UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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THE PNC FINANCIAL SERVICES GROUP, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Today the day 2019 proxy statement the PNC Financial services group PNC
Integrity.
Innovation.
Insight.
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Dear Shareholder,
We invite you to attend the 20162019 Annual Meeting of Shareholders of The PNC Financial Services Group, Inc. on Tuesday, April 26, 2016.23, 2019.
The meeting will be held in Pittsburgh, Pennsylvania in the James E. Rohr Auditorium in The Tower at PNC Plaza, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222, beginning at 11:00 a.m., Eastern time. Time.
We will consider the matters described in thisthe proxy statement and also review significant developments since last year’s annual meeting of shareholders.
We are again making our proxy materials available to you electronically. We hope that this continues to offer you convenience while allowing us to reduce the number of copies that we print.
The proxy statement contains important information and you should read it carefully. Even if you plan to attend the meeting in person,Your vote is important and we strongly encourage you to designatevote your shares using one of the proxies named onvoting methods described in the proxy card to vote your shares. statement. Please see the notice that follows for more information.
If you will not be thereare unable to attend the annual meeting in person, you will be able to listen to the meeting by webcast or conference call. Please see the notice that follows for more information.
We look forward to your participation and thank you for your support of PNC.
March | Sincerely, |
William S. Demchak
Chairman, President and Chief Executive Officer
PARTICIPATE IN THE FUTURE OF PNC – PLEASE CAST YOUR VOTE
Your vote is important to us and we want your shares to be represented at the annual meeting. Please cast your vote on the proposals listed below.
Under New York Stock Exchange (NYSE) rules, if you hold your shares through a broker, bank or other nominee (“street(referred to as holding your shares in “street name”), and you do not provide any voting instructions, your broker has discretionary authority to vote on your behalf for itemsonly with respect to proposals that are considered “routine”. items. The only routine item on this year’s ballot is the ratification of our auditor selection.If an item isnon-routine and you do not provide voting instructions, no vote will be cast on your behalf.behalf with respect to that item.
Proposals requiring your vote
More information |
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Item 1 | Election of 13 nominated directors | Page | FOR each nominee | No |
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Item 2 |
Ratification of independent registered public accounting firm for |
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Page 84 |
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Advisory approval of the compensation of PNC’s named executive officers(say-on-pay) |
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No |
With respect to each item, a majority of the votes cast will be required for approval. Abstentions will not be included in the total votes cast and will not affect the results.
Vote your shares
Please read thisthe proxy statement with care and vote right away. We offer a number of ways for you to vote your shares. We include votingVoting instructions are included in the Notice of Internet Availability of Proxy Materials and the proxy card. If you hold shares in street name, you will receive information on how to give voting instructions to your broker, bank or bank.other nominee. For registered holders, we offer the following methods to vote your shares and give us your proxy:
www.envisionreports.com/PNC | Follow the instructions on the proxy card. | Complete, sign and date the proxy card and return it in the envelope provided. |
Attend our 20162019 Annual Meeting of Shareholders
Directions to attend the annual meeting | Tuesday, April | |
are available at | The Tower at PNC Plaza – James E. Rohr Auditorium | |
www.pnc.com/annualmeeting | 300 Fifth Avenue | |
Pittsburgh, Pennsylvania 15222 |
4 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
PROXY STATEMENT SUMMARY
Proxy Statement Summary
To assist you in reviewing the proposals to be acted upon at the annual meeting, we have included a summary of certain relevant information. This summary does not contain all of the information that you should consider, and youconsider. You should review ourthe entire proxy statement and the 20152018 Annual Report before you vote.
You may also read ourthe proxy statement and 2015the 2018 Annual Report at www.envisionreports.com/PNC.
Who can vote (page 98)90)
You are entitled to vote if you were a PNC shareholder on the record date of January 29, 2016.February 1, 2019.
How to voteVoting methods (page 99)91)
We offer our shareholders a number of ways to vote, including by Internet, telephone or mail. Shareholders may also vote in person at the annual meeting.
Voting mattersItems of business
Item 1: Election of 13 nominated directors (page 12)11)
The proxy statement contains important information about the experience, qualifications, attributes and skills of the 13 nominees to our Board of Directors. OurDirectors (the “Board”). The Board’s Nominating and Governance Committee performs an annual assessment to confirm that our directors continue to have the skills and experience necessary to serve PNC, and that ourthe Board and its committees continue to be effective in carrying out their duties.
OurThe Board recommends that you voteFOR all 13 director nominees.
Item 2: Ratification of auditorsindependent registered public accounting firm for 2019 (page 81)84)
Each year, ourthe Board’s Audit Committee selects PNC’sour independent registered public accounting firm. For 2016,2019, the Audit Committee selected PricewaterhouseCoopers LLP (PwC)(“PwC”) to fulfill this role.
OurThe Board recommends that you voteFOR the ratification of the Audit Committee’s selection of PwC as our independent registered public accounting firm for 2016.2019.
Item 3: Approval of 2016 Incentive Award Plan“Say-on-pay” (page 84)87)
WeEach year, we ask our shareholders to approvecast a new equitynon-binding advisory vote on the compensation plan,of our named executive officers—known generally as the 2016 Incentive Award Plan, allowing us to make equity-based“say-on-pay” vote. We have offered an annualsay-on-pay vote since 2009. Last year, over 97% of the votes cast by our shareholders approved the compensation awards to employeesof our named executive officers, and directors. Ifwe have averaged over 95% support insay-on-pay votes over the 2016 Incentive Award Plan is approved, it will replace the 2006 Incentive Award Plan, and no further awards will be made under the 2006 Incentive Award Plan. Our Board adopted the 2016 Incentive Award Plan on March 3, 2016, and it will become effective as of April 26, 2016, subject to shareholder approval. We ask shareholders to approve the plan.past five years.
• | We recommend that you read theCompensation Discussion and Analysis beginning on page 40, which explains how and why the Board’s Personnel and Compensation Committee made its executive compensation decisions for 2018. |
OurThe Board recommends that you voteFOR the approval, on anon-binding advisory basis, of the 2016 Incentive Award Plan.compensation of our named executive officers.
Item 4: “Say-on-pay” (page 95)
We ask shareholders to cast a non-binding advisory vote on our executive compensation program – known generally as the “say-on-pay” vote. We have offered a say-on-pay vote since 2009, and our shareholders confirmed their preference for annual votes in 2011. Last year, 97% of the votes cast by our shareholders supported our executive compensation program, and PNC has averaged 92% support in its say-on-pay votes over the past five years.
We recommend that you read the Compensation Discussion and Analysis (CD&A) (beginning on page 39), which explains how and why our Board’s Personnel and Compensation Committee made executive compensation decisions for 2015.
Our Board recommends that you voteFORthe non-binding advisory vote on executive compensation (say-on-pay).
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 5
PROXY STATEMENT SUMMARY
20152018 PNC performance (pages 39 to(page 40)
PNC had a successful year in | ||
We grew loans and deposits, and generated record total | ||
We generated positive operating leverage in 2018 by growing revenue and reducing noninterest expense, and we achieved our $250 million continuous improvement program savings goal for the | ||
We | ||
Although our | ||
We | ||
We launched our | ||
We | ||
We made additional significant progress in leveraging technology to innovate and enhance our | ||
We significantly strengthened the |
20152018 compensation decisions (page 47)
The table below shows, for each NEO,named executive officer, the incentive compensation target for 20152018 and the actual annual cash incentive and long-term equity-based incentives awarded in 20162019 for 20152018 performance.
2015 incentive compensation decisions | William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III(1) | Joseph C. Guyaux | |||||||||||||||
Incentive compensation target | $ | 9,900,000 | $ | 3,000,000 | $ | 4,800,000 | $ | 5,500,000 | $ | 2,480,000 | ||||||||||
Incentive compensation awarded | $ | 11,900,000 | $ | 3,300,000 | $ | 6,100,000 | $ | 6,100,000 | $ | 2,880,000 | ||||||||||
Annual incentive award (cash) | $ | 4,100,000 | $ | 1,400,000 | $ | 2,020,000 | $ | 1,300,000 | $ | 1,130,000 | ||||||||||
Long-term incentive award (equity-based) | $ | 7,800,000 | $ | 1,900,000 | $ | 4,080,000 | $ | 4,800,000 | $ | 1,750,000 |
William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III | Joseph E. Rockey | ||||||||||||||||
Incentive compensation target | $ | 11,500,000 | $ | 3,800,000 | $ | 7,300,000 | $ | 7,300,000 | $ | 3,250,000 | ||||||||||
Incentive compensation awarded for 2018 performance | $ | 12,650,000 | $ | 4,000,000 | $ | 8,050,000 | $ | 8,050,000 | $ | 4,000,000 | ||||||||||
Annual cash incentive portion | $ | 4,400,000 | $ | 1,650,000 | $ | 2,800,000 | $ | 2,800,000 | $ | 1,750,000 | ||||||||||
Long-term incentive portion | $ | 8,250,000 | $ | 2,350,000 | $ | 5,250,000 | $ | 5,250,000 | $ | 2,250,000 | ||||||||||
Incentive compensation disclosed in the Summary compensation table(1) | $ | 13,880,000 | $ | 4,012,500 | $ | 7,900,000 | $ | 8,500,000 | $ | 3,750,000 | ||||||||||
Annual cash incentive portion (2018 performance) | $ | 4,400,000 | $ | 1,650,000 | $ | 2,800,000 | $ | 2,800,000 | $ | 1,750,000 | ||||||||||
Long-term incentive portion (2017 performance) | $ | 9,480,000 | $ | 2,362,500 | $ | 5,100,000 | $ | 5,700,000 | $ | 2,000,000 | ||||||||||
(1) |
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The amounts shown in the table above differ from the amounts reflected in the Summary compensation table on page 58. In accordance with SEC regulations, that table shows the long-term equity-based incentives granted in 2015 based on 2014 performance.
PNC corporate governance (page 18)
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OurThe entire Board is re-elected everyelected each year; we have no staggered elections.
Our BoardThe election of directors is subject to a majority voting requirement; any director who does not receivingreceive a majority of the votes cast in an uncontested election must tender his or her resignation to the Board.
6 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
PROXY STATEMENT SUMMARY
Our corporate governance guidelines require the Board to have a substantial majority (at least 2/3)two-thirds) of independent directors. Currently, 15 out of 16 directors (94%) are independent, and our only non-independent director is our CEO. All but one of our current directors and all but one of the nominees to the Board (12 out of 13, or 92%) are independent.independent, with the only exception in each case being our CEO.
OurThe Board has had a Presiding Director, a lead independent director with specific duties, since 2004.duties.
OurThe Presiding Director approves Board meeting schedules and agendas.
OurThe Board meets regularly in executive session, with no members of management present.
We have four primary standing Board committees:
– | Audit Committee |
6 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
– | Personnel and Compensation Committee |
– | Nominating and Governance Committee |
PROXY STATEMENT SUMMARY
– | Risk Committee |
The Risk Committee has formed two subcommittees:
– | Compliance Subcommittee |
– | Technology Subcommittee |
In 2015, our2018, the Board met 10ten times and each of our directors attended at least 75% of the aggregate number of meetings of the Board and the committees of the Board on which he or she served. The average attendance of all directors at Board and applicable committee meetings was 99%over 98%. All currentof our directors then serving attended our 2015 Annual Meeting2018 annual meeting of Shareholders.shareholders.
– We have four primary standing board committees:
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Board nominees (page 12)11)
Name | Age | Director since | Independent | Primary Standing Committee Memberships | ||||
Charles E. Bunch | 66 | 2007 | þ | Compensation; Governance | ||||
Marjorie Rodgers Cheshire | 47 | 2014 | þ | Audit; Risk | ||||
William S. Demchak | 53 | 2013 | ¨ | Risk | ||||
Andrew T. Feldstein | 51 | 2013 | þ | Compensation; Risk (Chair) | ||||
Daniel R. Hesse | 62 | 2016 | þ | Risk | ||||
Kay Coles James | 66 | 2006 | þ | Governance; Risk | ||||
Richard B. Kelson | 69 | 2002 | þ | Audit (Chair); Compensation | ||||
Jane G. Pepper | 70 | 1997 | þ | Risk | ||||
Donald J. Shepard | 69 | 2007 | þ | Audit; Governance (Chair); Risk | ||||
Lorene K. Steffes | 70 | 2000 | þ | Risk | ||||
Dennis F. Strigl | 69 | 2001 | þ | Compensation (Chair); Governance | ||||
Michael J. Ward | 65 | 2016 | þ | Compensation; Governance | ||||
Gregory D. Wasson | 57 | 2015 | þ | Audit |
Name | Age | Director since | Independent | Primary Standing Board Committee & Subcommittee Memberships | ||||
Joseph Alvarado
| 66
| 2019
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Audit; Compliance
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Charles E. Bunch
| 69
| 2007
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| Compensation (Chair); Governance
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Debra A. Cafaro
| 61
| 2017
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Audit; Compensation
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Marjorie Rodgers Cheshire
| 50
| 2014
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| Governance; Risk; Compliance (Chair)
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William S. Demchak
| 56
| 2013
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Risk
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Andrew T. Feldstein
| 54
| 2013
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| Compensation; Governance; Risk (Chair)
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Richard J. Harshman
| 62
| 2019
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Audit; Compensation
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Daniel R. Hesse
| 65
| 2016
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| Risk; Technology (Chair)
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Richard B. Kelson
| 72
| 2002
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Audit (Chair); Compensation; Compliance
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Linda R. Medler
| 62
| 2018
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| Risk; Technology
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Martin Pfinsgraff
| 64
| 2018
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Audit; Risk; Compliance; Technology
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Toni Townes-Whitley
| 55
| 2019
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| Technology
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Michael J. Ward
| 68
| 2016
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Compensation; Governance
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THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 7
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS | ||||
ELECTION OF DIRECTORS (ITEM 1) | ||||
CORPORATE GOVERNANCE | 18 | |||
18 | ||||
18 | ||||
19 | ||||
20 | ||||
20 | ||||
21 | ||||
21 | ||||
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS | ||||
RELATED PERSON TRANSACTIONS | ||||
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | ||||
DIRECTOR COMPENSATION | ||||
COMPENSATION DISCUSSION AND ANALYSIS | ||||
40 | ||||
40 | ||||
Stakeholder engagement and impact of | 41 | |||
COMPENSATION COMMITTEE REPORT |
8 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
COMPENSATION AND RISK | ||||
8 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
COMPENSATION TABLES | ||||
69 | ||||
71 | ||||
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT | ||||
CEO PAY RATIO | 81 | |||
SECURITY OWNERSHIP OF | ||||
82 | ||||
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 2) | ||||
Procedures forpre-approving audit services, audit-related services and permittednon-audit services | ||||
REPORT OF THE AUDIT COMMITTEE | ||||
87 | ||||
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 9
10 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 9
of Shareholders
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Tuesday, April 26, 201623, 2019
11:00 a.m. (Eastern time)Time)
The Tower at PNC Plaza – James E. Rohr Auditorium, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222
WEBCAST
A listen-only webcast of ourthe annual meeting will be available atwww.pnc.com/annualmeeting. An archive of the webcast will be available on our website for thirty30 days.
CONFERENCE CALL
You may access the listen-only conference call of the annual meeting by calling 877-272-3498877-402-9134 or303-223-2682303-223-4385 (international). A telephone replay will be available for one week by calling800-633-8284 or402-977-9140 (international), conference ID 21804913.21915453.
ITEMS OF BUSINESS
1. | Election of the 13 director nominees named in the proxy statement |
2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as |
3. | An advisory vote to approve the compensation of |
4. |
Such other business as may properly come before the meeting. |
RECORD DATE
The close of business on January 29, 2016February 1, 2019 is the record date for determining shareholders entitled to receive notice of and to vote at the annual meeting and any adjournment.
MATERIALS TO REVIEW
We began providing access to thisthe proxy statement and a form of proxy card on March 15, 2016.12, 2019. We have made our proxy materials available electronically. Certain shareholders will receive a noticeNotice of Internet Availability of Proxy Materials explaining how to access our proxy materials and vote. Other shareholders will receive a paper copy of thisthe proxy statement and a proxy card.
PROXY VOTING
Even if you plan to attend the annual meeting in person, we encourage you to cast your vote over the Internet, or if you have a proxy card, by mailing the completed proxy card or by telephone. This Notice of Annual Meeting and Proxy Statement and our 20152018 Annual Report are available atwww.envisionreports.com/PNC.PNC.
ADMISSION
To be admitted to ourthe annual meeting, you must present proof of your stock ownership as of the record date and valid photo identification. Each shareholder may bring one guest who must also present valid photo identification. Please follow the admission procedures described beginning on page 9789 of thisthe proxy statement.
March By Order of the Board of Directors, |
Christi DavisAlicia G. Powell
Corporate Secretary
10 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 11
ELECTION OF DIRECTORS (ITEM 1)
Our Board of Directors (the “Board”) determines the number of directors to nominate for election.election to the Board. OurBy-laws contemplate a range in the size of the Board that ranges in size from 5five to 36 directors. For thisthe annual meeting, ourthe Board fixed the number of directors to be elected at 13.
On January 3, 2019, the Board appointed Joseph Alvarado, Richard J. Harshman and Toni Townes-Whitley to serve as directors. Mr. Alvarado was initially recommended as a director candidate by anon-management director, Mr. Harshman was initially recommended as a director candidate by our CEO, and Ms. Townes-Whitley was identified as a director candidate by a search firm retained by the Nominating and Governance Committee. The candidates were reviewed by the search firm for inclusion in the pool of potential director candidates, and appointed to the Board following the Committee’s evaluation and nomination.
Each of the 13 nominees currently serves on ourthe Board. Beginning on page 13,12, we include the following information for ourregarding the nominees:
theirTheir names and ages
theThe years they first became directors of PNC
theirTheir principal occupations and public company directorships over the past five years
aA brief discussion of the specific experience, qualifications, attributes, or skills that led to ourthe Board’s conclusion that the personindividual should serve as a director
The directorsEach director elected at the annual meeting will serve for one year, unless they leaveuntil the Board early.next annual meeting of our shareholders and the election and qualification of his or her successor, or until his or her earlier resignation or removal from the Board. We do not stagger our elections—the entire Board will be considered for election at the 2016annual meeting. If elected, each nominee will hold office until the next annual meeting of our shareholders, and until the election and qualification of his or her successor.
Each nominee consents to being named in this proxy statement and to serve if elected. OurThe Board has no reason to believe that any nominee will be unavailable or unable to serve as a director.
On July 2, 2015, the Board of Directors appointed Gregory D. Wasson to serve on the Board. Mr. Wasson was identified as a director candidate by a search firm retained by the Nominating and Governance Committee. On January 7, 2016, the Board of Directors appointed Daniel R. Hesse and Michael J. Ward to serve on the Board. Mr. Hesse and Mr. Ward were each recommended as a director by one of our non-management directors.
In addition to information onregarding the background and qualifications of each director,nominee, this proxy statement contains other important information related to your evaluation of our nominees. We discuss:the nominees, including:
ourThe Board’s leadership structure
how ourHow the Board operates
relationshipsRelationships between PNC and our directors
howHow we evaluate director independence
howHow we pay our directors
ourOur director stock ownership requirement
See the following sections for moreadditional details on these topics:
Corporate Governance (page 18)
Director and Executive Officer Relationships (page 30)
Related Person Transactions (page 35)
Director Compensation (page 36)
Security Ownership of DirectorsManagement and Executive OfficersCertain Beneficial Owners (page 79)
If you sign, date and return your proxy card but do not give voting instructions, or if you do not provide voting instructions when voting over the Internet, we will vote your shares FOR all of the nominees namedlisted on pages 1312 to 17. See page 10092 for information regarding the vote required for election of the nominees as directors.director nominees.
The Board of Directors recommends a vote FOR each of the nominees listed on pages 1312 to 17.
12 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 11
ELECTION OF DIRECTORS (ITEM 1)
Joseph Alvarado
Age 66
Director Since 2019
Experience, Qualifications, Attributes, or Skills
Joseph Alvarado is the former Chairman, President and Chief Executive Officer of Commercial Metals Company, a Fortune 500 global metals company that under his leadership was active in recycling, manufacturing, fabricating and trading. In this role Mr. Alvarado was responsible for the overall strategic leadership of CMC, with nearly 9,000 employees and operations in over 200 locations in more than 20 countries. Mr. Alvarado held the position of Executive Vice President and Chief Operating Officer of CMC from 2010 to 2011, during which time he had full profit and loss responsibility for the company’s diverse global businesses.
Prior to his career with CMC, Mr. Alvarado served as Operating Partner for Wingate Partners and The Edgewater Funds from 2009 to 2010, where he consulted on new deal evaluation and portfolio company management. Mr. Alvarado worked for a number of other businesses throughout his42-year career within the steel, metal processing, energy and chemical industries. Mr. Alvarado held the position of President at United States Steel Tubular Products, Inc. from 2007 to 2009, President and Chief Operating Officer at Lone Star Technologies from 2004 to 2007, Vice President, Long Product Sales and Marketing, North America at Arcelormittal from 1998 to 2004, and Executive Vice President, Commercial for Birmingham Steel from 1997 to 1998. Mr. Alvarado also held various positions at Inland Steel Company from 1976 to 1997, the latest of which was President, Inland Steel Bar Company (a division of Inland Steel Company) from 1995 to 1997.
Mr. Alvarado received a BA in Economics from the University of Notre Dame and an MBA from Cornell University’s SC Johnson Graduate School of Management.
The Board values Mr. Alvarado’s extensive business knowledge and experience in accounting, sales, manufacturing, planning and global operations.
PNC Board Committee Memberships
Audit Committee
Compliance Subcommittee
Public Company Directorships
Arcosa, Inc.
Kennametal, Inc.
Trinseo S.A.
Spectra Energy Corp (until February 2017)
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Charles E. Bunch
Age 69
Director Since 2007
Experience, Qualifications, Attributes, or Skills
Charles E. Bunch is the retired Executive Chairman and former Chief Executive Officer of PPG Industries, Inc., a Pittsburgh-based global supplier of paints, coatings, optical products, specialty materials, chemicals, glass and fiberglass.
Mr. Bunch received an undergraduate degree from Georgetown University and a master’s degree in business administrationan MBA from the Harvard University.Business School.
Mr. Bunch’s service as a public company CEO, his extensive management and finance experience, and his involvement in the Pittsburgh community add significant value to ourthe Board. In addition, Mr. Bunch brings regulatory and banking industry experience to ourthe Board as he formerly served as a Director and the Chairman of the Federal Reserve Bank of Cleveland, our principal banking regulator.
PNC Board Committee Memberships
Executive Committee
Nominating and Governance Committee
Personnel and Compensation Committee (Chair)
Public Company Directorships
ConocoPhillips
H.J. Heinz Company (until June 2013)
Marathon Petroleum Corporation (September 2015)
Mondelēz International, Inc.
PPG Industries, Inc. (until September 2016)
Debra A. Cafaro
Age 61
Director Since 2017
Experience, Qualifications, Attributes, or Skills
Debra A. Cafaro is Chairman of the Board and Chief Executive Officer of Ventas, Inc., an S&P 500 company that is a leading owner of seniors housing, healthcare, and research properties.
Building on an early career in law and her20-year tenure at Ventas, Ms. Cafaro is broadly engaged across business, public policy, andnon-profit sectors. She is Chair of the Real Estate Roundtable, is a member of the Business Council, and serves on the boards of the Economic and Executives’ Clubs of Chicago, University of Chicago, Chicago Infrastructure Trust, Chicago Symphony Orchestra, World Business Chicago and the management committee of the Pittsburgh Penguins.
Ms. Cafaro received a JD cum laude in 1982 from the University of Chicago Law School and a BA magna cum laude from the University of Notre Dame in 1979.
The Board values Ms. Cafaro’s extensive corporate leadership, knowledge, and experience. Her years of experience as a public company CEO in the financial sector provide insight into the oversight of financial and accounting matters. Her vision as a strategic thinker adds depth and strength to the Board in its oversight of PNC’s continued growth. The Board also values Ms. Cafaro’s active involvement in the Chicago and Pittsburgh communities.
PNC Board Committee Memberships
Audit Committee
Personnel and Compensation Committee
Public Company Directorships
Ventas, Inc.
Weyerhaeuser Company (until February 2016)
12 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement ELECTION OF DIRECTORS (ITEM 1)
Marjorie Rodgers Cheshire Age 50 Director Since 2014 Experience, Qualifications, Attributes, or Skills Marjorie Rodgers Cheshire is President and Chief Operating Officer of A&R Development Corp. A&R is |
Corp., a diversified real estate development organization focused on the Baltimore and Washington markets. A&R’s portfolio includes residential, commercial, andmixed-use developments, ranging in value from $1 million to $152 million,million. In its history, A&R has developed 50 projects with an aggregate value of more than $900 million.
Prior to joining A&R, Ms. Cheshire spent many years in the media and sports industries. Her most recent position was as Senior Director of Brand & Consumer Marketing for the National Football League. Prior to that, Ms. Cheshire held positions as Vice President of Business Development for Oxygen Media, Director and Special Assistant to the Chairman & CEO of ESPN, and Manager of Strategic Marketing for ABC Daytime. Ms. Cheshire also worked as a consultant with The Boston Consulting Group, a strategic consulting firm serving Fortune 500 companies.
Ms. Cheshire hasreceived a B.S.BS in Economics from the Wharton School of the University of Pennsylvania and aan MBA from the Stanford University Graduate School of Business. She is a Trustee of Baltimore Equitable Insurance, Baltimore School for the Arts, Johns Hopkins Bayview Medical Center, and Johns Hopkins Hospital.
OurThe Board values Ms. Cheshire’s executive management experience and her background in real estate, marketing and media;media, as well as her involvement in the Baltimore community and her familiarity with this important market for PNC.
PNC Board Committee Memberships
AuditNominating and Governance Committee
Risk Committee
Special Compliance CommitteeSubcommittee (Chair)
Public Company Directorships
None
William S. Demchak
THEAge 56
Director Since 2013
Experience, Qualifications, Attributes, or Skills
William S. Demchak is Chairman, President and Chief Executive Officer of The PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 13
ELECTION OF DIRECTORS (ITEM 1)
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Financial Services Group, Inc., one of the largest diversified financial services companies in the United States. Mr. Demchak joined PNC in 2002 as chief financial officer.Chief Financial Officer. In July 2005, he was named headHead of PNC’s Corporate & Institutional Banking segment responsible for PNC’s middle market and large corporate businesses, as well as capital markets, real estate finance, equity management and leasing. Mr. Demchak was promoted to senior vice chairmanSenior Vice Chairman in 2009 and named headHead of PNC businessesBusinesses in August 2010,2010. He was elected presidentPresident in April 2012, chief executive officerChief Executive Officer in April 2013 and appointed as chairmanChairman in April 2014.
Before joining PNC in 2002, Mr. Demchak served as the global headGlobal Head of Structured Finance and Credit Portfolio for JPMorgan Chase. He also held key leadership roles at JPMorgan prior to its merger with the Chase Manhattan Corporation in 2000. He was actively involved in developing JPMorgan’s strategic agenda and was a member of the company’s capital and credit risk committees.
Mr. Demchak is directora member and past Chairman of BlackRock, Inc. Hethe board of directors of the Bank Policy Institute and is a member of the Board of The Financial Services Roundtable.Business Council. In addition, he serves as Chairman of the Allegheny Conference on Community Development and is on the boards of directors of the Extra Mile Education Foundation and the YMCA of Pittsburgh. He is Vice-Chair of the Allegheny Conference on Community Development, Vice-Chair of the Clearing House Corp., and a member of the Board of the Pittsburgh Cultural Trust. Mr. Demchak also is the Chair of the Advisory Committee of Envision Downtown.
Mr. Demchak received a Bachelor of Science degreeBS from Allegheny College and earned an MBA with an emphasis in accounting from the University of Michigan.
The Board believes that the current CEO should also serve as a director. Under the leadership structure discussed elsewhere in this proxy statement, aCEO-director acts as a liaison between directors and management, and assists the Board in its oversight of the company. Mr. Demchak’s experiences and strong leadership provide ourthe Board with insight into the business and strategic priorities of PNC.
PNC Board Committee Memberships
Executive Committee
Risk Committee
Public Company Directorships
BlackRock, Inc.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 13
ELECTION OF DIRECTORS (ITEM 1)
Andrew T. Feldstein
Age 54
Director Since 2013
Experience, Qualifications, Attributes, or Skills
Andrew T. Feldstein is the Chief Executive Officer and Chief Investment Officer of BlueMountain Capital Management, a leadingdiversified alternative asset manager with $21more than $19 billion in assets under management and approximately 285255 professionals worldwide. Mr. Feldstein is the Chair of the firm’s Management Committee and a member of the Investment and Risk Committees.
Prior toco-founding BlueMountain in 2003, Mr. Feldstein spent over a decade at JPMorgan where he was a Managing Director and served as Head of Structured Credit;Credit, Head of High Yield Sales, Trading and Research;Research, and Head of Global Credit Portfolio.
Mr. Feldstein is a Trustee of Third Way, a public policy think tank;tank, a Trustee of the Santa Fe Institute, an independent research and education center;center, and a member of the Harvard Law School Leadership Council.
Mr. Feldstein received an undergraduate degreea BA from Georgetown University and a J.D.JD from Harvard Law School.
OurThe Board values Mr. Feldstein’s extensive financial and risk management expertise. As founder and CEO of BlueMountain Capital and through his senior management positions at JPMorgan, Mr. Feldstein has built a reputation for innovation and significant insight into risk management. The boardBoard believes that these skills are particularly valuable to its effective oversight of risk management and will also be a valuable resource to PNC as it continues to grow its business and strengthen its balance sheet.
PNC Board Committee Memberships
Executive Committee
Nominating and Governance Committee
Personnel and Compensation Committee
Risk Committee (Chair)
Technology SubcommitteePublic Company Directorships
None
Richard J. Harshman
Age 62
Director Since 2019
Experience, Qualifications, Attributes, or Skills
Richard J. Harshman is the current Executive Chairman and former President and Chief Executive Officer of Allegheny Technologies, Inc., a Pittsburgh-based global manufacturer of technically advanced specialty materials and complex parts and components. Mr. Harshman previously served in other roles at ATI, including President and Chief Operating Officer from August 2010 to May 2011, Executive Vice President and Chief Financial Officer from December 2000 to August 2010, and other roles of increasing responsibility since August 1996. Mr. Harshman began his career as an Internal Auditor at Teledyne, Inc., an ATI predecessor company, in 1978.
Mr. Harshman is active within the Pittsburgh community, including through his service with severalnon-profit boards. Mr. Harshman is Chair of the board of trustees of Robert Morris University, Chair of the board of trustees of the Pittsburgh Cultural Trust and is a current member and past chair of the board of directors of the Allegheny Conference on Community Development, in addition to his service with other Pittsburgh-basednon-profit organizations.
Mr. Harshman received a BS in Accounting from Robert Morris University and was previously licensed as a Certified Public Accountant by the California Board of Accountancy.
The Board values Mr. Harshman’s depth of experience with the operational and financial aspects of leading a public company, including as chief executive officer, chief financial officer and chief operating officer. The Board also values Mr. Harshman’s active involvement in the Pittsburgh community.
PNC Board Committee Memberships
Audit Committee
Personnel and Compensation Committee
Public Company Directorships
NoneAllegheny Technologies, Inc. (Executive Chairman)
Ameren Corporation (Lead Director)
Daniel R. Hesse
Age 65 Director Since 2016 Experience, Qualifications, Attributes, or Skills Daniel R. Hesse is the former President and Chief Executive Officer of Sprint Corporation, one of the United States’ largest wireless carriers. |
Mr. Hesse received a bachelor’s degreeBA from the University of Notre Dame, aan MBA from Cornell University, and aan MS from Massachusetts Institute of Technology where he was awarded the Brooks Thesis prize.Prize.
Mr. Hesse brings extensive corporate leadership experience to ourthe Board, having served in a variety of executive positions, including as CEO of Sprint Corporation. His years of experience in the wireless communications industry provide insight into the dynamic and strategic issues overseen by the Board. The broad spectrum of technological issues in this industry give him a strong understanding to assist the Board in its oversight of technological issues.
PNC Board Committee Memberships
Risk Committee
Technology Subcommittee (Chair)
Public Company Directorships
NoneAkamai Technologies, Inc.
14 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
ELECTION OF DIRECTORS (ITEM 1)
Richard B. Kelson
Age 72 Director Since 2002 Experience, Qualifications, Attributes, or Skills Richard B. Kelson is the Chairman, President and Chief Executive Officer of ServCo, LLC, a |
African- American community.
From 2001 to 2005, she served as director of the U.S. Office of Personnel Management, where she was President George W. Bush’s principal human resources advisor.
She has also provided consulting services as a former Senior Partner in The J.C. Watts Companies.
Ms. James received an undergraduate degree from Hampton University.
Having supervised the management of thousands of federal employees, Ms. James understands large-scale human resources operations. Our Board values these senior-level federal government and regulatory experiences, Ms. James’ experience as former chair of the Nominating and Governance Committee and the Compensation Committee at AMERIGROUP Corporation, and her leadership of a non-profit organization in the Greater Washington, D.C. area, a significant market for PNC.
PNC Board Committee Memberships
Nominating and Governance Committee
Risk Committee
Public Company Directorships
AMERIGROUP Corporation (until 2012)
Magellan Health, Inc.
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strategic sourcing and supply chain management company. He has also served as an Operating Advisor with Pegasus Capital Advisors, L.P., a private equity fund manager.
Mr. Kelson retired in 2006 as Chairman’s Counsel for Alcoa, a leader in the production and management of primary aluminum, fabricated aluminum, and alumina. At Alcoa, he served as a member of the executive council, the senior leadership group for the company. From 1994 to 1997, Mr. Kelson served as Alcoa’s General Counsel. From 1997 through 2005, he served as Alcoa’s Chief Financial Officer.
Mr. Kelson received an undergraduate degreea BA from the University of Pennsylvania and a law degreeJD from the University of Pittsburgh.
Mr. Kelson’s service as a public company CFO and his designation as an “audit committee financial expert” assist the Board and Audit Committee with the oversight of financial and accounting issues. His financial background supports hisprovides strong leadership of our Audit Committee as its Chair. The Board also values Mr. Kelson’s executive management experience and his background as a public company general counsel, although he does not serve in a legal capacity or provide legal advice to PNC or ourthe Board.
PNC Board Committee Memberships
Audit Committee (Chair)
Executive Committee
Personnel and Compensation Committee
Special Compliance CommitteeSubcommittee
Public Company Directorships
ANADIGICS, Inc. (until March 2016)
Commercial Metals Company (Lead Director)
Lighting Science GroupIngevity Corporation (until 2010)(Non-Executive Chairman of Board)
MeadWestvaco Corp. (until July 2015)
Linda R. Medler
Age 62
Director Since 2018
Experience, Qualifications, Attributes, or Skills
Linda R. Medler, Brigadier General, United States Air Force (Retired), is Founder, President and CEO of L A Medler & Associates, LLC, providing cyber strategy and operational consulting services to commercial clients and numerous U.S. Department of Defense customers and academic institutions. Ms. Medler served until December 2017 as the Chief Information Security Officer and Director of IT Security for Raytheon Missile Systems, a major business unit of Raytheon Company, a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. She initially joined Raytheon Missile Systems in June 2015 as the Director of Cyber, where she was responsible for developing a roadmap to incorporate cyber resiliency into the company’s products.
In 2014, Ms. Medler completed 30 years of total military service, including 27 years of service in the U.S. Air Force, retiring as a Brigadier General. She began her military service as an enlisted U.S. Marine. Her last position held was Director of Capability and Resource Integration for the United States Cyber Command. Her previous assignments included Director of Communications and Networks for the Joint Staff, Joint Chiefs of Staff Deputy CIO, Chief of Staff for Air Force Materiel Command, and Commander/Vice Commander for the 75th Air Base Wing.
Ms. Medler received a BBA in Management & Computer Information Systems from the University of Arkansas at Little Rock, an MS in National Security & Strategic Studies from the Naval War College, and an MBA in Management Information Systems Concentration from the University of Arizona.
The Board values Ms. Medler’s extensive leadership experience and her deep knowledge of cybersecurity and information technology. Her years of experience leading cybersecurity, information technology, and multi-function organizations facing a broad range of technology and operational issues provide the Board with additional skills to facilitate oversight of the cybersecurity and technology issues facing PNC.
