirement Plan, including the NEOs, who are prohibited from receiving additional benefits under the Merged Retirement Plan because of Internal Revenue Code limits.

The Prudential Insurance Supplemental Executive Retirement Plan and the PFI Supplemental Executive Retirement Plan (collectively, the “Prudential SERPs”) provide “Early Retirement Benefits” to certain eligible executives, including the NEOs, subject to the approval of our Board and the Committee. Early Retirement Benefits are designed to recognize the service and contributions of eligible executives who are involuntarily terminated by exempting them from the reduction factor for early retirement between the ages of 55 and 65, a reduction of up to 50%, which would otherwise be applicable under the Traditional Pension Formula and the Grandfathered Benefit under the Cash Balance Formula of the Merged Retirement Plan and the Supplemental Retirement Plan. Benefits under the Supplemental Retirement Plan and the Prudential SERPs are generally payable at the earlier of six months after separation from service and age 65. No NEO is currently eligible for benefits under the Early Retirement Benefits provision. Because Mr.Messrs. Strangfeld is eligible for retirement, and otherwise would have a reduced benefit under the Traditional Pension Formula, he is potentiallyBaird are not eligible for benefits under the Early Retirement Benefits provision. Were Mr. Strangfeld to qualifyprovision of the Prudential SERPs because they are already eligible for Early Retirement Benefits, his benefits would not be subject to reduction upon an involuntary termination of employment.unreduced benefit under the Traditional Pension Formula. Mr. Lowrey is not eligible for Prudential SERPs benefits because he was hired in 2001 and does not have a Grandfathered Benefit under the Cash Balance Formula. Because Mr. BairdFalzon would be eligible for retirement upon an involuntary termination, and otherwise would have a reduced benefit on the Grandfathered Benefit portion of his benefit under the Cash Balance Formula, he is notpotentially eligible for benefits under the Early Retirement Benefits provisionprovision. Were Mr. Falzon to qualify for Early Retirement Benefits, the Grandfathered Benefit portion of the Prudential SERPs because he is already eligible forhis benefits would not be subject to reduction upon an unreduced benefit under the Traditional Pension Formula.involuntary termination of employment.

In 2008, the NEOs (with the exception of Mr. Lowrey) were permitted to make an irrevocable election regarding the form of payment for their pension benefits and each NEO (with the exception of Mr. Falzon) elected to receive his Supplemental Retirement Plan and Prudential SERPs benefits, if any, in a lump sum. By doing so, Messrs. Carbone and Grier forfeited their eligibility for a Prudential SERPs benefit since these benefits are not provided to participants under the Cash Balance Formula who receive their benefit in a lump sum. Notwithstanding the foregoing, benefits reported in the Pension Benefits Table are assumed to commence in the same form and at the same time as under the Merged Retirement Plan benefit to be consistent with assumptions used in the Company’s financial statements.

 

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       6365  


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Executive Compensation(continued)

 

NONQUALIFIED DEFERRED COMPENSATIONNonqualified Deferred Compensation

The following table provides information on the NEOs’ participation in the Prudential Supplemental Employee Savings Plan (the “SESP”) and the Deferred Compensation Plan:

20122013 Nonqualified Deferred Compensation Table

Name

   Plan     
 
 
 
Executive
Contributions
in Last Fiscal
Year ($)
  
  
  
(1) 
  
 
 
 
Registrant
Contributions
in Last Fiscal
Year ($)
  
  
  
(2) 
  
 
 
 
 
Aggregate
Earnings
in Last
Fiscal
Year ($)
  
  
  
  
  
   
 
 
 
Aggregate
Withdrawals/
Distributions
($)
  
  
  
(3) 
  
 
 
 
 
Aggregate
Balance at
Last Fiscal
Year End
($)
  
  
  
  
(4) 
  Plan    
 
 
 
Executive
Contributions
in Last
Fiscal Year 
  
  
  
($)(1) 
  
 
 

 

Registrant
Contributions
in Last

Fiscal Year 

  
  
  

($)(2) 

  
 
 
 
Aggregate
Earnings
in Last
Fiscal Year 
  
  
  
($) 
  
 
 

 

Aggregate
Withdrawals/
Distributions

($

  
  
  

)(3) 

  
 

 

 

Aggregate
Balance at Last

Fiscal Year End

($

  
 

 

)(4) 

John R. Strangfeld   SESP     46,000    46,000   28,957    0   887,251   SESP    45,800    45,800    32,329        1,011,180  
  Deferred Compensation   0    0    2,097,746        7,652,630  
Robert M. Falzon  SESP    13,585    13,585    1,219        56,415  
   Deferred Compensation    0    0    573,163     0    5,554,884    Deferred Compensation   0    0    335,213        2,004,118  
Richard J. Carbone   SESP     18,000    18,000   10,010    0   312,458   SESP    17,800    17,800    11,319        359,377  
   Deferred Compensation    0    0    288,871     (253,554)    3,910,958    Deferred Compensation   0    0    268,769    (152,329  4,027,398  
Mark B. Grier   SESP     37,600   37,600   18,708    0   584,059   SESP    37,400    37,400    21,441        680,300  
   Deferred Compensation    0    0    0     0    0    Deferred Compensation   0    0              
Edward P. Baird   SESP     20,800   20,800   8,530    0   273,282   SESP    20,600    20,600    10,031        324,513  
   Deferred Compensation    0    0    0     0    0    Deferred Compensation   0    0              
Charles F. Lowrey   SESP     20,800   20,800   7,023    0   230,043   SESP    20,600    20,600    8,517        279,761  
   Deferred Compensation    900,000    0    1,091,357     0    9,493,899    Deferred Compensation   0    0    667,595        10,161,494  

 

(1)The amounts reported in the Executive Contributions in Last Fiscal Year column represent elective contributions of a portion of their base salary to the SESP (which amounts are also included in the Salary Column of the Summary Compensation Table) and elective contributions to the Deferred Compensation Plan from the annual Bonus.

 

(2)The amounts reported in the Registrant Contributions in Last Fiscal Year column represent the Company’s contributions to each NEO’s SESP account (which amounts are also included in the All Other Compensation column of the Summary Compensation Table).

 

(3)The amounts reported in the Aggregate Withdrawals/Distributions column represent distributions in 20122013 from the Deferred Compensation Plan for Mr. Carbone for the 2000 plan year in the form of monthly payments that began in 2003 and the 2001 plan year that began as monthly payments in 2007. Distribution options for payments under the Deferred Compensation Plan are chosen as lump sum or monthly payments over a period of up to 10 years. A recordkeeping account is created for the deferred earnings for the participant. Interest is earned on the account based on the participant’s notional fund elections.

 

(4)The amounts reported in the Aggregate Balance at Last Fiscal Year-End column represent balances from the SESP and the Deferred Compensation Plan and includes various amounts previously reported in the Summary Compensation Table as Salary, Bonus or All Other Compensation.

 

TheTHE SESP

The SESP is a non-qualified profit-sharing plan designed to provide benefits in excess of amounts permitted to be contributed under the PESP. It allows employees, including the NEOs, to elect to defer from 1% to 4% of their eligible earnings paid after the Code limit is exceeded in the year ($250,000255,000 in 2012)2013) to a hypothetical recordkeeping account on a pre-tax basis through payroll deduction. We match 100% of an employee’s deferrals. Eligible earnings for the NEOs under the SESP are limited to base salary only. Interest is earned on a participant’s account at the same rate as the Fixed Rate Fund under the PESP. This rate is generally set quarterly within a calendar year, and the ratesrate in effect for each quarter of 2012 were 3.80%, 3.65%,2013 was 3.50%, and 3.50%, respectively.. A participant’s account is distributed to the employee six months after the participant’s separation from service.

The Deferred Compensation PlanTHE DEFERRED COMPENSATION PLAN

The Deferred Compensation Plan is a non-qualified, unfunded plan that provides certain designated executives in the United States, including the NEOs, with the ability to defer taxation on up to 85% of their annual cash incentive awards. Deferrals may be invested in notional funds that generally mirror the PESP fund offerings, including shares of our Common Stock.

POST-EMPLOYMENT COMPENSATION ARRANGEMENTSPost-Employment Compensation Arrangements

While we have not entered into employment agreements with our executive officers, including the NEOs, they are eligible to receive certain payments and benefits in the event of a termination of employment, including following a change in control of the Company, under the Severance Plan and Change in Control Program. Mr. Strangfeld does not participate in the Severance Plan.

 

 

 
6466      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


Executive Compensation(continued)

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Executive Compensation

 

In the case of the NEOs, and in many cases subject to the approval of our Board, the various payments and benefits provided under the Severance Plan, the Change in Control Program, the Omnibus Plan and other Company programs, as applicable, are as follows:

 

  Severance Annual
Incentives
 Stock
Options
Restricted
Stock Units
Options
 Performance
Shares/
Performance
Units
 Book Value
Units
 SERP 

Additional

Retirement

Accruals

 Health/
Life
Voluntary Termination; Early or Normal Retirement  Annual Incentive Program Omnibus Plan* Omnibus Plan* Omnibus Plan* Omnibus Plan* 

Merged Retirement Plan and Supplemental Retirement

Plan

 
Involuntary Termination Without Cause Severance Plan Annual Incentive Program Omnibus Plan* Omnibus Plan* Omnibus Plan* Omnibus Plan*Prudential SERP Merged Retirement Plan and Supplemental Retirement Plan 
Separation Due to Change in Control1 Change in Control Program 

Change in Control Program

and Annual Incentive Program

 Change in Control Program and Omnibus Plan Change in Control Program and Omnibus Plan Change in Control Program and Omnibus Plan Change in Control Program and Omnibus PlanPrudential SERP Merged Retirement Plan and Supplemental Retirement Plan Change in Control Program
Separation Due to Disability  Annual Incentive Program Omnibus Plan Omnibus Plan Omnibus Plan Omnibus Plan Merged Retirement Plan and Supplemental Retirement Plan Prudential Welfare Benefits Plan
Separation Due to Death  Annual Incentive Program Omnibus Plan Omnibus Plan Omnibus Plan Omnibus Plan Merged Retirement Plan and Supplemental Retirement Plan 

Voluntary Termination; Early or Normal Retirement

SeveranceSEVERANCE

Annual Incentives

Annual Incentive Program: an annual incentive payment based on the current year’s business and individual performance, payable following the completion of the performance year.