PNC Board Committee Memberships
Risk Committee
Technology Subcommittee
Public Company Directorships
None
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 15
ELECTION OF DIRECTORS (ITEM 1)
Martin Pfinsgraff
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Ms. PepperAge 64
Director Since 2018
Experience, Qualifications, Attributes, or Skills
Martin Pfinsgraff retired as Senior Deputy Comptroller Large Bank Supervision of the Office of the Comptroller of the Currency in February 2017. He held the position of Deputy Comptroller for Credit and Market Risk from 2011 to 2013. Mr. Pfinsgraff served on the Executive Committee of the OCC and as a member of the Senior Supervisors Group, an international committee comprised of supervisors from 10 Organisation for EconomicCo-operation and Development member countries and the European Central Bank.
Prior to his career with the OCC, Mr. Pfinsgraff held various positions from 2000 to 2009 at iJet International, a provider of operating risk management solutions, including Chief Operating Officer and Chief Financial Officer. Mr. Pfinsgraff held various positions with Prudential Securities from 1989 through 2000, the latest of which was President Capital Markets, Prudential Securities from 1997 to 2000.
Mr. Pfinsgraff received undergraduatea BBA in Psychology from Allegheny College and graduate degreesan MBA from Harvard Business School.
The Board values Mr. Pfinsgraff’s leadership experience as well as his extensive knowledge of the Universityfinancial services industry and the regulatory requirements applicable to the industry. His experience in banking regulation, risk management and finance, along with his years of Delaware.
Ms. Pepper brings a diverse set of experiences to our Board, beginning with her management experience at PHS. For 30 years, Ms. Pepper led this Philadelphia-based organization, supervising over 100 employees, and executing a strategic plan with a vision of sustainability and community impact. Beyond thisexecutive leadership, provide the Board appreciates her insights as PNC continueswith additional skills to expand our own environmentally conscious initiatives.
Ms. Pepper brings additionaloversee complex regulatory, risk management, and banking industry experience to our Board, having formerly served as a director and the Chairwoman of the Federal Reserve Bank of Philadelphia.financial matters.
PNC Board Committee Memberships
Risk Committee
Special Compliance Committee (Chair)
Public Company Directorships
None
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Mr. Shepard received a master’s degree in business administration from the University of Chicago.
Mr. Shepard joined our Board following PNC’s acquisition of Mercantile Bankshares Corporation. He joined the Mercantile Board of Directors in 1992.
Mr. Shepard’s service as the CEO of a large, international public company, particularly a company in the financial services sector, gives him insights into many issues facing PNC, and supports the Board’s ability to oversee complex and dynamic issues. Mr. Shepard’s duties and experiences at AEGON also assist our Board with its oversight of financial and risk issues. Our Board also values Mr. Shepard’s experience on the board of a public company in the banking business and his familiarity with the Baltimore community.
PNC Board Committee Memberships
Executive Committee
Audit Committee
Nominating and Governance Committee (Chair)
Risk Committee
Public Company Directorships
CSX Corporation
The Travelers Companies, Inc.
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and information technology industries. She formerly served as Vice President and General Manager, Global Electronics Industry, for IBM, an information technology company. Ms. Steffes also served as the President and Chief Executive Officer of Transarc Corporation, a software development firm, which was later acquired by IBM.
Ms. Steffes received undergraduate and master’s degrees from Northern Illinois University.
Our Board values Ms. Steffes’s managerial experiences throughout the technology industry, including as a chief executive. Her wide array of experiences in this industry and her understanding of operational and technological issues assist the Board in its oversight of technological issues, which have become increasingly important for large, complex banking organizations.
PNC Board Committee Memberships
Risk Committee
TechnologyCompliance Subcommittee (Chair)
Public Company Directorships
RadiSys Corporation (until September 2015)
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Inc., one of the world’s leading providers of communications services, until his retirement in December 2009. Prior to that, he was the President and Chief Executive Officer of Verizon Wireless, a joint venture controlled by Verizon.
Mr. Strigl received an undergraduate degree from Canisius College and a master’s degree in business administration from Fairleigh Dickinson University.
Our Board values Mr. Strigl’s service as a senior executive at a large public company, and his former executive management expertise as the CEO of Verizon Wireless. His management of a large workforce at Verizon informs his judgment as the Chair of our Personnel and Compensation Committee and gives him a strong understanding of human resources and compensation matters. Mr. Strigl’s additional responsibility for internal functional services, such as finance and real estate, adds depth and experience to the Board’s ability to oversee the operations of our company.
PNC Board Committee Memberships
Executive Committee
Nominating and Governance Committee
Personnel and Compensation Committee (Chair)
Technology Subcommittee
Public Company Directorships
ANADIGICS, Inc. (2000-2008; 2010-Present)None
Eastman KodakToni Townes-Whitley
Age 55
Director Since 2019
Experience, Qualifications, Attributes, or Skills
Toni Townes-Whitley is President, U.S. Regulated Industries at Microsoft Corporation, a technology company that enables digital transformation for the era of an intelligent cloud and an intelligent edge. In this role Ms. Townes-Whitley leads Microsoft’s U.S. sales team and manages a P&L of approximately $11 billion across the public sector and regulated industries, including healthcare, financial services, education and government, driving digital transformation across customers and partners. Prior to taking on her current role in July 2018, Ms. Townes-Whitley was Corporate Vice President for Global Industry at Microsoft, a role she held since 2015.
Before starting with Microsoft, Ms. Townes-Whitley worked for CGI Corporation, an IT and business consulting services firm, from 2010 to 2015. During her tenure at CGI, Ms. Townes-Whitley held the positions of President and Chief Operating Officer from 2011 to 2015 and Senior Vice President, Civilian Agency Program from 2010 to 2011. From 2002 to 2010, Ms. Townes-Whitley held various positions at Unisys Corporation, a global information technology company that provides a portfolio of IT services, software and technology, including Vice President, Global Public Sector, Vice President, North America Consulting & Systems Integration, and Lead Partner, Federal Civilian Business Unit.
Ms. Townes-Whitley is an active participant in industry client and partner organizations, and a presenter on IT innovation and societal impact. Ms. Townes-Whitley sits on the executive committee of the World Business Council for Sustainable Development, is a board member on the Northern VA Tech Council and Thurgood Marshall Foundation, and serves as an advisor to the Women’s Center of Northern Virginia.
Ms. Townes-Whitley received a BA in Economics from Princeton University’s Woodrow Wilson School.
The Board values Ms. Townes-Whitley’s significant experience and involvement in the information technology industry and the value she adds to the Board’s oversight of technological issues facing PNC.
PNC Board Committee Memberships
Technology Subcommittee
Public Company (until September 2013)Directorships
Nokia Corporation (May 2014 to May 2015)
Tellabs, Inc. (until December 2013)None
16 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
ELECTION OF DIRECTORS (ITEM 1)
Michael J. Ward
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Age 68
Director Since 2016
Experience, Qualifications, Attributes, or Skills
Michael J. Ward is the former Chairman and Chief Executive Officer of CSX Corporation, one of the world’s largest railroad companies. Mr. Ward received a bachelor’s degreeBS from the University of Maryland and aan MBA from the Harvard Business School.
Mr. Ward has extensive operations, sales, marketing and finance experience from his various management roles with CSX and its subsidiaries. As a public company CEO with years of corporate leadership experience in a regulated industry, he brings knowledge and insight to the Board in its oversight of complex issues. His management of an executive team and a large group of employees adds value to his oversight of compensation issues.
PNC Board Committee Memberships
Nominating and Governance Committee
Personnel and Compensation Committee
Public Company Directorships
CSX CorporationAshland Inc. (until September 2016)
Ashland Global Holdings, Inc.
CSX Corporation (until March 2017)
Contura Energy, Inc.
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Mr. Wasson received a bachelor’s degree from Purdue University in Pharmaceutical Science.
Mr. Wasson has extensive operational and executive management experience at a complex organization with a large, diverse workforce. Mr. Wasson brings an in-depth knowledge of the retail industry and insight into the consumer experience. His background of leading a company with thousands of retail locations in an industry that, like banking, is undergoing rapid transformation provides insight that benefits PNC as we work on our strategic priorities. His service as a public company CEO and his designation as an “audit committee financial expert” assist the Board and Audit Committee with the oversight of financial and accounting issues.
PNC Board Committee Memberships
Audit Committee
Technology Subcommittee
Public Company Directorships
Verizon Communications Inc.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 17
OurThe Board is committed to maintaining strong corporate governance practices. Through the Nominating and Governance Committee, the Board evaluates its corporate governance policies and practices against evolving best practices. This section highlights some of our corporate governance policies and practices. Please seeSeewww.pnc.com/corporategovernance for additional information about corporate governance at PNC, including:
Corporate governance guidelines
By-laws
Code of ethics
To receive free printed copies of any of these
documents, please send a request to:
Corporate Secretary
The PNC Financial Services Group, Inc.
300 Fifth Avenue
Pittsburgh, Pennsylvania 15222
or
corporate.secretary@pnc.com
This proxy statement is also available at
www.pnc.com/proxystatement
Recent corporate governance developments
Two of our current directors, Paul W. ChellgrenRichard B. Kelson and ThomasDonald J. Usher,Shepard, have reached the Board adopted mandatory retirement age of 72 in connection with the 2015 Annual meeting, butestablished by the Board, approved a limited waiver of this mandatory retirement untiland Gregory D. Wasson resigned from the period ending with the 2016 annual meeting. The Board also approved a waiver of the provision in our corporate governance guidelines that the Presiding Director is the Chair of the Nominating and Governance Committee. Mr. Usher remained our Presiding Director for his term beginning on his election at the 2015 annual meeting, but Mr. Shepard was appointed Chair of the Nominating and Governance Committee at the Board’s
organizational meeting on April 28, 2015. As these waivers end in connection with the 2016 annual meeting, Mr. Chellgren and Mr. Usher are not nominated for election as directors. Anthony A. Massaro reaches the mandatory retirement age in connection with the 2016 annual meeting and is not nominated for election as a director.October 1, 2018. As part of its continuing efforts to provide for director succession and strong Board composition in light of thesethe anticipated retirements and Mr. Wasson’s departure, on July 2, 2015 onJanuary 3, 2019, the adviceBoard appointed Joseph Alvarado, Richard J. Harshman and Toni Townes-Whitley to serve as directors upon the recommendation of the Nominating and Governance Committee,Committee. Each of Mr. Alvarado, Mr. Harshman and Ms. Townes-Whitley are included as nominees for election to the Board appointed Gregory D. Wassonat the annual meeting.
Additionally, in connection with director nominations made by the Nominating and
Governance Committee in February 2019, the committee recommended and the Board approved a limited waiver of the mandatory retirement age for Mr. Kelson, who serves as the current Chair of the Audit Committee. Mr. Kelson abstained from the vote on the waiver of the mandatory retirement age. Mr. Kelson is included as a directornominee for election to the Board at the annual meeting. It is anticipated that Mr. Kelson will continue to serve as Chair of the Audit Committee for an additional year and will assist with the transition to a new Chair of the Audit Committee in 2020.
The Board believes it is in the best interests of the company to waive the mandatory retirement age on January 7, 2016, appointed Daniel R. Hessea limited basis as described above, and Michael J. Ward as directors.does not intend to amend the mandatory retirement age policy on a permanent basis.
Corporate governance guidelines
OurThe Board has approved corporate governance guidelines. Our Board’s Nominating and Governance Committee reviews the corporate governance guidelines at least once a year. Any changes recommended by the Committee are approved by the Board. The guidelinesthat address important principles adopted by the Board, including:
The qualifications that we want to see in a director
The director nomination process
The dutiesBoard’s leadership structure
How the Board committees serve to support the Board’s duties
A description of ordinary course relationships that will not impair a director’s independence
The importance of the Board meeting in executive session without management
present
The importance of the Board having access to management
The mandatory director retirement age (72)
How the Board evaluates our CEO’s performance
How the Board considers management succession planning
Our views on directors holding other board positions
How the Board continually evaluates its own performance
and composition
Our approach to director orientation and education
The Board’s role in strategic planning
18 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
CORPORATE GOVERNANCE
Although our By-laws provideThe Nominating and Governance Committee reviews the ability to hold a virtual only annual meeting of shareholders, PNC currently has no intention to conduct its annual meeting of shareholders incorporate governance guidelines at least annually. Any changes recommended by the form of a virtual only annual meeting. Our By-laws preserve our option under Pennsylvania law to hold a virtual annual meeting should we ever decide to do so. While we
will continue to monitorCommittee are reviewed and approved by the development of corporate governance practices in regard to the conduct of annual meetings, we currently believe that we would move to a combined form of annual meeting, supplementing the in-person meeting with a virtual annual meeting before we would consider any further format changes to our annual meeting.Board.
Our Board leadership structure
Based on an assessment of its current needs and composition, as well as the composition, skills and qualifications of the directors, the Board believes that the appropriate Board leadership structure should include the following attributes:
A substantial majority (at least 2/3)two-thirds) of independent directors
A Presiding Director
Regular executive sessions of all independent directors without management present
The Board’s current leadership structure of the Board includes all three attributes. The Board has not adopted a policy with respect to separating the Chairman and CEO positions. The Board believes that the leadership structure should be flexible enough to accommodate different approaches based on an evaluation of relevant facts and circumstances. The Board considers its structure and leadership each year. Theyear, and the Personnel and Compensation Committee discusses whether to separate the positions of Chairman and CEO as part of its ongoing evaluation of management succession plans.
William S. Demchak, our current CEO, also serves as Chairman of the Board. ThomasDonald J. Usher,Shepard, the Board’s Presiding Director,Chair of the Nominating and Governance Committee, currently serves as our lead independent director.Presiding Director. We describe his dutiesthe responsibilities of the Presiding Director in more detail below. Mr. Shepard will not stand forre-election to the Board at the annual meeting and, following the annual meeting, will no longer be Presiding Director. The new Presiding Director will be selected when the Board meets on April 23, 2019.
Substantial majority of independent directors. We have long maintained a Board with a substantial majority of directors who are not PNC employees.employees and who otherwise qualify as independent under the rules of the New York Stock Exchange (the “NYSE”). The NYSE requires at least a majority of our directors to be independent from management.
Mr. Demchak is the only director who is not independent under the NYSE’s “bright-line” rulestests for independence because he is our CEO. The Board has affirmed the independence of each of ourthe other 12 nominees for director. Please seeSeeDirector and Executive Officer Relationships beginning on pages 30 topage 31 for a description of how we evaluate the independence of our directors, including information about the NYSE’s bright-line tests for independence.
Presiding Director duties.responsibilities. As theThe Presiding Director, Mr. Usher is the lead independent director for our Board. Thethe
Board, is selected by the Board’s independent andnon-management directors selected him for this role. directors. The Board approved the following dutiesresponsibilities for the Presiding Director, which are included in our corporate governance guidelines:
Preside at meetings of the Board of Directors in the event of the Chairman’s unavailability.
Convene and presidePreside at regularly scheduled executive sessions of the Board’s independent directors whenever he or she deems
Presideconvene and preside at meetings or executive sessions of the Board’s non-management and independent directors.
Act as the principal liaison between the Chairman and the CEO and the Board’s independent directors.
Be available for confidential discussions with any non-management or independent director who may have concerns whichthat he or she believes have not been properly considered by the Board as a whole.
Following consultation with the Chairman, CEO and other directors as appropriate, approve the Board’s meeting schedule and agendas, and the information provided to the Board, in order to promote the effectiveness of the Board’s operation and decision making and help ensure that there is sufficient time for discussion of all agenda items.
Be available for consultation and direct communication with major shareholders as appropriate.
Discharge such other responsibilities as the Board’s independent directors may assign from time to time.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 19
CORPORATE GOVERNANCE
During the course of the year, the Presiding Director may suggest, revise or otherwise discuss agenda items for the Board meetings with the Chairman or CEO. In between meetings, each director is encouraged to raise any topics or issues with the Presiding Director that the director believes should be discussed amongin executive session.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 19
CORPORATE GOVERNANCE
As Chair of the non-management or independentNominating and Governance Committee, the Presiding Director leads the Board and committee annual self-evaluation process and the evaluation of the independence of directors.
The Nominating and Governance Committee also reviews, and the Presiding Director as Chair of the Committee reports to the Board on, significant developments in corporate governance.
Regular executive sessions of independent directors. Our independent directors have met and will continue to meet in regularly scheduled executive sessions without management present. The NYSE requires our independent directors to meet in executive session at least once a year. Under ourthe Board’s own policy, our independent directors meet by themselvesin executive session at least quarterly. OurThe Presiding Director leads these executive sessions.
Communicating with ourthe Board
Shareholders and other interested parties who wish to communicate with the Board, of Directors, any director (including the Presiding Director), thenon-management or independent directors as a group, or any Board committee may send either (1) an email to corporate.secretary@pnc.com or (2) a letter to the following address:
Presiding Director
The PNC Financial Services Group, Inc.
Board of Directors
P.O. Box 2705
Pittsburgh, Pennsylvania 15230-2705
The Corporate Secretary will forward the email communication to the appropriate director(s) named. The Corporate Secretary may elect not to forward communications that she believes are: (i) a commercial, charitable or other solicitation; (ii) a
complaint about PNC products or services that would be customarily handled in the ordinary course of business; (iii) abusive, improper or otherwise irrelevant to the Board’s duties and responsibilities; or (iv) subject to the policies or procedures that specify the proper handling of a communication that addresses such subject matter.
The Corporate Secretary will not open the written communication sent to the above P.O. Box if it is addressed to the Board, of Directors, any director (including the Presiding Director), or group of directors, thenon-management or independent directors as a group, or any Board committee. He or sheThe Corporate Secretary will forward the communication to the Presiding Director who will determine how to respond. Depending on the content, he or shethe Presiding Director may forward the communication to a PNC employee, a third party, another director, a Board committee or the full board.Board.
Our codeCode of ethicsBusiness Conduct and Ethics
PNC has adopted and the Audit Committee has approved a Code of Business Conduct and Ethics that applies generally to all employees and directors.
Our codeThe Code of ethicsBusiness Conduct and Ethics addresses these important topics, among others:
Our commitment to ethics and values
Fair dealing with customers, suppliers, competitors, and employees
Conflicts and potential conflicts of interest,
Self-dealing and outside employment
Insider including self-dealing, insider trading and other trading restrictions, including prohibitions onoutside employment and transactions in any derivative ofwith PNC securities, includingnon-compensatory options
Transactions with PNC
Gifts and entertainment
Creating business records, document retention and protecting confidential information
Protection and proper use of our assets, including intellectual property and electronic media
Communicating with the public
Political involvement, including campaigning and political contributions and fundraising
Compliance with laws and regulations
The codeCode of ethicsBusiness Conduct and Ethics is available on our website atwww.pnc.com/corporategovernance. Any shareholder may also request a free printed copy by writing to our Corporate Secretary at the address givenprovided on page 18.
We intend that this code satisfiesOur adoption of the SEC’sCode of Business Conduct and Ethics is intended to satisfy the Securities and Exchange Commission (the “SEC”) requirement to adopt a code that applies to a company’s CEO and senior financial officers. Our Board’sThe Audit Committee must approve any waivers of or exceptions to code provisions forgranted to our directors or executive officers. We will post on our website any future amendments to, or waivers from, a provision of the codeCode of ethicsBusiness Conduct and Ethics that applies to any of our directors or executive officers (including our Chairman and CEO, CFO, and Controller).
PNC has also adopted, and ourthe Audit Committee has approved, Ethics Guidelines for Directors to supplement the PNC codeCode of ethics.Business Conduct and Ethics.
20 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
CORPORATE GOVERNANCE
All of our new directors undergo a director orientation and education program. In addition to written materials provided to new directors,in-person orientation sessions are held forwith each new director. In-person orientation
Thesein-person sessions generally include meetings with members of senior management to familiarize new directors with PNC’sour strategic plans, its significant financial, accounting and risk management issues, its capital markets activities, its compliance programs, itsthe Code of Business Conduct and Ethics and related policies, its principal officers, itsand internal and independent auditors, and specificas well as specified matters related to the Board committees or subcommittees to which athe new director has been appointed.
OurWe also provide a continuing education program for our directors that considers the directors’their knowledge and experience and PNC’sour risk profile, and includes training on complex products and services, PNC’sour lines of business, significant risks to PNC, appropriatethe company, applicable laws, regulations and supervisory requirements, and other relevant topics identified by the boardBoard and management. ItThe continuing education program is provided through a combination ofin-person sessions and coordination of attendance by directors at outside seminars, including those offered by regulators, relevant to the duties of a director. Thein-person sessions may be held in connection with, or as part of, a meeting of the Board or a Board committee.
OurThe Board currently has five standing committees. Four of theseThe four primary standing committees—Audit, Nominating and Governance, Personnel and Compensation, and Risk—meet on a regular basis. The Executive Committee, meets as needed andwhich is composed of our Chairman and CEO and the chairs of our otherthe four primary standing committees.committees, meets as needed. The Executive Committee may act on behalf of the Board and reports regularly to the full Board. Our Presiding Director chairs the Executive Committee, which did not meet in 2015.2018.
OurBy-laws authorize the Board to create other committees. Unless provide that, unless otherwise stated in its charter, each committee may form and delegate its authority to subcommittees of one or more committee members. OurThe Risk Committee has formed a Technology Subcommittee to facilitate Board-level oversight responsibilities with respect toof technology risk, technology risk management, cybersecurity, information security, business continuity and significant technology initiatives and programs. Our BoardThe Risk Committee has also createdformed a Special Compliance CommitteeSubcommittee to assistfacilitate Board-level oversight of compliance risk, significant compliance-related initiatives and programs, and the maintenance of a
strong compliance risk management culture. OurBy-laws also authorize the Board in its oversight and reporting responsibilities under certain regulatory consent orders.to establish other committees.
Each committee operates under a written charter approved by the Board, or inand each subcommittee operates under a written charter approved by the case of a subcommittee the applicable standing committee. Each committee and subcommittee annually reviews and reassesses its charter. The Nominating and Governance Committee assesses the Executive Committee charter.
Each committee and subcommittee, other than the Executive Committee, performs an annual self-evaluation to determine whether the committee and any of its subcommitteesit is functioning effectively and fulfilling its charter duties.
We describe the main responsibilities of the Board’s four primary standing committees below. The descriptions of the committee functions in this proxy statement are qualified by reference to the chartersapplicable committee charter and our relevantBy-law provisions. The charters for the four Boardprimary standing committees discussed in this section are all available on our website atwww.pnc.com/corporategovernance.
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Audit Committee
Chair | Other members: | |||
Richard B. Kelson |
| |||
Richard J. Harshman | ||||
Martin Pfinsgraff | ||||
Donald J. Shepard | ||||
The Audit Committee consists entirely of directors who are independent as defined in the NYSE’s corporate governance rules and in theSEC regulations of the Securities and Exchange Commission related to audit committee members. When ourthe Board meets on April 26, 201623, 2019 to organize its committees, only independent directors will be appointed to the Committee.
As Mr. ChellgrenShepard has reached the mandatory retirement age established by the Board, he will not stand forre-election to the Board at the annual meeting, and following the annual meeting he will no longer be a member of the Audit Committee.
The Board has determined that each Audit Committee member is financially literate and that at least two members possesspossesses accounting or related financial management expertise. The Board made these determinations in its business judgment, based on its interpretation of the NYSE’s requirements for audit committee members. Acting on the recommendation of the Nominating and Governance Committee, the Board of Directors determined that Mr. Chellgren, Mr. Kelson and Mr. Wasson are eachis an “audit committee financial expert,” as that term is defined by the SEC.
Our Board most recently approved the charter of the Audit Committee on November 19, 2015, and it is available on our website.
The Audit Committee satisfies the requirements of SEC Rule10A-3, which includesaddresses the following topics:
• | The independence of committee members |
• | The responsibility for selecting and overseeing our independent auditors |
• | The establishment of procedures for handling complaints regarding our accounting practices |
• | The authority of the committee to engage advisors |
• | The determination of appropriate funding for payment of the independent auditors and any outside advisors engaged by the committee and for the payment of the committee’s ordinary administrative expenses |
The Board most recently approved the charter of the Audit Committee on November 15, 2018, and it is available on our website atwww.pnc.com/corporategovernance.
The Audit Committee’s primary purposes are to assist the Board by:
• | Monitoring the integrity of our consolidated financial statements |
• | Monitoring the effectiveness of our internal control over financial reporting |
• | Monitoring compliance with our |
• | Monitoring compliance with certain legal and regulatory requirements |
• | Evaluating and monitoring the qualifications and independence of our independent auditors |
• | Evaluating and monitoring the performance of our internal audit function and our independent auditors |
At eachin-person meeting of ourthe full Board, the chairChair of the Audit Committee presents a report of the items discussed and the actions approved at previous meetings.meetings of the Committee.
The Audit Committee’s responsibility is one of oversight. Our managementManagement is responsible for preparing our consolidated financial statements, for maintaining internal controls, and for our compliance with laws and regulations, and the independent auditors are responsible for auditing our consolidated financial statements.
The Audit Committee typically reviews and approves the internal and external audit plans.plans, and reviews and discusses audit reports and results with representatives of our internal audit function and our independent auditors.
The Audit Committee has the authority to retain independent legal, accounting, economic or other advisors. The Committee is directly responsible for the selection, appointment, compensation and oversight of our independent auditors (including the resolution of any disagreements that may arise between management and the auditors regarding financial reporting if disagreements occur)reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditors report directly to the Committee. We describe the role of the Committee in regardas it relates to the independent auditors, including consideration of the rotation of the independent audit firm, in more detail on page 81. For work performed by the independent auditors, the Committee must pre-approve all audit engagement fees and terms, as well as all permitted non-audit engagements. The Committee (or delegate) pre-approves all audit services, audit-related services, and permitted non-audit services. The Committee considers whether providing audit services, audit-related services, and permitted non-audit services will impair the auditors’ independence.84.
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With respect to work performed by the independent auditors, the Audit Committee must approve all audit engagement fees and terms, as well as all permittednon-audit engagements. The Committee (or its delegate)pre-approves all audit services, audit-related services and permittednon-audit services to be performed by the independent auditors. The Committee also considers whether the provision of any audit services, audit-related services or permittednon-audit services will impair the auditors’ independence. We describe the Committee’s procedures for thepre-approval of audit services, audit-related services and permittednon-audit services on page 82. 85.
The Audit Committee receives routineperiodic reports on finance, reserve adequacy, ethics, and internal and external audit.
The Audit Committee hasalso appoints our General Auditor, who leads our internal audit function and reports directly to the authority to retain independent legal, accounting, economic, or other advisors.Committee. The Committee holds regular executive sessions with our management, the General Auditor, the Chief Ethics Officer and the independent auditors. The independent auditors report directly to the Committee. The Committee appoints our General Auditor, who leads PNC’s internal audit function and reports directly to the Committee. The Committee reviews the performance and approves the compensation of ourthe General Auditor.Auditor, and annually reviews the General Auditor succession plan with the CEO and the Board.
Under our corporate governance guidelines, Audit Committee members may serve on the audit committeecommittees of no more than three public companies at the same time, including PNC.
The Audit Committee has approved the report on page 8386 as required under its charter and in accordance with SEC regulations.
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Nominating and Governance Committee
Chair | ||||
Donald J. Shepard | Other members:
Charles E. Bunch | |||
Marjorie Rodgers Cheshire Andrew T. Feldstein Michael J. Ward |
The Nominating and Governance Committee consists entirely of independent directors. When ourthe Board meets on April 26, 2016,23, 2019 to organize its committees, only independent directors will be appointed to the Nominating and Governance Committee.
NeitherAs Mr. Massaro nor Mr. UsherShepard has reached the mandatory retirement age established by the Board, he will not stand forre-election to the Board at the annual meeting, and following the annual meeting neither will no longer be a member of the Nominating and Governance Committee. The new Chair of the Committee will be selected when the Board meets on April 23, 2019 to organize its committees.
OurThe Board most recently approved the charter of the Nominating and Governance Committee on November 19, 2015,15, 2018, and it is available on our website.website atwww.pnc.com/corporategovernance.
At eachin-person meeting of ourthe full Board, the chairChair of the Nominating and Governance Committee presents a report of the items discussed and the actions approved at previous meetings.meetings of the Committee. The primary purpose of ourthe Nominating and Governance Committee is to assist ourthe Board in promoting the best interests of PNC and its shareholders through the implementation of sound corporate governance principles and practices. The Committee also assists the Board by identifying individuals qualified to become Board members. The Committee recommends to the Board the director nominees for each annual meeting of shareholders, and may also recommend the appointment of qualified individuals as directors between annual meetings.
In addition to conducting its annual committee self-evaluation, the Nominating and Governance Committee oversees the annual evaluation of the performance of the Board and other Board committees and reports to the Board on the evaluation results as necessary or appropriate. The Committee also annually reviews and recommends any changes to the Executive Committee charter.
How we evaluate directors and director candidates. At least annually, the Nominating and Governance Committee assesses the skills, qualifications and experience of our directors and recommends a slate of director nominees to the Board. From time to time, the Committee also considers whether to change the composition of our Board. In evaluating existing directors orand new director candidates, the Committee assesses the needs of the Board and the qualifications of the individual. Please seeFrom time to time, the Committee also considers whether to change the composition of the Board. See the discussion on pages 1312 to 17 for moreadditional information onregarding each of our current director nominees.
OurThe Board and its committees must satisfy SEC, NYSE and other banking regulatory standards. At least a majority of our directors must be independent under the NYSE standards, however, ourstandards. Our corporate governance guidelines impose a more rigorous standard and require that a substantial majority (at least 2/3)two-thirds) of our directors be independent. We require a sufficient number of independent directors to satisfy the membership needs of Board committees that also require independence.
Beyond that, theThe Nominating and Governance Committee expects directors to gain a sound understanding of our strategic vision, our mix of businesses and our approach to regulatory relations and risk management. The Board must possess a mix of qualities and skills adequate to address the various risks facing PNC. For a discussion of ourthe Board’s oversight of risk, please see the section entitledCorporate Governance—Board committees—Risk Committee on pages 28 andpage 29.
The Committee has not adopted any specific, minimum qualifications for director candidates. When evaluating each director, as well as new director candidates for nomination, the Committee considers the following Board-approved criteria:criteria set forth in our Corporate Governance Guidelines:
• | A sustained record of high achievement in financial services, business, industry, government, academia, the professions, or civic, charitable ornon-profit organizations |
• | Manifest competence and integrity |
• | A strong commitment to the ethical and diligent pursuit of shareholders’ best |
• | The strength of character necessary to challenge management’s recommendations and actions when appropriate and to confirm the adequacy and completeness of management’s responses to such challenges to his or her satisfaction |
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• |
|
• | Personal qualities that will help to sustain an atmosphere of mutual respect and collegiality among the members of |
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The Nominating and Governance Committee also considers the diversity of perspective, experience, knowledge, education, age and skills experience in the context of each director, as well as the current needs of the Board and its committees, meeting attendance and participation, and the value of a director’s contributionscontribution to the effectiveness of ourthe Board and its committees.
Although the Board has not adopted a formal policy on diversity, the Board recognizes the value of a diverse Board. Therefore, the Nominating and Governance Committee considers the diversity of directors in the context of the Board’s overall needs. The Committee evaluates diversity in a broad sense, recognizing the benefits of demographic and cognitive diversity, but also consideringand the breadth of diverse backgrounds, skills and experiences thatthe directors may bring to ourthe Board.
How we identify new directors. The Nominating and Governance Committee may identifyutilizes as a discussion tool a matrix of certain skills and experiences the Committee believes would be beneficial to have represented on the Board and its committees. The Committee considers PNC’s strategy and industry trends in developing a view of those skills and characteristics that would benefit the Board. The Committee is also focused on what skills are required or beneficial for those serving in key Board positions such as committee chairs, and considers succession planning for those positions. The Committee leverages the matrix, and considers the Board-approved evaluation criteria and various regulatory requirements described above, when identifying potential directorsdirector candidates, which it does in a number of ways. The Committee may consider recommendations made by our current or former directors or members of executive management. The Committee may also identify potential directors through contacts in the business, civic, academic, legal andnon-profit communities. When appropriate, the Committee may retain a search firm to identify candidates. In 2018, the Committee retained a third party search firm to further develop the pool of director candidates, and emphasized to the search firm the importance of diversity in its consideration of director candidates.
In addition, the Nominating and Governance Committee will consider director candidates recommended by our shareholders for nomination at the next year’s annual meeting.meeting of shareholders. For the Committee to consider a director candidate for nomination,recommended by a shareholder, the shareholder must submit the recommendation in writing to the Corporate Secretary at our principal executive office. Eachoffices. The submission must include the information requireddescribed under “Director nomination process”Nomination Process” in Section 3 of our corporate governance guidelines, which can be found atwww.pnc.com/corporategovernance and. To be considered for the 2020 annual meeting of shareholders, the submission must be received by November 15, 2016.13, 2019.
The Nominating and Governance Committee will evaluate director candidates recommended by a shareholder in the same manner as candidates identified by the Committee or recommended by others. The Committee will not consider any candidate with an obvious impediment to serving as one of our directors.
The Nominating and Governance Committee will meet to considerreview and discuss relevant available information regarding a director candidate, in lightconsidering the Board-approved evaluation criteria, the candidate’s contribution to the diversity of the Board approved evaluation criteria and needs of our Board.PNC’s evolving strategic needs. If the Committee doesdecides not to recommend a candidate for nomination or appointment, or for moreadditional evaluation, no further action is taken. The chairChair of the Committee will later report thisthat decision to the full Board. ForBoard, and in the case of a shareholder-recommended candidates,candidate, the Corporate Secretary will communicate the decision to the shareholder.
If the Nominating and Governance Committee decides to recommend a director candidate to ourthe Board as a nominee for election at an annual meeting of shareholders or for appointment by ourthe Board, the chairChair of the Committee will report that decision to the full Board. After allowing forFollowing a discussion regarding the recommendation, the full Board will vote on whether to nominate the candidate for election or appoint the candidate to the Board.
As our corporate governance guidelines describe, invitationsBoard, as applicable. Invitations to join the Board should come fromare extended by the Chairman of the Board and the Presiding Director, and the Chairman, jointly acting on behalf of ourthe Board.
Shareholders who wish to directly nominate a director candidate directly at an annual meeting of shareholders or nominate and include a director candidate in our annual meeting proxy materials must do so in accordance with the procedures contained in ourBy-laws, and should follow as described inShareholder Proposals for the instructions in2020 Annual Meeting on page 94 under the section entitledheadingsShareholder proposals for 2017 annual meeting—Advance notice procedures on page 102.andProxy access procedures, respectively.
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Personnel and Compensation Committee
Chair | ||||
|
Charles E. Bunch | |||
Other members: Debra A. Cafaro Andrew T. Feldstein | ||||
Richard J. Harshman Richard B. Kelson | ||||
Michael J. Ward |
The Personnel and Compensation Committee consists entirely of independent directors. The Committee membership is intended to satisfy the independence standards established by applicable federal income tax and securities laws, as well as NYSE standards. When ourthe Board meets on April 26, 2016,23, 2019 to organize its committees, only independent directors will be appointed to the Committee.
Neither Mr. Chellgren nor Mr. Usher will stand for re-election to the Board at the annual meeting and, following the annual meeting, neither will be a member of the Committee.
OurThe Board most recently approved the charter of the Personnel and Compensation Committee on November 19, 2015,15, 2018, and it is available on our website.website atwww.pnc.com/corporategovernance.
The Personnel and Compensation Committee’s principal purpose is to discharge ourthe Board’s oversight responsibilities relating to the compensation of our executive officers and other specified responsibilities related to personnel and compensation matters affecting PNC. The Committee may also evaluate and approve, or recommend for approval, benefit, incentive compensation, severance, equity-based or other compensation plans, policies and programs. The Committee charter provides that approval of the compensation of the General Auditor and the Chief Risk Officer is made by the Audit Committee and the Risk Committee, respectively.
The Personnel and Compensation Committee has the authority to retain independent legal, compensation, accounting or other advisors. The charter provides the Committee with the sole authority to retain and terminate aan independent compensation consultant acting on the Committee’s behalf, and to approve the consultant’s fees and other retention terms. The Committee retained an independent compensation consultant in 20152018 and prior years. SeeRole of compensation consultants below.
The Personnel and Compensation Committee also reviews with management theCompensation Discussion and Analysis (CD&A) section of the proxy statement, with management. See the Compensation Committee Report on page 55. The CD&Awhich begins on page 39.40. TheCompensation Committee Report is included on page 57. The Committee also evaluates the relationship between risk management and our incentive compensation programs and plans. SeeCompensation and Risk beginning on pages 56 and 57.page 58.