Stock OptionsSTOCK OPTIONS

Omnibus Plan*: (i) except for stock options granted on January 18, 2008, vested stock options remain exercisable for a period of up to five years after termination; and unvested stock options continue to vest according to the original vesting schedule; and (ii) for stock options granted on January 18, 2008, (x) upon a voluntary termination of employment before January 18, 2012 (January 18, 2011, in the case of Mr. Carbone), unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination, and (y) upon a voluntary termination of employment on or after January 18, 2012 (January 18, 2011, in the case of Mr. Carbone), unexercised stock options remain exercisable for a period of up to five years after termination.

Notice of Annual Meeting of Shareholders and 2013 Proxy Statement     65


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Executive Compensation(continued)

Restricted Stock Units

Omnibus Plan*: all outstanding restricted stock unit awards will be paid out at the conclusion of the vesting periods.

Performance Shares/Performance UnitsPERFORMANCE SHARES/PERFORMANCE UNITS

Omnibus Plan*: each grant of performance shares and performance units will be paid out at the end of its respective performance period based on the actual number of shares and performance units earned as determined by the Committee.

Performance shares are paid in shares of Common Stock and performance units are paid in cash.

Book Value UnitsBOOK VALUE UNITS

Omnibus Plan*: each grant of book value units vests one-third each year and is paid out annually in cash based on the Company’s book value per share at the end of the fiscal quarter prior to payment.

SERP

Additional Retirement Accruals

Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.

Health/Life

Involuntary Termination Without Cause

Severance

Severance Plan: assuming all eligibility conditions are satisfied, severance payments of up to 18 months of salary and annual incentive.

Annual Incentives

Annual Incentive Program: an annual incentive payment based on the current year’s business and individual performance, payable following the completion of the performance year.

Stock Options

Omnibus Plan**: (i) except for stock options granted on January 18, 2008, vested stock options remain exercisable for a period of up to five years after termination date; and unvested stock options continue to vest according to the original vesting schedule; and (ii) for stock options granted on January 18, 2008, unvested stock options are pro-rated and are exercisable for up to 90 days after termination.

Restricted Stock Units

Omnibus Plan**: all outstanding restricted stock unit awards will be paid out at the conclusion of the vesting period.

Performance Shares/Performance Units

Omnibus Plan**: each grant of performance shares and performance units will be paid out at the end of its respective performance period based on the actual number of shares and performance units earned as determined by the Committee. Performance shares are paid in shares of Common Stock and performance units are paid in cash.

Book Value Units

Omnibus Plan**: each grant of book value units vests one-third each year and is paid out annually in cash based on the Company’s book value per share at the end of the fiscal quarter prior to payment.

 

*Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment (i) for stock options granted in 2005 or later, unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination, (ii) for stock options granted in 2004 or earlier, all stock options are cancelled, and (iii) all outstanding restricted stock units, performance shares, performance units and book value units are generally forfeited.

SERP

Additional Retirement Accruals

Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.

HEALTH/LIFE

Involuntary Termination Without Cause

SEVERANCE

Severance Plan: assuming all eligibility conditions are satisfied, severance payments of up to 18 months of salary and annual incentive.

ANNUAL INCENTIVES

Annual Incentive Program: an annual incentive payment based on the current year’s business and individual performance, payable following the completion of the performance year.

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Executive Compensation

STOCK OPTIONS

Omnibus Plan**: (i) except for stock options granted on January 18, 2008, vested stock options remain exercisable for a period of up to five years after termination date and unvested stock options continue to vest according to the original vesting schedule; and (ii) for stock options granted on January 18, 2008, unvested stock options are pro-rated and are exercisable for up to 90 days after termination.

PERFORMANCE SHARES/PERFORMANCE UNITS

Omnibus Plan**: each grant of performance shares and performance units will be paid out at the end of its respective performance period based on the actual number of shares and performance units earned as determined by the Committee. Performance shares are paid in shares of Common Stock and performance units are paid in cash.

BOOK VALUE UNITS

Omnibus Plan**: each grant of book value units vests one-third each year and is paid out annually in cash based on the Company’s book value per share at the end of the fiscal quarter prior to payment.

 

**Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment (i) unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination, (ii) for stock options granted on January 18, 2008, unvested stock options are pro-rated and are exercisable for up to 90 days after termination, and (iii) generally a pro-rata portion of restricted stock units, performance shares, performance units and book value units will vest.

SERP

Prudential SERP: Mr. Strangfeld isFalzon would be retirement eligible and may receive an Early Retirement Benefit.

Additional Retirement AccrualsADDITIONAL RETIREMENT ACCRUALS

Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.

Merged Retirement Plan (Traditional Pension Formula) and Supplemental Retirement Plan (Traditional Pension Formula): additional benefit to Mr. Baird based on the amount of severance paid and the period of time over which the severance is based (e.g., 78 weeks).

Merged Retirement Plan (Cash Balance Formula) and Supplemental Retirement Plan (Cash Balance Formula): additional benefit to Messrs. Carbone, Falzon, Grier and Lowrey based on the amount of severance.

Health/LifeHEALTH/LIFE

66  Notice of Annual Meeting of Shareholders and 2013 Proxy Statement


Executive Compensation(continued)

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Separation Due to Change in Control1

SeveranceSEVERANCE

Change in Control Program: (i) a lump-sum payment equal to the sum of two times annual base salary and bonus (based on the average of the annual incentive payments for the previous three calendar years); and (ii) a payment equal to the present value of the retirement benefits that would have accrued during the period of time on which the lump-sum payment in (i) is based.

 

(1)(1) 

Pursuant to the Change in Control Program, before payments may be made, a change in control must have occurred and the designated executive officer’s employment must, within two years following the change in control, either have terminated involuntarily without “cause” or by the eligible executive officer for “good reason”. An eligible executive officer would have good reason to terminate his or her employment in the event of a material reduction in his or her compensation or the terms and conditions of his or her employment were to adversely change (for example, a reduction in job responsibilities, title, or forced relocation).

Annual IncentivesANNUAL INCENTIVES

Change in Control Program and Annual Incentive Program: an annual incentive payment based on the target annual incentive award opportunity in the year termination occurs.

Stock OptionsSTOCK OPTIONS

Change in Control Program and Omnibus Plan: accelerated vesting of stock options only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.

Restricted Stock Units

Change in Control Program and Omnibus Plan: accelerated vesting of restricted stock units, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.

Performance Shares/Performance UnitsPERFORMANCE SHARES/PERFORMANCE UNITS

Change in Control Program and Omnibus Plan: payment of outstanding performance shares and performance units at target in cash or shares within 30 days of a change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.

Book Value UnitsBOOK VALUE UNITS

Change in Control Program and Omnibus Plan: payment of outstanding book value units in cash based on the Company book value per share at the end of the fiscal quarter ended on or immediately prior to the change in control only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.

SERP

Prudential SERP: Mr. Strangfeld isFalzon would be retirement eligible and may receive an Early Retirement Benefit.

Additional Retirement AccrualsADDITIONAL RETIREMENT ACCRUALS

Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.

Health/LifeHEALTH/LIFE

Change in Control Program: continued health benefits at active employee contribution levels for a period of 18 months, plus a “gross up” for any expected tax consequences associated with providing these health benefits.

68  Notice of Annual Meeting of Shareholders and 2014 Proxy Statement


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Executive Compensation

Separation Due to Disability

SeveranceSEVERANCE

Annual IncentivesANNUAL INCENTIVES

Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards.

Stock OptionsSTOCK OPTIONS

Omnibus Plan: stock option vesting accelerates with up to three years to exercise.

Restricted Stock Units

Omnibus Plan: all restricted stock units become fully vested and replaced with unrestricted shares of our Common Stock.

Performance Shares/Performance UnitsPERFORMANCE SHARES/PERFORMANCE UNITS

Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock and cash, respectively.

Book Value UnitsBOOK VALUE UNITS

Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company book value per share at the end of the fiscal quarter prior to payment.

SERP

Additional Retirement AccrualsADDITIONAL RETIREMENT ACCRUALS

Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.

Merged Retirement Plan (Cash Balance Formula) and Supplemental Retirement Plan (Cash Balance Formula): Messrs. Falzon, Grier and Lowrey would receive additional credits until pension commencement (assumed to be Normal Retirement Date).

Notice of Annual Meeting of Shareholders and 2013 Proxy Statement     67


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Executive Compensation(continued)

Health/LifeHEALTH/LIFE

Prudential Welfare Benefits Plan: monthly disability payment based on salary plus the greater of the most recently paid annual incentive award or the average of the last three most recently paid annual incentive awards.

Separation Due to Death

SeveranceSEVERANCE

Annual IncentivesANNUAL INCENTIVES

Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards.

Stock OptionsSTOCK OPTIONS

Omnibus Plan: stock option vesting accelerates with a minimum of one and up to three years to exercise outstanding options.

Restricted Stock Units

Omnibus Plan: all restricted stock units become fully vested and replaced with unrestricted shares of our Common Stock.

Performance Shares/Performance UnitsPERFORMANCE SHARES/PERFORMANCE UNITS

Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock and cash, respectively.

Book Value UnitsBOOK VALUE UNITS

Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company book value per share at the end of the fiscal quarter prior to payment.

SERP

Additional Retirement AccrualsADDITIONAL RETIREMENT ACCRUALS

Merged Retirement Plan and Supplemental Retirement Plan: additional benefit payable to the spouse based on the annual incentive.

Health/LifeHEALTH/LIFE

68  Notice of Annual Meeting of Shareholders and 2013 Proxy Statement


Executive Compensation(continued)

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POTENTIAL PAYMENTS UPONPotential Payments Upon

TERMINATION OR CHANGE IN CONTROLTermination or Change in Control

The following table presents, for each of the NEOs, the estimated payments and benefits that would have been payable as of the end of 20122013 in the event of:

 

voluntary termination of employment;

 

involuntary termination of employment without cause;

 

separation due to a change in control of the Company;

 

separation due to disability; and

 

separation due to death.

Consistent with SEC requirements, these estimated amounts have been calculated as if the NEO’s employment had been terminated as of December 31, 2012,2013, the last business day of 2012,2013, and using the closing market price of our Common Stock on December 31, 20122013 ($53.3392.22 per share).

Retirement eligibility differs according to the employment separation event. The following table assumes that benefits are paid in an annuity form and commence on January 1, 2013,2014, unless stated otherwise. The table also assumes Board approval of various payments and Prudential SERP Early Retirement Benefits, as applicable, for all NEOs.

The following items have been excluded from the table:

 

The benefits the NEOs would be entitled to receive under the SESP and the Deferred Compensation Plan (these benefits are disclosed in the Nonqualified Deferred Compensation Table contained in this proxy statement)Proxy Statement).

 

Additional payments to the NEOs under the PESP and The Prudential Welfare Benefits Plan (a plan providing, among other things, life insurance, disability insurance, medical insurance, and dental insurance), which do not discriminate in scope, terms, or operation in favor of the NEOs and are generally available to all salaried employees.

 

The effects of an involuntary separationtermination of employment for cause, which will result in a forfeiture of all outstanding vested and unvested performance shares, performance units, book value units, restricted stock units, and stock options. The NEOs will receive no additional payments forin the event of a separationtermination of employment for cause.

The amounts reported in the following table are hypothetical amounts based on the disclosure of compensation information about the NEOs. Actual payments and benefits will depend on the circumstances and timing of any termination of employment or other triggering event.

 

ESTIMATED POST-EMPLOYMENT PAYMENTS AND BENEFITS

Name Type of Payment or Benefit Voluntary
Termination/
Early or
Normal
Retirement
($)
  Involuntary
Termination
Without
Cause
($)
  Separation
Due to
Change In
Control
($)
  Separation
Due to
Disability
($)
  

Separation
Due to
Death

($)

 
John R. Strangfeld Severance Payment            18,950,073(1)         
 Annual Incentive    5,630,000(2)   5,630,000(2)   5,600,000    5,666,700    5,666,700  
 Long-term Incentive: Stock Options(3)     
  RSUs    1,360,608(4)   1,360,608(4)   1,360,608(4) 
  Performance Share    4,361,434(5)   4,361,434(5)   4,361,434(5) 
  Performance Units    4,361,434(6)   4,361,434(6)   4,361,434(6) 
 Book Value Performance Book Value Units          5,152,629(7)   5,152,629(7)   5,152,629(7) 
 Benefits:��SERP   4,194,755    4,191,332    
  Health/Life    33,538(8)   17,120,536   
   Addtl. Retire Accruals  2,627,297    2,627,297    2,579,631    2,685,608    1,341,200  
  Total    8,257,297    12,452,052    46,590,679    40,708,949    22,244,005  
Richard J. Carbone Severance Payment        4,700,100    7,683,725(1)         
 Annual Incentive    2,475,000(2)   2,475,000(2)   2,300,000    2,433,400    2,433,400  
 Long-term Incentive: Stock Options(3)     
  RSUs    221,106(4)   221,106(4)   221,106(4) 
  Performance Share    895,411(5)   895,411(5)   895,411(5) 
  Performance Units    895,411(6)   895,411(6)   895,411(6) 
 Book Value Performance Book Value Units          1,458,986(7)   1,458,986(7)   1,458,986(7) 
 Benefits: SERP     
  Health/Life    24,594(8)   3,018,291   
   Addtl. Retire Accruals  331,618    961,370    308,170    326,044    340,676  
  Total    2,806,618    8,136,470    13,787,403    9,248,649    6,244,990  

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       69  


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Executive Compensation(continued)

 

ESTIMATED POST-EMPLOYMENT PAYMENTS AND BENEFITSEstimated Post-Employment Payments and Benefits(CONTINUED)

 

Name Type of Payment or Benefit Voluntary
Termination/
Early or
Normal
Retirement
($)
 Involuntary
Termination
Without
Cause
($)
 Separation
Due to
Change In
Control
($)
 Separation
Due to
Disability
($)
 

Separation
Due to
Death

($)

  Type of Payment or Benefit 

Voluntary
Termination/Early or

Normal Retirement
($)

 Involuntary
Termination
Without Cause
($)
 Separation Due to
Change In Control
($)
 Separation
Due to Disability
($)
 

Separation
Due to Death

($)

 
John R. Strangfeld Severance Payment  19,014,479(1)  
 Annual Incentive  7,800,000(2)   7,800,000(2)   5,600,000    6,010,000    6,010,000  
 Long-term Incentive: Stock Options(3)     
  Performance Shares    7,974,909(4)   7,974,909(4)   7,974,909(4) 
  Performance Units    7,974,909(5)   7,974,909(5)   7,974,909(5) 
 Book Value Performance Book Value Units  6,391,815(6)   6,391,815(6)   6,391,815(6) 
 Benefits: SERP     
  Health/Life    26,966(7)   1,723,969   
 Addtl. Retire Accruals  4,945,997    4,945,997    2,047,413    2,587,604    1,290,486  
 Total  12,745,997    12,745,997    49,030,491    32,663,206    29,642,119  
Robert M. Falzon Severance Payment  2,367,600    3,814,907(1)  
 Annual Incentive  1,990,000(2)   1,450,000    928,400    928,400  
 Long-term Incentive: Stock Options(3)     
  Performance Shares    959,272(4)   959,272(4)   959,272(4) 
  Performance Units    959,272(5)   959,272(5)   959,272(5) 
 Book Value Performance Book Value Units  717,360(6)   717,360(6)   717,360(6) 
 Benefits: SERP   233,906    233,906    
  Health/Life    35,216(7)   4,654,539   
 Addtl. Retire Accruals  413,225    137,502    1,421,339    89,126  
 Total  0(8)   5,004,731    8,307,435    9,640,182    3,653,430  
Richard J. Carbone Severance Payment  4,937,600    8,278,536(1)  
 Annual Incentive  2,500,000(2)   2,500,000(2)   1,750,000    2,591,700    2,591,700  
 Long-term Incentive: Stock Options(3)     
  Performance Shares    1,731,154(4)   1,731,154(4)   1,731,154(4) 
  Performance Units    1,731,154(5)   1,731,154(5)   1,731,154(5) 
 Book Value Performance Book Value Units  2,040,980(6)   2,040,980(6)   2,040,980(6) 
 Benefits: SERP     
  Health/Life    25,403(7)   2,203,312   
 Addtl. Retire Accruals  346,718    1,031,499    242,703    359,435    362,838  
 Total  2,846,718    8,469,099    15,799,930    10,657,735    8,457,826  
Mark B. Grier Severance Payment  9,060,000    14,499,484(1)   Severance Payment  9,472,500    15,669,888(1)  
 Annual Incentive  4,825,000(2)   4,825,000(2)   4,800,000    4,850,000    4,850,000  
 Long-term Incentive: Stock Options(3)      Annual Incentive  6,500,000(2)   6,500,000(2)   4,800,000    5,125,000    5,125,000  
  RSUs    1,360,608(4)   1,360,608(4)   1,360,608(4)  Long-term Incentive: Stock Options(3)     
  Performance Share    3,415,680(5)   3,415,680(5)   3,415,680(5)   Performance Shares    6,317,070(4)   6,317,070(4)   6,317,070(4) 
  Performance Units    3,415,680(6)   3,415,680(6)   3,415,680(6)   Performance Units    6,317,070(5)   6,317,070(5)   6,317,070(5) 
 Book Value Performance Book Value Units  4,138,144(7)   4,138,144(7)   4,138,144(7)  Book Value Performance Book Value Units  5,266,402(6)   5,266,402(6)   5,266,402(6) 
 Benefits: SERP      Benefits: SERP     
  Health/Life    25,594(8)   17,878,523     Health/Life    24,334(7)   13,114,799   
 Addtl. Retire Accruals  564,009    1,623,062    561,087    3,740,677    562,600   Addtl. Retire Accruals  778,228    1,912,346    574,692    3,162,540    620,125  
 Total  5,389,009    15,508,062    32,216,277    38,799,312    17,742,712   Total  7,278,228    17,884,846    38,969,456    39,302,881    23,645,667  
Edward P. Baird Severance Payment  5,055,000    12,024,307(1)   Severance Payment  5,705,100    12,632,538(1)  
 Annual Incentive  3,300,000(2)   3,300,000(2)   3,000,000    2,600,000    2,600,000   Annual Incentive  4,050,000(2)   4,050,000(2)   3,000,000    3,033,400    3,033,400  
 Long-term Incentive: Stock Options(3)      Long-term Incentive: Stock Options(3)     
  Performance Share    1,606,620(5)   1,606,620(5)   1,606,620(5)   Performance Shares    3,195,239(4)   3,195,239(4)   3,195,239(4) 
  Performance Units    1,606,620(6)   1,606,620(6)   1,606,620(6)   Performance Units    3,195,239(5)   3,195,239(5)   3,195,239(5) 
 Book Value Performance Book Value Units  2,150,324(7)   2,150,324(7)   2,150,324(7)  Book Value Performance Book Value Units  3,000,400(6)   3,000,400(6)   3,000,400(6) 
 Benefits: SERP      Benefits: SERP     
  Health/Life    25,877(8)   4,246,192     Health/Life    26,966(7)   2,715,967   
 Addtl. Retire Accruals  2,754,917    4,568,388    2,316,434    1,731,793    870,258   Addtl. Retire Accruals  1,207,336    2,970,962    9,691    47,788    808,959  
 Total  6,054,917    12,923,388    22,730,182    13,941,549    8,833,822   Total  5,257,336    12,726,062    25,060,073    15,188,033    13,233,237  
Charles F. Lowrey Severance Payment  6,805,100    10,202,005(1)   Severance Payment  7,430,100    11,263,892(1)  
 Annual Incentive  4,050,000(2)   4,000,000    3,766,700    3,766,700   Annual Incentive  5,600,000(2)   5,600,000(2)   4,000,000    4,183,400    4,183,400  
 Long-term Incentive: Stock Options(3)      Long-term Incentive: Stock Options(3)     
  Performance Share    1,790,288(5)   1,790,288(5)   1,790,288(5)   Performance Shares    3,833,585(4)   3,833,585(4)   3,833,585(4) 
  Performance Units    1,790,288(6)   1,790,288(6)   1,790,288(6)   Performance Units    3,833,585(5)   3,833,585(5)   3,833,585(5) 
 Book Value Performance Book Value Units  2,690,375(7)   2,690,375(7)   2,690,375(7)  Book Value Performance Book Value Units  3,779,850(6)   3,779,850(6)   3,779,850(6) 
 Benefits: SERP      Benefits: SERP     
  Health/Life    31,232(8)   16,833,183     Health/Life    31,863(7)   13,502,129   
 Addtl. Retire Accruals  1,019,559    375,698    4,969,386    331,470   Addtl. Retire Accruals  509,102    1,184,579    363,644    4,203,034    384,873  
 Total  0(9)   11,874,659    20,879,886    31,840,220    10,369,121   Total  6,109,102    14,214,679    27,106,419    33,335,583    16,015,293  

 

(1)Includes severance payments equal to two times annual cash compensation (subject to execution of a non-competition agreement), and a cash payment for the pension impact of additional two years of credited service.