The Personnel and Compensation Committee has responsibility for periodically reviewing our workforce diversity initiatives and for reviewing and evaluating the development of anour executive management succession plan (except for the review and evaluation of the General Auditor and Chief Risk Officer succession plans, which is performed by the Audit Committee and the Risk Committee, respectively). The executive management succession plan, including for reviewing our workforce diversity objectives.the CEO, is reviewed with the full Board from time to time. The Committee reviews a detailed succession planning report at least annually. The materials in the report typically include a discussion of the individual performance of each executive officersofficer, as well as succession plans and development initiatives for other high potential employees.emerging talent. These materials provide necessary background and context to the Committee, and give each Committee member a familiarity with the employee’s position, duties, responsibilities and performance.
How the committee makeswe make decisions. The Personnel and Compensation Committee meets at least sixfour times a year. Before each meeting, the chairChair of the Committee reviews the agenda, materials and issues with members of our management and the Committee’s independent executive compensation consultant, as appropriate. The Committee may invite legal counsel or other external consultants to advise the Committee during meetings and preparatory sessions.
The Personnel and Compensation Committee regularly meets in executive sessions without management present. At eachin-person meeting of ourthe full Board, during an executive session of the chairBoard, the Chair of the Committee presents a report of the items discussed and the actions approved at previous meetings. The chair provides these reports during an executive sessionmeetings of the Board.Committee. The Committee consults with independent directors before approving the CEO’s compensation.
The Personnel and Compensation Committee has adopted guidelines for information that will be presented to the Committee. The guidelines contemplate, among other things, that any major changes in policiesmaterial change to a compensation program, plan or programsarrangement will be considered over the course of at least two separate meetings of the Committee, meetings, with any vote occurring atno earlier than the latersecond meeting.
The Personnel and Compensation Committee reviews all of the elements of theour compensation programs periodically and adjusts those programs as appropriate. Each year, the Committee makes decisions regarding the amount of annual compensation and equity-based or other longer-term compensation for our executive officers and other designated senior employees. For the most part, these decisions are made in the first quarter of each year, following thean evaluation of the prior year’s performance.
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Delegations of authority. The Personnel and Compensation Committee has delegated authority to management to make certain decisions or to take certain actions with respect to compensation or benefit plans or arrangements, (otherother than those that are solely or predominantly for the benefit of executive officers).
officers. For employee benefit, bonus, incentive compensation, severance, equity-based and other compensation or incentive plans and arrangements, the Committee has delegated to our Chief Human Resources Officer (or her designee) the ability to adopt a new plan or arrangement or amend an existing one if:
• | the |
• | the |
This delegation also includes the authority to take certain actions to implement, administer, interpret or construe, or make eligibility determinations under the plans and arrangements.arrangements, including the ability to appoint a plan manager, administrator or committee and to adopt policies and procedures with respect to the plan, except with respect to plans that are overseen by the PNC administrative committee under its charter.
For grants of equity or equity-based awards, the Personnel and Compensation Committee has delegated to our Chief Executive Officerthe CEO and ourthe Chief Human Resources Officer (or the designee of either) the responsibility to make decisions with respect to equity grants for individuals who are not designated by the Committee as executives, including the determination of participants and grant sizes, allocation of the pool from which grants will be made, establishment and documentation of the terms and conditions of such grants, approval of amendments to outstanding grants (subject to any limitations set forth in the applicable plan or the Committee’s delegation of authority) and exercise of any discretionary authority provided to PNC or the Committee pursuant to the terms of the grants.grants and the applicable plan.
The Committee has also delegated to the Audit Committee and the Risk Committee (or, a qualified subcommittee) and toin the case of equity-based grants, a qualified subcommittee of the Risk CommitteeCommittee) have the authority to make equity-based grants and otheraward compensation under applicable plans to theour General Auditor and our Chief Risk Officer, respectively.
Management’s role in compensation decisions. Our executive officers, including ourthe CEO and ourthe Chief Human Resources Officer, often review compensation information with the Personnel and Compensation Committee during Committee meetings and may present management’s views or recommendations. The Committee evaluates these recommendations, generally in consultation with an independent compensation consultant retained by the Committee who attends each meeting.
The chairChair of the Personnel and Compensation Committee typically meets with management and an independent compensation consultant before each meeting of the Committee meeting to discuss agenda topics, areas of focus or outstanding issues. The chairChair of the Committee schedules other meetings with the Committee’s independent compensation consultant without management present as needed. Occasionally, management will schedule meetings with eachthe Chair of the Committee memberor other Committee members to discuss substantive issues. For more complicated issues, theseone-on-one meetings provide a dedicated forum for Committee members to ask questions outside of the meeting environment.
During Personnel and Compensation Committee meetings, the CEO often reviews corporate and individual performance as part of the compensation discussions, and other members of executive management may be invited to speak to the Committee about specific elements of performance or risk management. Our Chief Risk Officer regularly presents to the Committee regarding risk management, including its impact on the Committee’s discussions and decisions regarding executive compensation. The Committee reviews any compensation decisions for the Chief Human Resources Officer and the CEO in executive session, without either officer present for the discussion of their compensation. Any recommendations for CEO compensation are also discussed with the full Board, with no members of management present for the discussion.
Role of compensation consultants. The Personnel and Compensation Committee has the sole authority to retain and terminate any compensation consultant directly assisting it. The Committee also has the sole authority to approve fees and other engagement terms. The Committee receives comparative compensation data from our management, from proxy statements and other public disclosures, and through surveys and reports prepared by compensation consultants.
The Personnel and Compensation Committee retained Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant for 2015.2018. In this capacity, Meridian reportsreported directly to the Committee. In 2015,2018, one or more representatives of Meridian attended all of thein-person and telephonic meetings of the Committee, and met regularly with the Committee without members of management present. Meridian also reviewed meeting agendas and materials prepared by management.
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Meridian and members of management assisted the Personnel and Compensation Committee in its review of proposed compensation packages for our executive officers. For the 20152018 performance year, Meridian prepared discussion materials for the compensation of the CEO, which were reviewed in executive session without any members of management present.session. Meridian also prepared other benchmarking reviews and pay for performance analyses for the Committee. PNC did not pay anypaid no fees to Meridian in 20152018 other than fees paid in connection with work performed by Meridian for the Committee.
The Personnel and Compensation Committee evaluated whether the work of Meridian raised any conflictconflicts of interest. The Committee considered various factors, including the six factors mandated by the SEC rules, and determined that no conflict of interest was raised by the work ofperformed by Meridian described in this proxy statement.
for the Committee.
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Our managementManagement retains other compensation consultants for its own use. In 2015, our2018, management retained McLagan to provide certain market data in the financial services industry. ItManagement also usesengages Willis Towers Watson, a global professional services firm, to provide from time to time, various actuarial and management consulting services from time to us,time, including:
• | Preparing specific actuarial calculations on values under our retirement plans |
• | Preparing surveys of competitive pay practices |
• | Analyzing our director compensation packages and providing related reports to |
• | Providing insurance brokerage and consulting services to mitigate certain property and casualty risks |
• | Providing guidance on certain aspects of total rewards, talent management and other human resources initiatives |
Reports prepared by Willis Towers Watson and McLagan that relate to executive compensation may also be shared with the Personnel and Compensation Committee.
Compensation committee interlocks and insider participation. None ofDuring 2018, the current members of the Personnel and Compensation Committee areincluded Charles E. Bunch, Debra A. Cafaro, Andrew T. Feldstein, Richard B. Kelson, Dennis F. Strigl and Michael J. Ward. None of these directors were officers or employees orof PNC during 2018, nor are they former officers of PNC or any of our subsidiaries. No PNCDuring 2018, no executive officer of PNC served on the board of directors or compensation committee (or other board committee performing equivalent functions) of anotheran entity that employedhad an executive officer who also served on our Board. No PNC executive officer served as a director of an entity that employed an executive officer who also served on ourthe Board or the Personnel and Compensation Committee.
Certain members of the Personnel and Compensation Committee, their immediate family members andor entities with which they are affiliated were our customers or had transactions with us (or our subsidiaries) during 2015.2018. Transactions that involved loans or commitments by subsidiary banks were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features, and otherwise complied with regulatory restrictions onapplicable to such transactions.
PleaseFor additional information, seeDirector and Executive Officer Relationships—Regulation O policies and procedureswhich begins beginning on page 33, for more information.34.
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Risk Committee
Chair | Other members: | |||||
Andrew T. Feldstein | Marjorie Rodgers Cheshire | |||||
William S. Demchak | ||||||
Daniel R. Hesse | ||||||
Donald J. Shepard |
The Board performs its risk oversight function primarily through the Risk Committee, which includes both independent and management directors.
As Mr. MassaroShepard has reached the mandatory retirement age established by the Board, he will not stand forre-election to the Board at the annual meeting, as he has reached the mandatory retirement age set in PNC’s corporate governance guidelines and following the annual meeting he will no longer be a member of the Risk Committee.
OurThe Board most recently approved the charter of the Risk Committee on November 19, 2015,15, 2018, and it is available on our website.website atwww.pnc.com/corporategovernance.
At each in-person meeting of our full Board, the chair of the Committee presents a report of the items discussed and the actions approved at previous meetings. The Risk Committee’s purpose is to require and oversee the establishment and implementation of our enterprise-wide risk governance framework, including related policies, procedures, activities and the processes to identify, measure, monitor and manage direct and indirectmaterial risks of PNC. Direct risks consistat PNC, consisting primarily of credit, risk, market, risk (includes interest rateliquidity, compliance, operational, business, strategic, model, conduct and price risk), liquidity risk, compliance risk (includes fiduciary risk)reputational risks. Accounting and operational risk (includes legal, operating, insurance, and technology risk). Indirect risks include business risk, strategic risk, model risk, and reputation risk. PNC’s major financial reporting risk exposures and related reputational risks are the responsibility of the Audit Committee. The Risk Committee serves as the primary point of contact between our Board and the management-level committees dealing with risk management. The Committee’s responsibility is one of oversight, and the Committee has no duty to assure compliance with laws and regulations.
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The Risk Committee serves as the primary point of contact between the Board and the management-level committees dealing with risk management. The Committee receives regular reports on enterprise-wide risk management credit risk, marketand capital and liquidity risk, operating risk,management, as well as credit, operational, line of business, model and capital management.reputational risks. At eachin-person meeting of the full Board, the Chair of the Risk Committee presents a report of the items discussed and actions approved at previous meetings of the Committee.
The Risk Committee may also form subcommitteesappoints our Chief Risk Officer, who leads our risk management function. The Committee reviews the performance and approves the compensation of the Chief Risk Officer, except with respect to his equity-based grants, which are approved by a qualified subcommittee of the Risk Committee. The Committee reviews the Chief Risk Officer succession plan with the CEO annually and with the Board from time to time.
The Risk Committee, along with the Personnel and Compensation Committee, reviews the risk components of our incentive compensation plans. For a discussion of the relationship between compensation and risk, seeCompensation and Risk beginning on page 58.
Subcommittees. The Risk Committee may form subcommittees as appropriate from time to time.
The Risk Committee has formed a subcommitteeTechnology Subcommittee to assist in fulfilling the Committee’s oversight responsibilities with respect to technology risk, technology risk management, cybersecurity, information security, business continuity and significant technology initiatives and programs. The members of the Technology Subcommittee are:
The Committee appoints our Chief Risk Officer, who leads PNC’s risk management function. The Committee reviews the performance and approves the compensation of our Chief Risk Officer.
Chair | Other members: | |||||
Daniel R. Hesse | Linda R. Medler | |||||
Martin Pfinsgraff | ||||||
Toni Townes-Whitley |
The Risk Committee alonghas also formed a Compliance Subcommittee to assist in fulfilling the Committee’s oversight responsibilities with respect to compliance risk, significant compliance-related initiatives and programs, and the Personnel and Compensation Committee, each reviews themaintenance of a strong compliance risk components of our incentive compensation plans. For a discussionmanagement culture. The members of the relationship between compensation and risk, please seeCompliance Subcommittee are:
Chair | Other members: | |||||
Marjorie Rodgers Cheshire | Joseph Alvarado | |||||
Richard B. Kelson | ||||||
Martin Pfinsgraff |
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The table below showssets forth the namesmembership of our directorseach Board committee as of December 31, 2015.2018 and indicates the number of meetings held by each committee during 2018. The table also showsidentifies the number of Board committee meetings held in 2015, and the members and chairsChair of each committee. We also identifycommittee, the Presiding Director, any management directors and each director who has been designated by ourthe Board as an “audit committee financial expert,”expert” as defined under SEC regulations.
OurThe Board held 10ten meetings in 2015.2018. Each director attended at least 75% of the combined total number
of meetings of the Board and all Board committees on which the director served. OurThe average attendance of all directors at Board and applicable committee meetings was over 98%. The Board has adopted a policy that strongly encourages each director to attend the annual meeting of shareholders in person. We remind each director of this policy beforeprior to the date of the annual meeting. All of our directors then serving attended PNC’s 2015our 2018 annual meeting of shareholders.
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(1) | (2) | (1) | (3) | (1) | ||||||||||||||||||||||||||||
Audit | l | l | l | l | 12 | |||||||||||||||||||||||||||
Nominating and Governance | l | l | l | l | l | 5 | ||||||||||||||||||||||||||
Personnel and Compensation | l | l | l | l | l | 6 | ||||||||||||||||||||||||||
Risk | l | l | l | l | l | l | l | 8 |
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(2) | (1) | (3) | ||||||||||||||||||||||||
Audit | l |
| l | l | 12 | |||||||||||||||||||||
Nominating and Governance | l | l | l | l | 7 | |||||||||||||||||||||
Personnel and Compensation | l | l | l | l | 6 | |||||||||||||||||||||
Risk | l | l |
| l | l | l | l | 9 |
Chair |
(1) | Designated as an “audit committee financial expert” under SEC regulations |
(2) | Management director |
(3) | Presiding |
30 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 29
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
This section discusses relationships between PNC and(including its subsidiariessubsidiaries) and our directors, executive officers, their immediate family members, orand certain of their affiliated entities. These relationships include transactions that we analyzed to determine
considered in determining the independence of our directors.
In this section, we describe the NYSE independence standards for directors and our Board-adopted independence guidelines.
To be independent under NYSE rules, ourThe Board must affirmatively determine that a director does not have ahas no “material relationship” with PNC.PNC for the director to qualify as independent under NYSE rules. A material relationship between a director and PNC could also includecan exist as a result of a relationship between PNC and an organization affiliated with athe director.
NYSE rules describe specific relationships that will always impair independence. The absence of one of these “bright-line” relationships does not mean that a director is automatically independent. The Board must consider all relevant facts and circumstances in determining whether a material relationship exists.
Material relationships that we may consider include commercial, industrial, banking, consulting, legal, accounting, charitable, and family relationships. The ownership of a significant amount of PNC stock, by itself, will not prevent a finding of independence under NYSE rules.
NYSE rules describe specific relationships that will always impair independence. The absence of one of the enumerated relationships under this “bright-line” test does not mean that a director is deemed independent. The Board must consider all relevant facts and circumstances in determining whether a material relationship exists.
The NYSE bright-line independence tests. Each of the following relationships will automatically impair a director’s independence under the NYSE’s “bright-line”bright-line tests:
A director was employed by PNC
within the last three years
A director whosedirector’s immediate family member is awas an executive officer of PNC executive officer
The director’s receipt ofA director or immediate family member received more than $120,000 a year in direct compensation from PNC, except for certain permitted payments (such as director fees)
Certain employment relationships withbetween a director or an immediate family member and PNC’s internal or external or internal auditors
A director (oror immediate family member) whomember has within the last three years been an executive officer of a company whereduring the same time that a PNC executive officer serves or served on that company’s compensation committee
Business relationships involving certain companies affiliated with aA director is an employee or an immediate family member is an executive officer of a directorcompany that makehas made payments to, or receivereceived payments from, PNC in excess of certain amounts
An employee-directorFor purposes of PNC (or a director with an immediate family member who is a PNC executive officer) will not be independent until three years after the employment relationship ends. The otherthese bright-line tests, will impair independence if they existed at any time within the past three years.references to PNC include certain of PNC’s subsidiaries.
For moreAdditional information about the NYSE’s bright-line director independence tests, including the commentary explainingregarding the application of the tests, please go tocan be found on the NYSE’s website atwww.nyse.com.
Our Board guidanceguidelines on independence. To help assess whether a material relationship exists, ourdirector independence, the Board adopted guidelines that describe four categories of relationships that will not be considereddeemed to be material. If a relationship involving a director meets the criteria outlined in this guidance, it will not be deemed to be a material relationship. This guidance can be found in our corporate governancethe guidelines, on our website atwww.pnc.com/corporategovernance. Thethe Board may then affirm athe director’s independence without further analysis of thisthat relationship, provided that the director otherwise meets the other relevant independence tests. These guidelines are included in our corporate governance guidelines, which can be found on our website atwww.pnc.com/corporategovernance.
The four categories of relationships described in this guidancethe director independence guidelines include:
Ordinary course business relationships, such as lending, deposit, banking or other financial service relationships or other relationships involving the provision of products or services betweenby or to PNC or its subsidiaries and involving a director, his or heran immediate family members,member, or an affiliated entity of a director or immediate family member, which meetwhere such relationships satisfy the criteria defineddescribed in the guidelines
Contributions made by PNC, its subsidiaries or a PNC sponsoredPNC-sponsored foundation to a charitable organization inof which a director or an immediate family member is an executive officer, director or trustee,
Relationships involving a director’s relative who is not an immediate family member
30 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
Relationships or transactions between PNC or its subsidiaries and a company or charitable organization where a director or an immediate family member serves solely as anon-management board member or trustee or where an immediate family member is employed in anon-officer position
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 31
These
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
The director independence guidelines also allow investors to assessunderstand the quality of aconsiderations underlying the Board’s independence determinations.
In applying this guidance,these guidelines, an “immediate family member” includes a person’s spouse, parents, children, siblings, mothersmothers- andfathers-in-law, sons sons- anddaughters-in-law, brothers brothers- andsisters-in-law, and anyone (other than domestic employees) who shares such person’s home.
If a director has a relationship that would be not be considered material under our guidelines for independence but crossesis one of the relationships described in the NYSE’s bright-line tests, the NYSE test governsrules govern and the director will not be treatedqualify as independent.
Our Board’sThe Board’s independence determinations. At a meeting held on February 11, 2016,13, 2019, the Board made an independence determination for each of our 16 directors, including our 13 director nominees.
In making these determinations, ourthe Board relied on the evaluation and recommendations made by the Nominating and Governance Committee. The Board considered relevant facts and circumstances, when making these determinations, including an evaluation of the relationships described below.
Our Board based the independence decisions on information known as of February 11, 2016. Each director has been asked to provide updates on changes that could impact the director’s status as an independent director. The Nominating and Governance Committee and Board will consider
information throughout the year that may impact independence.
Non-independent directors. Our Board affirmatively determined that Mr. Demchak is the only non-independent director. Mr. Demchak meets the NYSE’s bright-line relationship test as an executive officer of PNC.in this proxy statement.
Independent directors. Our Board affirmatively determined that each of the directors listed below has no material relationship with PNC under the NYSE corporate governance listing standards. These determinations were based, in part, on an evaluation of the facts and circumstances of relevant relationships in light of PNC’s own independence guidelines. In some cases, the relationships that we analyzed includethe Board evaluated included relationships that a director has as a partner,
member, shareholder, officer or employee of an organization that has a relationship with PNC. TheyThe relationships evaluated may have also includeincluded relationships where an immediate family member of a director is a partner, member, shareholder or officer of an organization that has a relationship with PNC.
The Board based its independence decisions on information known as of February 13, 2019. Each director has been asked to provide updates regarding any changes in circumstances that could impact the director’s status as an independent director. The Nominating and Governance Committee and the Board will consider information received throughout the year that may impact director independence.
Non-independent directors. The Board determined that Mr. Demchak is anon-independent director under the NYSE’s bright-line tests because he is an executive officer of PNC.
Independent directors. Based on these evaluations, ourits evaluation of the facts and circumstances of relevant relationships, the Board affirmatively determined that each of these directorsdirector and director nominee other than Mr. Demchak qualifies as independent under the NYSE’s corporate governance listing standards: Charles E. Bunch, Paul W. Chellgren, Marjorie Rodgers Cheshire, Andrew T. Feldstein, Daniel R. Hesse, Kay Coles James, Richard B. Kelson, Anthony A. Massaro, Jane G. Pepper, Donald J. Shepard, Lorene K. Steffes, Dennis F. Strigl, Thomas J. Usher, Michael J. Ward and Gregory D. Wasson. Mr. Chellgren, Mr. Massaro and Mr. Usher are not nominees for director. Richard O Berndt, George H. Walls, Jr. and Helge H. Wehmeier, who served as directors until April 28, 2015, also qualified as independent until they retired from the Board.NYSE rules.
32 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 31
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
This chartThe table below reflects banking relationships between PNC and thea director, the director’san immediate family members, andmember of a companydirector, or an affiliated entity. Affiliated entities include companies of which thea director is, or was during 2015,2018, a partner, executive officer, or employee, anycompanies of which an immediate family member of a director is, or was during 2015,2018, a partner or executive officer, orand companies in which thea director or any immediate family
member holds a
significant ownership or voting position (an affiliated entity).position. The charttable below also reflects relationships where PNC contributed to a charitable organization of which a director or immediate family member of a director was a trustee, director, or executive officer. All of these transactions meet our Board guidance onsatisfy the Board’s director independence guidelines as transactions that do not impair independence.
Personal or Family Relationships | ||||||||||||||||||||||||||||||||||||||||
| Deposit, Wealth Management and Similar Banking Products(1) | l | l | l | l | l | l | l | l | l | l | l | l | |||||||||||||||||||||||||||
Credit Relationships(2) | l | l | l | l | l | l | l | l | l | l | l | l | ||||||||||||||||||||||||||||
Charitable Contributions(3) | l | l | l | l | l | l | l | l | l | l | l | |||||||||||||||||||||||||||||
Affiliated Entity Relationships | Deposit, Wealth Management and Similar Banking Products(1) | l | l | l | l | l | l | |||||||||||||||||||||||||||||||||
Credit Relationships or Commercial Banking Products(4) | l | l | l | |||||||||||||||||||||||||||||||||||||
| l | l | ||||||||||||||||||||||||||||||||||||||
(1) | Includes deposit accounts, trust accounts, certificates of deposit, safe deposit boxes, workplace banking |
(2) | Includes extensions of credit, including mortgages, commercial loans, home equity loans, credit cards |
(3) | Does not include matching gifts provided to charities personally supported by the director, because under |
(4) | Includes extensions of credit, including commercial loans, credit cards |
Customer relationships. We provide financial services to most of our directors. We also provide financial services to some of their immediate family members and affiliated entities. We offer these services in the ordinary course of our business. Webusiness and provide the services on substantially the same terms and conditions, including price, as we provide to other similarly situated customers.
We also extend credit to some of our directors and their immediate family members and affiliated entities. Federal banking law (Regulation O)(“Regulation O”) governs these extensions of credit. We discuss the impact of Regulation O and our process for managing these extensions of credit on pages 33 and 34.underDirector
and ExecutiveOfficer Relationships—Regulation O policies and procedures beginning on page 34.
Business relationships. We also enter into other business relationships with certain entities affiliated with our directors or their immediate family members. These relationships are entered into in the ordinary course of business.
Certain charitable contributions. We make contributions to charitable organizations where our directors serve as directors, trustees, or executive officers. We also match charitable contributions made by our directors. We describe thishave a matching gift program on page 37.whereby we will match anon-employee director’s personal gifts to qualifying charities up to a limit of $5,000 per year.
32 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 33
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
Code of ethicsBusiness Conduct and Ethics
Our Code of Business Conduct and Ethics contains several provisions that regulate related person transactions. The Code of Business Conduct and Ethics applies generally to all employees, including our executive officers, and directors.
Doing business with PNC.PNC. An employee or an immediate family member may want to engage in a business arrangement, such as the sale or lease of property or the provision of services, with PNC. For these transactions, we require prior approval from a supervisor and our Corporate Ethics Office. If a director desires to engage in a business arrangement with PNC, approval is required from theour Corporate Ethics Office and from athe appropriate Board committee.
Financial services to employees.employees. Our employees and their extended families are encouraged to use PNC for their personal financial services. AnyThese services must be provided on the same terms as are available to the general public, all employees in a market or business, or all similarly situated employees.
Transacting PNC business.business. We prohibit directors and employees from transacting business on behalf of PNC with a supplier or customer in which the director, employee or an extended family member has a significant personal or financial interest. We also prohibit directors and employees from transacting business on behalf of PNC with respect to their own accounts, extended family member accounts or accounts for anyone whose close relationship may reasonably be viewed as creating a conflict of interest. Our phrase “extended family member” is similar to the SEC’s definition of “immediate family member” in Item 404(a) of RegulationS-K. We have established procedures in certain of our businesses to permit employees to transact business with family members, subject to appropriate oversight and compliance with applicable laws and regulations, including Regulation O.
Employing relatives.relatives. We employ relatives of certain executive officers and directors, in some cases under circumstances that constitute related person transactions. SeeFor additional information, seeDirector and Executive Officer Relationships—Family relationships on page 34.35. We track the employment and compensation of relatives of our executive officers and directors. Wedirectors, and we have policies that restrict special treatment in the hiring or compensation of a relative of an executive officer or director. Our employment of a director’s relative would beis also a factor in the determination of the director’s independence under NYSE rules and our own adopted guidelines forregarding director independence. SeeDirector and Executive Officer Relationships—Director independence, which begins beginning on page 30.31.
Waivers. UnderEmployees may generally request waivers or exceptions from certain provisions of the Code of Business Conduct and Ethics employees may generally request waivers or exceptions from our Corporate Ethics Office. In the case of directors and executive officers, any proposed waiver or exception must be approved by both theour Corporate Ethics Office and the appropriate committee of our Board.Board committee. In 2015,2018, no directors or executive officers requested an exemption undera waiver of any of the provisions described above.
Ethics guidelinesGuidelines for directorsDirectors. The Nominating and GovernanceAudit Committee has adopted Ethics Guidelines for Directors that contain comprehensive guidance regarding the various PNC policies that governgoverning the conduct of our directorsdirectors. The guidelines are designed to supplement and assist directors in understanding these policies. These guidelines were most recently approved on August 12, 2015. The guidelines include reference to ourrelevant policies, and procedures applicable to directors, including ourthe Code of Business Conduct and Ethics described above, and our Related Person Transactions Policy and Regulation O policies and procedures, each described in more detail below, as well as our DirectorPre-Clearance of Securities Policy and our Anti-Corruption Policy. The Ethics Guidelines for Directors were most recently approved on August 8, 2018.
Regulation O policies and procedures
We maintain additional policies and procedures to help ensure our compliance with Regulation O, which imposes various conditions on a bank’s extension of credit to directors and executive officers and related interests. Any extensions of credit we make must comply with our policies and procedures in accordance with Regulation O. A director can only meet our guidelines for independence for extensions of credit if the credit complied with Regulation O at the time PNC extended it.
Our Regulation O policies and procedures require:
Extensions of credit to covered individuals or entities be made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with those who are not covered. For credit extensions under a benefit or compensatory program widely available to all employees, we may not give preference to any covered individual.
extensions under a benefit or compensatory program widely available to all employees, we may not give preference to any covered individual |
The covered extension of credit be made following credit underwriting procedures no less stringent than those prevailing at the time for comparable transactions withnon-covered
individuals or entities. The extension of credit may not involve more than the normal risk of repayment or present other unfavorable featuresTHE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 33
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
The amount of covered extensions of credit do not exceed individual and aggregate lending limits, depending on the identity of the borrower and the nature of the loan.
34 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
DIRECTOR AND EXECUTIVE OFFICER RELATIONSHIPS
depending on the identity of the borrower and the nature of the loan |
Our subsidiary bank, PNC Bank, National Association, has a Regulation O Credit Officer to reviewwho reviews extensions of credit to determine our compliance with these policies. If an extension of credit would result in an aggregate credit extension of more than $500,000, the bank’s Board of Directors must approve it. The bank’s Board of
Directors receives a report of all extensions of credit made to directors and executive officers under Regulation O. A director can only meet our guidelines for independence with respect to extensions of credit if the credit complied with Regulation O at the time PNC extended it.
All loans to directors and executive officers and related interests outstanding during 2015:
2018 complied with our Regulation O policies and procedures;procedures.
were made in the ordinary course of business;
were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to PNC; and
did not involve more than the normal risk of collectability or present other unfavorable features.
No family relationship exists betweenrelationships exist among any of our directors or executive officers and any of our other directors or executive officers. There are family relationships between certain of our directors and executive officers and some of the approximately 53,000 PNC employees. These employees, including those discussed below, participate in compensation and incentive plans or arrangements on the same basis as other similarly situated employees.
A brother-in lawbrother-in-law of Gregory Jordan, one of our executive officers, is employed by PNC and had been for many years before Mr. Jordan joined PNC in 2013. He participates in compensation and incentive plans or arrangements on the same basis as similarly situated employees. He does not share a household with Mr. Jordan, is not an executive officer of PNC and does not report directly to an executive officer of PNC. His compensation paid in 20152018 exceeded the $120,000 related person transaction threshold and as a result was reviewed by the Audit Committee.
A son of Michael Hannon, one of our executive officers, is employed by PNC. He participates in compensation and incentive plans or arrangements on the same basis as similarly situated employees. Hedoes not share a household with Mr. Hannon, is not an executive officer of PNC and does not report directly to an executive officer of PNC. His compensation paid in 20152018 exceeded the $120,000 related person transaction threshold and as a result was reviewed by the Audit Committee.
The daughter of Charles E. Bunch, one of ournon-management directors, has been employed by PNC for several years. She participates in compensation and incentive plans or arrangements on the same basis as similarly situated employees. She does not share a household with Mr. Bunch, is not an executive officer of PNC and does not report directly to an executive officer of PNC. Her compensation paid in 20152018 exceeded the $120,000 related person transaction threshold. Her compensationthreshold and as a result was reviewed by the Nominating and Governance Committee.
Indemnification and advancement of costs
We indemnify directors, executive officers, and in some cases employees and agents against certain liabilities. The covered person may have incurred a liability as a result of service on our behalf or at our request. On behalf of a covered person, weWe may also advance the costs of certain claims or proceedings.proceedings on behalf of a covered person. If we advance costs, the covered person agrees to repay us if it is determined that the person was not entitled to indemnification. The insurance
policies we maintain for our directors and executive officers also provide coverage against certain liabilities.
The indemnification provisions, the advancement of costs, and our insurance coverage may provide benefits to our directors and executive officers. During 2015,2018, we advanceddid not advance legal costs with respect to pending litigation against us on behalf of certain former and current directors and officers, including our CEO, who were also named as defendants.any director or executive officer.
34 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 35
Related person transactions policy
Our policy for the review and approval of related person transactions was most recently approved on August 12, 2015. A related person transaction is generally any transaction in which PNC or its subsidiaries is or will be a participant, in which the amount involved exceeds $120,000, and a director (or nominee), executive officer, family member or any beneficial owner of more than 5% of our common stock has or will have a direct or indirect material interest. Our policy for the review and approval of related person transactions was most recently approved on August 8, 2018.
This policy provides guidance on the framework for reviewing potential related person transactions and approving or ratifying related person transactions, and establishes our Presiding Director as the
individual who decides how transactions should be evaluated.
In general, a potential related person transaction that involves a director would be reviewed by ourthe Nominating and Governance Committee, as the transaction could also impact independence. A transaction involvingthat involves an executive officer or beneficial owner of more than 5% of our common stock would generally be reviewed by the Audit Committee. Under this policy, ourThe full Board receives reports on approved, disapproved and ratified transactions. Under the policy, a permitted related person transaction must be considered to be in, or not inconsistent with, the best interestinterests of PNC and its shareholders.
Certain related person transactions
Based on information contained in a Schedule 13G filed with the SEC, BlackRock, Inc. (BlackRock)(“BlackRock”), through certain of its subsidiaries, indicated that it beneficially owned more than 5% of our outstanding shares of common stock as of December 31, 20152018 (seeSecurity Ownership of Management and Certain Beneficial Owners—Security ownership of certain beneficial owners on page 80)83). BlackRock is the beneficial owner of our common stock as a result of being a parent company or control person of the subsidiaries disclosed in its Schedule 13G, each of which holds less than 5% of theour outstanding shares of common stock.
During 2015, PNC2018, we paid BlackRock approximately $8$7 million for use of BlackRock’s enterprise investment system and related services, which include risk analytics, portfolio management, compliance and operational processing. PNCWe also paid BlackRock approximately $4$3 million for securities trading related services and approximately $2$1 million for investment advisory and administration services provided to certain PNCof our subsidiaries and separate accounts assets for a fee based on assets under management. These transactions were entered into on an arm’s length basis and contain customary terms and conditions.
During 2015, PNC2018, we received approximately $9$7 million in fees from BlackRock for distribution and shareholder servicing activities. These transactions were entered into on an arm’s length basis and contain customary terms and conditions.
PNCWe may in the ordinary course of business engage in transactions with BlackRock mutual funds, including using the BlackRock funds as treasury
management vehicles for PNC’sour corporate clients, selling BlackRock investment products to PNCour customers or placing PNCour customer funds in
BlackRock mutual funds, using BlackRock funds as an investment vehicle for the PNC 401(k) accounts, providing commercial loan servicing to BlackRock funds or providing shareholder services to PNCour clients who are shareholders of BlackRock mutual funds.
PNCWe may also make loans to BlackRock or the BlackRock funds. These loans are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to PNC;PNC, and do not involve more than the normal risk of collectability.
PNC holdsWe hold an equity investment of approximately 22% in BlackRock. In connection with this equity investment, PNC haswe have entered into various agreements governing the terms of this relationship. PNCWe received cash dividends from BlackRock of $320approximately $420 million during 2015.2018.
Based on information contained in separate Schedule 13G filings with the SEC, Wellington Management Group, LLP and certain subsidiaries (Wellington) and(“Wellington”), The Vanguard Group, (Vanguard)Inc. (“Vanguard”) and Capital World Investors, a division of Capital Research and Management Company (“CRMC”), each indicated that it beneficially owned more than 5% of our outstanding shares of common stock as of December 31, 20152018 (seeSecurity Ownership of Management and Certain Beneficial Owners—Security ownership of certain beneficial ownerson page 80)83). In the ordinary course of business during 2015, PNC’s2018, our Corporate & Institutional Banking business engaged in treasury management and capital markets transactions with Vanguard. These transactions were entered into on an arm’s length basis and contain customary terms and conditions. This business is also a party to several credit facilities with Vanguard. The credit transactions were on substantially the same terms, including interest rates
36 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 35
RELATED PERSON TRANSACTIONS
Banking business engaged in treasury management and capital markets transactions with Vanguard. These transactions were entered into on an arm’s length basis and contain customary terms and conditions. This business is also a party to several credit facilities with Vanguard and counterparty clearing lines with each of Wellington and CRMC. These credit transactions were on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loansfacilities with persons not related to PNC, and do not involve more than the normal risk of
collectability. In addition, PNC’sour Asset Management Group and PNC Investments includeincludes Vanguard funds, andincluding Vanguard exchange traded funds, in their
its investment platforms.platform, and has historically included Wellington funds in its investment platform and may do so again in the future. PNC Investments includes Vanguard exchange traded funds in its investment platform. While wePNC Investments does not currently do not include Wellington funds in theits platform, weit may do so in the ordinary course when evaluating the funds to be included. Furthermore, our Deferred Compensation Plan included several Vanguard funds as an investment option during 2015.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires persons who own more than ten percent of a registered class of our equity securities (currently, none) and our directors and executive officers to file with the SEC initial reports of ownership and reports inof changes in ownership of any PNC equity
securities. To the best of our knowledge, all formssuch reports were filed on a timely basis during 2015.2018. In making this statement, we have relied in part on the written representations of our directors and executive officers and on copies of the reports provided to us.
Our Board’sThe Nominating and Governance Committee of the Board reviews all elements ofnon-employee director compensation, explainedwhich are described below, and makes an annual compensation recommendation to the Board. In addition to annual compensation, the Committee may approve special compensation to a director for extraordinary service. The primary objectives of the Committee’s annual review are to confirm continued alignment
with business and shareholder interests,
evaluate the competitiveness of our director compensation program relative to the peer group, and identify and respond to continued changes in director compensation in light of the competitive environment. The Nominating and Governance Committee conducted its annual compensation review for 20152018 on April 28, 2015.24, 2018.
Mr. Demchak receives no additional compensation for serving as a PNC director.