 

(2)Includes annual incentive award amount for 20122013 performance.

 

(3)For disability and death, accelerated vesting of all stock options with up to three years to exercise.

 

(4)Includes the accelerated value of the 2010 restricted stock units based on the closing market price of our Common Stock on December 31,2011, 2012, ($53.33 per share) for Messrs. Strangfeld, Carbone and Grier.

(5)Includes the value of 2010, 2011, and 20122013 target performance shares paid based on the closing market price of our Common Stock on December 31, 20122013 ($53.3392.22 per share).

 

(6)(5)Includes the value of 2010, 2011, 2012, and 20122013 target performance units paid based on the closing market price of our Common Stock on December 31, 20122013 ($53.3392.22 per share).

 

(7)(6)Includes the value of 2010, 2011, 2012, and 20122013 book value units paid based on the companyCompany’s book value per share as of December 31, 20122013 ($58.12)59.99 per share).

 

(8)(7)Reflects the expected contribution subsidy for 18 months and the associated tax gross-up. For this purpose, we have assumed the 20132014 premium and contribution rates continue for the full 18 months.

(9)(8)Not eligible for additional payments or benefits upon voluntary termination.

 

 
70      Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement


LOGO

General Information About The Meeting

LOGO       

 

VOTING INSTRUCTIONS AND INFORMATION

Who Can Vote

You are entitled to vote your Common or Class B Stock if our records show that you held your shares as of the record date, March 15, 2013.14, 2014. At the close of business on that date, a total of 465,299,523460,979,359 shares of Common Stock and 2,000,000 shares of Class B Stock were outstanding and entitled to vote. Each share of Common Stock and Class B Stock is entitled to one vote, and vote together as a single class on the matters submitted for a vote at this Annual Meeting. Your voting instructions are confidential and will not be disclosed to persons other than those recording the vote, except if a shareholder makes a written comment on the proxy card, otherwise communicates his or her vote to management, as may be required in accordance with the appropriate legal process, or as authorized by you.

Voting Your Proxy

If your Common Stock is held through a broker, bank or other nominee (held in street name), you will receive instructions from such entity that you must follow in order to have your shares voted. If you want to vote in person, you must obtain a legal proxy from your broker, bank or other nominee and bring it to the meeting.meeting, and submit it with your vote.

If you hold your shares in your own name as a holder of record with our transfer agent, Computershare, you may instruct the proxies how to vote by following the instructions listed on the Notice of Internet Availability or the proxy card to vote online, or by signing, dating and mailing the proxy card in the postage-paid envelope. Of course, you can always come to the meeting and vote your shares in person.

Whichever method you select to transmit your instructions, the proxies will vote your shares in accordance with those instructions. If you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board of Directors: for each director nominee, for ratification of the appointment of the independent registered public accounting firm, for the advisory vote to approve named executive officer compensation, and against the shareholder proposal for written consent.regarding executive stock ownership.

Matters to Be Presented

We are not aware of any matters to be presented at the Annual Meeting, other than those described in this proxy statement. If any matters not described in this proxy statementProxy Statement are properly presented at the meeting, the proxies will use their own judgment to determine how to vote your shares. If the meeting is adjourned or postponed, the proxies can vote your shares at the adjournment or postponement as well.

Revoking Your Proxy

If you hold your shares in street name, you must follow the instructions of your broker, bank or other nominee to revoke your voting instructions. If you are a holder of record and wish to revoke your proxy instructions, you must deliver later-dated proxy instructions, advise the Chief Governance Officer and Corporate Secretary in writing before the proxies vote your shares at the meeting, or attend the meeting and vote your shares in person.

How Votes Are Counted

A quorum is required to transact business at our Annual Meeting. Shareholders of record holding shares of stock constituting 50% of the shares entitled to be cast shall constitute a quorum. If you have returned valid proxy instructions or attend the meeting in person, your shares will be counted for the purpose of determining whether there is a quorum, even if you abstain from voting on some or all matters introduced at the meeting. In addition, broker non-votes will be treated as present for purposes of determining whether a quorum is present.

Voting

You may either vote for, against or abstain on each of the proposals. The affirmative vote of a majority of the votes cast is required to approve each proposal. Broker non-votes and abstentions will have no impact, as they are not counted as votes cast. Although the advisory vote in Item 3 isnon-binding, as provided by law, our Board will review the results of the vote and, consistent with our commitment to shareholder engagement, will take it into account in making a determination concerning executive compensation. If you hold your shares in street name, and you do not submit voting instructions to your broker, bank or other nominee, your broker, bank or other nominee will not be permitted to vote your shares in their discretion on the election of directors, the advisory vote to approve executive compensation, and the shareholder proposal regarding written consent,executive stock ownership, but may still be permitted to vote your shares in their discretion on the ratification of the independent registered public accounting firm.

Election of Directors

At the meeting, each nominee must receive the affirmative vote of a majority of the votes cast with respect to his or her election, in order to be elected. If an incumbent nominee is not elected by the requisite vote, he or she must tender his or her resignation, and the Board, through a process managed by the Corporate Governance and Business Ethics Committee, will decide whether to accept the resignation.

 

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       71  


LOGO

LOGO
 

General Information About The Meeting (continued)

Board Recommendations

 

Board RecommendationsThe board recommends that you voteFOR each of the Director Nominees,FOR the

THE BOARD RECOMMENDS THAT YOU VOTE FOR EACH OF THE DIRECTOR NOMINEES, FOR THE RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, FOR THE ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION, AND AGAINST THE SHAREHOLDER PROPOSAL ON WRITTEN CONSENT.Ratification of the Appointment of the Independent Registered Public Accounting Firm,

FOR the Advisory Vote to approve named Executive Officer Compensation, and

AGAINST the Shareholder Proposal on Executive Stock Ownership.

Cost of Proxy Solicitation

We are providing these proxy materials in connection with the solicitation by the Company’s Board of Directors of proxies to be voted at our Annual Meeting. We will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, we expect that a number of our employees will solicit shareholders personally, electronically and by telephone. None of these employees will receive any additional compensation for doing this. We have retained Georgeson, Inc. to assist in the solicitation of proxies for a fee of $25,000 plus reimbursement of expenses. We will, on request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.

Attending the Annual Meeting

If you attend the Annual Meeting, you will be asked to present photo identification, such as a driver’s license. If you are a holder of record, the top half of your proxy card or your Notice of Internet Availability is your admission ticket. If you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from your bank or broker are examples of proof of ownership. If you want to vote your shares held in street name in person, you must get a legal proxy in your name from the broker, bank or other nominee that holds your shares.shares, and submit it with your vote.

You may listen to the Annual Meeting on the Internet by visiting www.investor.prudential.com. Please log in a few minutes early in the event you need to download any required software.

SUBMISSION OF SHAREHOLDER PROPOSALS

In order to submit shareholder proposals for the 20142015 Annual Meeting of Shareholders for inclusion in the Company’s proxy statementProxy Statement pursuant to SEC Rule 14a-8, materials must be received by the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark, New Jersey, no later than the close of business on November 27, 2013.25, 2014.

The proposalsProposals must comply with all of the requirements of SEC Rule 14a-8. Proposals should be addressed to: Margaret M. Foran, Chief Governance Officer and Corporate Secretary, Prudential Financial, Inc., 751 Broad Street,

Newark, NJ 07102. As the rules of the SEC make clear, simply submitting a proposal does not guarantee its inclusion.

The Company’s By-laws also establish an advance notice procedure with regard to director nominations and shareholder proposals that are not submitted for inclusion in the proxy statement,Proxy Statement, but that a shareholder instead wishes to present directly at an Annual Meeting. To be properly brought before the 20142015 Annual Meeting, a notice of the nomination or the matter the shareholder wishes to present at the meeting must be delivered to the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark (see above), not less than 120 or more than 150 days prior to the first anniversary of the date of this year’s Annual Meeting. As a result, any notice given by or on behalf of a shareholder pursuant to these provisions of the Company’s By-laws (and not pursuant to SEC Rule 14a-8) must be received no earlier than December 15, 2013,14, 2014, and no later than January 14, 2014.13, 2015. However, if the 2015 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the Annual Meeting was mailed or public disclosure of the meeting date was made. All director nominations and shareholder proposals must comply with the requirements of the Company’s By-laws, a copy of which may be obtained at no cost from the Chief Governance Officer and Corporate Secretary. The Chairman may refuse to acknowledge or introduce any such matter at the Annual Meeting if notice of the matter is not received within the applicable deadlines or does not comply with the Company’s By-laws. If a shareholder does not meet these deadlines, or does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the Annual Meeting.

ELIMINATING DUPLICATIVE PROXY MATERIALS

A single proxy statementProxy Statement and annual report,Annual Report, along with individual proxy cards, or individual Notices of Internet Availability will be delivered in one envelope to multiple shareholders having the same last name and address and to individuals with more than one account registered at Computershare with the same address unless contrary instructions have been received from an affected shareholder.

72  Notice of Annual Meeting of Shareholders and 2014 Proxy Statement


LOGO

General Information About The Meeting

If you would like to enroll in this service or receive individual copies of all documents, now or in the future, please contact Computershare by calling 1-800-305-9404 or writing Computershare, P.O. Box 43033, Providence, RI 02940-3033. We will deliver a separate copy of all documents to a shareholder at a shared address to which a single copy of the documents was delivered promptly upon request to the address or telephone number provided above.