The following table describes the components of director compensation in 2015:2018:
Annual Retainer | ||||
Each Director | $ | 67,500 | ||
Presiding Director | $ | 30,000 | ||
Additional retainer for Chairs of Audit, Risk, and Personnel and Compensation Committees | $ | 20,000 | ||
Additional retainer for Chair of Nominating and Governance Committee | $ | 15,000 | ||
Additional retainer for Chair of Executive Committee | $ | 10,000 | ||
Meeting Fees (Board) | ||||
Each meeting (except for quarterly scheduled telephonic meetings) | $ | 1,500 | ||
Each quarterly scheduled telephonic meeting | $ | 1,000 | ||
Meeting Fees (Committee/Subcommittee) | ||||
First six meetings | $ | 1,500 | ||
All other meetings | $ | 2,000 | ||
Equity-Based Grants | ||||
Value of 1,504 deferred stock units awarded as of April 28, 2015 | $ | 137,481 |
Annual Retainer | ||||
Each director | $ | 90,000 | ||
Additional retainer for Presiding Director | $ | 30,000 | ||
Additional retainer for Chairs of Audit, Nominating and Governance, Personnel and Compensation, and Risk Committees | $ | 25,000 | ||
Additional retainer for Chairs of Compliance Subcommittee and Technology Subcommittee | $ | 25,000 | ||
Meeting Fees (Committee/Subcommittee) | ||||
First six meetings | $ | 1,500 | ||
All other meetings | $ | 2,000 | ||
Equity-Based Grants | ||||
Value of 999 deferred stock units awarded as of April 24, 2018 | $ | 144,865 |
Deferred compensation plans.Our non-management directors may choose to defer the compensation they receive fromfor meeting fees and retainers under our Directors Deferred Compensation Plan. Our Outside Directors Deferred Stock Unit Plan provides for automatic deferrals of any stock unitsUnder this plan, the directors may elect to defer compensation into an account that we may award from time to time. For compensation deferred under these plans:
The deferred compensation account tracks the price of PNC common stock (the Directors Deferred Compensation Plan allowsor an interest rate defined in the plan. The accounts that track the price of PNC common stock are credited with a number of units (including
fractional shares) that could have been purchased with the equivalent of PNC common stock cash dividends. We do not pay above-market or preferential earnings on any director to
|
compensation that is deferred. The directordirectors may choose the payout date and beneficiary (the stock unit plan does not allow awhether the payout, date until retirement or age 72).
The payoutswhich is made in cash, will be made in cash.a lump sum or up to 10 annual installment payments.
36 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 37
DIRECTOR COMPENSATION
Under the Outside Directors Deferred Stock Unit Program, a subprogram of the 2016 Incentive Award Plan, eachnon-employee director is eligible to receive an annual grant of deferred stock units that vest immediately upon grant and are paid out in shares of PNC common stock at retirement. The deferred stock units accrue dividends with reinvestment equal to the number of units that could have been purchased with the equivalent of PNC common stock cash dividends (rounded down to the nearest whole share).
Other director benefits. We generally limit the benefits that we provide to our directors, but we regularly provide the following:
• | Charitable matching |
• | Insurance |
• |
|
We may also provide other incidental benefits to our directors from time to time, including tickets to
cultural, social, sporting or other events and small gifts for holidays, birthdays or special occasions. WeIn limited circumstances, we may also provide travel for directors on corporate aircraft for personal purposes, in limited circumstances, such as when a family emergency arises or when
a seat is available on a previously scheduled flight. We determine the value of these benefits based on the incremental cost to PNC as described on pages 52 and 53 and we include the amount in the “All Other Compensation” column of the Director compensation in 2018 table below.
Director stock ownership requirement. OurThe Board has adopted a common stock purchase guideline for ournon-management directors. Under this guideline, each director must own at least 5,000 shares of PNC common stock (including phantom stock units). Until a director meets this ownership level, he or she must purchase or acquire common stock or stock units that equal at least 25% of the annual retainer for that year. A director may satisfy this requirement through open market purchases or by deferring compensation into stock units under the Directors Deferred Compensation Plan. As of December 31, 2015,2018, the minimum ownership threshold for directors was valued at $476,550, and all$584,550. All of our directors serving at that time, other than Marjorie Rodgers CheshireDebra A. Cafaro, who was appointed in October 2014August 2017, and Gregory D. WassonLinda R. Medler and Martin Pfinsgraff, who waswere appointed in July 2015,January 2018, satisfied the ownership guideline.
Director compensation in 20152018
For the fiscal year 2015,2018, we provided the following compensation to ournon-employee directors:
Director Name | Fees Earned(a) | Stock Awards(b) | All Other Compensation(c) | Total | ||||||||||||
Richard O. Berndt* | $ | 37,620 | - | $ | 20,455 | $ | 58,075 | |||||||||
Charles E. Bunch | $ | 92,750 | $ | 137,481 | $ | 38,089 | $ | 268,320 | ||||||||
Paul W. Chellgren | $ | 104,250 | $ | 137,481 | $ | 117,836 | $ | 359,567 | ||||||||
Marjorie Rodgers Cheshire | $ | 123,250 | $ | 137,481 | $ | 2,027 | $ | 262,758 | ||||||||
Andrew T. Feldstein | $ | 125,750 | $ | 137,481 | $ | 14,517 | $ | 277,748 | ||||||||
Kay Coles James | $ | 96,750 | $ | 137,481 | $ | 48,079 | $ | 282,310 | ||||||||
Richard B. Kelson | $ | 137,250 | $ | 137,481 | $ | 59,275 | $ | 334,006 | ||||||||
Anthony A. Massaro | $ | 107,750 | $ | 137,481 | $ | 50,245 | $ | 295,476 | ||||||||
Jane G. Pepper | $ | 110,250 | $ | 137,481 | $ | 63,532 | $ | 311,263 | ||||||||
Donald J. Shepard | $ | 133,750 | $ | 137,481 | $ | 71,712 | $ | 342,943 | ||||||||
Lorene K. Steffes | $ | 102,250 | $ | 137,481 | $ | 64,956 | $ | 304,687 | ||||||||
Dennis F. Strigl | $ | 112,750 | $ | 137,481 | $ | 85,503 | $ | 335,734 | ||||||||
Thomas J. Usher | $ | 130,250 | $ | 137,481 | $ | 110,942 | $ | 378,673 | ||||||||
George H. Walls, Jr.* | $ | 37,620 | - | $ | 54,106 | $ | 91,726 | |||||||||
Gregory D. Wasson** | $ | 46,380 | - | $ | 217 | $ | 46,597 | |||||||||
Helge H. Wehmeier* | $ | 25,620 | - | $ | 62,409 | $ | 88,029 |
Director Name | Fees Earned(a) | Stock Awards(b) | All Other Compensation(c) | Total | ||||||||||||
Charles E. Bunch
|
|
$135,000
|
|
|
$144,865
|
|
|
$ 70,447
|
|
|
$350,312
|
| ||||
Debra A. Cafaro
|
|
$115,500
|
|
|
$144,865
|
|
|
$ 2,579
|
|
|
$262,944
|
| ||||
Marjorie Rodgers Cheshire
|
|
$155,000
|
|
|
$144,865
|
|
|
$ 22,342
|
|
|
$322,207
|
| ||||
Andrew T. Feldstein
|
|
$149,500
|
|
|
$144,865
|
|
|
$ 44,535
|
|
|
$338,900
|
| ||||
Daniel R. Hesse
|
|
$136,000
|
|
|
$144,865
|
|
|
$ 15,745
|
|
|
$296,610
|
| ||||
Kay Coles James*
|
|
$ 25,500
|
|
|
$ –
|
|
|
$ 18,812
|
|
|
$ 44,312
|
| ||||
Richard B. Kelson
|
|
$158,000
|
|
|
$144,865
|
|
|
$ 95,794
|
|
|
$398,659
|
| ||||
Linda R. Medler
|
|
$111,000
|
|
|
$144,865
|
|
|
$ 5,359
|
|
|
$261,224
|
| ||||
Jane G. Pepper**
|
|
$ 36,000
|
|
|
$ –
|
|
|
$ 84,012
|
|
|
$120,012
|
| ||||
Martin Pfinsgraff
|
|
$135,000
|
|
|
$144,865
|
|
|
$ 5,000
|
|
|
$284,865
|
| ||||
Donald J. Shepard
|
|
$192,000
|
|
|
$144,865
|
|
|
$137,250
|
|
|
$474,115
|
| ||||
Lorene K. Steffes**
|
|
$ 34,500
|
|
|
$ –
|
|
|
$ 93,018
|
|
|
$127,518
|
| ||||
Dennis F. Strigl**
|
|
$ 37,500
|
|
|
$ –
|
|
|
$128,323
|
|
|
$165,823
|
| ||||
Michael J. Ward
|
|
$106,500
|
|
|
$144,865
|
|
|
$ 13,687
|
|
|
$265,052
|
| ||||
Gregory D. Wasson***
|
|
$109,500
|
|
|
$144,865
|
|
|
$ 17,068
|
|
|
$271,433
|
|
* |
|
** | Ms. Pepper, Ms. Steffes and Mr. Strigl served as directors through April 24, 2018. |
*** | Mr. Wasson |
(a) | This column includes the annual |
38 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
DIRECTOR COMPENSATION
(b) | The |
As of December 31, |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 37
DIRECTOR COMPENSATION
Director Name | Cash-Payable Stock Units | Stock-Payable Stock Units | ||||||
Charles E. Bunch
|
| 20,292
|
|
| 2,247
|
| ||
Debra A. Cafaro
|
| 1,064
|
|
| 1,012
|
| ||
Marjorie Rodgers Cheshire
|
| 5,256
|
|
| 2,247
|
| ||
Andrew T. Feldstein
|
| 12,189
|
|
| 2,247
|
| ||
Daniel R. Hesse
|
| 2,591
|
|
| 2,247
|
| ||
Richard B. Kelson
|
| 17,659
|
|
| 2,247
|
| ||
Linda R. Medler
|
| 184
|
|
| 1,012
|
| ||
Martin Pfinsgraff
|
| –
|
|
| 1,012
|
| ||
Donald J. Shepard
|
| 41,483
|
|
| 2,247
|
| ||
Michael J. Ward
|
| 4,355
|
|
| 2,247
|
|
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
None of ournon-employee directors had any outstanding stock options or unvested stock awards as of December 31, |
(c) | This column includes income under the Directors Deferred Compensation Plan and the Outside Directors Deferred Stock Unit Plan |
38 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 39
COMPENSATION DISCUSSION AND ANALYSIS
This section (CD&A)Compensation Discussion and Analysis (“CD&A”) explains our executive compensation philosophy, describes our compensation programs and reviews our compensation decisions for the following named executive officers (NEOs)(“NEOs”):
Name of NEO | Title | |
William S. Demchak | Chairman, President and Chief Executive Officer | |
Robert Q. Reilly | Executive Vice President and Chief Financial Officer | |
Michael P. Lyons | Executive Vice President, | |
E William Parsley, III | Executive Vice President and Chief | |
Joseph | Executive Vice |
common share. Our | ||
We | ||
We | ||
We returned $4.4 billion of capital to our shareholders through share repurchases of $2.8 billion and common stock dividends of $1.6 billion, including raising the quarterly common stock dividend to $0.95 per share, an increase of 27%. | ||
Although our stock price at December 31, 2018 decreased fromyear-end 2017, we compared favorably to our peers with a total shareholder return that was above the peer median for 2018, slightly below the top quartile of peers over the past three years, and in the top quartile of peers during the five-year period ended December 31, 2018. | ||
We successfully expanded our corporate banking business into new markets (Denver, Houston and Nashville). | ||
We |
We review various performance metrics with our Board’s Personnel and Compensation Committee each quarter and after the end of our performance year. For the key metrics listed below, we compare this year’s performance to how we performed last year, how we performed against this year’s budget, and how we performed against peers (see page 50 for the companies in our 2015 peer group). We also provide information to the Committee on other important capital, risk, expense and business metrics, some of which are shown below. For a general explanation of the metrics that we use to evaluate our compensation program, and our rationale for using them, see page 45.
KEY PERFORMANCE METRICS | 2015 actual(1) | 2014 actual(1) | 2015 budget(2) | |||||||||
Net interest income (in millions) | $ | 8,278 | $ | 8,525 | $ | 8,401 | ||||||
Noninterest income (in millions) | $ | 6,947 | $ | 6,850 | $ | 6,660 | ||||||
Diluted earnings per common share | $ | 7.39 | $ | 7.30 | $ | 6.88 | ||||||
Return on common equity (without goodwill) | 12.22% | 12.84% | 11.61% | |||||||||
Return on assets | 1.17% | 1.28% | 1.10% | |||||||||
Efficiency ratio(3) | 62.15% | 61.71% | 63.08% | |||||||||
2015 actual(1) | 2014 actual(1) | |||||||||||
Annual total shareholder return | 6.81% | 20.32% | ||||||||||
Tangible book value per share | $ 63.65 | $ | 59.88 | |||||||||
Tier 1 risk-based capital ratio | 12.00% | 12.60% | ||||||||||
Return on economic capital vs. cost of capital | 5.06% | 5.02% |
These tables include non-GAAP financial measures. See Annex A for additional information.
|
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 39
COMPENSATION DISCUSSION AND ANALYSIS
The Committee also reviewed PNC’s performance against key strategic objectives. Despite a challenging revenue environment, management continued to drive growth throughout the franchise and make strategic investments to position PNC for long-term success.
|
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On pages 47 to 52, we discuss in more detail how our 2018 performance affected our compensation decisions.
Compensation philosophy and principles
A well-designed compensation program provides incentives to achieve desired results, helps to retain and attract talent, and discourages excessive risk-taking. ThisIn this section, talks aboutwe discuss how we view
executive compensation and why we make the decisions that we do. Our The Personnel and Compensation
Committee (referred to in this CD&A as the Committee) relies on several keyclear principles to help guide its executive compensation decisions:
COMPENSATION PRINCIPLES | |||||||||
| |||||||||
Provide appropriate | Create value Align executive | ||||||||
Provide competitive compensation opportunities to attract, retain and motivate high-quality executives | |||||||||
Discourage excessive risk-taking Encourage |
40 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The Committee believes that the successful application of these principles requires a thoughtful program design, which includes a balanced evaluation of performance metrics.performance. The Committee believes that discretion, flexibility and judgment are
critical to its ability to deliver incentive compensation that
reflects near-term performance results and progress toward longer-term objectivespriorities that enhance PNC’s ability to continueallow PNC to create value for our shareholders. The following table illustrates some important features of our executive compensation program:
40 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
WHAT WE DO | WHAT WE DON’T DO | |||||
| ||||||
û | ||||||
| We discourage excessive | |||||
û | ||||||
| ||||||
û | ||||||
| We have a clawback and forfeiture policy. Our | |||||
û | ||||||
| ||||||
û | ||||||
| We retain an independent compensation consultant. The |
|
| |||||
Stakeholder engagement and impact of 2015 2018say-on-pay vote
| The annual advisory vote on executive compensation(“say-on-pay”) that we provide to shareholders received another year of strong support in 2018, with over 97% of our shareholders voting in favor. | |
| For the past several years, we have initiated outreach efforts with certain institutional investors based on investor interest. In 2018, we continued to engage in a productive dialogue with our investors and certain other stakeholders. | |
| The Committee considered the results of thesay-on-pay vote as one factor in its compensation decisions, among the other factors discussed in this CD&A. The Committee did not recommend any changes to the executive compensation program based on thesay-on-pay vote or specific feedback from shareholders. |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 41
In 2015, our shareholders voiced substantial support for the compensation of our NEOs, with approximately 97% of the votes cast approving the “say-on-pay” advisory vote on executive compensation. In seven years of say-on-pay votes, this represented the highest level of support that we have received from our shareholders.COMPENSATION DISCUSSION AND ANALYSIS
For the past several years, we have initiated specific outreach efforts with certain institutional investors. In 2015, we invited many of our largest institutional
shareholders to participate in telephone conferences to discuss governance, compensation, and other matters included in the proxy statement. We had productive conversations with the shareholders who agreed to participate. Based on the results of these efforts and in light of the strong investor support in 2015, the Committee did not believe that any significant changes to the compensation program were needed. The Committee considered the results of this vote as one factor in its compensation decisions, among the other factors discussed in this CD&A.
Key program features
The Committee reviews and approves the compensation to be paid to our CEONEOs and a group ofother senior leaders that includes our NEOs.leaders. We strive forseek clarity and transparency in our compensation
structure, using several features that we believe will help to designcreate a balanced program. While we try to reflectconsider the expectations of various
stakeholders, we want our compensation program to achieve multiple objectives, consistent with our compensation principles. The Committee also regularly reviews the operation of our compensation program to help ensure that our objectives continue to be met.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 41
COMPENSATION DISCUSSION AND ANALYSIS
We provide incentives for performance over different time horizons (short- and long-term). | ||
We embed performance goals into a significant portion of our long-term incentives, and include a risk-based performance review that could reduce or eliminate the awards. | ||
We reward achievement against both quantitative and qualitative goals, while allowing for discretion. | ||
We connect pay to our own performance, relative to our internal objectives and controls, as well as relative to the performance of a carefully selected peer group. | ||
We consider market data and trends when making pay decisions. | ||
We place a substantial majority of compensation at risk. | ||
| We pay some incentive compensation in cash today, while deferring a majority of incentives for several years through potential equity-based payouts. | |
Regulatory expectations
As a large diversified financial institution,services company, we must also comply with various regulatory requirements. The Board of Governors of the Federal Reserve (Federal Reserve)(the “Federal Reserve”) regulates PNC as a bank holding company and has provided guidance and set expectations with respect to our current compensation program. The Office of the Comptroller of the Currency (OCC)(the “OCC”) regulates our primary banking subsidiary, and also sets expectations for our compensation program. We expect that theThe Federal Reserve, the OCC and other financial industry regulatory entities, including the SEC, will remain closely involved inmay provide guidance periodically on compensation matters.
Taken as a whole, our program provides incentives for performance over the short and long-term, rewards achievement against measurable goals and qualitative objectives, considers market data and discretion, and uses cash today as well as equity deferred into the future. The Committee evaluates multiple performance metrics, both on an absolute basis and as measured against our peers. The
Committee regularly reviews the operation of our compensation program to help ensure that our objectives continue to be met.
Total compensation targets
Each of our NEOsNEO receives a total compensation target for the year – this includes the— consisting of a base salary and an incentive compensation target (payable in cash(cash and equity-based awards). We generally set these targets in the first quarter of the year, or when an executive joins PNC or assumes new responsibilities.
In establishing totalTotal compensation targets include the Committee reviews available market data for each position. We do not set targets by formula. Instead, the Committee evaluates a variety of factors, including the appropriateness of the job match and market data, the responsibilities of the position at PNC and the executive’s demonstrated performance, skills, and experience.following components:
The total compensation target for each NEO generally consists of the following components:
Our Committee believes that annual compensation should include a substantial performance-based component that varies from year to year. For information on how our Committee evaluates performance to determine the annual incentive payout, see the discussion starting on page 44.
We want our NEOs to receive a significant portion of compensation in equity that pays out, if at all, over several years. To achieve that goal, at least 50% of the total compensation target is allocated to long-term equity awards. For our CEO (and one other NEO), this proportion increases to 60%. The remainder of the annual incentive payout is delivered as an annual cash incentive award.
The Committee believes that these components collectively provide an appropriate balance between fixed and variable amounts, short-term and long-term duration of payouts, and cash and equity-based awards.
42 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
UnderWhen constructing an appropriate total compensation target for an NEO, the Committee
uses a framework that is consistent with our current programs, each NEO generally receives theircompensation principles:
| Targets are informed by market data but take several factors into account. The Committee reviews available market data, but does not use a formula to set the target. The Committee evaluates many factors, including the appropriateness of the job match and market data, the responsibilities of the position and the executive’s demonstrated performance, skills and experience. | |||
| At least 50% of compensation is equity-based and not payable for several years. The Committee believes that a significant portion of compensation should be at risk, tied to PNC stock performance and not payable, if at all, for several years. Long-term equity-based awards make up at least 50% of the value of the total compensation target, with that percentage rising to 60% for our CEO and two other NEOs. The remainder of the annual incentive payout is delivered as a cash incentive award. | |||
| The equity-based incentive is split between two forms of awards. Each NEO generally receives a long-term incentive award in two primary forms, a Performance Share Unit (“PSU”) and a Restricted Share Unit (“RSU”). Payouts under these awards are deferred for multiple years. For information on the terms of the PSU and RSU awards, see theLong-term incentive program section immediately below on pages 43 to 45. |
The Committee believes the total compensation targets collectively provide an appropriate balance between fixed and variable amounts, measuring short-term and long-term performance, immediate
and deferred payouts, and cash and equity-based awards. For information on how the 2018 incentive compensation decisions by the Committee compared to the targets, see page 49.
Long-term incentive program
In 2018, the Committee approved a redesign of the long-term incentive award in two primary forms(“LTI”) program that are equally weighted by dollar value – the incentive performance unit, which measures PNC performance over a three-year period,applies to our NEOs. In considering and the performance-based restricted share unit (RSU), which vests in equal annual installments over a four-year period. In additionapproving changes to the regularLTI program, the Committee focused on the following goals:
Throughout several meetings held in 2017 and 2018, the Committee engaged in an incentive performance unit tiedextensive discussion of potential changes to the LTI program, with discussions led by management and feedback provided by the Committee’s independent compensation consultant. Before making its
decision, the Committee reviewed several options and features, considered various performance metrics, evaluated financial models (including expected outcomes and backtesting) and considered input from a range of our Asset & Liability Management (ALM) function, which he manages. Each long-term incentive award also contains forfeiture provisions that can reduce or eliminate payouts if PNC does not meet risk-based criteria.stakeholders.
AllThe new grants consisted of Performance Share Units (“PSUs”) and Restricted Share Units (“RSUs”). The Committee made these grants to NEOs beginning in 2018 (for 2017 performance) as well as in 2019 (for 2018 performance). These awards, and all other equity-based awards, are made under PNC’s shareholder-approved 20062016 Incentive Award Plan. The table below summarizes the material terms and conditions of these awards.the awards granted in 2019 for 2018 performance (these terms and conditions do not differ from the same terms and conditions of the awards granted in 2018 for 2017 performance):
Incentive performance units | Performance-based RSUs | ALM incentive performance units | ||||||||||||||
Who receives an award? | All NEOs | All NEOs | Mr. Parsley | |||||||||||||
How do we measure performance? | • 2016-2018 (three years)
• Vesting occurs at the end of the period
• Performance based on absolute and relative metrics
- 50% based on our return on common equity without goodwill (ROCE) compared to our cost of common equity (COCE)
- 50% based on our EPS growth rank against our peers
• 0-125% of target award
• Units payable in PNC common stock up to target (0-100%) and payable in cash above target (100-125%) | • 2016-2019 (four years)
• Vesting occurs in annual installments
• Vested amount adjusted based on PNC’s annual total shareholder return (TSR)
• Aligns executives’ interests directly with the interests of shareholders, and has a considerably stronger tie to performance than time-based restricted shares while also supporting retention | • 2016-2018 (three years)
• Vesting occurs at the end of the period
• PNC’s ALM performance compared to a benchmark performance index
• 0-200% of target award
• Units payable in cash | |||||||||||||
• 75-125% of target award
• Units payable in PNC common stock | ||||||||||||||||
What is the payout? | • The payout percentage grid ranges are listed below. Actual payout percentages will be interpolated – taking into account how close the performance metric or peer group rank is to the actual metric or rank above and below. For example, if EPS Growth Rank is closer to 5th than 6th, the actual payout percentage will be closer to 115% than 105%. If ROCE as a % of COCE is between 105% and 110%, the payout percentage will be between 100% and 125%. | |||||||||||||||
ROCE as % of COCE | Payout % |
EPS | Payout % | Annual TSR | Payout % | ALM vs. index | Payout % | |||||||||
>= 110% | 125% | 1 | 125% | >= +25% | 125% | >= +40 basis points | 200% | |||||||||
105% | 100% | 2 | 125% | 0% | 100% | +20 basis points | 150% | |||||||||
100% | 75% | 3 | 125% | <= -25% | 75% | 0 to -25 basis points | 100% | |||||||||
75% | 50% | 4 | 120% | -35 basis points | 40% | |||||||||||
<= 50% | 0% | 5 | 115% | <= -40 basis points | 0% | |||||||||||
6 | 105% | |||||||||||||||
7 | 95% | |||||||||||||||
8 | 80% | |||||||||||||||
9 | 60% | |||||||||||||||
10 | 40% | |||||||||||||||
11 | 0% | |||||||||||||||
12 | 0% | |||||||||||||||
How do we adjust for risk? | • If PNC does not meet or exceed the required Tier 1 risk-based capital ratio for “well-capitalized” institutions in a specific year, the award will be forfeited.
• If our return on economic capital does not exceed our cost of capital for the year, the Committee may reduce or eliminate the award. | |||||||||||||||
What are other important provisions? | • No voting rights
• Dividends will accrue until vesting and be paid out in cash, adjusted for actual performance | • No voting rights
• No accrued dividends |
Name of Award | % of | Vesting | Metrics | Payout Range (% of target) | Stock or Cash Payout | |||||
Performance | 60% | After3-year | PNC’s return on equity (ROE) compared to performance targets EPS growth rank against our peer group | 0-150% | Stock | |||||
Restricted Share Unit (RSU) | 40% | Annual installments over 3 years | Time-based | 0-100% | Stock |
Performance Share Units (PSUs). With respect to 2018 performance, the Committee granted PSUs in early 2019 that represent an opportunity to receive an award paid in shares of PNC common stock to certain of our senior executives, including all of the NEOs. The award payout is based on how PNC performs against two corporate performance metrics over a three-year performance period. Performance on these two metrics generates a
percentage (the corporate performance factor). The award may be decreased if PNC fails to satisfy a risk performance metric or based on a discretionary risk performance review conducted by the Committee. After applying any risk-related performance adjustment (and if PNC satisfies the risk performance metric), the resulting percentage is applied to the number of target PSUs to determine the final number of units available for settlement.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 43
COMPENSATION DISCUSSION AND ANALYSIS
The PSUs have a maximum payout opportunity of 150% of target. Payout of any award under the PSUs also requires the satisfaction of service requirements and other conditions of the award.
The Committee also retains limited discretion to reduce or increase the size of the final payout as it deems equitable to maintain the intended economics of the award in light of changed circumstances. These circumstances are limited to external events affecting PNC or members of its peer group or its financial statements that are outside of PNC’s control and not reasonably anticipated.
Corporate performance metrics. The two corporate performance metrics include an absolute metric (an internal PNC measurement against a target) and a relative metric (PNC performance against peers). The relative metric is PNC’s three-year average earnings per share (“EPS”) growth, as adjusted, compared to the three-year average EPS growth of PNC peers, and the absolute metric is PNC’s three-year average return on equity (“ROE”), as adjusted, compared to three-year ROE performance targets established in advance by the Committee.
The EPS growth metric will be calculated for each year of the performance period. At the end of the three-year performance period, the annual EPS growth percentages will be averaged. PNC’s three-year average EPS growth will be compared to the three-year average of each member of the peer group to determine our percentile rank.
The ROE metric will be calculated annually for each year of the performance period. At the end of the three-year performance period, average ROE for the performance period will be determined as the average of PNC’s annual ROE for each year.
Once PNC’s percentile rank relating to average EPS growth and PNC’s average ROE are determined for purposes of the grants, a corporate performance factor, ranging from0-150%, will be calculated using the grid below and applying bilinear interpolation. The following chart shows the corporate performance metrics for the 2019 grants (the corporate performance metrics for the 2018 grants were included in our 2018 proxy statement).
Three-year average EPS growth (relative)
| ||||||||
PNC percentile rank
|
PNC percentile rank
|
PNC percentile rank
| ||||||
Three-year average ROE (absolute)
|
13.00%
|
100.0%
|
125.0%
|
150.0%
| ||||
12.25%
|
87.5%
|
112.5%
|
137.5%
| |||||
11.25%
|
75.0%
|
100.0%
|
125.0%
| |||||
10.25%
|
62.5%
|
87.5%
|
100.0%
| |||||
8.00%
|
50.0%
|
75.0%
|
87.5%
| |||||
Below
|
0.0%
|
25.0%
|
50.0%
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When calculating our average ROE and EPS growth for this award, we will reverse theafter-tax impact of our provision for credit losses — that is, we will add back the provision amount to our reported net income. We will then subtract total net charge-offs from the net income amount. Net charge-offs represent the amount of a loan (or portion of a loan) that we remove from our balance sheet because we deem it to be uncollectible, less any recoveries. We expect this adjusted ROE and EPS growth to present a good measurement of how efficiently we create profit, as it will replace a forecasted loss amount (provision) with the actual losses incurred (net charge-offs). Adjustments will also be made on an after-tax basis for the impact on PNC and the companies in our peer group, as appropriate, of items resulting from a change in federal tax law, discontinued operations (as such term is used under GAAP), acquisition costs and merger integration costs, and the net impact on PNC of significant gains or losses related to certain BlackRock transactions.
Risk-based performance reviews. In addition to the corporate performance factor, we use a risk-based performance metric to determine whether to reduce the number of target shares available for payout. The risk-based performance metric looks at whether or not, as of the end of a given performance year, PNC has a Basel III common equity Tier 1 capital ratio of at least 7.0% based on current definitions and requirements (“CET1 Ratio”).
For each year during the three-year performance period that PNC fails to meet or exceed the CET1 Ratio,one-third of the target number of PSUs granted will be eligible for forfeiture. At the end of the performance period, the Committee will conduct its final performance review and reduce the number of target shares available for payout if PNC failed to meet or exceed the CET1 Ratio for one or more years during the performance period.
In addition, and independent from the evaluation of the CET1 Ratio, the Committee may conduct a risk performance review. This discretionary review would generally occur in connection with a risk-
44 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
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related action of potentially material consequence to PNC. If the Committee exercises its discretion to conduct a risk performance review, the Committee will review and determine if a reduction to the corporate performance factor for risk performance is appropriate for the PSUs.
Dividends. The PSUs will accrue cash dividend equivalents during the performance period. These accrued dividend equivalents will be adjusted by the same percentage as the target PSUs at the time of payout, and will then be paid out in cash.
Restricted Share Units (RSUs). With respect to 2018 performance, the Committee also granted RSUs in early 2019 that represent an opportunity to receive an award paid in shares of PNC common stock to certain of our senior executives, including all of the NEOs. The RSUs have three-year pro rata vesting, and each of the three annual installments (tranches) will vest on the anniversary of the grant date, and require the satisfaction of service requirements and other award conditions.
Risk-based performance reviews. Each RSU tranche is subject to a risk-based performance metric, based on the same risk-related performance metric that
will be applied to the PSUs, with all or a portion of that tranche being eligible for forfeiture. At the end of each year, the Committee will conduct a risk-based performance review and decrease the number of shares available for payout under the applicable tranche if PNC failed to meet or exceed the CET1 Ratio for theyear-end preceding the vesting date for that tranche.
In addition, as with the PSUs, the Committee may conduct a discretionary risk performance review in connection with a risk-related action of potentially material consequence to PNC, independent from the evaluation of the risk-based performance metric (the CET1 Ratio). If the Committee exercises its discretion to conduct a risk performance review, the Committee will review and determine if a reduction for risk performance is appropriate for the applicable RSU tranche.
Dividends. The RSUs will accrue cash dividend equivalents. The accrued dividend equivalents with respect to a tranche will pay out in cash at the same time, and will be adjusted by the same payout percentage, as the RSUs to which they relate.
Other compensation and benefits
In addition to the components included in the total compensation target outlined above, our executive
compensation program also includes the following components:
Perquisites |
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Change in Control Arrangements | • | |
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Health and Retirement Plans | • Promote health and | |
• Help employees achieve financial security after |
Evaluating performance
The Committee evaluates severalbelieves that an effective executive compensation program requires a comprehensive evaluation of performance across multiple categories. This evaluation generally includes a review of financial performance compared to both peers and internal benchmarks (such as budget and prior year results), how we executed against strategic objectives and how we managed risk. The performance factors may be quantitative or qualitative.
The Committee does not believe that a formula-driven compensation program is the most effective way to pay for performance, as formulas may reward short-term results that do not serve the long-term interests of our shareholders. Metrics that rely on formulas may also be inappropriately skewed by results outside of management’s control. Finally, formulas may undervalue important strategic objectives that do not translate to immediately quantifiable metrics.
The performance metrics when making compensation decisions. We design these metrics toreviewed by the Committee align, to the extent possible, the objectives of our management, long-term shareholders and banking regulators. In some cases, these stakeholders have different objectives that cannot be easily reconciled –— for example, long-term shareholders seeking higher returns may be willing to tolerate more risk than a federal banking
regulator would.would accept. That is one reason we use multiple metrics, representing achievement against both objective and subjective goals, as well as significant adjustments for risk management. The Committee does not necessarily favor one metric over another. Instead, the Committee uses these metrics to gain a comprehensive understanding of our overall performance.
44 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 45
COMPENSATION DISCUSSION AND ANALYSIS
The following chart describes some of the key metrics that the Committee evaluates, and provides a brief explanation of why we use them.each metric. We consider all of these metrics in our overall evaluation
of executive compensation, and some of these metrics are also used to calculate payouts under the long-term incentive program, as described above.
Capital and risk metrics | ||||
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The | ||||
Expense metrics
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| The efficiency ratio helps us evaluate how efficiently we operate our business. The ratio divides our noninterest expense (such as compensation and benefits, occupancy costs, equipment and marketing) by our revenue. In general, a smaller ratio is better. A bank’s efficiency ratio will be affected, however, by its particular mix of businesses. We calculate risk-adjusted efficiency ratio by adding our net charge-offs to our noninterest expense, which helps to show the quality of our overall credit decisions. | |||
Profitability metrics
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| EPS is a common metric used by investors to evaluate the profitability of a company. It shows the earnings (net income) we make on each outstanding share of | |||
common stock. While EPS represents a specific dollar amount, EPS growth represents the percentage growth of EPS | ||||
Return on assets | Investors often evaluate banks by their asset size, with loans and investment securities making up the largest components of assets. ROA is our annualized net income divided by our average assets and represents how efficiently we use assets to generate profit. | |||
Return on | Return on equity (including return on common equity) measures profitability by showing how much profit we generate (net income) with the money our shareholders have invested (equity). It shows how efficiently we deploy our investors’ funds. Return on equity measures total annualized net income divided by average total shareholders’ equity. Return on common equity is our annualized net income attributable to our common shareholders, divided by average common shareholders’ equity. | |||
Revenue metrics
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| Net interest income measures the revenue generated from lending and other activities minus all interest expenses (such as interest paid on deposits and borrowing). It is a good indicator of performance for banks given the importance of | |||
Noninterest income | Noninterest income measures the fees and other revenue we derive from our businesses (other than interest income). A healthy mix of net interest income and noninterest income provides diverse earnings streams and lessens a bank’s reliance on the interest rate environment. | |||
Valuation metrics
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| Thisnon-GAAP financial measure takes our total tangible common shareholders’ equity (intangible assets, such as goodwill, are excluded) and divides that by the number of shares outstanding. This provides investors with an objective valuation method and allows them to compare relative values of similar companies. | |||
Total shareholder | TSR is a common metric used to show the total | |||
After reviewing these metrics and evaluating our corporate performance, the Committee reviews the individual performance of each NEO. The CEO reviews his assessment of the performance of executives, including the NEOs, with the Committee. To help the Committee understand the market, management provides current benchmark compensation data for each NEO. The Committee
discusses, then approves the compensation amounts for each of our NEOs. In awarding compensation to each NEO, the Committee considers PNC’s overall performance for the year, as well as performance for the lines of business or functions managed by the NEO, and the individual performance of the NEO.