DELIVERY OF PROXY MATERIALS

We want to communicate with you in the way that is most convenient for you. You may choose to receive either a full set of printed materials – which will include an Annual Report, Proxy Statement, and Proxyproxy card – or an email with instructions for how to view the materials and vote online. To select a method of delivery during the voting season, registered shareholders may follow the instructions when voting online at www.investorvote.com/prudential. Following the 20132014 Annual Meeting, you may continue to choose your method of delivery of future documents by visiting www.computershare.com/investor. If you own shares indirectly through a broker, bank, or other nominee, please contact your financial institution for additional information regarding delivery options.

If you do not choose a method of delivery as outlined above, you may receive a one-page Notice of Internet Availability instructing you how to access the materials and vote online in

72  Notice of Annual Meeting of Shareholders and 2013 Proxy Statement


General Information About The Meeting (continued)

LOGO       

lieu of printed or electronic materials. As a publicly traded company, Prudential is legally required to make these materials available to all shareholders and it is not possible to opt out of the mailing.

Important Notice Regarding the Availability of Proxy Materials for the 20132014 Annual Meeting of Shareholders to Be Held on May 14, 2013:13, 2014: Our 20132014 Proxy Statement and Annual Report for the year ended December 31, 2012,2013, are available free of charge on our website at www.prudential.com/governance.

ANNUAL REPORT ON FORM 10-K

The Company will provide by mail, without charge, a copy of its Annual Report on Form 10-K, at your request. Please direct all inquiries to the Company’s Corporate Information Service at 1-877-998-ROCK (7625) or 751 Broad Street, Newark, NJ 07102.

INCORPORATION BY REFERENCE

To the extent that this proxy statementProxy Statement has been or will be specifically incorporated by reference into any other filing of Prudential Financial under the Securities Act of 1933 or the Exchange Act, the sections of this proxy statementProxy Statement entitled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC) and “Compensation Committee Report” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing.

SHAREHOLDER LIST

A list of shareholders entitled to vote at the Annual Meeting will be available for examination by shareholders at the Annual Meeting.

 

 

 
Notice of Annual Meeting of Shareholders and 20132014 Proxy Statement       73  


LOGOLOGO

Value Creation Model

PRUDENTIAL’S MISSION: PRUDENTIAL’S VISION:

To help our customers achieve financial To distinguish Prudential as an admired prosperity and peace of mind. multinational financial services leader, trusted partner, and provider of innovative solutions for growing and protecting wealth.

As a member of the International Integrated Reporting activities that affect the ability of Prudential to keep its promises Council Pilot Program, Prudential has been participating in to our investors and customers now and well into the future. the development of a framework that helps investors better Detailed data on financial results and other outputs of the model understand the process that underlies a company’s short-, are available at www.prudential.com or in Prudential’s Annual medium- and long-term value creation.

Report and the company’s Sustainability Report. Additional This infographic portrays a model of Prudential’s process at the information about integrated reporting is offered at www.theiirc.org. conceptual level, tying together the direct business and corporate

Financial Intellectual Human Social

Global economic and Impaired trust in industry Attracting and retaining Underserved communities social volatility Financial and regulatory crucial talent Effects of climate change

The level and volatility of environment SKS interest rates and equity RI markets

Complex insurance and ?nancial products

Strong investment, actuarial Improving understanding Reputation as employer of Functioning local economies E S and risk management skills of business may choice supports recruitment, can strengthen pipelines for

IT I

N may attract customers and strengthen trust retention and loyalty talent and customers U enhance ?nancial results Good public policy supports

Financial strength and value creation OPPORT capacity enhances ?exibility and competitiveness

Prudential’s Assets Thought leadership in Diverse, talented employees Strong corporate social

Client Assets retirement and Collaborative mindset responsibility program RCES Under Management financial services inclusive of grants, volunteer U O Seasoned management services and social

Overall financial strength Ethical culture team with strong succession

R ES investments

Global platform History of product innovation planning

Capital & diversi?cation Environmental commitment

Previous performance

BUSINESS ACTIVITIES

Individual and group Investments Retirement solutions Corporate activities insurance

STRATEGY

High value-added products Integrity in a diverse and Growing financial strength Creating shared value through meeting long-term, inclusive culture corporate social responsibility sophisticated client needs

Complementary high-quality businesses

Increased book value, New longevity risk Engaged employees resulting Resilient communities shareholder distributions management products in a competitive advantage Strong brand and share price

Studies outlining needs of Tradition of service

Benefits for and payments underserved markets S UT to customers, shareholders Research on P ROI, ROE, AOI retirement issues

UT

O Taxes

Ful?lling promises to customers, employees, vendors and investors

PAPERS PRODUCED UNDER A

PRINTED ON REYCLED SUSTAINABLE FOREST MANAGEMENT PAPER WITH 10% PROGRAM. PRINTED WITH VEGETABLE-POST-CONSUMER WASTE BASED INKS AND RENEWABLE ENERGY.


 

LOGOLOGO

 

 Admission Ticket
   IMPORTANT ANNUAL MEETING INFORMATION       
   
Electronic Voting Instructions
   

 

You can vote by Internet or telephone

   

 

Instead of mailing your proxy, you may choose to vote online or by telephone.

   

 

Proxies submitted by the Internet or telephone must be received by 11:59 p.m. EDT, May 13, 2013.12, 2014.

   LOGO 

Vote by Internet

•  Go towww.investorvote.com/prudential.

•  Follow the steps outlined on the secured website.

   LOGO 

Vote by telephone

•  Call toll free1-800-652-VOTE (8683) within the USA, Territories & Canada any time on a touch tone telephone. There isNO CHARGE to you for the call.

•  Follow the instructions provided by the recorded message.

 

Annual Meeting Proxy Card LOGO

q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

 

  A   Proposals –The Board of Directors recommends a voteFOR the Election of Directors.

 

1. Election of Directors: +
  For Against Abstain  For Against Abstain  For Against Abstain  

+

 

01 - Thomas J.

       Baltimore, Jr.

 ¨ ¨ ¨ 

05 - James G.Mark B.

       CullenGrier

 ¨ ¨ ¨ 

09 - Martina Hund-Christine A.

       MejeanPoon

 ¨ ¨ ¨  
 

 

02 - Gordon M.

       Bethune

 ¨ ¨ ¨ 

 

06 - William H.Constance J.

       Gray IIIHorner

 ¨ ¨ ¨ 

 

10 - Karl J.Douglas A.

       KrapekScovanner

 ¨ ¨ ¨ 

12 - John R.

       Strangfeld

 

For

¨

Against

¨

Abstain

¨

 

 

03 - GastonGilbert F.

       CapertonCasellas

 ¨ ¨ ¨ 

 

07 - Mark B.Martina

       GrierHund-Mejean

 ¨ ¨ ¨ 

 

11 - Christine A.John R.

       PoonStrangfeld

 ¨ ¨ ¨ 

13 - James A.

       Unruh

 ¨¨¨
 

 

04 - Gilbert F.James G.

       CasellasCullen

 ¨ ¨ ¨ 

 

08 - ConstanceKarl J.

       HornerKrapek

 ¨ ¨ ¨ 

12 - James A.

       Unruh

 ¨ ¨ ¨  

 

The Board of Directors recommends a voteFOR Proposals 2 and 3.

The Board of Directors recommends a voteAGAINST Proposal  4.

  

 

For

 

 

Against

 

 

Abstain

  

 

For

 

 

Against

 

 

Abstain

2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2013.2014. ¨ ¨ ¨ 

4. Shareholder proposal regarding written consent.executive stock ownership.

 ¨ ¨ ¨
  

 

For

 

 

Against

 

 

Abstain

    
3. Advisory vote to approve named executive officer compensation. ¨ ¨ ¨    

 

  B   Non-Voting Proposal –(Please select one option or leave blank if you do not want to participate.)

 

I would like a free tote bag from Prudential.   ¨ I prefer Prudential plant a tree in my honor.       ¨

 

 C   Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

 

Date (mm/dd/yyyy) Please print date below.  Signature 1 Please keep signature within the box.  Signature 2 Please keep signature within the box.
    /    /         

    

         

 

¢ 

 

1 U P X

 +
01KHXF01R39F  


 

 

ANNUAL MEETING OF SHAREHOLDERS  

 

May 14, 2013,13, 2014, 2:00 p.m. EDT at  

Prudential’s Corporate Headquarters,  

751 Broad Street, Newark, New Jersey 07102  

 

 

You may vote via the telephone number or website on the front of this card. When voting on the Internet, you can also register to receive electronic delivery of future proxy materials. Votes must be received by 11:59 p.m. EDT, May 13, 2013,12, 2014, if submitted via the phone or Internet. Votes submitted by returning this proxy card in the mail must be received by 10:00 a.m. EDT, May 14, 2013.13, 2014.

If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits a shareholder and one guest. All meeting attendees must present valid photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.

q   IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.  q

 

  

+

 

 

Proxy — Prudential Financial, Inc.

  

 

  

This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT on May 14, 2013.13, 2014.

The undersigned, having received the Notice of Meeting and Proxy Statement dated March 26, 2013,25, 2014, appoints Susan L. Blount, Margaret M. Foran and John R. Strangfeld, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc. held of record on March 15, 2013,14, 2014, at the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT, May 14, 2013,13, 2014, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.

If no directions are given, the proxies will vote in accordance with the Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 14, 2013.13, 2014.

The Proxy Statement and Annual Report to Shareholders are available at www.investorvote.com/prudential.

Comments — We value your feedback. Please provide any comments you have in the space below.

 
 

 

    PAPER PRODUCED UNDER A LOGOLOGO 
    SUSTAINABLE FOREST  

¢

    MANAGEMENT PROGRAM.  +
      


 

LOGOLOGO

 

 Admission Ticket
   IMPORTANT ANNUAL MEETING INFORMATION       
   
Electronic Voting Instructions
   

 

You can vote by Internet or telephone

   

 

Instead of mailing your form,proxy, you may choose to vote online or by telephone.

   

 

Proxies submitted by the Internet or telephone must be received by 11:59 p.m. EDT, May 13, 2013.12, 2014.

   LOGO 

Vote by Internet

•  Go towww.investorvote.com/prudential.

•  Follow the steps outlined on the secured website.

   LOGO 

Vote by telephone

•  Call toll free1-800-652-VOTE (8683) within the USA, Territories & Canada any time on a touch tone telephone. There isNO CHARGE to you for the call.

•  Follow the instructions provided by the recorded message.

 

Annual Meeting Proxy Card LOGO

q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

 

  A   Proposals –The Board of Directors recommends a voteFOR the Election of Directors.

 

1. Election of Directors: +
  For Against Abstain  For Against Abstain  For Against Abstain  

+

 

01 - Thomas J.

       Baltimore, Jr.

 ¨ ¨ ¨ 

05 - James G.Mark B.

       CullenGrier

 ¨ ¨ ¨ 

09 - MartinaChristine A.

       Hund-MejeanPoon

 ¨ ¨ ¨  
 

 

02 - Gordon M.

       Bethune

 ¨ ¨ ¨ 

 

06 - William H.Constance J.

       Gray IIIHorner

 ¨ ¨ ¨ 

 

10 - Karl J.Douglas A.

       KrapekScovanner

 ¨ ¨ ¨ 

12 - John R.

       Strangfeld

 

For

¨

Against

¨

Abstain

¨

 

 

03 - GastonGilbert F.

       CapertonCasellas

 ¨ ¨ ¨ 

 

07 - Mark B.Martina

       GrierHund-Mejean

 ¨ ¨ ¨ 

 

11 - Christine A.John R.

       PoonStrangfeld

 ¨ ¨ ¨ 

13 - James A.

       Unruh

 ¨¨¨
 

 

04 - Gilbert F.James G.

       CasellasCullen

 ¨ ¨ ¨ 

 

08 - ConstanceKarl J.

       HornerKrapek

 ¨ ¨ ¨ 

12 - James A.

       Unruh

 ¨ ¨ ¨  

 

The Board of Directors recommends a voteFOR Proposals 2 and 3.

The Board of Directors recommends a voteAGAINST Proposal  4.

  

 

For

 

 

Against

 

 

Abstain

  

 

For

 

 

Against

 

 

Abstain

2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2013.2014. ¨ ¨ ¨ 

4. Shareholder proposal regarding written consent.executive stock ownership.

 ¨ ¨ ¨
  

For

 

Against

Abstain

     
3. Advisory vote to approve named executive officer compensation. ¨ ¨ ¨    

 

  B   Non-Voting Proposal –(Please select one option or leave blank if you do not want to participate.)

 

I would like a free tote bag from Prudential.   ¨ I prefer Prudential plant a tree in my honor.       ¨

 

 C   Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

 

Date (mm/dd/yyyy) Please print date below.  Signature 1 Please keep signature within the box.  Signature 2 Please keep signature within the box.
    /    /         

    

         

 

¢ 

 

1 U P X

 +
01L6RE01RW0B  


 

 

ANNUAL MEETING OF SHAREHOLDERS  

 

May 14, 2013,13, 2014, 2:00 p.m. EDT at  

Prudential’s Corporate Headquarters,  

751 Broad Street, Newark, New Jersey 07102  

 

 

 

You may vote via the telephone number or website on the front of this card. When voting on the Internet, you can also register to receive electronic delivery of future proxy materials. Votes must be received by 11:59 p.m. EDT, May 13, 2013,12, 2014, if submitted via the phone or Internet. Votes submitted by returning this proxy card in the mail must be received by 10:00 a.m. EDT, May 14, 2013.13, 2014.

If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits a shareholder and one guest. All meeting attendees must present valid photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.

q  IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.  q

 

  

+

 

 

Proxy — Prudential Financial, Inc.                                                                       Class B Stock

  

 

  

This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT on May 14, 2013.13, 2014.

The undersigned, having received the Notice of Meeting and Proxy Statement dated March 26, 2013,25, 2014, appoints Susan L. Blount, Margaret M. Foran, and John R. Strangfeld, and each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Class B Stock of Prudential Financial, Inc. held of record on March 15, 2013,14, 2014, at the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT, May 14, 2013,13, 2014, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.

If no directions are given, the proxies will vote in accordance with the Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on May 14, 2013.13, 2014.

The Proxy Statement and Annual Report to Shareholders are available at www.investorvote.com/prudential.

Comments— We value your feedback. Please provide any comments you have in the space below.

 
 

 

    PAPER PRODUCED UNDER A LOGOLOGO 
    SUSTAINABLE FOREST  

¢

    MANAGEMENT PROGRAM.  +
      


LOGOLOGO

 +

 

IMPORTANT SHAREHOLDER INFORMATION

YOUR VOTE COUNTS!

 
 

 

ANNUAL MEETING OF SHAREHOLDERS

 

May 14, 2013,13, 2014, 2:00 p.m. EDT at

Prudential’s Corporate Headquarters,

751 Broad Street, Newark, New Jersey 07102

 

You can vote and obtain proxy materials online.

 

VOTING INSTRUCTIONS ARE LOCATED BELOW

 

    

Shareholder Meeting Notice & Admission Ticket LOGO

Important Notice Regarding the Availability of Proxy Materials for the

Prudential Financial, Inc. Shareholder Meeting to be Held on May 14, 201313, 2014

The proxy materials for the annual meeting are available online. The items to be voted on are listed below. Follow the instructions to view the materials and vote online. Your vote is important! To obtain a paper ore-mail copy of the proxy materials follow the instructions on the reverse side.

Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations.

The Board of Directors recommends that you voteFOR Proposals1-3 andAGAINST Proposal 4:

 1.Election of Directors: Thomas J. Baltimore, Jr., Gordon M. Bethune, Gaston Caperton, Gilbert F. Casellas, James G. Cullen, William H. Gray III, Mark B. Grier, Constance J. Horner, Martina Hund-Mejean, Karl J. Krapek, Christine A. Poon, Douglas A. Scovanner, John R. Strangfeld and James A. Unruh.
 2.Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2013.2014.
 3.Advisory vote to approve named executive officer compensation.
 4.Shareholder proposal regarding written consent.executive stock ownership.

This communication presents only an overview of the more complete proxy materials that are available to you on the Internet.

We encourage you to access and review all of the important information contained in the proxy materials before voting.

The proxy statement and annual report to shareholders are available at www.investorvote.com/prudential.

 

LOGO    Easy Online Access — A Convenient Way to Vote!
    If you have access to the Internet, you can complete the process in a few easy steps:
    Step 1: Go towww.investorvote.com/prudential
    Step 2: Click theViewbuttons to see the proxy statement, which contains details of the proposals to be voted on, and the annual report.
    Step 3: Follow the instructions on the screen to log in.
    Step 4: Make your selection as instructed on each screen to select delivery preferences.
    Step 5: Make your voting selections as instructed on the screen and click the vote button to submit your vote.

PLEASE NOTE — YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares, you must vote online or request a paper copy of the proxy materials to receive a proxy card.

 

¢ +

01KHZG01R3AF

 


Shareholder Meeting Notice & Admission Ticket

 

LOGO    Obtaining a Copy of the Proxy Materials – If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed below on or before May 3, 2013,2, 2014, to facilitate timely delivery.
    

 

You may still request paper copies of the materials after this date; however, your vote will not count if received after 11:59 p.m. EDT on May 13, 2013,12, 2014, via the Internet or telephone or after 10:00 a.m. EDT on May 14, 2013,13, 2014, via a proxy card.

Here’s how to order a copy of the proxy materials and select future delivery preference:

Paper copies:Current and future paper delivery requests can be submitted via the telephone, Internet ore-mail options below.

E-mail copies:Current and futuree-mail delivery requests must be submitted via the Internet ore-mail following the instructions below. If you request ane-mail copy of the materials, you will receive ane-mail with a link to view the materials on the Internet.

PLEASE NOTE:You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials.

 

 gInternet –Go to www.investorvote.com/prudential. Follow the instructions to log in and order a paper ore-mail copy of the current meeting materials and submit your preference fore-mail or paper delivery of future meeting materials.

 

 gTelephone –Call us free of charge at1-866-641-4276 using a touch-tone phone and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings.

 

 gE-mailSend ane-mail to investorvote@computershare.com with “Proxy Materials Prudential” in the subject line. In thee-mail, include your full name and address, plus the number located in the shaded bar on the reverse side of this document. State in thee-mail whether you want a paper ore-mail copy of the current meeting materials. You can also state your preference for ane-mail or paper copy for future meetings.

PLEASE NOTE — YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares, you must vote online or request a paper copy of the proxy materials to receive a proxy card. If you wish to attend and vote at the meeting, please bring this notice and identification with you.

 

 

Prudential Financial, Inc.’s Annual Meeting of Shareholders will be held on May 14, 2013,13, 2014, at Prudential’s Corporate Headquarters, 751 Broad Street, Newark, New Jersey 07102, at 2:00 p.m. EDT.

If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits a shareholder and one guest. All meeting attendees must present valid photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.

 

    PAPER PRODUCED UNDER A LOGO

LOGO

    SUSTAINABLE FOREST 
    MANAGEMENT PROGRAM. 
     

      01KHZF01R3AF


 

LOGOLOGO

 

 Admission Ticket
   IMPORTANT ANNUAL MEETING INFORMATION       
   
Electronic Voting Instructions
   

 

You can vote by Internet or telephone

   

 

Instead of mailing your proxy, you may choose to vote online or by telephone.

   

 

Proxies submitted by the Internet or telephone must be received by 11:59 p.m. EDT, May 8, 2013,7, 2014, for PESP Shares and by 11:59 p.m. EDT, May 13, 2013,12, 2014, for Registered Shares.

   LOGO 

Vote by Internet

•  Go towww.investorvote.com/prudential.

•  Follow the steps outlined on the secured website.

   LOGO 

Vote by telephone

•  Call toll free1-800-652-VOTE (8683) within the USA, Territories & Canada any time on a touch tone telephone. There isNO CHARGE to you for the call.

•  Follow the instructions provided by the recorded message.

 

Annual Meeting Proxy Card LOGO

q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

 

  A   Proposals –The Board of Directors recommends a voteFOR the Election of Directors.

 

1. Election of Directors: +
  For Against Abstain  For Against Abstain  For Against Abstain  

+

 

01 - Thomas J.

       Baltimore, Jr.

 ¨ ¨ ¨ 

05 - James G.Mark B.

       CullenGrier

 ¨ ¨ ¨ 

09 - Martina Hund-Christine A.