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20152018 compensation decisions
For 2015,2018 total compensation targets
At the beginning of 2018, the Committee set the following total compensation targets for our NEOs:
William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III(1) | Joseph C. Guyaux | ||||||||||||||||
Base salary | $ | 1,100,000 | $ | 500,000 | $ | 700,000 | $ | 500,000 | $ | 620,000 | ||||||||||
Incentive compensation target(2) | $ | 9,900,000 | $ | 3,000,000 | $ | 4,800,000 | $ | 5,500,000 | $ | 2,480,000 | ||||||||||
Annual cash incentive portion | $ | 3,300,000 | $ | 1,250,000 | $ | 1,500,000 | $ | 1,000,000 | $ | 930,000 | ||||||||||
Long-term incentive portion | $ | 6,600,000 | $ | 1,750,000 | $ | 3,300,000 | $ | 4,500,000 | $ | 1,550,000 | ||||||||||
Total compensation target | $ | 11,000,000 | $ | 3,500,000 | $ | 5,500,000 | $ | 6,000,000 | $ | 3,100,000 |
William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III | Joseph E. Rockey | ||||||||||||||||
Base salary (annualized) | $ | 1,100,000 | $ | 700,000 | $ | 700,000 | $ | 700,000 | $ | 500,000 | ||||||||||
Incentive compensation target | $ | 11,500,000 | $ | 3,800,000 | $ | 7,300,000 | $ | 7,300,000 | $ | 3,250,000 | ||||||||||
Annual cash incentive portion | $ | 3,940,000 | $ | 1,550,000 | $ | 2,500,000 | $ | 2,500,000 | $ | 1,375,000 | ||||||||||
Long-term incentive portion | $ | 7,560,000 | $ | 2,250,000 | $ | 4,800,000 | $ | 4,800,000 | $ | 1,875,000 | ||||||||||
Total compensation target | $ | 12,600,000 | $ | 4,500,000 | $ | 8,000,000 | $ | 8,000,000 | $ | 3,750,000 |
The market data reviewed by the Committee showshows that our CEO’s total compensation target generally fell within 15%approximately 20% of the median compensation for peers, as adjusted for PNC’s size. The total compensation targets for our other NEOs are generally fell nearaligned with the unadjusted median compensation for peers, except for Mr. Guyaux whose target was positioned above the median. The Committeemarket, based Mr. Guyaux’s total compensation target on his demonstrated performance and leadership across a variety of roles at PNC throughout his career, and his agreementour size relative to take on a new role in 2015 as the CEO and President of our mortgage business, following the departure of the prior head of that business.peers. For the 20162018 performance year, the Committee also approved target increases for our CEO and two other NEOs. The Committee increased incentivethe total compensation targets for Mr. Demchak ($10,500,000)(from $11.6 to $12.6 million), Mr. Reilly (from $3.75 to $4.5 million), Mr. Lyons ($6,050,000)(from $6.75 to $8.0 million), Mr. Parsley (from $7.5 to $8.0 million) and Mr. Parsley ($6,900,000). The Committee also increased Mr. Parsley’s base salaryRockey (from $3.0 to $600,000.$3.75 million). The Committee approved these increases based on theeach executive’s scope of duties, performance, skills and experience, of each NEO, as well as changes in market information for similar executives at other financial institutions. Mr. Parsley’s target increase was also based on the significant expansion of his duties at the end of 2015 and beginning of 2016, as he now has responsibility for our mortgage business, and for retail lending and pricing, in addition to his previous responsibilities.
2018 performance
At meetings held during the first quarter of 2016,2019, the Committee reviewed PNC’s 2018 performance
with the CEO, the Chief Risk Officer and other members of management. In evaluating our 2018 performance, the Committee reviewed our performance against several metrics, as compared to our 2017 results and our 2018 budget previously reviewed with the Board, and relative to the performance of our peers described on page 53. These metrics included adjusted net interest income, noninterest income, diluted EPS, ROE, ROA and risk-adjusted efficiency ratio.
The Committee also considered other performance metrics, including net income, tangible book value per share and TSR, each as compared to our peers, and our CET1 Ratio, a risk-based metric that is described in more detail on page 44. For an explanation of our rationale for the 2015 performance year. As stated earlier in this CD&A,using certain metrics, see page 46.
Key performance metrics | 2018 results(1) | 2018 budget | 2017 results(1) | 2018 results vs. 2018 budget | 2018 results v. 2017 results | |||||||||||||||
Net interest income (in millions)* | $ | 9,721 | $ | 9,671 | $ | 9,134 | +0.5% | +6.4% | ||||||||||||
Noninterest income (in millions) | $ | 7,411 | $ | 7,345 | $ | 7,221 | +0.9% | +2.6% | ||||||||||||
Diluted EPS* | $ | 10.69 | $ | 10.21 | $ | 8.02 | +4.7% | +33.3% | ||||||||||||
ROE* | 11.40% | 10.72% | 9.18% | +6.3% | +24.2% | |||||||||||||||
ROA* | 1.41% | 1.33% | 1.14% | +6.0% | +23.7% | |||||||||||||||
Risk-adjusted efficiency ratio* | 62.55% | 63.84% | 66.37% | +2.0%(2) | +5.8%(2) | |||||||||||||||
Net income (in millions) | $ | 5,346 | $ | 5,388 | ||||||||||||||||
Tangible book value per share* | $ | 75.42 | $ | 72.28 | ||||||||||||||||
Annual total shareholder return | (17.0)% | 26.0% | ||||||||||||||||||
CET1 Ratio | 9.60% | 9.80% |
* | Non-GAAP financial measure. See Annex A for a reconciliation ofnon-GAAP financial measures to GAAP, and for additional information. |
(1) | Some of the results include certain adjustments to PNC’s performance. Based on these adjustments, the results in the table may differ from reported results under GAAP. PNC’s 2018 results included adjustments to reflect the addition of provision for credit losses and reduction of net charge-offs. PNC’s 2017 results included adjustments related to the impact of the Tax Cuts and Jobs Act. When reviewing PNC’s performance against peer performance, we adjust peer performance for the same types |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 47
COMPENSATION DISCUSSION AND ANALYSIS
of items for which we could adjust PNC performance. We adjusted peer results for the impact of the Tax Cuts and Jobs Act (2018 and 2017), various merger-related and restructuring charges (2018 and 2017), income or loss from discontinued operations (2018 and 2017), Visa-related adjustments (2018) and gains from the sale of businesses or equity investments (2018 and 2017). |
(2) | As a smaller efficiency ratio is better than a larger one, we have presented the reduction in the risk-adjusted efficiency ratio as a positive change when compared to our budget and the prior year’s results. |
The Committee noted that PNC delivered consistent performancea successful year in 2015,2018, with solidgrowth in both loans and deposits, and record total revenue. When compared to the prior year, PNC increased adjusted net interest income in a difficult
environment, a well-positioned balance sheet, strong shareholder returns,(6.4%) and substantial execution against our main strategic objectives. We performed well against our peers in return on assets, a key metric for the banking industry. We werenoninterest income (2.6%), placing PNC above the peer median in both categories. In addition, PNC generated positive operating leverage for non-interest income (up 1.4% over last year), EPS growth (up 1.2% over last year)the year by growing revenues while reducing expenses, and delivered a risk-adjusted efficiency ratio that improved significantly from the prior year’s results, and atwas also above our peer median.
The Committee discussed two metrics where PNC exceeded its 2018 budget, but placed slightly below the peer median for return on common equitythe year — adjusted without goodwill. We lagged ourEPS growth (up 33.3% year over year) and adjusted ROE (11.40%). The Tax Cuts and Jobs Act of 2017, which reduced the marginal tax rate for all peers, served as the primary driver for EPS growth and ROE. The Committee noted that PNC’s tax credit business, which helped PNC generate an average marginal tax rate that was generally lower than peers in prior years, had muted the positive earnings effect of the tax cuts in 2018 — in general, the peer group realized a larger EPS benefit due to a larger reduction in net interest incometheir tax rates. Consistent with a focus on long-term strategy and performance, the Committee evaluated below-median adjusted EPS growth but this reflected,and ROE by comparing what management could influence (a long-term strategic decision to grow a tax credit business that has fueled lower tax rates) to what was outside of management’s control (aone-time legislatively-driven reduction in large part,tax rates).
While TSR for 2018 exceeded the desire to stay within our risk appetitepeer median, it was negative 17.0% for the year. The Committee noted that PNC delivered a 9.6% TSR over the three-year period, which was slightly below the top quartile of peers, and an 11.1% TSR over the five-year period, which was in the current low interest rate environment, which has limited our opportunitiestop quartile of peers. PNC also returned $4.4 billion of capital to grow loans. Based on an evaluationshareholders in 2018 through a combination of share repurchases ($2.8 billion) and common stock dividends ($1.6 billion), including raising the quarterly common stock dividend to $0.95 per share (a 27% increase).
Finally, the Committee reviewed the significant improvements to PNC’s 2015 performance, including a reviewrisk management infrastructure. These included enhancements to the enterprise operational risk framework and implementation of the performanceframework across our lines of business and risk domains, the continued development of a comprehensive compliance management system, and the enterprise-wide validation of risk controls.
The Committee reviewed these and other metrics described previouslyand concluded that in this CD&Athe aggregate, they reflected a successful year in 2018, on both an absolute basis and management’s execution against strategic objectives,peers. At these meetings held in early 2019, the Committee determinedalso reviewed PNC’s performance against the strategic priorities listed below, which had previously been reviewed with the Board in 2018. The Committee concluded that it was appropriatemanagement continued to drive growth across the franchise and make above-target incentive compensation awardsstrategic investments to position PNC for long-term success, including the following achievements against these strategic priorities:
2018 strategic priorities
Expanding our leading banking franchise to new markets and digital platforms | We successfully expanded into new markets (Denver, Houston and Nashville). | |||
We successfully launched our national retail digital strategy in markets outside of our existing retail branch network. | ||||
Deepening customer relationships by delivering a superior banking experience and financial solutions | We continued to focus on the strategy of transforming the customer experience in our Retail Banking segment. | |||
We enhanced product and service offerings within our Corporate & Institutional Banking segment. | ||||
Leveraging technology to innovate and enhance products, services, security and processes | We deployed several automation solutions into production processes across PNC. | |||
We successfully launched a new cloud-based sales and service platform, designed to transform the way we manage customer data, as well as a new enterprise fraud platform. |
In addition to evaluating our NEOs. The actual incentive compensation payoutscorporate performance based on these financial and strategic metrics, the Committee also reflectreviewed the individual performance including business unit (or function) performance and consideration of risk management.
each NEO. The CEO discussed the individual performance of the NEOs with the Committee, and, where appropriate, discussed the
performance of the lines of business or functions managed by the NEOs. The Committee approved compensation awards for each NEO based on an evaluation of corporate, business and individual performance. For ourThe Committee discussed compensation recommendations for the CEO the Committee approved the compensation amounts in an executive session, with no members of management present. Meridian, the Committee’s independent compensation consultant for 2015, participated in this discussion with the Committee.
4648 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
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Meridian, the Committee’s independent compensation consultant for 2018, and our Chief Human Resources Officer, but with no other members of management present. Following this discussion, the Committee approved the compensation amounts for our CEO in an executive session.
The Committee also reviewed the CEO compensation decisions in an executive session of the independent members of the board of directors of PNC,Board, with no members of management present. In that executive session, the Committee allowed time for the independent directors to provide
comments or questions about the CEO’s performance or compensation.
Based on an overall evaluation of PNC’s 2018 performance, the Committee determined that it was
appropriate to award incentive compensation that was above target for each NEO but below last year’s aggregate incentive compensation awards for all NEOs. The key contributing factors in the Committee’s compensation decisions included PNC’s solid absolute and compensation.relative growth in 2018 while staying within our desired risk appetite, continued disciplined expense management and demonstrable execution against strategic objectives. While PNC outperformed most peers in annual TSR, the negative return to our shareholders over the year played a role in why several NEO incentive compensation awards, including our CEO’s award, were lower than in 2017. The actual incentive compensation payouts also reflected individual performance, including business unit or function performance and consideration of risk management.
2018 compensation decisions
The table below shows, for each NEO, the incentive compensation target for 20152018 and the actual annual cash incentive and long-term equity-based incentives awarded in 2016 for 20152018 performance.
2015 incentive compensation decisions | William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III(1) | Joseph C. Guyaux | |||||||||||||||
Incentive compensation target | $ | 9,900,000 | $ | 3,000,000 | $ | 4,800,000 | $ | 5,500,000 | $ | 2,480,000 | ||||||||||
Incentive compensation awarded | $ | 11,900,000 | $ | 3,300,000 | $ | 6,100,000 | $ | 6,100,000 | $ | 2,880,000 | ||||||||||
Annual incentive award (cash) | $ | 4,100,000 | $ | 1,400,000 | $ | 2,020,000 | $ | 1,300,000 | $ | 1,130,000 | ||||||||||
Long-term incentive award (equity-based) | $ | 7,800,000 | $ | 1,900,000 | $ | 4,080,000 | $ | 4,800,000 | $ | 1,750,000 |
The amounts shown in the table above differincentive compensation awarded for 2018 performance differs from the amounts reflectedwhat we disclose in the Summary compensation table on page 58.60. In accordancecompliance with SEC regulations, thatrules, the 2018
incentive compensation disclosed in the Summary compensation table showsincludes incentive awards from two different performance years — the long-term equity-based incentives granted in 2015 based on 2014 performance.
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The charts below show the base salary for 2015 for each NEO,2018 (for 2017 performance) and the annual cash incentive and long-term incentive awardedpaid in 2016 for 2015 performance. The bar surrounding each circle shows the amount of total compensation that is variable and at-risk.2019 (for 2018 performance).
William S. Demchak | Robert Q. Reilly | Michael P. Lyons | E William Parsley, III | Joseph E. Rockey | ||||||||||||||||
Incentive compensation target | $ | 11,500,000 | $ | 3,800,000 | $ | 7,300,000 | $ | 7,300,000 | $ | 3,250,000 | ||||||||||
Incentive compensation awarded for 2018 performance | $ | 12,650,000 | $ | 4,000,000 | $ | 8,050,000 | $ | 8,050,000 | $ | 4,000,000 | ||||||||||
Annual cash incentive portion | $ | 4,400,000 | $ | 1,650,000 | $ | 2,800,000 | $ | 2,800,000 | $ | 1,750,000 | ||||||||||
Long-term incentive portion | $ | 8,250,000 | $ | 2,350,000 | $ | 5,250,000 | $ | 5,250,000 | $ | 2,250,000 | ||||||||||
Incentive compensation disclosed in the Summary compensation table(1) | $ | 13,880,000 | $ | 4,012,500 | $ | 7,900,000 | $ | 8,500,000 | $ | 3,750,000 | ||||||||||
Annual cash incentive portion (2018 performance) | $ | 4,400,000 | $ | 1,650,000 | $ | 2,800,000 | $ | 2,800,000 | $ | 1,750,000 | ||||||||||
Long-term incentive portion (2017 performance) | $ | 9,480,000 | $ | 2,362,500 | $ | 5,100,000 | $ | 5,700,000 | $ | 2,000,000 |
Under SEC regulations, the incentive compensation amounts disclosed in the Summary compensation table on page 60 include the cash incentive award paid in 2019 for 2018 performance (the
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THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 4749
COMPENSATION DISCUSSION AND ANALYSIS
As described on pages 43 to 45, the long-term incentive portion of the incentive compensation granted by the Committee in 2019 consisted of two grants, the PSUs and the RSUs.
The charts below show the base salary for 2018 for
each executive, and the annual cash incentive and long-term incentive awarded in 2019 for 2018 performance. The blue and orange portions of each circle show the amount of total compensation that isat-risk and not guaranteed.
Chairman, President and Chief Executive Officer | ||
• As our CEO, Mr. Demchak delivered another successful year in 2018, with reported net income of $5.3 billion, or $10.71 per diluted common share, and record total revenue of $17.1 billion. • PNC generated positive operating leverage for the year, and improved the efficiency ratio over 2017. • PNC returned $4.4 billion of capital to shareholders through both share repurchases and dividends. • PNC successfully expanded its corporate banking business into new markets, launched a national retail digital strategy in markets outside of our retail branch network, continued to transform the customer experience in our Retail Banking segment and enhanced our products and services in the Corporate & Institutional Banking segment. • We continued to invest in talent by raising the minimum pay rate to $15 per hour for eligible employees, decreasing turnover, achieving several organizational diversity objectives and hiring PNC’s first accessibility officer. • We strengthened our enterprise risk framework. • Please see the discussion on pages 47 to 49 for additional 2018 achievements considered by the Committee. | ||
Robert Q. Reilly Executive Vice President and Chief Financial Officer | ||
2018 KEY ACHIEVEMENTS • As our CFO, Mr. Reilly provided • Mr. Reilly continued to lead the strategic planning and budgeting process for PNC and successfully identified, established and managed enterprise-wide financial goals consistent with our short-term and long-term financial and risk objectives. • PNC generated positive operating leverage for the year, improved its efficiency ratio over 2017 and exceeded our $250 million continuous improvement program savings goal
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Executive Vice President and Head of Corporate & Institutional Banking and Asset Management Group | ||
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Executive Vice President and Chief Operating Officer | ||
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• • On the balance sheet side, Mr. Parsley delivered outstanding investment portfolio performance, exceeding the benchmark index on a total basis by over $430 million (62 basis points) in 2018. • The capital markets group delivered improved business results in several business lines, achieving record net income in 2018. | ||
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 4951
COMPENSATION DISCUSSION AND ANALYSIS
Joseph E. Rockey Executive Vice President and Chief Risk Officer | ||
2018 KEY ACHIEVEMENTS • As our Chief Risk Officer, Mr. Rockey had an outstanding year as he guided PNC through an increasingly complex and changing risk and regulatory landscape, while strengthening our risk management framework and continuing to manage the enterprise to its desired risk appetite. • Mr. Rockey oversaw the comprehensivebuild-out of our enterprise operational risk framework and implementation of the framework across our lines of business and risk domains. • He made significant progress on a multi-year project to enhance the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) program at PNC. • He also led continued efforts to develop a comprehensive compliance management system, and the enterprise-wide validation of risk controls. | ||
Prior long-term incentive awards
At meetings held in the first quarter of 2019, the Committee also approved payouts from awards that had previously been granted to each of our NEOs. The Committee evaluated performance and risk-based metrics for the outstanding long-term incentive awards that vested based on performance for the period ended December 31, 2018. The Committee approved a payout based on a formula that compared our actual results to previously established performance-based metrics. In addition to confirming any applicable achievement under the performance metrics, the Committee also confirmed that PNC met or exceeded applicable risk-based metrics. SeeOutstanding equity awards at 2018 fiscalyear-end beginning on page 63 for additional information regarding these grants, including the established goals, the results achieved, the payout percentage grids and the payouts under each grant.
For the incentive performance units (“Standard IPUs”) granted in 2016 to all NEOs, the Committee approved a payout of 102.61% of target based on the results achieved against the goals established for the three-year performance period (2016-2018).
These units are paid out in stock up to the target amount and in cash for any amount above target.
For the incentive performance units related to Asset & Liability Management performance (“ALM IPUs”) granted in 2016 to Mr. Parsley, the Committee approved a payout of 200% of target based on the results achieved against the goals established for the three-year performance period (2016-2018). These units are paid out in cash.
For the performance-based restricted share units (“PRSUs”) granted in 2015, 2016 and 2017 to all NEOs, the Committee approved a payout of 83.02% of target for the 2018 tranche based on our TSR for the year. These units are paid out in stock.
For the RSUs granted in 2018 to all NEOs, the Committee approved a payout of 100% of target for the 2018 tranche. These awards pay out at target over three years, subject to the NEO satisfying a service-based vesting requirement and PNC meeting specified risk-based performance requirements. These units are paid out in stock.
Compensation policies and practices
The Committee adopts policies and procedures to assist in the fulfillment of its duties, and reviews these from time to time. Wewe describe some of the significant policies and procedures in this section. In addition to formal policies and procedures, the Committee has several practices that it follows in the fulfillment of its duties and responsibilities. Some of thesethose practices are described below.
Compensation and risk
The Committee evaluates the risks inherent in the incentive compensation program. For a detailed discussion of how the Committee evaluates risk, please seeCompensation and Risk, which begins beginning on page 56.58.
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Independent compensation consultant
The Committee retains Meridian Compensation Partners, LLC as its independent compensation consultant. For a discussion of this relationship and the considerations that the Committee takes into account when determining independence, please see pages 27the discussion under the headingCorporate Governance—Board committees—Personnel and 28.Compensation Committee—Role of compensation consultants beginning on page 27.
Peer group
The Committee selects a peer group each year. We use this group to help measure relative performance and to determine payouts under our long-term incentive performance unit payouts.awards. We
also use this group for general compensation comparisons. In approving a peer group, the Committee analyzes several factors, including the mix and complexity of businesses, the markets being served, market capitalization, asset size and changes resulting from mergers or shifts in strategic direction. We also look at the companies with whom we generally compete for talent.
TheEach year, the Committee annually reviews the composition of the peer group with management and its independent compensation consultant. For 2015,2018, the Committee believed that the existing peer group generally provided a balanced mix of institutions in light of our size, mix and scope of businesses, products and services, and sources of executive talent. However, in performing this review, the Committee decided to remove Comerica Incorporated from the peer group. The Committee approved the removal of Comerica based on its relatively smaller size, business mix and geographic footprint as compared to PNC. Even with this change, PNC is larger than a majority of the peers, positioned between the median and the 75th percentile of the peer group, based on total assets, revenue and market capitalization. For 2018, the Committee approved the addition of Citizens Financial Group, Inc. (“Citizens”). Citizens was added to the peer group based on several factors, including financial metrics that are comparable to the existing peers, an overlap in geographic markets with PNC, similar products and services offered, and the inclusion of Citizens in the peer groups of certain other peers of PNC.
The 2018 peer group for 2016 remained unchanged from 2015included PNC and includedthe following 12 companies, (including PNC), with assets revenues and market capitalization for each company measured as of December 31, 2015:2018 and revenue measured for the full year:
Peer Group Company | Ticker Symbol | Peer | Assets (in billions) | Peer | Revenue (in billions) | Peer | Market (in billions) | Ticker Symbol
| Assets (in billions) | Revenue (in billions) | Market Capitalization (in billions) | |||||||||||||||||||||||||||||||||||||||||||||||||
Bank of America Corporation | BAC | JPM | $ | 2,351.7 | JPM | $ | 93.5 | WFC | $ | 276.8 | BAC | JPM | $ | 2,622.5 |
| JPM | $ | 109.0 |
| JPM | $ | 319.8 |
| |||||||||||||||||||||||||||||||||||||
BB&T Corporation | BBT | BAC | $ | 2,144.3 | WFC | $ | 86.1 | JPM | $ | 241.9 | BBT | BAC | $ | 2,354.5 |
| BAC | $ | 91.2 |
| BAC | $ | 238.3 |
| |||||||||||||||||||||||||||||||||||||
Capital One Financial Corporation | COF | WFC | $ | 1,787.6 | BAC | $ | 82.5 | BAC | $ | 174.7 | COF | WFC | $ | 1,895.9 |
| WFC | $ | 86.4 |
| WFC | $ | 211.1 |
| |||||||||||||||||||||||||||||||||||||
Citizens Financial Group, Inc. | CFG | USB | $ | 467.4 |
| COF | $ | 28.1 |
| USB | $ | 73.5 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Fifth Third Bancorp | FITB | USB | $ | 421.9 | COF | $ | 23.4 | USB | $ | 74.5 | FITB | PNC | $ | 382.3 |
| USB | $ | 22.5 |
| PNC | $ | 53.4 |
| |||||||||||||||||||||||||||||||||||||
JPMorgan Chase & Co. | JPM | PNC | $ | 358.5 | USB | $ | 20.1 | PNC | $ | 48.0 | JPM | COF | $ | 372.5 |
| PNC | $ | 17.1 |
| COF | $ | 35.4 |
| |||||||||||||||||||||||||||||||||||||
KeyCorp | KEY | COF | $ | 334.0 | PNC | $ | 15.2 | COF | 38.1 | KEY | BBT | $ | 225.7 |
| BBT | $ | 11.6 |
| BBT | $ | 33.1 |
| ||||||||||||||||||||||||||||||||||||||
M&T Bank Corporation | MTB | BBT | $ | 209.9 | BBT | $ | 9.6 | BBT | $ | 29.5 | MTB | STI | $ | 215.5 |
| STI | $ | 9.2 |
| STI | $ | 22.5 |
| |||||||||||||||||||||||||||||||||||||
Regions Financial Corporation | RF | STI | $ | 190.8 | STI | $ | 8.0 | STI | $ | 21.8 | RF | CFG | $ | 160.5 |
| FITB | $ | 6.9 |
| MTB | $ | 19.8 |
| |||||||||||||||||||||||||||||||||||||
SunTrust Banks, Inc. | STI | FITB | $ | 141.1 | FITB | $ | 6.5 | MTB | $ | 19.3 | STI | FITB | $ | 146.1 |
| KEY | $ | 6.4 |
| FITB | $ | 15.2 |
| |||||||||||||||||||||||||||||||||||||
U.S. Bancorp | USB | RF | $ | 126.1 | RF | $ | 5.4 | FITB | $ | 15.8 | USB | KEY | $ | 139.6 |
| CFG | $ | 6.1 |
| KEY | $ | 15.1 |
| |||||||||||||||||||||||||||||||||||||
Wells Fargo & Company | WFC | MTB | $ | 122.8 | MTB | $ | 4.7 | RF | $ | 12.5 | WFC | RF | $ | 125.7 |
| MTB | $ | 5.9 |
| CFG | $ | 13.9 |
| |||||||||||||||||||||||||||||||||||||
KEY | $ | 95.1 | KEY | $ | 4.2 | KEY | $ | 11.0 | MTB | $ | 120.1 |
| RF | $ | 5.8 |
| RF | $ | 13.7 |
|
After a review by the Committee, the peer group for 2019 remained unchanged from 2018.
Executive stock ownership and retention
Our executive officers historically have held a significant portion of their personal wealthassets in the form of our common stock (or other equity-based instruments that reflect the performance of our common stock). The Committee believes it is important to require our executive officers to meet minimum stock ownership guidelines, denominated in shares.
Each executive officer and other key employees is subject tomust meet additional ownership requirements, even after meeting the original ownership target is met.target. The ownership requirements increase the number of PNC shares that an individual needs to own over time. As new awards vest, designated employeesexecutives need to retain more shares of stock, which they must then hold until they retire or leave PNC. This ownership policy reflects compensation awards over an executive’s career, and also ties an executive’s personal wealth closely to the performance of PNC and the interests of our long-term shareholders.
50 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 53
COMPENSATION DISCUSSION AND ANALYSIS
Equity interests that count toward satisfaction of the ownership guidelines include shares owned outright by the officer, or his or her spouse and dependent children, restricted shares (subject to vesting requirements), certain equity awards and
shares or stock units held in a benefit plan. WeFor awards granted on or after 2018, we do not permit executives to count 50% of any unvested equity-based awardperformance-based securities (i.e., the PSUs) toward satisfaction of the ownership guidelines. The guidelines are as follows:
Officer/Category | Share ownership (base requirement) | Base requirement (value as of 12/31/2015)(1) | Ongoing retention requirement | Base ownership requirement (in shares) | Base ownership requirement (in dollars)(1) | Ongoing retention requirement (as a % of newly vested equity) | ||||||||||||
President and Chief Executive Officer | 125,000 | $11,913,750 | 33% | 125,000 | $14,613,750 | 33% | ||||||||||||
Management Executive Committee and Other Corporate Executive Group (CEG) Members(2) | 15,000 - 25,000 | $ | 1,429,650 - $2,382,750 | 25% | ||||||||||||||
Executive Officers (non-CEG Members) | 5,000 | $476,550 | 10% | |||||||||||||||
All other NEOs(2) | 15,000 – 25,000 | $1,753,650 – $2,922,750 | 25% |
(1) | Value based on PNC closing price of |
(2) | The |
Newly hired or promoted employeesexecutives who become subject to these guidelines will have up to six years to satisfy the guidelines. TheUnder the policy, the Committee monitors complianceconsiders the circumstances of an executive’s failure to comply with these stock ownership guidelines and hasthe policy when making compensation decisions for that executive. At the time of the compensation decisions, the Committee determined that all of our current NEOs satisfycomplied with the guidelines.policy. All other employees subject to the guidelines either satisfy the guidelines or are within the compliance period.
Clawback and forfeiture
We have a “clawback” policy that applies to all of our NEOs and other executive officers, as well as other senior employeesexecutives and those employees receiving equity-based compensation.
A summary of PNC’sour clawback and incentive compensation adjustment policy is included in the tableprovided below.
| Inaccurate Metrics | Applies to incentive compensation awarded as the result of materially inaccurate performance metrics (see below for additional details) | ||||||||||||
| ||||||||||||||
|
| Risk Metrics Performance May apply when there is less than desired performance against corporate or business unit risk metrics, as applicable | ||||||||||||
| May apply when an individual’s actions, or the failure to act, either as an individual or | |||||||||||||
Applies to | All incentive compensation – vested or unvested | Unvested long-term incentive compensation | Unvested long-term incentive compensation | |||||||||||
Employees affected | NEOs and other senior leaders | All equity recipients | NEOs and other senior leaders | All equity recipients |
For purposes of the clawback for materially inaccurate performance metrics, performance metrics include any metric, including corporate financial results, used directly or indirectly to determine whether or not incentive compensation is to be provided to an executive (or group of executives) or to determine the amount of any such compensation. The portion of the incentive compensation that represents the excess over what
would have been provided if there had been no material inaccuracy in the performance metric will be subject to clawback. The Committee retains discretion, to the extent legally permissible, to determine that it would not be in PNC’s best interests to seek to enforce the clawback.
For purposes of the negative adjustment resulting from risk relatedrisk-related actions, the Committee may
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 51
COMPENSATION DISCUSSION AND ANALYSIS
reduce or cancel unvested long-term incentive compensation granted to an employee who takes risk-related actionsaction (or fails to take action) that resultresults in, or areis reasonably expected to result in, a material adverse impact to PNC or a business unit, such as:
Not following applicable risk management policies or procedures;
Disregarding the significant risks associated with a course of action for which the employee is responsible;
Violating, or permitting or enabling PNC to violate, statutory or regulatory requirements; or
54 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
This applies both to individual employees who took risk-related actions (or failed to take action) and their supervisors. The types of adverse impacts could include matters such as impacts to PNC’s or a business segment’s or corporate function’s financial performance, capital or liquidity positions, reputation or business prospects.
The negative adjustment resulting from risk relatedrisk-related actions allows PNC to recoup unvested equity awards from recipients whose inappropriate risk-taking activities have resulted in, or are expected to result in, a material adverse impact to PNC in the future. By doing so, PNC iswe are able to add further risk-balancing to our incentive arrangements by accounting for both forward- and backward-looking risk adjustments.
The policy provides that if PNC applies the policy to recoup or clawback incentive compensation or negatively adjust incentive compensation as a result of risk-related actions and the underlying factual circumstances are otherwise publicly reported by PNC (1) in a filing with the SEC or (2) in disclosure that would otherwise meet the requirements for public disclosure by PNC under the SEC’s Regulation FD, or (3) are disclosed by a third party in a publicly available court or administrative filing, then PNC will disclose in its annual shareholder meeting proxy statement, a current report on FormForm 8-K or other public filing made by it with the SEC or a posting in a clearly identifiable location in the Investor Relations section of its corporate website:
a general description of the circumstances giving rise to the incentive compensation recovery or adjustment, including items such as the number of employees, seniority of employees and line of business impacted; and
the aggregate amount of incentive compensation recovered or adjusted.
PNC may limit such disclosure if it would be likely to result in, or exacerbate, any existing or threatened employee, shareholder or other litigation, arbitration or proceeding against PNC.
Shareholder approval of severance agreements
We have a Board-approved policy regarding the shareholder approval of future severance arrangements. This policy applies to future severance arrangements with executive officers. Under this policy, PNC will not enter into an arrangement with an executive officer that provides for additional severance benefits in an amount exceeding 2.99 times the sum of the executive officer’s annual base salary and target bonus for the year of termination, unless the future severance arrangement is approved by the affirmative vote of a majority of votes cast by shareholders on the matter.
The policy applies only to future severance arrangements. Future severance arrangements do not include existing severance agreements or agreements to which PNC becomes obligated in connection with an acquisition, unless in each case the severance agreement is modified to materially increase benefits that would be considered additional severance benefits. Our Board retains the right to amend, terminate or waive the policy, and will promptly disclose any such change. We have made this policy available atwww.pnc.com/corporategovernance.corporategovernance.
Since 2009, no newNone of our change inof control agreement has included anagreements contain any excise tax gross-up.“gross-up” provisions. For a more detailed discussion onregarding change inof control arrangements, pleaseagreements, seeChange in Control and Termination of Employment—Change of control agreements on pages 73 andpage 74.
Limiting perquisites
The Committee believes in limiting the amount of perquisites provided to our executives.
We consider a benefit to be a perquisite or personal benefit unless its purpose is clearly and exclusively business-related. We determine the value of perquisites based on their incremental cost to us. Executive officers do not receive tax “gross-ups” on any perquisites.
The principal perquisites that we may provide to our executive officers include financial consulting and tax preparation services and limited personal use of corporate aircraft, as approved by our CEO. OneThe perquisites we provide to our executive officers under the program do not include any tax “gross ups.” Some of our executive officers also receives the reimbursement of costs relatedparticipate in benefit programs or receive perquisites that we no longer offer to home security services. Wecurrent executives, including two NEOs who remain eligible to receive executive physicals. In addition, we may provide additional perquisites to an executive officer from time to time, but this is not common.
Each executive officer receivesIn addition to these perquisites, certain executives, including all NEOs (other than Mr. Demchak), receive a $10,000 allowance for general perquisites, with an additional $10,000 allowance for personal aircraft usage. This modest perquisite limit allows an NEO to receive financial consulting and tax preparation services and also allows for an occasional personal flight on the corporate aircraft (usually no more than 2-4 hours of flight time a year). In addition, asAs the Committee has previously recommended that Mr. Demchak take all flights (personal or business) on the
52 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
corporate aircraft, the Committee has approved a general perquisite allowance of $10,000 for Mr. Demchak with an additional allowance not to exceed $100,000 for personal flights taken on the aircraft. If the executive exceeds his perquisite allowance, PNC requests reimbursement for the excess, unless reimbursement is legally impermissible.aircraft by Mr. Demchak.
The Committee has previously approved the execution of lease (“time-sharing”) agreements between PNC and certain executive officers, including our CEO and twoone other NEOsNEO (Mr. Guyaux and Mr. Reilly). These agreements help us to comply with Federal Aviation Administration (FAA) rules and regulations that would otherwise prohibit executives from reimbursing PNC for the incremental cost of personal flights. Under the terms of these time-sharing agreements, Mr. Demchak Mr. Guyaux and Mr. Reilly will pay for the costs of any personal flights that exceed the perquisite allowances described above.
Due to certain operational restrictions and administrative efficiencies, we operate our corporate aircraft under FAAFederal Aviation Administration rules and regulations that limit our ability to accept reimbursement for personal aircraft usage unless an individual has a time-sharing agreement. The time-sharing agreements provide a mechanism to obtain reimbursement from the executive. The costs paid by our executive officers
under the terms of the agreements include incremental costs, as well as a federal excise tax and other fees. For flights subject to these time-sharing agreements, the officer is required to pay us for the following costs:
fuel, oil, lubricants and other additives;
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 55
COMPENSATION DISCUSSION AND ANALYSIS
hangar andtie-down costs away from the aircraft’s base of operation;
insurance obtained for the specific flight;
landing fees, airport taxes and similar assessments;
custom, foreign permit and similar fees directly related to the flight;
in-flight food and beverages; and
passenger ground transportation.
The Committee has adopted an aviation policy and written procedures to document the principles to be applied in determining the classification of a flight as business or personal and the calculation of aggregate incremental cost for perquisite purposes, including definitions of personal use, and enhanced methods for allocating costs between business and personal use in complex situations and an approach for capturing deadhead flights, where appropriate, in the calculation of incremental costs for personal aircraft use. The Committee has also approved the use of an amended form of time-sharing agreement to bring amounts to be billed into alignment with the new
procedures (subject to FAA maximum billing limitations). As permitted by the FAA rules, the new form of agreement provides for the billing of an additional charge equal to 100% of the costs of fuel, oil and lubricants listed above to facilitate the alignment of incremental cost as currently calculated and amounts billed.
Guidelines on the use of discretion
The Committee has adopted guidelines regarding the use ofon using discretion in incentive compensation plans. Under these guidelines, the use of discretion will be exercised, when permitted under a plan, so that incentive compensation awards are reasonably aligned with risk-adjusted performance. TheCertain plans have discretionary and formulaic components, while other plans are fully discretionary. For plans with both discretionary and formulaic components, the guidance provides, among other things, that a discretionary increasesincrease in otherwise formulaically-determined incentive compensation should be based on behaviors, actions or results that are deemed to be extraordinary, exceed expectations or provide meaningful direct or indirect benefits to PNC or our businesses. At the same time, discretionary reductions in compensation should be based on behaviors, actions or results that fail to meet expectations or negatively impact our performance, reputation or work environment. The guidelines specifically address the need to evaluate both inappropriate risk-taking behaviors during the performance year, as well as the outcome of prior inappropriate risk-taking behaviors, when making discretionary incentive compensation decisions. In addition, managers are generally required to document how discretion was applied in considering risk-taking behaviors and outcomes in employees’ performance evaluations or incentive compensation recommendations, particularly for our most senior level employees.executives.