       MejeanPoon

 ¨ ¨ ¨  
 

 

02 - Gordon M.

       Bethune

 ¨ ¨ ¨ 

 

06 - William H.Constance J.

       Gray IIIHorner

 ¨ ¨ ¨ 

 

10 - Karl J.Douglas A.

       KrapekScovanner

 ¨ ¨ ¨ 

12 - John R.

       Strangfeld

 

For

¨

Against

¨

Abstain

¨

 

 

03 - GastonGilbert F.

       CapertonCasellas

 ¨ ¨ ¨ 

 

07 - Mark B.Martina

       GrierHund-Mejean

 ¨ ¨ ¨ 

 

11 - Christine A.John R.

       PoonStrangfeld

 ¨ ¨ ¨ 

13 - James A.

       Unruh

 ¨¨¨
 

 

04 - Gilbert F.James G.

       CasellasCullen

 ¨ ¨ ¨ 

 

08 - ConstanceKarl J.

       HornerKrapek

 ¨ ¨ ¨ 

12 - James A.

       Unruh

 ¨ ¨ ¨  

 

The Board of Directors recommends a voteFOR Proposals 2 and 3.

The Board of Directors recommends a voteAGAINST Proposal  4.

  

 

For

 

 

Against

 

 

Abstain

  

 

For

 

 

Against

 

 

Abstain

2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2013.2014. ¨ ¨ ¨ 

4. Shareholder proposal regarding written consent.executive stock ownership.

 ¨ ¨ ¨

For

Against

Abstain

3. Advisory vote to approve named executive officer compensation. ¨ ¨ ¨    

 

  B   Non-Voting Proposal –(Please select one option or leave blank if you do not want to participate.)

 

I would like a free tote bag from Prudential.   ¨ I prefer Prudential plant a tree in my honor.       ¨

 

 C   Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

 

Date (mm/dd/yyyy) Please print date below.  

Signature 1 –Please— Please keep signature within

the box.

  

Signature 2 –Please— Please keep signature within

the box.

    /    /         

    

         

 

¢ 

 

1 U P X

 +
01L6ME01RW1B  


 

 

ANNUAL MEETING OF SHAREHOLDERS  

 

May 14, 2013,13, 2014, 2:00 p.m. EDT at  

Prudential’s Corporate Headquarters,  

751 Broad Street, Newark, New Jersey 07102  

 

 

This card covers the total number of shares of Prudential Financial, Inc. Common Stock (“Common Stock”) held in The Prudential Financial, Inc. Common Stock Fund (the “Fund”) and deemed to be credited to your account in The Prudential Employee Savings Plan (“PESP”) on March 12, 2013,11, 2014, as well as your shares of Common Stock registered in your name (“Registered Shares”) at Prudential’s transfer agent, Computershare, as of March 15, 2013.14, 2014.

You only need to vote once. This card enables you to provide voting instructions to the PESP Trustee for your PESP shares and submit your vote directly on your Registered Shares. Your vote will remain confidential. Please review the enclosed letter from the PESP Trustee dated April 1, 2013,March 31, 2014, for more information on voting your PESP shares.

You may vote via the telephone number or website on the front of this card. Your vote must be received by 11:59 p.m. EDT, May 8, 2013,7, 2014, in order for your instructions to apply to your PESP shares and by 11:59 p.m. EDT, May 13, 2013,12, 2014, for your Registered Shares. Should you choose to vote by mailing back this card, it must be received by 11:59 p.m. EDT, May 8, 2013,7, 2014, for your PESP shares and by 10:00 a.m. EDT, May 14, 2013,13, 2014, for your Registered Shares.

If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits a shareholder and one guest. All meeting attendees must present valid photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.

q  IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.  q

 

  

+

 

 

Proxy — Prudential Financial, Inc.

  

 

  

This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT on May 14, 2013.13, 2014.

The undersigned, having received the Notice of Meeting and Proxy Statement dated March 26, 2013,25, 2014, appoints Susan L. Blount, Margaret M. Foran and John R. Strangfeld, and each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc. held of record on March 15, 2013,14, 2014, at the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT, May 14, 2013,13, 2014, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.

If no directions are given, the proxies will vote in accordance with the Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.

Your voting instructions will also direct the PESP Trustee to vote (in person or by proxy) as indicated on the reverse side of this card. The Trustee’s representative will tally all the timely votes for the Trustee to present in person or by proxy at the Annual Meeting of Shareholders on May 14, 2013.13, 2014.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 14, 2013.13, 2014. The Proxy Statement and Annual Report to Shareholders are available at www.investorvote.com/prudential.

Comments — If there are any comments that you would like to provide, please write them below.

 
 

 

    PAPER PRODUCED UNDER A LOGOLOGO 
    SUSTAINABLE FOREST  

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    MANAGEMENT PROGRAM.  +
      


 

 

LOGO

LOGO

 

LOGO

 

Dear Shareholder:

This package includes your proxy and voting materials. We care about what you think and voting is an important way for you to let us know how we’re doing.

To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or having a tree planted in your honor. Since it began in 2010,its inception, this program has resulted in over 340,000500,000 trees being planted in our national forests and provided over 300,000375,000 tote bags to our shareholders. We areThis years’s tree planting will continue our work in Osceola National Forest, but will also pleased that over 190,000 shareholders voted who had not votedinclude funding for the prior three years.City of Newark’s “Greenstreets” urban reforesting project.

When you vote on the Internet, via phone, or through the mail, you can indicate your choice of either the bag or a tree planted in your honor. If you elect to receive a bag, you can expect to receive your free gift around the end of June.

 

Thank you,

LOGO

Margaret M. Foran

Chief Governance Officer,

Vice President, and Corporate Secretary

Prudential Financial, Inc.

002CSN8887002CSN35BB
 


LOGO  

 

Margaret M. Foran

Chief Governance Officer

Vice President, and Corporate Secretary

 

Prudential Financial, Inc.

751 Broad Street, Newark NJ 07102-3777

 

March 26, 201325, 2014

Dear Shareholder:

As a shareholder, you have the right to vote on important matters that affect Prudential Financial. We take the opinions of Prudential’s shareholders very seriously and we hope you will provide your input by casting your vote on the items in the 20132014 proxy statement.

Enclosed you will find a Notice of Internet Availability (Notice), which provides information on how to view the materials and cast your vote online. If you would prefer to vote by mail, you may request a paper copy of the proxy materials by visiting www.investorvote.com/prudential, calling 1-866-641-4276, or by sending an email to investorvote@computershare.com.

Additional information regarding the Notice is located on the reverse side of this letter. The SEC has also created an educational website where you can learn more about proxy voting—www.sec.gov/spotlight/proxymatters.shtml.

To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or having a tree planted in your honorhonor. Since the inception of this program, we have planted more than 5000,000 trees through our partnership with American Forests and have provided 375,000 bags to our shareholders.

This year’s planting initiative will continue to support our work with American forests in Osceola National Forest in Florida. Since it began in 2010, this program has resulted in over 340,000 trees being planted in our national forests and provided over 300,000 tote bags to our shareholders. We areFlorida, but will also pleased that over 190,000 shareholders voted who had not votedinclude funding for the prior three years.City of Newak’s “Greenstreets” urban reforesting project.

As always, we thank you for your investment in Prudential.

Sincerely,

 

LOGO

Margaret M. Foran

Chief Governance Officer,

Vice President, and Corporate Secretary

Prudential Financial, Inc.

© 2013 2014 Prudential Financial, Inc., and its related entities. All rights reserved.


FAQ – Internet Availability of Proxy Materials

The Securities and Exchange Commission (SEC) has issued rules requiring public companies to:

 

Make proxy materials (such as the Annual Report and Proxy Statement) available on the Internet

 

Notify shareholders how and where to access those materials online

These rules allow companies to give shareholders more options for reviewing important proxy materials. Information can be made available to shareholders more quickly and conveniently—online documents are easily searchable, enabling shareholders to quickly andfind the information they need to make informed voting decisions.

The SEC also allows companies to send a one-page Notice to holders with instructions on how to access the materials online, rather than sending a full set of materials. Our reasons for choosing the notice-only option are to:

 

Adopt more sustainable practices and be more environmentally responsible—by shrinking our carbon footprint through reductions in ink and paper used in printing and fuel used in shipping

 

Increase shareholder value—by reducing print and mail costs

Please refer to the information below to learn more and to Findfind out what your options are as a shareholder to view materials and vote.

 

What is on the one-page Notice?

 

The Notice contains simple instructions on how to:

 Access and view the proxy materials online

 Vote your shares online

 Request a free set of printed materials

 Change delivery preferences for future proxy mailings

 

DO retain the Notice for future reference

DO NOTmark your vote on the Notice and return it; the Notice is not a proxy card or ballot

 

If I received only a one-page Notice, how do I vote my shares?

 

To vote your shares, follow the instructions on the Notice to vote online. If you request a paper copy of the proxy materials, you’ll receive a proxy card with voting instructions. You may also vote your shares in person by bringing the Notice with you and attending the meeting.

 

If I received only a one-page Notice, how do I request a full set of printed materials for this meeting or future proxy mailings?

 

To request a free set of printed materials for this meeting or for future mailings, refer to the Notice for detailed instructions on how to request a copy via Internet, telephone or email.

 

If I received a full set of materials, may I request only a one-page Notice for future proxy mailings?

 

Our company will make a decision for each meeting whether or not to use the notice-only option, and send notice-only mailings at our discretion.

 

Can I elect to receive my proxy materials electronically?

 

You may elect to receive materials via email for future mailings. You will receive the materials electronically if our company chooses to offer email delivery in the future. To change your delivery preferences, follow the instructions on the Notice.

 

 

One of your key privileges as an investor is the right to vote on

important matters that affect the company you own shares in.

 

Please vote. Your vote is important to us and our business.

 

 

002CSN8886002CSN35BA  © Copyright 2013 Computershare Limited. All rights reserved.


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                    Admission Ticket
                    

IMPORTANT ANNUAL MEETING INFORMATION

                    
                    
                    
                    
                    
                    

Electronic Voting Instructions

 

You can vote by Internet or telephone

 

Instead of mailing your form, you may choose to vote online or by

telephone.