Restrictions on trading, hedging and pledging
Our Code of Business Conduct and Ethics and related policies, which apply to all of our employees have for many years includedand directors, include anti-hedging provisions that prohibit all employees and directors from day trading or short selling PNC securities and prohibit all employees from engaging in transactions in any derivative of PNC
securities (other than securities issued under a PNC compensation plan), including buying and writing options.
We have a policy that prohibitsprohibit certain employees, including all of our executive officers, and our directors from purchasing or selling our securities beginning the 16th day of the last month of each calendar quarter until the second business day after we release our earnings for that quarter. We may also impose additional trading restrictions on certain employees, including all of our executive officers, and directors due to the availability of material,non-public information regarding PNC or our securities. In addition, we require certain employees, including all executive officers, topre-clear personal investments (other than in specified types of securities) made by the individual or any immediate family members.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 53
COMPENSATION DISCUSSION AND ANALYSIS
Additionally, the Restricted Employee Investment Transaction Rules, which coverswe do not allow directors, executive officers, and certain other senior executives, and other employees who by the nature of their role must comply with additional restrictions and procedures that govern their personal investment transactions prohibits pledgingto pledge PNC securities. This policy prohibitsThese restrictions also generally apply to immediate family members of the covered employees and directors from pledging PNC securities owned by them for loans or obligations on the margin or otherwise.directors.
Consideration of tax deductibility
Section 162(m) of the Internal Revenue Code does not generally allow a company to deduct compensation over $1 million paid to certain executive officers. Under the tax rules, the executive officers whose compensation is subjectHistorically, companies were permitted to Section 162(m) includes the CEO and the next three highest-compensated executive officers (other than the CEO and the CFO).
One exception to this disallowance applies todeduct performance-based compensation paid under shareholder-approved plans. Awards made underplans (such as our shareholder-approved plans—the 1996 Executive Incentive Award Plan (annual incentive awards) and our 2016 Incentive Award Plan). The Tax Cuts and Jobs Act eliminated the 2006performance-based compensation exception under Section 162(m) for tax years beginning on and after January 1, 2018, subject to a special rule that “grandfathers” certain awards or arrangements that were in effect on or before November 2, 2017.
As a result, beginning with the 2018 performance year, NEOs are no longer designated as eligible to participate in our Executive Incentive Award Plan (other equity-based awards)—are intendedfor annual incentive awards. Instead, all annual incentive awards made to NEOs will be eligible forunder the performance-based exception and therefore, deductible by PNC for federal income tax purposes.same program as other executive officers of PNC. In addition, beginning as of January 1, 2018, the CFO is included in the scope of covered employees under Section 162(m).
Although the Committee considers the desirability of limiting PNC’snon-deductible expenses when it makes compensation decisions, the Committee believes in maintaining the flexibility and competitive effectiveness of the executive compensation program. The Committee retains the discretion to establish the compensation paid to the NEOs as the Committee determines to be in the best interests of PNC and its shareholders, and without regard to any limitation provided in Section 162(m). Tax deductibility, while an important consideration, is analyzed as one component of the overall program.
5456 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
We have reviewed and discussed the Compensation Discussion and Analysis with PNC’s management, and based on our review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
The Personnel and Compensation Committee of the Board of Directors of The PNC Financial Services Group, Inc.
Dennis F. Strigl,Charles E. Bunch,Chair
Charles E. Bunch
Paul W. ChellgrenDebra A. Cafaro
Andrew T. Feldstein
Richard B. KelsonJ. Harshman
Thomas J. UsherRichard B. Kelson
Michael J. Ward
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 5557
This section explains how we consider risk at PNC, and the relationship between risk management, performance and compensation. We also discuss the risk reviews presented to our Board’sthe Personnel and
Compensation Committee and the methodology we use to assess the potential risks in our incentive compensation plans.
We encounter risk as part of the normal course of operating our business. The successful execution of our strategy requires effective management of the risks we decide to take.
take to maintain the trust of our customers and provide the best overall customer experience.
We want our decisions to reflect our desired risk appetite. It is our responsibility to establish an enterprise risk management framework that facilitates risk management for the benefit of our customers and shareholders.
Enterprise risk appetite statement
We dynamically manage our risk appetite to optimize long-term shareholder value while supporting our employees, customers, and communities. In doing so, we:
Achieve our business objectives and protect our brand by accepting risks that are understood, quantifiable, and analyzed through all phases of the economic | ||||
Earn trust and loyalty from all stakeholders, including employees, customers, communities, and | ||
Reward individual and team performance by taking into account risk discipline and performance | ||
Practice disciplined capital and liquidity management so that |
We strive to embed a culture of risk management throughout PNC. With each of our employees, we reinforce the importance of managing risks in executing on our strategic objectives and in support of our desired risk appetite.
We approve our Enterprise Risk Management Framework and key risk policies at the Board level. We discuss our risk management approach in the Risk Management section of Item 7 of our 2015this year’s Annual Report on Form10-K.
We reflect our desired enterprise risk appetite by helping to ensure that our performance management and compensation arrangements for all employees are balanced in ways that do not create incentives for imprudent or excessive risk-taking, are designed to provide a superior customer experience, and best reflectare reflective of our strategic objectives, business model, management structure and management structure.risk appetite.
Our compensation philosophy supports and reflects PNC’s risk appetite and risk management culture. Our risk policies and procedures guide our management decisions, including how we pay employees. By setting and communicating our risk appetite in advance, we seek to manage and control the risks that employees can take or influence, consistent with their roles and responsibilities.
All employees have performance goals tied to business and individual performance, but each
employee, no matter their role at PNC, also has
customer focus and risk management goals. We evaluate employee performance against these goals, including the risk management goals, in addition to considering risk outcomes from actions taken in prior years. This year, we also required, for each of our employees, a rating for how well they achieved the risk management goal. We incorporate this comprehensive evaluation of employee risk management into our performance and incentive compensation decisions. In addition, all employees are encouraged to collaborate across groups to identify and mitigate risks and elevate and address identified issues as required.or concerns.
Our compensation program is designed to encourage management of risk within our appetite and discourage inappropriate risk-taking by granting a diverse portfolio of incentive compensation awards to our executives and other senior employees that is expected to reward desired behavior over time. Specifically, we balance our portfolio of awards between fixed and variable compensation; cash and equity-based compensation; and annual and long-term compensation. We base awards on the Committee’s assessment of a variety of quantitative and qualitative performance measurements, both on an absolute and a relative basis. Compensation decisions also rely on discretion to consider other factors, such as effective risk management, commitment to delivering a superior customer experience, compliance with controls and ethical duties.duties, competition for top talent, market-based pay
5658 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
COMPENSATION AND RISK
levels and the need to attract and engage our leaders.
As discussed in ourthe CD&A, the long-term incentive program includes grants to our NEOs and certain other executives that include robusta risk-based performance metrics.metric. Payouts under these grants could be reduced or eliminatedforfeited if we do not meet specific risk criteria over the vesting period.CET1 Ratio described on page 44. We also have a broad-based clawback and incentive compensation adjustment policy as described beginning on pages 51 and 52.page 54.
We maintain an equity program for approximately 130 senior leaders below the executive levels that is designed to help ensure that their incentive compensation awards reflect risk-adjusted performance outcomes that would pay out, if at all, over a four-yearthree-year period. These senior leaders
receive a portion of their
incentive compensation in an equity-based award that is subject to a risk-based review trigger. Thethe same risk-related performance metric that will be applied to the PSU and RSU grants made to NEOs and certain other executives. Additionally, the equity award agreements for ourthese senior leaders all contain an enterprise-wide risk-based review trigger, while the agreements for senior leaders in business segments (as opposed to those in administrative or control functions) contain an additional business-specific risk-based review trigger. If a risk-based review is triggered, the applicable review committee will determine whether a downward adjustment is warranted, up to a complete cancellation of the share units in that year’s tranche.
Risk review of compensation plans
Our Chief Risk Officer (CRO) reports at least quarterly to our Board’sthe Personnel and Compensation Committee to discuss risk management and review the connection between effective risk management and incentive compensation. Our CROThe Chief Risk Officer also presents the Committee with a risk assessment for each of our principal business units as well asand a collective assessment of staff functions, including finance, human resources, legal, operations and technology. In addition, we have a practice of havingmaintain at least one director who is a member of both the Personnel and Compensation and Risk Committees. At present, the Chair of the Risk Committee also serves on the Personnel and Compensation Committee.
We also have systematically identified individuals — or groups of employees — who could potentially expose us to material amounts of risk or financial loss, either individually or as a collective group.loss. As with our incentive compensation planrisk assessment described below, we alsohave established a cross-functional team that continues to identify and monitor these individuals. These individuals or groups.are subject to a supplemental risk management review as part of the performance management process by the Chief Risk Officer and his designees — we take this review into account when determining incentive compensation awards for our most senior executives.
We have developed a standardized governance framework for our incentive compensation plans to help monitor and validate these plans. We wantthat our plans to achievebalance risk and reward, comply with applicable laws and regulations, demonstrate fiscal responsibility and maintain an appropriate balance of compensation and risk-adjusted performance — this customer focus. This
framework helps to ensure that we have the appropriate
procedures, controls and reviewsindependent challenges in place to do so. We will continue to assess and, where appropriate, modify our incentive compensation plans as part ofin accordance with this framework to help ensure our plans appropriately reflect risk considerations, andincluding the management of identified issues, the duration of the risks and to enhance the documentation of existing risk-balancing strategies.alignment with our desired risk appetite. Examples of incentive plan modifications include:
Adding or increasing the visibility of risk and customer focus metrics into plans based on the structure of the plan and the nature of the business and the roles of participants
Adding or formalizing language around delaying award payments or recapture or reduction of payments where subsequent risk metrics indicate excessive risk taking
Enhancing documentation of the plan design and use of discretion innon-formulaic plans at the pool funding, business allocation or individual award level
Based on our approach to risk management, our comprehensive incentive plan governance framework, our risk assessments for significant businesses and staff functions, and the additioninclusion of risk-based metrics toin our long-term incentive compensation programs, we believe that the risks arising from our compensation plans, policies and practices are not reasonably likely to have a material adverse effect on PNC.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 5759
Name & Principal Position | Year | Salary ($)(a) | Stock Awards ($)(b) | Non-Equity Incentive Plan Compensation ($)(c) | Change in Pension Value & Nonqualified Deferred Compensation Earnings ($)(d) | All Other Compensation ($)(e) | Total ($) | Year | Salary ($)(a) | Stock Awards ($)(b) | Non-Equity Incentive Plan Compensation ($)(c) | Change in Pension Value & Nonqualified Deferred Compensation Earnings ($)(d) | All Other Compensation ($)(e) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
William S. Demchak | 2015 | $ | 1,100,000 | $ | 6,959,910 | $ | 4,100,000 | $ | 393,715 | $ | 165,501 | $ | 12,719,126 |
| 2018 |
| $ | 1,100,000 |
| $ | 9,479,858 |
|
| $4,400,000 |
|
| $530,583 |
|
| $165,853 |
| $ | 15,676,294 |
| ||||||||||||||||||||||
Chairman, President | 2014 | $ | 1,089,615 | $ | 5,999,978 | $ | 3,540,000 | $ | 650,626 | $ | 57,685 | $ | 11,337,904 |
| 2017 |
| $ | 1,100,000 |
| $ | 6,749,956 |
|
| $5,220,000 |
|
| $666,341 |
|
| $165,556 |
| $ | 13,901,853 |
| ||||||||||||||||||||||
& Chief Executive Officer | 2013 | $ | 922,115 | $ | 3,863,752 | $ | 3,083,333 | $ | 53,668 | $ | 59,235 | $ | 7,982,103 |
| 2016 |
| $ | 1,100,000 |
| $ | 7,799,958 |
|
| $3,400,000 |
|
| $623,494 |
|
| $218,008 |
| $ | 13,141,460 |
| ||||||||||||||||||||||
Robert Q. Reilly | 2015 | $ | 500,000 | $ | 1,874,944 | $ | 1,400,000 | $ | 193,677 | $ | 43,344 | $ | 4,011,965 |
| 2018 |
| $ | 673,077 |
| $ | 2,362,411 |
|
| $1,650,000 |
|
| $178,815 |
|
| $ 43,116 |
| $ | 4,907,419 |
| ||||||||||||||||||||||
Executive Vice President & | 2014 | $ | 500,000 | $ | 1,549,936 | $ | 1,375,000 | $ | 316,836 | $ | 60,922 | $ | 3,802,694 |
| 2017 |
| $ | 500,000 |
| $ | 1,774,900 |
|
| $1,862,500 |
|
| $339,545 |
|
| $ 47,817 |
| $ | 4,524,762 |
| ||||||||||||||||||||||
Chief Financial Officer | 2013 | $ | 475,000 | $ | 1,189,642 | $ | 1,075,000 | $ | 35,169 | $ | 35,327 | $ | 2,810,138 |
| 2016 |
| $ | 500,000 |
| $ | 1,899,844 |
|
| $1,275,000 |
|
| $295,003 |
|
| $ 47,495 |
| $ | 4,017,342 |
| ||||||||||||||||||||||
Michael P. Lyons | 2015 | $ | 700,000 | $ | 4,019,824 | $ | 2,020,000 | $ | 22,953 | $ | 6,754 | $ | 6,769,531 |
| 2018 |
| $ | 700,000 |
| $ | 5,099,853 |
|
| $2,800,000 |
|
| $ 26,429 |
|
| $ 19,459 |
| $ | 8,645,741 |
| ||||||||||||||||||||||
Executive Vice President & Head of | 2014 | $ | 700,000 | $ | 4,079,882 | $ | 1,980,000 | $ | 21,677 | $ | 6,577 | $ | 6,788,136 | |||||||||||||||||||||||||||||||||||||||||||
Corporate & Institutional Banking | 2013 | $ | 700,000 | $ | 4,555,912 | $ | 2,020,000 | $ | 21,411 | $ | 2,154 | $ | 7,299,477 | |||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, Head of |
| 2017 |
| $ | 700,000 |
| $ | 3,959,882 |
|
| $2,700,000 |
|
| $ 24,170 |
|
| $ 14,529 |
| $ | 7,398,581 |
| |||||||||||||||||||||||||||||||||||
Corporate & Institutional Banking and Asset Management Group |
| 2016 |
| $ | 700,000 |
| $ | 4,079,848 |
|
| $1,940,000 |
|
| $ 22,610 |
|
| $ 36,228 |
| $ | 6,778,686 |
| |||||||||||||||||||||||||||||||||||
E William Parsley, III | 2015 | $ | 500,000 | $ | 4,549,900 | $ | 1,300,000 | $ | 50,634 | $ | 22,108 | $ | 6,422,642 |
| 2018 |
| $ | 686,538 |
| $ | 5,699,808 |
|
| $2,800,000 |
|
| $ 69,183 |
|
| $ 21,030 |
| $ | 9,276,559 |
| ||||||||||||||||||||||
Executive Vice President, Chief | 2014 | $ | 500,000 | $ | 4,574,917 | $ | 1,050,000 | $ | 164,669 | $ | 10,200 | $ | 6,299,786 | |||||||||||||||||||||||||||||||||||||||||||
Investment Officer & Treasurer | 2013 | $ | 500,000 | $ | 4,194,598 | $ | 1,075,000 | – | $ | 5,577 | $ | 5,775,175 | ||||||||||||||||||||||||||||||||||||||||||||
Joseph C. Guyaux | 2015 | $ | 620,000 | $ | 1,999,842 | $ | 1,130,000 | $ | 708,458 | $ | 38,551 | $ | 4,496,851 | |||||||||||||||||||||||||||||||||||||||||||
Senior Vice Chairman & CEO & | 2014 | $ | 620,000 | $ | 1,874,984 | $ | 1,380,000 | $ | 725,352 | $ | 22,235 | $ | 4,622,571 | |||||||||||||||||||||||||||||||||||||||||||
President of PNC Mortgage | 2013 | $ | 620,000 | $ | 1,605,308 | $ | 1,255,000 | $ | 435,506 | $ | 34,253 | $ | 3,950,067 | |||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, |
| 2017 |
| $ | 600,000 |
| $ | 4,349,903 |
|
| $3,200,000 |
|
| $183,992 |
|
| $ 18,696 |
| $ | 8,352,591 |
| |||||||||||||||||||||||||||||||||||
Chief Operating Officer |
| 2016 |
| $ | 588,462 |
| $ | 4,799,872 |
|
| $2,250,000 |
|
| $123,239 |
|
| $148,341 |
| $ | 7,909,914 |
| |||||||||||||||||||||||||||||||||||
Joseph E. Rockey* |
| 2018 |
| $ | 500,000 |
| $ | 1,999,848 |
|
| $1,750,000 |
|
| $ 16,400 |
|
| $ 21,126 |
| $ | 4,287,374 |
| |||||||||||||||||||||||||||||||||||
Executive Vice President, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Risk Officer |
* | Mr. Rockey was not an NEO in 2016 and 2017. |
(a) |
|
(b) | In 2018, stock awards were granted on February 15, 2018 consisting of PSUs and RSUs. The amounts in |
Grant Date Fair Value of Maximum Award | ||||||||
NEO | Incentive Performance Units | Performance-Based Restricted Share Units | ||||||
William S. Demchak | $ | 4,349,943 | $ | 4,349,943 | ||||
Robert Q. Reilly | $ | 1,171,840 | $ | 1,171,840 | ||||
Michael P. Lyons | $ | 2,512,390 | $ | 2,512,390 | ||||
E William Parsley, III* | $ | 968,720 | $ | 968,720 | ||||
Joseph C. Guyaux | $ | 1,249,901 | $ | 1,249,901 |
Grant Date Fair Value of Maximum Award | ||||||||
NEO | Performance Share Units | Restricted Share Units | ||||||
William S. Demchak |
| $8,531,888 |
|
| $3,791,879 |
| ||
Robert Q. Reilly |
| $2,126,138 |
|
| $ 944,932 |
| ||
Michael P. Lyons |
| $4,589,740 |
|
| $2,039,973 |
| ||
E William Parsley, III |
| $5,129,748 |
|
| $2,279,923 |
| ||
Joseph E. Rockey |
| $1,799,864 |
|
| $ 799,939 |
|
See |
(c) | Our NEOs received an annual incentive award paid in cash early in |
(d) | The dollar amounts in this column include the increase in the actuarial value of our Qualified Pension Plan, ERISA Excess Pension Plan and Supplemental Executive Retirement Plan. We describe these plans on page |
We do not pay above-market or preferential earnings on any compensation that is deferred on a basis that is nottax-qualified, including such earnings onnon-qualified defined contribution plans. For |
|
5860 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
SUMMARY COMPENSATION TABLE
(e) | The amounts in this column include, for all NEOs, net of any reimbursements to PNC: (i) the dollar value of matching contributions made by us to the ISP; (ii) the insurance premiums paid by us in connection with our Key Executive Equity Program; |
|
NEO | Perquisites and Other Personal Benefits* | Registrant ISP Contributions | Insurance Premiums** | Other*** | Total to Summary Compensation Table | Perquisites and Other Personal Benefits* | Registrant ISP Contributions | Insurance Premiums** | Other*** | Total to Summary Compensation Table | ||||||||||||||||||||||||||||||
William S. Demchak | $ | 109,975 | $ | 10,600 | $ | 44,835 | $ | 91 | $ | 165,501 |
| $109,975 |
|
| $11,000 |
|
| $44,736 |
|
| $ 142 |
|
| $165,853 |
| |||||||||||||||
Robert Q. Reilly | $ | 10,761 | $ | 10,600 | $ | 20,927 | $ | 1,056 | $ | 43,344 |
| $ 9,975 |
|
| $11,000 |
|
| $20,927 |
|
| $1,214 |
|
| $ 43,116 |
| |||||||||||||||
Michael P. Lyons | – | $ | 6,577 | – | $ | 177 | $ | 6,754 |
| $ 8,513 |
|
| $10,800 |
|
| – |
|
| $ 146 |
|
| $ 19,459 |
| |||||||||||||||||
E William Parsley, III | $ | 11,108 | $ | 10,900 | – | $ | 100 | $ | 22,108 |
| $ 10,000 |
|
| $10,838 |
|
| – |
|
| $ 192 |
|
| $ 21,030 |
| ||||||||||||||||
Joseph C. Guyaux | $ | 20,000 | $ | 10,600 | $ | 5,293 | $ | 2,658 | $ | 38,551 | ||||||||||||||||||||||||||||||
Joseph E. Rockey |
| $ 9,975 |
|
| $11,000 |
|
| – |
|
| $ 151 |
|
| $ 21,126 |
|
* | The dollar amount of the perquisite represents the incremental cost to PNC of providing the benefit. |
** | We pay premiums for certain of the NEOs in connection with our Key Executive Equity Program, which is a split-dollar insurance arrangement. |
*** | This column reflects the dollar amount of matching gifts made by us to charitable organizations under our employee charitable matching gift program for Mr. Reilly ($ |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 5961
GRANTS OF PLAN-BASED AWARDS IN 2015FISCAL 2018
Grants of plan-based awards in 2015fiscal 2018
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(a) | Estimated Future Payouts Under Equity Incentive Plan Awards(b) | Grant Date of Stock ($)(c) | ||||||||||||||||||||||||||||||
Award Type | Grant Date | Thres- hold ($) | Target ($) | Maximum ($) | Thres- hold ($) | Target (#) | Maximum (#) | |||||||||||||||||||||||||
William S. Demchak | ||||||||||||||||||||||||||||||||
Annual Incentive Award | February 13, 2015 | – | $ | 3,300,000 | $ | 10,152,000 | ||||||||||||||||||||||||||
Incentive Performance Units | February 13, 2015 | – | 37,670 | 47,087 | $ | 3,479,955 | ||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 13, 2015 | – | 37,670 | 47,087 | $ | 3,479,955 | ||||||||||||||||||||||||||
Robert Q. Reilly | ||||||||||||||||||||||||||||||||
Annual Incentive Award | February 13, 2015 | – | $ | 1,250,000 | – | |||||||||||||||||||||||||||
Incentive Performance Units | February 13, 2015 | – | 10,148 | 12,685 | $ | 937,472 | ||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 13, 2015 | – | 10,148 | 12,685 | $ | 937,472 | ||||||||||||||||||||||||||
Michael P. Lyons | ||||||||||||||||||||||||||||||||
Annual Incentive Award | February 13, 2015 | – | $ | 1,500,000 | $ | 10,152,000 | ||||||||||||||||||||||||||
Incentive Performance Units | February 13, 2015 | – | 21,757 | 27,196 | $ | 2,009,912 | ||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 13, 2015 | – | 21,757 | 27,196 | $ | 2,009,912 | ||||||||||||||||||||||||||
E William Parsley, III | ||||||||||||||||||||||||||||||||
Annual Incentive Award | February 13, 2015 | – | $ | 1,000,000 | $ | 10,152,000 | ||||||||||||||||||||||||||
Incentive Performance Units | February 13, 2015 | – | 8,389 | 10,486 | $ | 774,976 | ||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 13, 2015 | – | 8,389 | 10,486 | $ | 774,976 | ||||||||||||||||||||||||||
ALM Incentive Performance Units | February 13, 2015 | – | 32,474 | 64,948 | $ | 2,999,948 | ||||||||||||||||||||||||||
Joseph C. Guyaux | ||||||||||||||||||||||||||||||||
Annual Incentive Award | February 13, 2015 | – | $ | 930,000 | $ | 10,152,000 | ||||||||||||||||||||||||||
Incentive Performance Units | February 13, 2015 | – | 10,824 | 13,530 | $ | 999,921 | ||||||||||||||||||||||||||
Performance-Based Restricted Share Units | February 13, 2015 | – | 10,824 | 13,530 | $ | 999,921 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(a) | Estimated Future Payouts Under Equity Incentive Plan Awards(b) | Grant Date Fair Value of Stock and Option Awards ($)(c) | ||||||||||||||||||||||||||||||
Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||
William S. Demchak | ||||||||||||||||||||||||||||||||
Annual Incentive Award |
| February 15, 2018 |
|
| – |
| $ | 3,940,000 |
|
| – |
| ||||||||||||||||||||
PSUs |
| February 15, 2018 |
|
| – |
|
| 35,581 |
|
| 53,371 |
| $ | 5,687,979 |
| |||||||||||||||||
RSUs |
| February 15, 2018 |
|
| – |
|
| 23,720 |
|
| 23,720 |
| $ | 3,791,879 |
| |||||||||||||||||
Robert Q. Reilly | ||||||||||||||||||||||||||||||||
Annual Incentive Award |
| February 15, 2018 |
|
| – |
| $ | 1,550,000 |
|
| – |
| ||||||||||||||||||||
PSUs |
| February 15, 2018 |
|
| – |
|
| 8,867 |
|
| 13,300 |
| $ | 1,417,479 |
| |||||||||||||||||
RSUs |
| February 15, 2018 |
|
| – |
|
| 5,911 |
|
| 5,911 |
| $ | 944,932 |
| |||||||||||||||||
Michael P. Lyons | ||||||||||||||||||||||||||||||||
Annual Incentive Award |
| February 15, 2018 |
|
| – |
| $ | 2,500,000 |
|
| – |
| ||||||||||||||||||||
PSUs |
| February 15, 2018 |
|
| – |
|
| 19,141 |
|
| 28,711 |
| $ | 3,059,880 |
| |||||||||||||||||
RSUs |
| February 15, 2018 |
|
| – |
|
| 12,761 |
|
| 12,761 |
| $ | 2,039,973 |
| |||||||||||||||||
E William Parsley, III | ||||||||||||||||||||||||||||||||
Annual Incentive Award |
| February 15, 2018 |
|
| – |
| $ | 2,500,000 |
|
| – |
| ||||||||||||||||||||
PSUs |
| February 15, 2018 |
|
| – |
|
| 21,393 |
|
| 32,089 |
| $ | 3,419,885 |
| |||||||||||||||||
RSUs |
| February 15, 2018 |
|
| – |
|
| 14,262 |
|
| 14,262 |
| $ | 2,279,923 |
| |||||||||||||||||
Joseph E. Rockey | ||||||||||||||||||||||||||||||||
Annual Incentive Award |
| February 15, 2018 |
|
| – |
| $ | 1,375,000 |
|
| – |
| ||||||||||||||||||||
PSUs |
| February 15, 2018 |
|
| – |
|
| 7,506 |
|
| 11,259 |
| $ | 1,199,909 |
| |||||||||||||||||
RSUs |
| February 15, 2018 |
|
| – |
|
| 5,004 |
|
| 5,004 |
| $ | 799,939 |
|
(a) | The amounts listed in the “Target” column relate to the target annual cash incentive award for the |
(b) | The amounts listed in these columns include the |
(c) | The grant date |
6062 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
GRANTS OF PLAN-BASED AWARDS IN 2015
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|
|
|
|
|
|
|
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 61
OUTSTANDING EQUITY AWARDS AT 20152018 FISCALYEAR-END
Outstanding equity awards at 20152018 fiscalyear-end
The following tables show, for each NEO, the outstanding equity awards as of December 31, 2015.2018. These awards include stock options exercisable over time and the following:
Stock options exercisable over time
Incentive performance units, specifically:
Schedule | Metrics | Payout Range (% of target) | Stock or Cash Payout | |||||
Performance Share Units (PSUs) | After3-year performance period ends | PNC’s return on equity (ROE) compared to performance EPS growth rank against our | 0-150% | Stock | ||||
Restricted Share Units (RSUs) | Annual installments over 3 years | Time-based | 0-100% | Stock | ||||
Performance-based Restricted Share Units (PRSUs) | Annual installments over 4 years | Adjustment based on PNC’s annual TSR | 75-125% | Stock | ||||
Incentive Performance Units | After3-year performance period ends | PNC’s return on common equity without goodwill (ROCE) compared to our cost of common equity (COCE) |
Cash (above target) |
ALM Incentive Performance Units (ALM IPUs) (a) |
performance period ends | Based on PNC’s Asset & Liability Management function performance, compared to | 0-200% | Cash |
(a) | Mr. Parsley was the |
Performance-based restricted share units, specifically:
|
With respect to the following three forms of equity-basedperformance-based equity awards included inthat vested based on performance for the table,period ended December 31, 2018, the Personnel and Compensation Committee made performance-based orand risk-based
determinations in the first quarter of 2016,2019, as described in more detail below:below. The payout percentage grids are included below for each of these performance-based equity awards.
Performance share units
The PSUs granted in 2018 that vest based on performance for the three-year period ended December 31, 2020 are included in the following table as of December 31, 2018. Following the conclusion of the performance period, the Committee will determine the level of the payout, which could range from 0% to 150% of the target number of units based on our ROE, as adjusted, compared to established performance targets and
our EPS growth, as adjusted, compared to the EPS growth of our peers, with actual payout percentages calculated using bilinear interpolation. As discussed in the CD&A beginning on page 40, these awards are also subject to a risk-based performance metric that could reduce the payout. The PSUs will be paid out in shares of PNC common stock.
Restricted share units
The RSUs granted in 2018, which vest in annual installments over three years, are included in the following table as of December 31, 2018. As discussed in the CD&A beginning on page 40,
these awards are subject to a risk-based performance metric that could reduce the payout. The RSUs will be paid out in shares of PNC common stock.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 63
OUTSTANDING EQUITY AWARDS AT 2018 FISCALYEAR-END
Performance-based restricted share units
The performance-based restricted share unitsPRSUs that vestvested based on 20152018 performance are included in the following table as of December 31, 2015.2018. At a meeting held on January 28, 2016, our Board’s30, 2019, the Personnel and Compensation Committee certified the levelslevel of performance achieved and determined the payout for the 20152018 tranche of each of the 2012 grants, the 2013 grants, the 2014 grants2015, 2016 and the 2015 grants and determined the payout level.2017 grants. The Committee certified that the required Tier 1 risk-based capital ratio of 6% established by our primary regulator had been
achieved. The Committee then determined the size of the payout, which could range from 75% to 125% of the target number of units based on 2015 TSR. The Committee approved a payout at 106.81% for the applicable tranche of each of the 2012, 2013, 2014 and 2015 grants. As noted above, 2013, 2014 and 2015 awards also have an ROEC related risk metric that could trigger an additional review or adjustment. No additional review or adjustment was required as ROEC exceeded the Committee approved hurdle.
| ||
|
62 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
OUTSTANDING EQUITY AWARDS AT 2015 FISCAL YEAR-END
Incentive performance units
The incentive performance units granted in 2013 are included in the following table as of December 31, 2015. At a meeting held on February 10, 2016, our Board’s Personnel and Compensation Committee certified the levels of performance achieved for the January 1, 2013 to December 31, 2015 performance period and determined the payout level. The units provided an opportunity for the executive to receive a payout after the end of the performance period based on our earnings per share growth (EPS growth) as compared to our peers and our ROCE performance compared to our COCE, each adjusted as defined in the award agreement. The
Committee certified that the required Tier 1 risk-based capital ratio of 6% established by our primary regulator had been achieved. TheseThe Committee then determined the level of the payout, which could range from 75% to 125% of the target number of units based on TSR for 2018, with actual
payout percentages based on straight-line interpolation between the data points reflected in the payout percentage grid. The payout under these awards were alsois subject to the same ROEC related risk metric as noted earlier which could have reduced the payout;reduction or elimination if our return on economic capital (“ROEC”) does not exceed our cost of capital; however, no reduction was required, as ROEC exceeded the cost of capital hurdle and thein 2018. The Committee approved a payout at 109.78%83.02% for these awards.the 2018 tranche of each of the 2015, 2016 and 2017 grants. In accordance with the terms of these awards, the incentive performance unitsPRSUs were payablepaid out in PNC common stock up to target (100%) and payable in cash above target.stock.
Payout % | Overall Payout
| |||||||||||
Metric | 2013 | 2014 | 2015 | |||||||||
EPS Growth Payout | 125.00% | 59.23% | 99.45% | 109.78% | ||||||||
(PNC Ranking in peer group) | (2 out of 13) | (10 out of 13) | (7 out of 12) | |||||||||
ROCE Payout | 125.00% | 125.00% | 125.00% | |||||||||
(ROCE as a percentage of COCE) | (180.00%) | (169.75%) | (160.41%) |
ALM incentive performance units
The ALM-based incentive performance units granted in 2013 to Mr. Parsley were outstanding as of December 31, 2015 and are included in the following table. At a meeting held on February 10, 2016, our Board’s Personnel and Compensation Committee certified the levels of performance achieved under Mr. Parsley’s ALM-based grant and determined the final award. The maximum potential
payout percentage was 200%. The maximum permitted payout for these units is generated by applying the performance factor to the number of target share units of 46,970. The Committee approved payout at 199.78% of target. In accordance with the terms of this award, the ALM-based units awarded to Mr. Parsley paid out entirely in cash share equivalents.
Payout Percentage | ||||||||||||||||
Metric | 2013 | 2014 | 2015 | Overall | ||||||||||||
Performance of ALM unit against benchmark index | 200.00 | % | 199.33 | % | 200.00 | % | 199.78 | % |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 63
OUTSTANDING EQUITY AWARDS AT 2015 FISCAL YEAR-END
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Grant Date or Performance Period(a) | No. of Securities Underlying Unexercised Options (#) Exercisable(b) | Option Exercise Price ($) | Option Expiration Date | Grant Date or Period(a) | No. of Units of Stock That Have Not Vested (#)(c) | Market Value of Shares or Units of Stock That Have Not Vested ($)(d) | Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not Vested (#)(e) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) | ||||||||||||||||||||||||
William S. Demchak |
| |||||||||||||||||||||||||||||||
Options | Performance-Based Restricted Share Units | |||||||||||||||||||||||||||||||
January 25, 2007 | 82,500 | $ | 72.65 | January 25, 2017 | Jan. 1, 2012–Dec. 31, 2015 | 9,501 | $ | 905,540 | ||||||||||||||||||||||||
January 22, 2008 | 93,500 | $ | 57.21 | January 22, 2018 | Jan. 1, 2013–Dec. 31, 2016 | 8,076 | $ | 769,724 | 7,562 | $ | 720,734 | |||||||||||||||||||||
July 21, 2008 | 138,000 | $ | 63.69 | July 21, 2018 | Jan. 1, 2014–Dec. 31, 2017 | 9,872 | $ | 940,900 | 18,487 | $ | 1,761,996 | |||||||||||||||||||||
February 12, 2009 | 180,000 | $ | 31.07 | February 12, 2019 | Jan. 1, 2015–Dec. 31, 2018 | 10,058 | $ | 958,628 | 28,253 | $ | 2,692,793 | |||||||||||||||||||||
April 26, 2010 | 75,000 | $ | 66.77 | April 26, 2020 | Incentive Performance Units | |||||||||||||||||||||||||||
Jan. 1, 2013–Dec. 31, 2015 | 33,205 | $ | 3,164,769 | |||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 46,216 | $ | 4,404,847 | |||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 47,087 | $ | 4,487,862 | |||||||||||||||||||||||||||||
Robert Q. Reilly |
| |||||||||||||||||||||||||||||||
Options | Performance-Based Restricted Share Units | |||||||||||||||||||||||||||||||
January 25, 2007 | 22,000 | $ | 72.65 | January 25, 2017 | Jan. 1, 2012–Dec. 31, 2015 | 1,935 | $ | 184,425 | ||||||||||||||||||||||||
January 22, 2008 | 33,000 | $ | 57.21 | January 22, 2018 | Jan. 1, 2013–Dec. 31, 2016 | 2,486 | $ | 236,941 | 2,329 | $ | 221,977 | |||||||||||||||||||||
July 21, 2008 | 65,000 | $ | 63.69 | July 21, 2018 | Jan. 1, 2014–Dec. 31, 2017 | 2,550 | $ | 243,041 | 4,776 | $ | 455,201 | |||||||||||||||||||||
February 12, 2009 | 50,000 | $ | 31.07 | February 12, 2019 | Jan. 1, 2015–Dec. 31, 2018 | 2,709 | $ | 258,195 | 7,611 | $ | 725,404 | |||||||||||||||||||||
February 12, 2009 | 19,800 | $ | 31.07 | February 12, 2019 | Incentive Performance Units | |||||||||||||||||||||||||||
April 26, 2010 | 25,000 | $ | 66.77 | April 26, 2020 | Jan. 1, 2013–Dec. 31, 2015 | 10,223 | $ | 974,354 | ||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 11,938 | $ | 1,137,811 | |||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 12,685 | $ | 1,209,007 | |||||||||||||||||||||||||||||
Michael P. Lyons |
| |||||||||||||||||||||||||||||||
Performance-Based Restricted Share Units | ||||||||||||||||||||||||||||||||
Jan. 1, 2012–Dec. 31, 2015 | 7,258 | $ | 691,760 | |||||||||||||||||||||||||||||
Jan. 1, 2013–Dec. 31, 2016 | 6,592 | $ | 628,284 | 6,172 | $ | 588,253 | ||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2017 | 6,713 | $ | 639,816 | 12,571 | $ | 1,198,142 | ||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 5,809 | $ | 553,656 | 16,318 | $ | 1,555,269 | ||||||||||||||||||||||||||
Incentive Performance Units | ||||||||||||||||||||||||||||||||
Jan. 1, 2013–Dec. 31, 2015 | 27,101 | $ | 2,582,996 | |||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 31,426 | $ | 2,995,212 | |||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 27,196 | $ | 2,592,051 | |||||||||||||||||||||||||||||
E William Parsley, III |
| |||||||||||||||||||||||||||||||
Options | Performance-Based Restricted Share Units | |||||||||||||||||||||||||||||||
July 21, 2008 | 25,000 | $ | 63.69 | July 21, 2018 | Jan. 1, 2012–Dec. 31, 2015 | 2,969 | $ | 282,975 | ||||||||||||||||||||||||
February 12, 2009 | 50,000 | $ | 31.07 | February 12, 2019 | Jan. 1, 2013–Dec. 31, 2016 | 2,497 | $ | 237,989 | 2,338 | $ | 222,835 | |||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2017 | 2,591 | $ | 246,948 | 4,853 | $ | 462,539 | ||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 2,239 | $ | 213,399 | 6,292 | $ | 599,691 | ||||||||||||||||||||||||||
Incentive Performance Units | ||||||||||||||||||||||||||||||||
Jan. 1, 2013–Dec. 31, 2015 | 10,266 | $ | 978,452 | |||||||||||||||||||||||||||||
Jan. 1, 2013–Dec. 31, 2015(f) | 93,836 | $ | 8,943,509 | |||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016(f) | 73,946 | $ | 7,047,793 | |||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 12,131 | $ | 1,156,206 | |||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017(f) | 64,948 | $ | 6,190,194 | |||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 10,486 | $ | 999,421 |
Annual | Payout % | 2018 TSR | 2018 Payout % | |||||||||
>= +25% | 125% |
| (17.0)% |
|
| 83.02% |
| |||||
0% | 100% | |||||||||||
<= -25% | 75% |
64 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
OUTSTANDING EQUITY AWARDS AT 20152018 FISCALYEAR-END
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Grant Date or Performance Period(a) | No. of Securities Underlying Unexercised Options (#) Exercisable(b) | Option Exercise Price ($) | Option Expiration Date | Grant Date or Period(a) | No. of Units of Stock That Have Not Vested (#)(c) | Market Value of Shares or Units of Stock That Have Not Vested ($)(d) | Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not Vested (#)(e) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(d) | ||||||||||||||||||||||||
Joseph C. Guyaux |
| |||||||||||||||||||||||||||||||
Options | Performance-Based Restricted Share Units | |||||||||||||||||||||||||||||||
February 12, 2009 | 180,000 | $ | 31.07 | February 12, 2019 | Jan. 1, 2012–Dec. 31, 2015 | 3,464 | $ | 330,154 | ||||||||||||||||||||||||
Jan. 1, 2013–Dec. 31, 2016 | 3,355 | $ | 319,765 | 3,142 | $ | 299,464 | ||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2017 | 3,084 | $ | 293,936 | 5,778 | $ | 550,701 | ||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2018 | 2,890 | $ | 275,446 | 8,118 | $ | 773,727 | ||||||||||||||||||||||||||
Incentive Performance Units | ||||||||||||||||||||||||||||||||
Jan. 1, 2013–Dec. 31, 2015 | 13,796 | $ | 1,314,897 | |||||||||||||||||||||||||||||
Jan. 1, 2014–Dec. 31, 2016 | 14,442 | $ | 1,376,467 | |||||||||||||||||||||||||||||
Jan. 1, 2015–Dec. 31, 2017 | 13,530 | $ | 1,289,544 |
Standard incentive performance units
The Standard IPUs granted in 2016 that vest based on performance for the three-year period ended December 31, 2018 are included in the following table as of December 31, 2018. At a meeting held on February 12, 2019, the Personnel and Compensation Committee certified the level of performance achieved and determined the payout for the January 1, 2016 to December 31, 2018 performance period. The Committee certified that the required Tier 1 risk-based capital ratio of 6% established by our primary regulator had been achieved. The Committee then determined the level of the payout, which could range from 0% to 125% of the target number of units based on our earnings per share growth as compared to our peers and our ROCE
performance compared to our COCE, each adjusted as defined in the award agreement. The actual payout percentages are interpolated, which takes into account how close the actual performance or peer group rank is to the metric or rank above and below. The payout under these awards is subject to reduction or elimination if ROEC does not exceed our cost of capital; however, no reduction was required, as ROEC exceeded the cost of capital hurdle in 2018. The Committee approved a payout at 102.61% for the Standard IPUs granted in 2016. In accordance with the terms of these awards, the Standard IPUs were paid out in PNC common stock up to target (100%) and were paid out in cash above target.
ROCE as % of COCE | Payout % | |||
>= 110% | 125% | |||
105% | 100% | |||
100% | 75% | |||
75% | 50% | |||
<= 50% | 0% |
2016-2017 EPS Growth Payout Grid | ||||
EPS Growth Rank | Payout% | |||
1 | 125% | |||
2 | 125% | |||
3 | 125% | |||
4 | 120% | |||
5 | 115% | |||
6 | 105% | |||
7 | 95% | |||
8 | 80% | |||
9 | 60% | |||
10 | 40% | |||
11 | 0% | |||
12 | 0% |
2018 EPS Growth Payout Grid | ||
EPS Growth Rank | Payout% | |
1 | 125% | |
2 | 125% | |
3 | 125% | |
4 | 125% | |
5 | 116.7% | |
6 | 108.3% | |
7 | 100% | |
8 | 90% | |
9 | 80% | |
10 | 60% | |
11 | 40% | |
12 | 0% | |
13 | 0% |
2016 | 2017 | 2018 | ||||||||||||
ROCE as % of COCE | EPS Growth | ROCE as % of COCE | EPS Growth | ROCE as % of COCE | EPS Growth | 2016-2018 Payout% | ||||||||
Metric | 161.41% | 8th | 164.10% | 6th | 186.80% | 10th | 102.61% | |||||||
Payout | 125% | 73.62% | 125% | 107.73% | 125% | 59.30% |
ALM incentive performance units
The ALM IPUs granted to Mr. Parsley in 2016 that vest based on performance for the three-year period ended December 31, 2018 are included in the following table as of December 31, 2018. At a meeting held on January 30, 2019, the Personnel and Compensation Committee certified the level of performance achieved and determined the payout for the January 1, 2016 to December 31, 2018 performance period. The Committee determined the level of the payout, which could range from 0% to
200% of the target number of units based on our Asset & Liability Management function performance against a benchmark index, with actual payout percentages based on straight-line interpolation between the data points reflected in the payout percentage grid. The Committee approved a payout at 200% for the ALM IPUs granted in 2016. In accordance with the terms of this award, the ALM IPUs awarded to Mr. Parsley were paid out in cash.
ALM Performance vs. Index | Payout % | 2016 | 2017 | 2018 | 2016-2018 Payout % | |||||||||||||||
>= +40 basis points | 200% | 200% | 200% | 200% | 200% | |||||||||||||||
+20 basis points | 150% | |||||||||||||||||||
0 to -25 basis points | 100% | |||||||||||||||||||
-35 basis points | 40% | |||||||||||||||||||
<= -40 basis points | 0% |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 65
OUTSTANDING EQUITY AWARDS AT 2018 FISCALYEAR-END
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(a) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(a) | |||||||||||||||||||||||||
William S. Demchak |
| |||||||||||||||||||||||||||||||
April 26, 2010 |
| 75,000 |
| $ | 66.77 |
|
| April 26, 2020 |
|
| 7,818 | (b) | $ | 914,002 |
| |||||||||||||||||
| 10,355 | (c) | $ | 1,210,603 |
|
| 12,473 | (d) | $ | 1,458,217 |
| |||||||||||||||||||||
| 51,193 | (e) | $ | 5,984,974 |
| |||||||||||||||||||||||||||
| 5,517 | (f) | $ | 644,992 |
|
| 13,292 | (g) | $ | 1,553,968 |
| |||||||||||||||||||||
| 33,228 | (h) | $ | 3,884,685 |
| |||||||||||||||||||||||||||
| 53,371 | (i) | $ | 6,239,604 |
| |||||||||||||||||||||||||||
| 23,720 | (j) | $ | 2,773,105 |
| |||||||||||||||||||||||||||
Robert Q. Reilly |
| |||||||||||||||||||||||||||||||
February 12, 2009 |
| 25,000 |
| $ | 31.07 |
|
| February 12, 2019 |
|
| 2,106 | (b) | $ | 246,212 |
| |||||||||||||||||
April 26, 2010 |
| 25,000 |
| $ | 66.77 |
|
| April 26, 2020 |
|
| 2,522 | (c) | $ | 294,847 |
|
| 3,038 | (d) | $ | 355,173 |
| |||||||||||
| 12,469 | (e) | $ | 1,457,751 |
| |||||||||||||||||||||||||||
| 1,450 | (f) | $ | 169,520 |
|
| 3,496 | (g) | $ | 408,717 |
| |||||||||||||||||||||
| 8,737 | (h) | $ | 1,021,443 |
| |||||||||||||||||||||||||||
| 13,300 | (i) | $ | 1,554,903 |
| |||||||||||||||||||||||||||
| 5,911 | (j) | $ | 691,055 |
| |||||||||||||||||||||||||||
Michael P. Lyons |
| |||||||||||||||||||||||||||||||
| 4,516 | (b) | $ | 527,966 |
| |||||||||||||||||||||||||||
| 5,416 | (c) | $ | 633,185 |
|
| 6,524 | (d) | $ | 762,721 |
| |||||||||||||||||||||
| 26,777 | (e) | $ | 3,130,499 |
| |||||||||||||||||||||||||||
| 3,236 | (f) | $ | 378,321 |
|
| 7,798 | (g) | $ | 911,664 |
| |||||||||||||||||||||
| 19,493 | (h) | $ | 2,278,927 |
| |||||||||||||||||||||||||||
| 28,711 | (i) | $ | 3,356,603 |
| |||||||||||||||||||||||||||
| 12,761 | (j) | $ | 1,491,889 |
| |||||||||||||||||||||||||||
E William Parsley, III |
| |||||||||||||||||||||||||||||||
| 1,741 | (b) | $ | 203,540 |
| |||||||||||||||||||||||||||
| 2,389 | (c) | $ | 279,298 |
|
| 2,879 | (d) | $ | 336,584 |
| |||||||||||||||||||||
| 11,813 | (e) | $ | 1,381,058 |
| |||||||||||||||||||||||||||
| 76,754 | (k) | $ | 8,973,310 |
| |||||||||||||||||||||||||||
| 2,329 | (f) | $ | 272,283 |
|
| 5,612 | (g) | $ | 656,099 |
| |||||||||||||||||||||
| 14,030 | (h) | $ | 1,640,247 |
| |||||||||||||||||||||||||||
| 23,628 | (l) | $ | 2,762,349 |
| |||||||||||||||||||||||||||
| 32,089 | (i) | $ | 3,751,525 |
| |||||||||||||||||||||||||||
| 14,262 | (j) | $ | 1,667,370 |
| |||||||||||||||||||||||||||
Joseph E. Rockey |
| |||||||||||||||||||||||||||||||
February 9, 2011 |
| 18,000 |
| $ | 64.21 |
|
| February 9, 2021 |
|
| 498 | (m) | $ | 58,221 |
| |||||||||||||||||
February 7, 2012 |
| 18,000 |
| $ | 60.70 |
|
| February 7, 2022 |
|
| 664 | (c) | $ | 77,628 |
|
| 800 | (d) | $ | 93,528 |
| |||||||||||
| 3,281 | (e) | $ | 383,582 |
| |||||||||||||||||||||||||||
| 718 | (f) | $ | 83,941 |
|
| 1,733 | (g) | $ | 202,605 |
| |||||||||||||||||||||
| 4,331 | (h) | $ | 506,337 |
| |||||||||||||||||||||||||||
| 11,259 | (i) | $ | 1,316,290 |
| |||||||||||||||||||||||||||
| 5,004 | (j) | $ | 585,018 |
|
(a) |
|
(b) |
|
66 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
OUTSTANDING EQUITY AWARDS AT 2018 FISCALYEAR-END
(c) |
|
| ||||
| ||||
| ||||
|
(d) |
|
(e) |
|
(f) |
|
(g) | 2017 PRSUs (Performance Not Yet Achieved). Represents the remaining two tranches of the award, which are scheduled to vest in approximately equal annual installments on February 16, 2020 and February 16, 2021 based on achievement of the applicable performance conditions for the performance period ending December 31, 2019 and December 31, 2020, respectively. The number of PRSUs included in the table above is based on achievement at the target level. |
(h) | 2017 Standard IPUs (Performance Not Yet Achieved). The award is scheduled to vest in early 2020 based on achievement of the applicable performance conditions over a three-year performance period ending December 31, 2019. The number of Standard IPUs included in the table above is based on achievement at the maximum level. |
(i) | 2018 PSUs (Performance Not Yet Achieved). The award is scheduled to vest in early 2021 based on achievement of the applicable performance conditions over a three-year performance period ending December 31, 2020. The number of PSUs included in the table above is based on achievement at the maximum level. See the description of the 2018 PSUs in the Compensation Discussion and Analysis section of our 2018 proxy statement. |
(j) | 2018 RSUs. The first tranche of the award vested on February 15, 2019, and the remaining two tranches are scheduled to vest in approximately equal annual installments on February 15, 2020 and February 15, 2021. |
(k) | 2016 ALM |
(l) | 2017 ALM IPUs (Performance Not Yet Achieved).The award is scheduled to |
(m) | 2015 Senior Leader PRSUs. The performance conditions applicable to the 2018 tranche of the award were satisfied as of December 31, 2018, and |
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 6567
OPTION EXERCISES AND STOCK VESTED IN FISCAL 20152018
Option exercises and stock vested in fiscal 20152018
Option Awards | Stock Awards(b) | Option Awards | Stock Awards(b) | |||||||||||||||||||||||||||||||||||
NEO | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(a) ($) | Number of Shares Acquired on Vesting (#) | Value Realized ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(a) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||||||||||||||||||||
William S. Demchak | 102,057 | $6,176,490 | 82,195 | $ 7,267,946 |
| – |
| $ | – |
|
| 87,598 |
| $ | 13,640,632 |
| ||||||||||||||||||||||
Robert Q. Reilly | - | - | 18,593 | $ 1,650,212 |
| 24,710 |
| $ | 2,706,239 |
|
| 23,012 |
| $ | 3,585,268 |
| ||||||||||||||||||||||
Michael P. Lyons | - | - | 63,571 | $ 5,547,511 |
| – |
| $ | – |
|
| 51,001 |
| $ | 7,941,458 |
| ||||||||||||||||||||||
E William Parsley, III | - | - | 124,634 | $10,681,420 |
| – |
| $ | – |
|
| 86,697 |
| $ | 13,730,693 |
| ||||||||||||||||||||||
Joseph C. Guyaux | 145,000 | $4,396,675 | 37,581 | $ 3,340,859 | ||||||||||||||||||||||||||||||||||
Joseph E. Rockey |
| – |
|
| – |
|
| 3,149 |
| $ | 490,402 |
|
(a) | The dollar amount in this column includes the value realized upon the exercise of various options throughout |
(b) | These columns include |
|
6668 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
PENSION BENEFITS AT 20152018 FISCALYEAR-END
Pension benefits at 20152018 fiscalyear-end
The principal elements of our post-employment compensation are a qualified defined benefit cash balance pension plan, anon-qualified excess cash balance pension plan and anon-qualified supplemental executive retirement plan, each described in this section, as well as a qualified defined contribution savings plan and anon-qualified deferred compensation and incentive plan.plan as described inNon-qualified deferred compensation in fiscal 2018 on page71.
Cash balance pension plan. We maintain a pension plan for most of our full-time employees. The pension plan is a defined benefit cash balance pension plan under the Employee Retirement Income Security Act of 1974, as amended (ERISA)(“ERISA”), and is intended to be qualified under Section 401(a) of the Internal Revenue Code. Each calendar quarter, eligible participants receive “earnings credits” based on a percentage of eligible compensation in accordance withcompensation. Earnings credit percentages for employees who were plan participants on December 31, 2009 are based on a schedule based onusing the participant’s age and years of credited service. Earnings credit percentages for plan participants on December 31, 2009service at that date and are frozen at their level earned to that point.level. Earnings credits for all employees who become participants on or after January 1, 2010 are a flat 3% of eligible compensation.
The plan defines eligible “compensation” as regular earnings plus eligible variable compensation, such as paid annual incentives. Eligible “compensation” does not include deferred payments of annual incentives; these are instead taken into account under our excess pension plan described below. We generally limit eligible variable compensation for a plan year to a total of 100% of the first $25,000 plus 50% of the next $225,000.
For participants who had accrued benefits prior to 1999 under the pension plan formula then in effect, an initial cash balance “account” was established based on the present value of the accrued benefits at the time of the conversion to the current program. Employees who were at least age 40 and had at least 10 years of credited service as of January 1, 1999 were awarded additional “Transitional Earnings Credits” under the plan for up to 10 years.
Employees who were alreadyPlan participants at December 31, 2009 generally receive quarterly “interest credits” at a rate ofone-fourth of the annual interest rate on30-year Treasury securities, withsecurities. Employees who were already plan participants as of December 31, 2009 receive a minimum interest credit. New participants on
or after January 1, 2010 are not subject to this minimum interest credit.
At the end of 2008, the cash balance pension plan previously sponsored by National City Corporation was merged into this plan. Earnings and interest credits for National City participants are generally as noted above.
We contribute to the plan an actuarially determined amount necessary to fund the total benefits payable to participants. Actuaries calculate total contributions instead of contributions for each individual participant.
Excess pension plan. We maintain an ERISA excess pension plan, which is a supplementalnon-qualified pension plan. The excess benefits under this plan equal the difference, if any, between a participant’s benefit under the qualified pension plan computed without regard to applicable Internal Revenue Code limits and taking into account bonus amounts deferred under thenon-qualified deferred compensation and incentive plan, and the participant’s actual benefit under the qualified pension plan.
Supplemental executive retirement plan. We maintain a supplemental executive retirement plan for certain executive officers. As part of its ongoing review of compensation practices, the Personnel and Compensation Committee decided in 2007 to eliminate future plan participation for new executive officers. This plan provides earnings credits based on a percentage of annual incentives awarded under eligible executive bonus plans in accordance with a schedule based on the participant’s age and years of credited service. This plan also provides quarterly interest credits that mirror the interest credits under the qualified pension plan.
Executive officers who participated in the supplemental executive retirement plan on December 31, 1998 and who were at least age 50 with five or more years of credited service receive grandfathered benefits based on the pension formula in effect prior to 1999. For executive officers at or above a certain organizational level who participated on December 31, 1998 but who did not meet the requirements for grandfathered benefits, we doubled the earnings credit percentages in order to mitigate the effect of the transition to the cash balance pension formula.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 6769
PENSION BENEFITS AT 20152018 FISCALYEAR-END
NEO | Plan Name | Number of Years Credited Service (#)(a) | Present Value of Accumulated Benefit ($)(b) | Payments during last fiscal year | Plan Name | Number of Years Credited Service (#)(a) | Present Value of Accumulated Benefit ($)(b) | Payments During Last Fiscal Year | ||||||||||||||||||||
William S. Demchak | Qualified Pension Plan | 13 | $ | 191,866 | – | Qualified Pension Plan | 16 | $ | 261,029 | – | ||||||||||||||||||
ERISA Excess Pension Plan | 13 | $ | 1,212,820 | – | ERISA Excess Pension Plan | 16 | $ | 1,826,456 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | 13 | $ | 1,765,101 | – | Supplemental Executive Retirement Plan | 16 | $ | 2,902,720 | – | |||||||||||||||||||
Total | $ | 3,169,787 | – | Total | $ | 4,990,205 | – | |||||||||||||||||||||
Robert Q. Reilly | Qualified Pension Plan | 28 | $ | 337,520 | – | Qualified Pension Plan | 31 | $ | 434,215 | – | ||||||||||||||||||
ERISA Excess Pension Plan | 28 | $ | 441,694 | – | ERISA Excess Pension Plan | 31 | $ | 691,980 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | 28 | $ | 642,509 | – | Supplemental Executive Retirement Plan | 31 | $ | 1,108,891 | – | |||||||||||||||||||
Total | $ | 1,421,723 | – | Total | $ | 2,235,086 | – | |||||||||||||||||||||
Michael P. Lyons | Qualified Pension Plan | 4 | $ | 25,976 | – | Qualified Pension Plan | 7 | $ | 50,147 | – | ||||||||||||||||||
ERISA Excess Pension Plan | 4 | $ | 51,513 | – | ERISA Excess Pension Plan | 7 | $ | 100,551 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | NA | – | – | Supplemental Executive Retirement Plan | N/A | – | – | |||||||||||||||||||||
Total | $ | 77,489 | – | Total | $ | 150,698 | – | |||||||||||||||||||||
E William Parsley, III | Qualified Pension Plan | 12 | $ | 165,157 | – | Qualified Pension Plan | 15 | $ | 230,677 | – | ||||||||||||||||||
ERISA Excess Pension Plan | 12 | $ | 685,691 | – | ERISA Excess Pension Plan | 15 | $ | 996,585 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | NA | – | – | Supplemental Executive Retirement Plan | N/A | – | – | |||||||||||||||||||||
Total | $ | 850,848 | – | Total | $ | 1,227,262 | – | |||||||||||||||||||||
Joseph C. Guyaux | Qualified Pension Plan | 43 | $ | 1,294,615 | – | |||||||||||||||||||||||
Joseph E. Rockey | Qualified Pension Plan | 19 | $ | 304,000 | – | |||||||||||||||||||||||
ERISA Excess Pension Plan | 43 | $ | 2,671,828 | – | ERISA Excess Pension Plan | 19 | $ | 226,856 | – | |||||||||||||||||||
Supplemental Executive Retirement Plan | 43 | $ | 5,929,932 | – | Supplemental Executive Retirement Plan | N/A | – | – | ||||||||||||||||||||
Total | $ | 9,896,375 | – | Total | $ | 530,856 | – |
(a) | To compute the number of years of service, we use the same plan measurement date that we use for our |
(b) | We compute the present values shown here as of December 31, |
We calculate the present values for the plans by projecting the December 31, |
See Note |
6870 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 20152018
Non-qualified deferred compensation in fiscal 20152018
SupplementalWe offer an incentive savings plan (SISP). Prior to 2012, we offered a non-qualified supplemental incentive savings plan for certain designated employees who exceeded a compensation threshold. Effective January 1, 2012, the SISP was frozen to new participants and to the deferral of amounts earned on and after January 1, 2012. Participants with existing account balances can direct the investment of their accounts among the hypothetical investment alternatives made available under the plan and their accounts are adjusted for deemed investment gains or losses resulting from such investment directions.
The SISP was a supplement to the incentive savings plan (ISP)(“ISP”) in which most of our employees can participate after they meet any applicable service requirements.requirements, and for designated employees who exceed a compensation threshold, we also offer anon-qualified deferred compensation and incentive plan (“DCIP”). Prior to establishing the DCIP in 2012, we offered anon-qualified supplemental incentive savings plan (“SISP”), which was a supplement to the ISP, and anon-qualified deferred compensation plan (“DCP”), in each case for certain designated employees who exceeded applicable compensation thresholds.
Incentive savings plan (ISP). The ISP is a defined contribution 401(k) plan whichthat is intended to be qualified under Section 401(a) of the Internal Revenue Code. During 2015, Participants2018, participants could elect to contribute between 1% and 75% of eligible compensation to the plan each year aspre-tax elective deferrals, subject to Internal Revenue Code limits. Participants who are age 50 or older may contribute additionalpre-tax amounts called “catch-up“catch-up contributions” each year. For 2015,2018, we made employer matching contributions on behalf of eligible participants equal to 100% of elective deferrals up to 4% of eligible compensation. Matching contributions were made in cash. Participants direct the investment of their accounts among the investment options offered under the plan and their account balances are adjusted for gains or losses resulting from those investment directions.
ISP and SISP participants have the same investment options. The employee directs investment of contributions under either plan. Investment options include several collective funds and mutual funds
(including BlackRock mutual funds), a proprietary PNC investment fund, and a PNC common stock fund. We no longer permit new funds to be contributed or transferred into the PNC common stock fund. SISP investments are invested on a phantom basis and are considered “deemed” investments.
Deferred compensation plan (DCP) and deferred compensation and incentive plan (DCIP). We maintain a non-qualified deferred compensation and incentive plan (DCIP)DCIP for designated employees who exceed a compensation threshold. Participants can elect to defer up to 20% of base salary and/or up to 75% of eligible short-term incentive pay earned with respect to a plan year. The DCIP’s plan year is the calendar yearyear.
Supplemental incentive savings plan (SISP) and the DCIP’s first plan year began January 1, 2012. Prior to 2012, we offered a non-qualified deferred compensation plan (DCP) for designated employees who exceeded a compensation threshold.. Effective January 1, 2012, the SISP and DCP waswere frozen to new participants and to the deferral of amounts earned on and after January 1, 2012. Distributions from this planthese plans are paid in cash in accordance with the participant’s election. Participants with existing account balances can direct the investment of their accounts among the hypothetical investment alternatives made available under the plan and their accounts are adjusted for deemed investment gains or losses resulting from such investment directions.
Investment options. ISP, DCIP, SISP and DCP and DCIP participants currently have many of the same investment options available tolisted on page 73. The employee directs investment of contributions under each plan. Investment options include several collective funds and mutual funds (including BlackRock mutual funds) and a proprietary PNC investment fund. ISP and SISP participants.participants may also hold investments in a PNC common stock fund; however, we no longer permit new funds to be contributed or transferred into the PNC common stock fund. ISP, DCIP, SISP and DCP and DCIP participants also have additional investment options, including additional BlackRock mutual funds. DCP and DCIP investments are invested on a phantom basis and are considered “deemed” investments.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 6971
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 20152018
Executive ($) | Registrant ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | Executive Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | ||||||||||||||||||||||||||||||||
NEO | Name of Plan | (a) | (b) | (c) | Name of Plan | (a) | (b) | (c) | ||||||||||||||||||||||||||||||||
William S. Demchak | Supplemental Incentive Savings Plan | – | – | $ | 27,196 | – | $ | 1,065,272 | Supplemental Incentive Savings Plan | – | $ | (119,930 | ) | – | $ | 1,388,486 | ||||||||||||||||||||||||
Deferred Compensation & Incentive Plan | $ | 442,500 | – | $ | (40,678 | ) | $ | (971,618 | ) | $ | 600,129 | Deferred Compensation & Incentive Plan | $ | 652,500 | $ | 10,598 | $ | (1,172,156 | ) | $ | 654,608 | |||||||||||||||||||
Deferred Compensation Plan | – | – | $ | (14,617 | ) | $ | (1,182,566 | ) | $ | 1,638,280 | Deferred Compensation Plan | – | $ | 4,641 | $ | (164,600 | ) | $ | 166,247 | |||||||||||||||||||||
Total | $ | 442,500 | – | $ | (28,099 | ) | $ | (2,154,184 | ) | $ | 3,303,681 | Total | $ | 652,500 | $ | (104,691 | ) | $ | (1,336,756 | ) | $ | 2,209,341 | ||||||||||||||||||
Robert Q. Reilly | Supplemental Incentive Savings Plan | – | – | $ | (591 | ) | – | $ | 646,153 | Supplemental Incentive Savings Plan | – | $ | (62,160 | ) | – | $ | 808,167 | |||||||||||||||||||||||
Deferred Compensation & Incentive Plan | – | – | – | – | – | Deferred Compensation & Incentive Plan | – | – | – | – | ||||||||||||||||||||||||||||||
Deferred Compensation Plan | – | – | $ | 21,673 | – | $ | 2,320,235 | Deferred Compensation Plan | – | $ | (194,403 | ) | – | $ | 2,780,849 | |||||||||||||||||||||||||
Total | – | – | $ | 21,082 | – | $ | 2,966,388 | Total | $ | – | $ | (256,563 | ) | $ | – | $ | 3,589,016 | |||||||||||||||||||||||
Michael P. Lyons | Supplemental Incentive Savings Plan | – | – | – | – | – | Supplemental Incentive Savings Plan | – | – | – | – | |||||||||||||||||||||||||||||
Deferred Compensation & Incentive Plan | – | – | – | – | – | Deferred Compensation & Incentive Plan | – | – | – | – | ||||||||||||||||||||||||||||||
Deferred Compensation Plan | – | – | – | – | – | Deferred Compensation Plan | – | – | – | – | ||||||||||||||||||||||||||||||
Total | – | – | – | – | – | Total | $ | – | $ | – | $ | – | $ | – | ||||||||||||||||||||||||||
E William Parsley, III | Supplemental Incentive Savings Plan | – | – | $ | (42,052 | ) | – | $ | 1,754,190 | Supplemental Incentive Savings Plan | – | $ | (210,255 | ) | – | $ | 2,171,084 | |||||||||||||||||||||||
Deferred Compensation & Incentive Plan | – | – | – | – | – | Deferred Compensation & Incentive Plan | – | – | – | – | ||||||||||||||||||||||||||||||
Deferred Compensation Plan | – | – | $ | (64,928 | ) | $ | (599,350 | ) | $ | 1,738,109 | Deferred Compensation Plan | – | $ | 3,483 | $ | (710,094 | ) | – | ||||||||||||||||||||||
Total | – | – | $ | (106,980 | ) | $ | (599,350 | ) | $ | 3,492,299 | Total | $ | – | $ | (206,772 | ) | $ | (710,094 | ) | $ | 2,171,084 | |||||||||||||||||||
Joseph C. Guyaux | Supplemental Incentive Savings Plan | – | – | $ | 620 | – | $ | 1,871,603 | ||||||||||||||||||||||||||||||||
Joseph E. Rockey | Supplemental Incentive Savings Plan | – | $ | (97,339 | ) | – | 797,606 | |||||||||||||||||||||||||||||||||
Deferred Compensation & Incentive Plan | – | – | – | – | – | Deferred Compensation & Incentive Plan | $ | 203,125 | $ | (127,595 | ) | – | $ | 722,751 | ||||||||||||||||||||||||||
Deferred Compensation Plan | – | – | $ | 41,904 | – | $ | 2,817,439 | Deferred Compensation Plan | – | – | – | – | ||||||||||||||||||||||||||||
Total | – | – | $ | 42,524 | – | $ | 4,689,042 | Total | $ | 203,125 | $ | (224,934 | ) | $ | – | $ | 1,520,357 |
(a) | Amounts in this column |
(b) | No amounts in this column have been reported in the Summary compensation table on page |
(c) | We calculate the dollar amounts in this column by taking the aggregate balance at the end of fiscal year |
7072 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 20152018
The amounts for each year reflect the contributions that were reported in previous summary compensation tables (since 2006). The total represents the portion of the aggregate balance, without giving effect to earnings or distributions, that were reported in previous summary compensation tables.
NEO | Plan | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Total* | ||||||||||||||||||||||||||||||||||||
William S. Demchak | SISP | $ | 77,102 | $ | 97,100 | $ | 75,200 | $ | 63,620 | – | – | – | – | – | – | $ | 313,022 | |||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | $ | 150,000 | $ | 684,690 | $ | 385,417 | $ | 442,500 | $ | 1,662,607 | ||||||||||||||||||||||||||||||||
DCP | $ | 1,278,907 | $ | 1,625,000 | $ | 1,125,603 | – | – | – | $ | 745,500 | – | – | – | $ | 4,775,010 | ||||||||||||||||||||||||||||||||
Robert Q. Reilly | SISP | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||
DCP | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||
Michael P. Lyons | SISP | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||
DCP | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||
E William Parsley, III | SISP | – | – | – | – | $ | 665,038 | – | – | – | – | – | $ | 665,038 | ||||||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||
DCP | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||
Joseph C. Guyaux | SISP | $ | 61,944 | $ | 21,000 | $ | 17,625 | $ | 15,864 | $ | 4,127 | – | – | – | – | – | $ | 120,560 | ||||||||||||||||||||||||||||||
DCIP | – | – | – | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||||||
DCP | – | – | – | – | – | – | – | – | – | – | – |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 71
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2015
The following table shows the 20152018 investment options for the DCP, DCIP, ISP SISP, DCP and DCIP,SISP, along with annual rates of return. See page 6971 for an explanation of ourthe DCP, DCIP, ISP SISP, DCP and DCIP.SISP. Ticker symbols are listed for investment options available to the general public.
Benchmark Performance | Ticker Symbol | DCP | DCIP | ISP/SISP |
Rate of Return | |||||||||||||||
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BlackRock High Yield BR | BHYIX | X | X | X | )% | |||||||||||||||
BlackRock | ||||||||||||||||||||
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| X | X | X | % | ||||||||||||||||
BlackRock LifePath | X | X | X | )% | ||||||||||||||||
BlackRock LifePath | X | X | X | )% | ||||||||||||||||
BlackRock LifePath | X | X | X | )% | ||||||||||||||||
BlackRock LifePath | ||||||||||||||||||||
| ||||||||||||||||||||
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| ||||||||||||||||||||
| ||||||||||||||||||||
| X | X | X | )% | ||||||||||||||||
BlackRock LifePath 2040 Fund | X | X | X | (7.19 | )% | |||||||||||||||
BlackRock LifePath 2045 Fund | X | X | X | (7.84 | )% | |||||||||||||||
BlackRock LifePath 2050 Fund | X | X | X | (8.09 | )% | |||||||||||||||
BlackRock LifePath 2055 Fund | X | X | X | (8.11 | )% | |||||||||||||||
BlackRock LifePath 2060 Fund | X | X | X | (8.11 | )% | |||||||||||||||
BlackRock LifePath Retirement Fund | X | X | X | (3.46 | )% | |||||||||||||||
BlackRock TIPS | X | X | X | (1.13 | )% | |||||||||||||||
Brandywine Intern’l Opp Fixed Inc | LMOTX | X | X | |||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| )% | |||||||||||||||||||
PNC Common Stock Fund | PNC | X | X | )% | ||||||||||||||||
PNC Stable Value Fund | X | X | X | % | ||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| X | X | X | )% | ||||||||||||||||
| X | X | X | )% | ||||||||||||||||
| X | X | X | )% | ||||||||||||||||
| X | )% | ||||||||||||||||||
| X | X | X | )% | ||||||||||||||||
| X | X | X | )% | ||||||||||||||||
| X | X | X | )% | ||||||||||||||||
FPA | FPACX | X | X | )% | ||||||||||||||||
Aberdeen Emerging Markets | ABEMX | X | X | )% | ||||||||||||||||
BlackRock Global Allocation I | MALOX | X | X | )% | ||||||||||||||||
First Eagle Overseas I | SGOIX | X | X | )% | ||||||||||||||||
Vulcan Large Cap Value | VVPLX | X | X | )% | ||||||||||||||||
Fiduciary Mgmt Small Cap | FMIMX | X | X | )% |
72 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 73
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Benefits upon termination of employment
Our NEOs may receive various forms of compensation or benefits in connection with a termination of employment. These benefits result from:
change inof control agreements,
the terms of our equity-based grants, and
other existing plans and arrangements in which our NEOs participate.
We do not have a separate severance plan or program for the NEOs, although theNEOs. The Personnel and Compensation Committee has discretion to provide severance benefits subject to the parameters of our Board-approved policy, as described in the policy we adopted in February 2011 and describedCD&A on page 52 of our CD&A.55.
The benefits an executive may receive will depend on whether PNC or the executive terminated employment and, if PNC terminated employment, whether itthe termination was for cause; whether the terminationcause, resulted from death or disability; whether the terminationdisability, or followed a change in control, and whether the executive is retirement-eligible. If a retirement-eligible employee resigns or is terminated without cause, we consider it a retirement. For these purposes, a “retirement-eligible” employee is someone who is at least 55 years old and has at least five years of service with us.PNC. As of December 31, 2015, Mr. Guyaux2018, one of our NEOs was retirement-eligible, while Mr. Demchak, Mr. Reilly, Mr. Lyons, and Mr. Parsley were not.retirement-eligible.