 

Votes submitted by the Internet or telephone must be received by

11:59 p.m. EDT, May 8, 2013.7, 2014

                    LOGO  

Vote by Internet

• Go towww.investorvote.com.

• Follow the steps outlined on the secured website.

                    LOGO  

Vote by telephone

• Call toll free1-800-652-VOTE (8683) within the USA, territories & Canada any time on a touch tone telephone. There isNO CHARGE to you for the call.

• Follow the instructions provided by the recorded message.

 

Voting Instruction Form           LOGO  

q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q

  A  Proposals –The Board of Directors recommends a voteFOR the Election of Directors.

 

 A Proposals – The Board of Directors recommends a voteFOR the Election of Directors.
1. Election of Directors:  
  For Against Abstain  For Against Abstain  For Against Abstain  

+

 

01 - Thomas J.

       Baltimore, Jr.

 ¨ ¨ ¨ 

05 - James G.Mark B.

       CullenGrier

 ¨ ¨ ¨ 

09 - MartinaChristine A.

       Hund-MejeanPoon

 ¨ ¨ ¨ 
ForAgainstAbstain 
 

02 - Gordon M.

       Bethune

 ¨ ¨ ¨ 

06 - William H.Constance J.

       Gray IIIHorner

 ¨ ¨ ¨ 

10 - Douglas A.

       Scovanner

¨¨¨

03 - Gilbert F.

       Casellas

¨¨¨

07 - Martina Hund-

       Mejean

¨¨¨

11 - John R.

       Strangfeld

¨¨¨

04 - James G.

       Cullen

¨¨¨

08 - Karl J.

       Krapek

 ¨ ¨ ¨ 

12 - John R.James A.

       StrangfeldUnruh

 ¨ ¨ ¨¨

The Board of Directors recommends a voteFOR Proposals 2 and 3.

The Board of Directors recommends a vote AGAINST Proposal  4.

 

03 - Gaston

       CapertonFor

 ¨¨¨

Against

 

07 - Mark B.

       GrierAbstain

 ¨¨¨ 

11 - Christine A.

       PoonFor

 ¨¨¨

Against

 

13 - James A.

       UnruhAbstain

 ¨
2. ¨Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014. ¨¨
¨¨

4. Shareholder proposal regarding executive stock ownership.

¨¨¨
 

04 - Gilbert F.

       Casellas

For

 ¨¨¨

Against

 

08 - Constance J.

       HornerAbstain

¨¨¨     
3. Advisory vote to approve named executive officer compensation. 
The Board of Directors recommends a voteFORProposals 2 and 3.¨ The Board of Directors recommends a voteAGAINST Proposal 4.¨ 
¨     
ForAgainstAbstainForAgainstAbstain

2.  Ratification of the appointment of PricewaterhouseCoopers LLP asour independent registered public accounting firm for 2013.

¨¨¨

4.  Shareholder proposal regarding written consent.

¨¨¨

3.  Advisory vote to approve named executive officer compensation.

¨¨¨

 

 B 

 Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

Date (mm/dd/yyyy) Please print date below.

  

Signature 1 Please keep signature within the box.

  

Signature 2 Please keep signature within the box.

    /    /        

 

   

  

 

¢

  

1 U P X

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01L6QC01RW3B    


  

 

ANNUAL MEETING OF SHAREHOLDERS

 

May 14, 2013,13, 2014, 2:00 p.m. EDT at

Prudential’s Corporate Headquarters,

751 Broad Street, Newark, New Jersey 07102

 

 

You may vote via the telephone number or website on the front of this card. Your vote must be received by 11:59 p.m. EDT, May 8, 2013.7, 2014.

If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits a shareholder and one guest. All meeting attendees must present valid photo identification. For your safety, all personal belongings or effects including bags, purses, and briefcases are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Parking will be available at Edison Park Fast located at 84 Edison Place, Newark, New Jersey 07102.

q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q

Your vote is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. EDT on May 14, 2013.13, 2014.

The administrator and/or custodian, Computershare Shareholder Services, Inc., for the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, and the international portion of the Associates Grants (including vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan (collectively “the Plan”), will be recording and tabulating votes associated with the Plan. You are eligible to vote if you own at least one share of Prudential Financial, Inc. Common Stock under the terms of the Plan, registered in your name with the Administrator as of the close of business on the record date of March 15, 2013.14, 2014. Shares voted will be counted at the Annual Meeting of Shareholders to be held on May 14, 2013,13, 2014, or at any adjournment or postponement thereof. Items to be voted upon are listed on the reverse side of this Voting Instruction Form and are more fully set forth in the proxy statement.

Your vote will be tabulated as directed on the reverse side of this form, if properly completed and signed. If no choice is made, your shares will be voted in accordance with the recommendation of the Board of Directors. Your vote must be received by 11:59 p.m. EDT on May 8, 2013,7, 2014, in order to be counted at the Annual Meeting of Shareholders.

 

 

PAPER PRODUCED UNDER A

SUSTAINABLE FOREST

MANAGEMENT PROGRAM.

  

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LOGO

 


LOGO

 

LOGO

 

IMPORTANT ANNUAL MEETING INFORMATION

   
   
   Electronic Voting Instructions
   

Electronic Voting Instructions

 

You can vote by Internet or telephone

 

Instead of mailing your form, you may choose to vote online or by

telephone.

 

Votes submitted by the Internet or telephone must be received by

11:59 p.m. EDT, May 8, 2013.7, 2014.

 

   LOGO 

Vote by Internet

•Go towww.investorvote.com.www.investorvote.com.

•Follow the steps outlined on the secured website.

   LOGO 

Vote by telephone

•Call toll free1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There isNO CHARGE to you for the call.

•Follow the instructions provided by the recorded message.

 

Voting Instruction Form LOGO

q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q

  A  Proposals –The Board of Directors recommends a voteFOR the Election of Directors.

 

 A 

Proposals – The Board of Directors recommends a voteFOR the Election of Directors.
1. 

Election of Directors:

  
  For Against Abstain  For Against Abstain  For Against Abstain  

+

 

01 - Thomas J.

       Baltimore, Jr.

 ¨ ¨ ¨ 

05 - James G.Mark B.

       CullenGrier

 ¨ ¨ ¨ 

09 - MartinaChristine A.

       Hund-MejeanPoon

 ¨ ¨ ¨ 
ForAgainstAbstain 
 

02 - Gordon M.

       Bethune

 ¨ ¨ ¨ 

06 - William H.Constance J.

       Gray IIIHorner

 ¨ ¨ ¨ 

10 - Douglas A.

       Scovanner

¨¨¨

03 - Gilbert F.

       Casellas

¨¨¨

07 - Martina

       Hund-Mejean

¨¨¨

11 - John R.

       Strangfeld

¨¨¨

04 - James G.

       Cullen

¨¨¨

08 - Karl J.

       Krapek

 ¨ ¨ ¨ 

12 - John R.James A.

       StrangfeldUnruh

 ¨ ¨ ¨¨

The Board of Directors recommends a voteFOR Proposals 2 and 3.

The Board of Directors recommends a vote AGAINST Proposal  4.

 

03 - Gaston

       CapertonFor

 ¨¨¨

Against

 

07 - Mark B.

       GrierAbstain

 ¨¨¨ 

11 - Christine A.

       PoonFor

 ¨¨¨

Against

 

13 - James A.

       UnruhAbstain

 ¨
2. ¨Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014. ¨¨¨¨

4. Shareholder proposal regarding executive stock ownership.

¨¨¨

For

Against

Abstain

3.Advisory vote to approve named executive officer compensation.¨¨¨

 

04 - Gilbert F.

       Casellas

¨B   ¨¨

08 - Constance J.

       Horner

¨¨¨
The Board of Directors recommends a voteFOR Proposals 2 and 3.The Board of Directors recommends a voteAGAINST Proposal 4.

For

Against

Abstain

For

Against

Abstain

2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2013.

¨¨¨

4. Shareholder proposal regarding written consent.

¨¨¨

3. Advisory vote to approve named executive officer compensation.

¨¨¨

 B 

Authorized SignaturesThis section must be completed for your vote to be counted. — Date and Sign Below
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

Date (mm/dd/yyyy) — Please print date below.

  

Signature 1 — Please keep signature within the box.

  

Signature 2 — Please keep signature within the box.

    /    /        

 

   

  

 

¢

 

1 U P X

 +
01L6PC01RW2B  


  

 

ANNUAL MEETING OF SHAREHOLDERS

 

May 14, 2013,13, 2014, 2:00 p.m. EDT at

Prudential’s Corporate Headquarters,

751 Broad Street, Newark, New Jersey 07102

 

 

q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

 

 

Voting Instruction Form

 

 

Confidential Voting Instructions to Prudential Trust Company, Trustee of the Master Trust for

The Prudential Financial, Inc. Common Stock Fund of The Prudential Employee Savings Plan (“PESP”)

By signing on the reverse side or by voting on the Internet or by telephone, the PESP participant directs the Trustee to vote (in person or by proxy) as indicated on the other side of this form. This vote will apply to the number of shares of Prudential Financial, Inc. (Prudential) Common Stock deemed to be credited to the participant’s PESP account and held in the PFI Common Stock Fund (the “Fund”) on March 12, 2013,11, 2014, as described in the PESP Trustee’s letter dated April 1, 2013.March 31, 2014. If the voting instructions do not include a vote on a particular matter, please mark it to abstain or the shares deemed to be credited to this PESP account in the Fund will be voted as recommended by the Board of Directors. The Trustee’s representative will tally all the timely votes for the Trustee to present in person or by proxy at the Prudential Financial, Inc. Annual Meeting of Shareholders on May 14, 2013.13, 2014. Your vote will remain confidential.

Also, unless the Named Fiduciary of the PESP plan (or its delegate) directs otherwise in accordance with plan provisions, the Trustee will apply this voting instruction pro rata (along with the votes of all other eligible individuals in PESP) to all shares of PFI Common Stock held in the Fund for which the Trustee receives no voting instructions. For more information, please see the April 1, 2013,March 31, 2014, letter from the Trustee.

Your vote must be received no later than 11:59 p.m. EDT on May 8, 2013.7, 2014.

Only the Trustee’s authorized representatives will see these confidential voting instructions.

 

 

PAPER PRODUCED UNDER A

SUSTAINABLE FOREST

MANAGEMENT PROGRAM.

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