Change inof control agreements
As of December 31, 20152018 we have entered into separate change inof control agreements with each of our NEOs and similar agreements with a limited group of other senior officers. These agreements have been a valuable component of our executive compensation program for several years. We believe that these arrangements mitigate concerns arising from a change inof control, and help to ensure the continued dedicated service of our key employees. Cash payments received undercontemplated by these agreements require a “double trigger”—that is, the occurrence of both a change inof control and a qualifying termination of employment. A qualifying termination would occur if the executive resigned for “good reason”“Good Reason” or the surviving company terminated the executive without “cause”other than for “Cause,” “Disability” or death (each as defined in the change inof control agreement). The treatment of equity awards upon a change inof control is handledaddressed in the equity awardsaward agreements themselves, as described below, not in theserather than the change of control agreements.
TheseThe change of control agreements would payprovide for cash payments to our executives,NEOs calculated based on various compensation components. These components, includeincluding annual base salary and an annual incentive award (bonus). For purposes of the change of control agreements, annual base salary is equal to 12 times the highest monthly base salary rate payable to the executive in the12-month period preceding the month of the change of control. The cash severance payment related to base salary for Mr. Demchak, Mr. Reilly and Mr. Guyaux is based on three times, and for Mr. Lyons and Mr. Parsleyequal to two times the annual base salary, (the highest monthly base salary rate forand the twelve months preceding the change in control multiplied by twelve). The cash severance payment related to the bonus is three times for Mr. Demchak, Mr. Reilly and Mr. Guyaux,equal to two times for Mr. Lyons, one times for Mr. Parsley, the applicable average bonus percentpercentage multiplied by the applicableannual base salary.
The agreements also provide for continued benefits under (or compute cash payments by reference to) somecertain of our retirement and health and welfare benefit plans.
Our historicalNone of our change of control agreements require a payment to the NEO to reimburse the executive forcontain any excise tax“gross-up” provisions. Our current change of control agreements provide that in the event the benefits payable to an executive trigger excise taxes on severance or other benefits that are considered “excess parachute payments” under Section 4999 of the Internal Revenue Code, as long as severance and otherthe executive will be entitled to a reduction in benefits are at least 105%so that no excise tax is imposed if such a reduction would result in a greater net(after-tax) benefit to the executive than payment of the maximum that can be paid without incurring the excise tax. Since 2009, wefull amount of his or her benefits. We have eliminated the excise tax “gross-up” provision from new change in control agreements. Mr. Parsley’s and Mr. Lyons’ agreements do not contain an excise tax gross-up provision. Our Board adopted a Board-approved policy in February 2011 that requires shareholder approval of certain future severance arrangements if the arrangement provides for additional severance benefits in an amount exceeding 2.99 times the sum of the executive’s annual base salary and target bonus.
The change inof control agreements prohibit the executiveexecutives from employing or soliciting any of our officers during theone-year period following termination, and from using or disclosing any of our confidential business or technical information or trade secrets. The executive may also not employ or solicit any of our officers during the one-year period following termination.
While the benefits to be received under a change inof control agreement may be significant to an individual, they first require the occurrence of a significant transaction. As a result, the benefits are highly speculative and are contingent on a variety of facts and circumstances. In recognition of this, ourthe Personnel and Compensation Committee of the Board does not
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 73
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
consider the amount of potential change in control payments when it makes annual compensation decisions for our NEOs. Change in control protections,
although meaningful, also become relatively less significant to PNC as we increase in size.
74 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
If aan NEO resigns or the NEO’s employment is terminated with or without cause, any unvested equity-based compensation is generally forfeited. IfHowever, if an NEO retires (i.e., a retirement-eligible employeeNEO resigns or is terminated without cause, we consider itcause), equity-based compensation is not forfeited and continues in effect until its originally scheduled payment date. Equity-based compensation is also not forfeited under certain circumstances following a retirement. Beginningchange in 2015, grantscontrol. Grants to our executive officers arecontain a “double trigger”, feature, meaning such grants
require the occurrence of both a change in control of PNC and a qualifying termination (which qualifying termination includes a termination without cause or a resignation for good
reason following a change reason) in control)order to vest prior to the original vesting year, although payout does not occur until the original vesting year. Upondate in connection with a change in control of PNC, while the potential payout amount is calculated and fixed at that time, payout is not accelerated.control.
A change in control of PNC, retirement of aan NEO or termination of an NEO’s employment by PNC by reason of disability of a NEO, has the following impact on unvested equity-based compensation:
OUTSTANDING OPTION AWARDS
Change in Control | Retirement | Disability | ||
|
|
|
RESTRICTED SHARE UNITS
Change in Control | Retirement | Disability | ||
Following a change in control, outstanding RSUs will vest upon a qualifying termination or continued employment through the original vesting date, and will be paid as soon as practicable following the original vesting date. All outstanding RSUs pay out in shares if the CET1 Ratio is met or exceeded as of the last-completed quarter-end. If the Tier 1 capital ratio risk factor is not met, the remaining tranches will be forfeited and expire. Dividend equivalents cease to accrue at the change in control date. | RSUs continue in effect in accordance with their terms as if the grantee had remained employed through each vesting date. |
GRANTS THAT VEST UPON THE ACHIEVEMENT OF ADDITIONAL PERFORMANCE CRITERIA
Performance-Based Restricted StockPerformance Share Units
Change in Control | Retirement | Disability | ||
Following a change in control, outstanding PSUs will vest Dividend equivalents cease to accrue at the change in control date. | PSUs continue in effect in accordance with their terms as if the grantee had remained employed for the full performance period. |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 75
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
GRANTS THAT VEST UPON THE ACHIEVEMENT OF ADDITIONAL PERFORMANCE CRITERIA (CONTINUED)
Performance-Based Restricted Share Units | ||||
Change in Control | Retirement | Disability | ||
The remaining 2014 PRSUs will vest and be paid as soon as practicable following a change in control. The remaining 2015, Dividend equivalents cease to accrue at the change in control |
74 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
GRANTS THAT VEST UPON THE ACHIEVEMENT OF ADDITIONAL PERFORMANCE CRITERIA (CONTINUED)
Incentive Performance Units (IPUs)
Change in Control | Retirement | Disability | ||||
In each part, the award is calculated by multiplying a performance factor by the target number of units, and then prorating such performance-adjusted amount of units as described below:
Part 1 - The corporate performance factor used to calculate the first part would be the higher of 100% and the actual payout percentage achieved prior to the date of the change in control, and the proration is based on the portion of the overall performance period (measured in quarters) that elapsed before the date of the change in control.
Part 2 - The corporate performance factor used to calculate the second part is 100%, and the proration is based on the remainder of the overall performance period not completed due to the change in control.
Dividend equivalents cease to accrue at the change in control date and receive the same performance adjustment as their related units.
| Outstanding |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 75
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Acceleration upon death. If the executive officer dies,Upon death, generally (1)(i) stock options remain exercisable until the original option termination date, (2)(ii) outstanding RSUs immediately vest and pay out at 100%, (iii) outstanding PSUs will vest and pay out based on target corporate performance RSUsand actual risk performance through the calendar year of the NEO’s death, subject to the negative discretion of the Personnel and Compensation Committee, (iv) PRSUs vest and pay out at 100% (provided that if death occurs after the close of a performance year but before that year’s tranche has paid out, payout of that tranche is the same as if still an employee and otherwise at 100%)employee), and (3) for incentive performance units (a) granted in 2013, a portion of the(v) all outstanding incentive performance units,Standard IPUs and (b) for incentive performance units granted in 2014 and 2015, all such outstanding units,ALM IPUs may be paid out up to a maximum
based on actual corporate and risk performance through the calendar year of the executive officer’sNEO’s death (and, for 2014 and 2015 grants, at 100% thereafter) andthereafter, subject to the negative discretion of the Board’s Personnel and Compensation Committee. Vested awards are paid out no later than December 31 of the year following the year of death.
Other material conditions. The retirement and disability awards summarized above are generally subject to forfeiture by PNC if it is determined that a grantee has engaged in certain competitive activities during employment andor the one yearone-year period following termination of employment, or if the grantee has engaged in other detrimental conduct. In addition, the award is subject to grantee’s
76 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
agreement not to solicit certain customers or employees of PNC during employment and the one yearone-year period following termination of employment, as well as to at all times maintain the confidentiality of business and technical information, and to disclose certain and assign certain inventions.
Awards are generally subject to PNC’s clawback, adjustment, or similar policies and to any clawback or recoupment that may be required by applicable law or regulations.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 77
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
Existing plans and arrangements
As of December 31, 2015,2018, our NEOs could participate in our qualified cash balance pension plan, our ERISA excess pension plan, our ISP and our DCIP. In addition, our NEOs, other than Mr. Lyons,Demchak, Mr. Reilly, Mr. Parsley and Mr. Rockey participate in our SISP, and Mr. Demchak, Mr. Reilly and Mr. Parsley participate in our DCP (although they may no longer make contributions to these plans) and our. The NEOs other than Mr. Lyons
and Mr. Parsley, participate in our supplemental executive retirement plan. The officers earn these benefits for services provided to us while employed, and many of these plans are also available on a broader basis to other employees. For the most part, an officer’sNEO’s entitlement to these benefits does not depend on how employment terminates.
Mr. Demchak and Mr. Reilly also participate in our supplemental executive retirement plan, a company-paid executive long-term disability (“LTD”) program, and the Key Executive Equity Program (“KEEP”), a split-dollar life insurance program. Participants in the executive LTD program
are generally eligible for additional LTD benefits of $10,000 per month until they are no longer disabled or have reached age 65. KEEP provides benefits in the event of a participating executive’s death while actively employed (equal to 1.5 times then-current annual base salary) or following an eligible retirement (retirement after reaching age 55 and five years of service with PNC, generally equal to annual base salary prior to retirement). Following a change in control, the life insurance policy would transfer to the participating executive. The supplemental executive retirement plan, executive LTD program and KEEP were frozen to new participants as of December 31, 2007.
Certain NEOs are also eligible to receive two years of company-paid financial planning and tax preparation services upon retirement.
Estimated benefits upon termination
The following table shows the estimated incremental benefits payable to our NEOs as of December 31, 20152018 as a result of termination of employment in a variety of situations. These estimated amounts have been calculated as if employment was terminated on December 31, 2015.2018. For change in control benefits, we assumed a change in control of PNC and a termination of employment by the surviving company without cause (or a resignation of the officer for good reason) on that date. To the extent relevant, the amounts assume a PNC stock price of $95.31,$116.91, the
closing price for our common stock on December 31, 2015.2018. If we calculated these amounts using a different price, the amounts could be significantly different. The benefits below do not include the balances under our qualified cash balance pension plan, our ERISA excess pension plan, our supplemental executive retirement plan, ourSISP, ISP, our SISP, ourDCIP or DCP and our DCIP unless the NEO receives an enhanced benefit under the termination scenario. In addition, the value of vested but unexercised stock options as of December 31, 2015 are2018 is not included as they do not provide anthere is no incremental benefit.benefit provided.
William S. Demchak | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||
Cash Severance |
| – |
|
| – |
|
| – |
| $ | 10,680,000 |
|
| – |
|
| – |
| ||||||
Base Salary |
| – |
|
| – |
|
| – |
| $ | 2,200,000 |
|
| – |
|
| – |
| ||||||
Bonus |
| – |
|
| – |
|
| – |
| $ | 8,480,000 |
|
| – |
|
| – |
| ||||||
Enhanced Benefits |
| – |
|
| – |
| $ | 19,950 |
| $ | 374,964 |
| $ | 1,040,000 |
| $ | 1,650,000 |
| ||||||
Defined Benefit Plans |
| – |
|
| – |
|
| – |
| $ | 322,000 |
|
| – |
|
| – |
| ||||||
Defined Contribution Plans |
| – |
|
| – |
|
| – |
| $ | 22,000 |
|
| – |
|
| – |
| ||||||
General Benefits & Perquisites |
| – |
|
| – |
| $ | 19,950 |
| $ | 30,964 |
| $ | 1,040,000 |
| $ | 1,650,000 |
| ||||||
Value of Unvested Equity |
| – | �� |
| – |
| $ | 22,942,992 |
| $ | 23,809,719 |
| $ | 22,942,992 |
| $ | 23,547,366 |
| ||||||
RSUs |
| – |
|
| – |
| $ | 2,835,963 |
| $ | 2,835,963 |
| $ | 2,835,963 |
| $ | 2,835,963 |
| ||||||
PSUs |
| – |
|
| – |
| $ | 4,254,064 |
| $ | 4,254,064 |
| $ | 4,254,064 |
| $ | 4,254,064 |
| ||||||
PRSUs |
| – |
|
| – |
| $ | 6,133,458 |
| $ | 6,737,832 |
| $ | 6,133,458 |
| $ | 6,737,832 |
| ||||||
Standard IPUs |
| – |
|
| – |
| $ | 9,719,507 |
| $ | 9,981,860 |
| $ | 9,719,507 |
| $ | 9,719,507 |
| ||||||
TOTAL |
| $0 |
|
| $0 |
| $ | 22,962,942 |
| $ | 34,864,683 |
| $ | 23,982,992 |
| $ | 25,197,366 |
|
7678 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
EMPLOYEES WHO ARE NOT ELIGIBLE FOR RETIREMENT
Robert Q. Reilly | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||
Cash Severance |
| – |
|
| – |
|
| – |
| $ | 5,635,000 |
|
| – |
|
| – |
| ||||||
Base Salary |
| – |
|
| – |
|
| – |
| $ | 1,400,000 |
|
| – |
|
| – |
| ||||||
Bonus |
| – |
|
| – |
|
| – |
| $ | 4,235,000 |
|
| – |
|
| – |
| ||||||
Enhanced Benefits |
| – |
|
| – |
|
| – |
| $ | 264,014 |
| $ | 1,320,000 |
| $ | 1,050,000 |
| ||||||
Defined Benefit Plans |
| – |
|
| – |
|
| – |
| $ | 211,050 |
|
| – |
|
| – |
| ||||||
Defined Contribution Plans |
| – |
|
| – |
|
| – |
| $ | 22,000 |
|
| – |
|
| – |
| ||||||
General Benefits & Perquisites |
| – |
|
| – |
|
| – |
| $ | 30,964 |
| $ | 1,320,000 |
| $ | 1,050,000 |
| ||||||
Value of Unvested Equity |
| – |
|
| – |
|
| – |
| $ | 5,983,698 |
| $ | 5,763,081 |
| $ | 5,918,222 |
| ||||||
RSUs |
| – |
|
| – |
|
| – |
| $ | 706,719 |
| $ | 706,719 |
| $ | 706,719 |
| ||||||
PSUs |
| – |
|
| – |
|
| – |
| $ | 1,060,139 |
| $ | 1,060,139 |
| $ | 1,060,139 |
| ||||||
PRSUs |
| – |
|
| – |
|
| – |
| $ | 1,719,200 |
| $ | 1,564,059 |
| $ | 1,719,200 |
| ||||||
Standard IPUs |
| – |
|
| – |
|
| – |
| $ | 2,497,640 |
| $ | 2,432,164 |
| $ | 2,432,164 |
| ||||||
TOTAL |
| $0 |
|
| $0 |
|
| $0 |
| $ | 11,882,712 |
| $ | 7,083,081 |
| $ | 6,968,222 |
|
William S. Demchak | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Michael P. Lyons | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Cash Severance | – | – | – | $ | 13,246,251 | – | – |
| – |
|
| – |
|
| – |
| $ | 5,840,000 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Base Salary | – | – | – | $ | 3,300,000 | – | – |
| – |
|
| – |
|
| – |
| $ | 1,400,000 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Bonus | – | – | – | $ | 9,946,251 | – | – |
| – |
|
| – |
|
| – |
| $ | 4,440,000 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Enhanced Benefits | – | – | – | $ | 1,077,458 | – | – |
| – |
|
| – |
|
| – |
| $ | 104,810 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Defined Benefit Plans | – | – | – | $ | 1,010,430 | – | – |
| – |
|
| – |
|
| – |
| $ | 50,250 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Defined Contribution Plans | – | – | – | $ | 31,800 | – | – |
| – |
|
| – |
|
| – |
| $ | 22,000 |
|
| – |
|
| – |
| |||||||||||||||||||||||
General Benefits & Perquisites | – | – | – | $ | 35,228 | – | – |
| – |
|
| – |
|
| – |
| $ | 32,560 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Value of Unvested Equity | – | – | – | $ | 19,750,224 | $ | 19,909,025 | $ | 19,671,127 |
| – |
|
| – |
|
| – |
| $ | 12,997,794 |
| $ | 12,519,195 |
| $ | 12,855,230 |
| |||||||||||||||||||||
Performance-based RSUs | – | – | – | $ | 8,815,302 | $ | 9,053,200 | $ | 8,815,302 | |||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | – | – | – | $ | 10,934,922 | $ | 10,855,825 | $ | 10,855,825 | |||||||||||||||||||||||||||||||||||||||
Excise Tax and Gross-Up | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
RSUs |
| – |
|
| – |
|
| – |
| $ | 1,525,705 |
| $ | 1,525,705 |
| $ | 1,525,705 |
| ||||||||||||||||||||||||||||||
PSUs |
| – |
|
| – |
|
| – |
| $ | 2,288,498 |
| $ | 2,288,498 |
| $ | 2,288,498 |
| ||||||||||||||||||||||||||||||
PRSUs |
| – |
|
| – |
|
| – |
| $ | 3,744,468 |
| $ | 3,408,433 |
| $ | 3,744,468 |
| ||||||||||||||||||||||||||||||
Standard IPUs |
| – |
|
| – |
|
| – |
| $ | 5,439,123 |
| $ | 5,296,559 |
| $ | 5,296,559 |
| ||||||||||||||||||||||||||||||
TOTAL | $ | 0 | $ | 0 | $ | 0 | $ | 34,073,933 | $ | 19,909,025 | $ | 19,671,127 |
| $0 |
|
| $0 |
|
| $0 |
| $ | 18,942,604 |
| $ | 12,519,195 |
| $ | 12,855,230 |
|
Robert Q. Reilly | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||
Cash Severance | – | – | – | $ | 5,250,000 | – | – | |||||||||||||||||
Base Salary | – | – | – | $ | 1,500,000 | – | – | |||||||||||||||||
Bonus | – | – | – | $ | 3,750,000 | – | – | |||||||||||||||||
Enhanced Benefits | – | – | – | $ | 572,208 | – | – | |||||||||||||||||
Defined Benefit Plans | – | – | – | $ | 502,500 | – | – | |||||||||||||||||
Defined Contribution Plans | – | – | – | $ | 31,800 | – | – | |||||||||||||||||
General Benefits & Perquisites | – | – | – | $ | 37,908 | – | – | |||||||||||||||||
Value of Unvested Equity | – | – | – | $ | 5,375,673 | $ | 5,417,409 | $ | 5,356,080 | |||||||||||||||
Performance-based RSUs | – | – | – | $ | 2,343,412 | $ | 2,404,741 | $ | 2,343,412 | |||||||||||||||
Incentive Performance Units | – | – | – | $ | 3,032,261 | $ | 3,012,668 | $ | 3,012,668 | |||||||||||||||
Excise Tax and Gross-Up | – | – | – | $ | 4,057,844 | – | – | |||||||||||||||||
TOTAL | $0 | $0 | $0 | $ | 15,255,725 | $ | 5,417,409 | $ | 5,356,080 |
Michael P. Lyons | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
E William Parsley, III | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Cash Severance | – | – | – | $ | 5,001,600 | – | – |
| – |
|
| – |
|
| – |
| $ | 6,898,275 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Base Salary | – | – | – | $ | 1,400,000 | – | – |
| – |
|
| – |
|
| – |
| $ | 1,400,000 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Bonus | – | – | – | $ | 3,601,600 | – | – |
| – |
|
| – |
|
| – |
| $ | 5,498,275 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Enhanced Benefits | – | – | – | $ | 98,436 | – | – |
| – |
|
| – |
|
| – |
| $ | 262,016 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Defined Benefit Plans | – | – | – | $ | 50,250 | – | – |
| – |
|
| – |
|
| – |
| $ | 207,456 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Defined Contribution Plans | – | – | – | $ | 21,200 | – | – |
| – |
|
| – |
|
| – |
| $ | 22,000 |
|
| – |
|
| – |
| |||||||||||||||||||||||
General Benefits & Perquisites | – | – | – | $ | 26,986 | – | – |
| – |
|
| – |
|
| – |
| $ | 32,560 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Value of Unvested Equity | – | – | – | $ | 13,405,295 | $ | 13,521,468 | $ | 13,353,817 |
| – |
|
| – |
|
| – |
| $ | 20,510,641 |
| $ | 20,269,386 |
| $ | 20,433,825 |
| |||||||||||||||||||||
Performance-based RSUs | – | – | – | $ | 5,903,993 | $ | 6,071,644 | $ | 5,903,993 | |||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | – | – | – | $ | 7,501,302 | $ | 7,449,824 | $ | 7,449,824 | |||||||||||||||||||||||||||||||||||||||
Excise Tax and Gross-Up | – | – | – | N/A | – | – | ||||||||||||||||||||||||||||||||||||||||||
RSUs |
| – |
|
| – |
|
| – |
| $ | 1,705,165 |
| $ | 1,705,165 |
| $ | 1,705,165 |
| ||||||||||||||||||||||||||||||
PSUs |
| – |
|
| – |
|
| – |
| $ | 2,557,747 |
| $ | 2,557,747 |
| $ | 2,557,747 |
| ||||||||||||||||||||||||||||||
PRSUs |
| – |
|
| – |
|
| – |
| $ | 2,012,411 |
| $ | 1,847,972 |
| $ | 2,012,411 |
| ||||||||||||||||||||||||||||||
Standard IPUs |
| – |
|
| – |
|
| – |
| $ | 2,960,050 |
| $ | 2,883,234 |
| $ | 2,883,234 |
| ||||||||||||||||||||||||||||||
ALM IPUs |
| – |
|
| – |
|
| – |
| $ | 11,275,268 |
| $ | 11,275,268 |
| $ | 11,275,268 |
| ||||||||||||||||||||||||||||||
TOTAL | $0 | $0 | $0 | $ | 18,505,331 | $ | 13,521,468 | $ | 13,353,817 |
| $0 |
|
| $0 |
|
| $0 |
| $ | 27,670,932 |
| $ | 20,269,386 |
| $ | 20,433,825 |
|
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 7779
CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
E William Parsley, III | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||
Cash Severance | – | – | – | $ | 1,947,252 | – | – | |||||||||||||||||
Base Salary | – | – | – | $ | 1,000,000 | – | – | |||||||||||||||||
Bonus | – | – | – | $ | 947,252 | – | – | |||||||||||||||||
Enhanced Benefits | – | – | – | $ | 151,455 | – | – | |||||||||||||||||
Defined Benefit Plans | – | – | – | $ | 97,362 | – | – | |||||||||||||||||
Defined Contribution Plans | – | – | – | $ | 21,200 | – | – | |||||||||||||||||
General Benefits & Perquisites | – | – | – | $ | 32,893 | – | – | |||||||||||||||||
Value of Unvested Equity | – | – | – | $ | 24,095,802 | $ | 24,141,314 | $ | 24,075,831 | |||||||||||||||
Performance-based RSUs | – | – | – | $ | 2,285,190 | $ | 2,350,673 | $ | 2,285,190 | |||||||||||||||
Incentive Performance Units | – | – | – | $ | 2,875,079 | $ | 2,855,108 | $ | 2,855,108 | |||||||||||||||
Phantom Units | – | – | – | $ | 18,935,533 | $ | 18,935,533 | $ | 18,935,533 | |||||||||||||||
Excise Tax and Gross-Up | – | – | – | N/A | – | – | ||||||||||||||||||
TOTAL | $0 | $0 | $0 | $ | 26,194,509 | $ | 24,141,314 | $ | 24,075,831 |
EMPLOYEES WHO ARE ELIGIBLE FOR RETIREMENT
Joseph C. Guyaux | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Joseph E. Rockey | Termination for Cause | Voluntary Termination/ Termination without Cause(a) | Retirement(a) | Change in Control(b) | Disability | Death | ||||||||||||||||||||||||||||||||||||||||||
Cash Severance | – | – | – | $ | 5,480,400 | – | – |
| – |
|
| – |
|
| – |
| $ | 3,259,384 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Base Salary | – | – | – | $ | 1,860,000 | – | – |
| – |
|
| – |
|
| – |
| $ | 1,000,000 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Bonus | – | – | – | $ | 3,620,400 | – | – |
| – |
|
| – |
|
| – |
| $ | 2,259,384 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Enhanced Benefits | – | – | $ | 16,275 | $ | 931,548 | – | – |
| – |
|
| – |
|
| – |
| $ | 108,887 |
|
| – |
|
| – |
| ||||||||||||||||||||||
Defined Benefit Plans | – | – | – | $ | 872,880 | – | – |
| – |
|
| – |
|
| – |
| $ | 63,750 |
|
| – |
|
| – |
| |||||||||||||||||||||||
Defined Contribution Plans | – | – | – | $ | 31,800 | – | – |
| – |
|
| – |
|
| – |
| $ | 22,000 |
|
| – |
|
| – |
| |||||||||||||||||||||||
General Benefits & Perquisites | – | – | $ | 16,275 | $ | 26,868 | – | – |
| – |
|
| – |
|
| – |
| $ | 23,137 |
|
| – |
|
| – |
| ||||||||||||||||||||||
Value of Unvested Equity | – | – | $ | 6,590,667 | $ | 6,532,304 | $ | 6,590,667 | $ | 6,509,330 |
| – |
|
| – |
|
| – |
| $ | 2,942,952 |
| $ | 2,885,442 |
| $ | 2,920,487 |
| ||||||||||||||||||||
Performance-based RSUs | – | – | $ | 2,948,332 | $ | 2,866,995 | $ | 2,948,332 | $ | 2,866,995 | ||||||||||||||||||||||||||||||||||||||
Incentive Performance Units | – | – | $ | 3,642,335 | $ | 3,665,309 | $ | 3,642,335 | $ | 3,642,335 | ||||||||||||||||||||||||||||||||||||||
Excise Tax and Gross-Up | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
RSUs |
| – |
|
| – |
|
| – |
| $ | 598,278 |
| $ | 598,278 |
| $ | 598,278 |
| ||||||||||||||||||||||||||||||
PSUs |
| – |
|
| – |
|
| – |
| $ | 897,417 |
| $ | 897,417 |
| $ | 897,417 |
| ||||||||||||||||||||||||||||||
PRSUs |
| – |
|
| – |
|
| – |
| $ | 517,246 |
| $ | 482,201 |
| $ | 517,246 |
| ||||||||||||||||||||||||||||||
Standard IPUs |
| – |
|
| – |
|
| – |
| $ | 866,984 |
| $ | 844,519 |
| $ | 844,519 |
| ||||||||||||||||||||||||||||||
Senior Leader PRSUs |
| – |
|
| – |
|
| – |
| $ | 63,027 |
| $ | 63,027 |
| $ | 63,027 |
| ||||||||||||||||||||||||||||||
TOTAL | $0 | $0 | $ | 6,606,942 | $ | 12,944,252 | $ | 6,590,667 | $ | 6,509,330 |
| $0 |
|
| $0 |
|
| $0 |
| $ | 6,311,223 |
| $ | 2,885,442 |
| $ | 2,920,487 |
|
(a) | If a retirement-eligible employee resigns or is terminated without cause, we consider it a retirement. |
(b) | The |
7880 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
We are providing the following information about the relationship between the annual total compensation of William S. Demchak, our Chairman, President and CEO, and the median of the annual total compensation of all of our employees (other than Mr. Demchak).
For the year ended December 31, 2018:
We believe that our ratio represents a reasonable estimate, calculated in a manner consistent with SEC rules, based on the following methodology:
• | We evaluated the compensation for 52,885 active U.S. employees as of December 31, 2018 (this population excluded Mr. Demchak and all of our 126 non-U.S. employees)(1) |
• | Using this compensation measure, we identified the median employee and calculated the annual total compensation for that employee(2) |
• | To calculate the ratio, we identified a new median employee by selecting the first employee with a lower W-2 compensation amount than the original median employee whose annual total compensation did not include anomalous pay characteristics(3) |
For purposes of calculating the ratio, the annual total compensation for Mr. Demchak includes incentive awards from two different performance years. In order to comply with SEC rules, Mr. Demchak’s total compensation amount includes the equity-based incentive award granted in 2018 (based on 2017 performance) and the cash incentive award paid in 2019 (based on 2018 performance). This is described in more detail in the CD&A on page 49. If the ratio had been calculated using the equity-based incentive awards granted to Mr. Demchak in 2019 (for 2018 performance), his annual total compensation would have been $14,465,331 and the ratio would have been 214 to 1.
(1) | We excluded 78 employees in the UK, 33 employees in Canada and 15 employees in Germany, representing less than 1% of our total employee population. |
(2) | We calculated the annual total compensation for the median employee in accordance with SEC rules, using the same methodology used to calculate Mr. Demchak’s total compensation in the Summary compensation table, and we also included PNC’s health care premium contributions for both the employee and for Mr. Demchak. As a result, Mr. Demchak’s annual total compensation for pay ratio purposes is slightly higher than the amount reported for him in the Summary compensation table on page 60. |
(3) | For purposes of calculating the ratio, anomalous pay characteristics may include the following: the absence of PNC contributions to the employee’s health care premiums or 401(k) plan, or factors that could unfairly distort the change in the employee’s pension value, such as years of service (either too few or too many). |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 81
SECURITY OWNERSHIP OF DIRECTORSMANAGEMENT AND EXECUTIVE OFFICERSCERTAIN BENEFICIAL OWNERS
Security ownership of directors and executive officers
The table below sets forth information regarding ownership of our common stock ownership by our directors and executive officers. We include beneficial ownership of common stock as of January 29, 2016February 1, 2019, the record date for the annual meeting, for each director (including all nominees for director), each executive officer named in the Summary compensation table on page 58,NEO and all directors and executive officers as a group. Unless we otherwise note,noted, each person listed in the table below exercises sole voting and investment power over thesethe shares of common stock.stock they beneficially own.
We determine the numberbeneficial ownership of shares in the Common Stock Ownership column as beneficially owned by each director and executive officer pursuant to SEC regulations. This information does not necessarily
indicate beneficial ownership for any other purpose.
Beneficial ownership includes any shares of common stock as to which the individual has sole or shared voting power or investment power. Wepower, and also includeincludes any shares of common stock that the individual has the right to acquire within 60 days of January 29, 2016February 1, 2019 through the exercise of any option, warrant or right andor the vesting or payout of any restricted stockshare units or other units payable in common stock that vest within 60 days of January 29, 2016. Thestock. Although not considered beneficially owned under SEC rules, the table also shows as of January 29, 2016, the number of cash-payable common stock units credited to the accounts of our directors and executive officers under various benefit plans.plans as of February 1, 2019. Each of our directors standingthe nominees for electiondirector owns shares of our common stock.
Name | Common Stock Ownership* | Options and Restricted Share Units** | Total Number of Shares Beneficially Owned | Common Stock Unit Ownership*** | Total Shares Beneficially Owned Plus Common Stock Units | Common Stock Ownership | Options and Common Stock Units* | Total Number of Shares Beneficially Owned | Cash- Payable Common Stock Unit Ownership** | Total Shares Beneficially Owned Plus Cash-Payable Common Stock Units*** | ||||||||||||||||||||||||||||||||
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Joseph Alvarado | 120 | (1) | – | 120 | – | 120 | ||||||||||||||||||||||||||||||||||||
Charles E. Bunch | 781 | — | 781 | 17,429 | 18,210 | 2,781 | 2,247 | 5,028 | 20,292 | 25,320 | ||||||||||||||||||||||||||||||||
Paul W. Chellgren | 24,209 | (1) | — | 24,209 | 60,026 | 84,235 | ||||||||||||||||||||||||||||||||||||
Debra A. Cafaro | 20 | 1,012 | 1,032 | 1,316 | 2,348 | |||||||||||||||||||||||||||||||||||||
Marjorie Rodgers Cheshire | 218 | — | 218 | 2,069 | 2,287 | 218 | 2,247 | 2,465 | 5,374 | 7,839 | ||||||||||||||||||||||||||||||||
Andrew T. Feldstein | 83,600 | (1)(2) | — | 83,600 | 6,377 | 89,977 | 83,600 | (1)(2) | 2,247 | 85,847 | 12,462 | 98,309 | ||||||||||||||||||||||||||||||
Richard J. Harshman | 150 | (3) | – | 150 | – | 150 | ||||||||||||||||||||||||||||||||||||
Daniel R. Hesse | 100 | — | 100 | — | 100 | 1,100 | 2,247 | 3,347 | 2,662 | 6,009 | ||||||||||||||||||||||||||||||||
Kay Coles James | 315 | — | 315 | 22,466 | 22,781 | |||||||||||||||||||||||||||||||||||||
Richard B. Kelson | 119 | — | 119 | 28,111 | 28,230 | 119 | 2,247 | 2,366 | 17,659 | 20,025 | ||||||||||||||||||||||||||||||||
Anthony A. Massaro | 3,149 | (1)(3) | — | 3,149 | 24,745 | 27,894 | ||||||||||||||||||||||||||||||||||||
Jane G. Pepper | 2,840 | — | 2,840 | 29,535 | 32,375 | |||||||||||||||||||||||||||||||||||||
Linda R. Medler | 10 | 1,012 | 1,022 | 252 | 1,274 | |||||||||||||||||||||||||||||||||||||
Martin Pfinsgraff | 1,050 | 1,012 | 2,062 | – | 2,062 | |||||||||||||||||||||||||||||||||||||
Donald J. Shepard | 8,967 | (2) | — | 8,967 | 34,606 | 43,573 | 8,967 | (2) | 2,247 | 11,214 | 41,862 | 53,076 | ||||||||||||||||||||||||||||||
Lorene K. Steffes | 2,041 | (3) | — | 2,041 | 29,728 | 31,769 | ||||||||||||||||||||||||||||||||||||
Dennis F. Strigl | 10,714 | (3) | — | 10,714 | 29,884 | 40,598 | ||||||||||||||||||||||||||||||||||||
Thomas J. Usher | 7,139 | (3) | — | 7,139 | 54,163 | 61,302 | ||||||||||||||||||||||||||||||||||||
Toni Townes-Whitley | 1,000 | – | 1,000 | – | 1,000 | |||||||||||||||||||||||||||||||||||||
Michael J. Ward | 1,000 | — | 1,000 | — | 1,000 | 1,000 | 2,247 | 3,247 | 4,569 | 7,816 | ||||||||||||||||||||||||||||||||
Gregory D. Wasson | 2,070 | — | 2,070 | 683 | 2,753 | |||||||||||||||||||||||||||||||||||||
NEOs: | ||||||||||||||||||||||||||||||||||||||||||
William S. Demchak | 360,592 | (3)(4) | 636,754 | 997,346 | 2,869 | 1,000,215 | 539,306 | (3)(4) | 156,487 | 695,793 | 3,055 | 698,848 | ||||||||||||||||||||||||||||||
Robert Q. Reilly | 72,328 | (3)(4) | 233,793 | 306,121 | 2,160 | 308,281 | 107,779 | (3)(4) | 70,200 | 177,979 | 2,310 | 180,289 | ||||||||||||||||||||||||||||||
Michael P. Lyons | 61,263 | 51,059 | 112,322 | — | 112,322 | 124,841 | 43,517 | 168,358 | – | 168,358 | ||||||||||||||||||||||||||||||||
E William Parsley, III | 70,470 | 94,648 | 165,118 | — | 165,118 | 97,025 | 22,726 | 119,751 | – | 119,751 | ||||||||||||||||||||||||||||||||
Joseph C. Guyaux | 55,099 | (3)(4) | 205,360 | 260,459 | 1,781 | 262,240 | ||||||||||||||||||||||||||||||||||||
10 remaining executive officers | 171,975 | (2)(3)(4) | 341,468 | 513,443 | 14,266 | 527,709 | ||||||||||||||||||||||||||||||||||||
Directors and executive officers as a group (30 persons): | 938,989 | 1,563,082 | 2,502,071 | 360,898 | 2,862,969 | |||||||||||||||||||||||||||||||||||||
Joseph E. Rockey | 13,870 | 42,746 | 56,616 | – | 56,616 | |||||||||||||||||||||||||||||||||||||
7 remaining executive officers | 162,756 | (2)(3)(4) | 70,103 | 232,859 | – | 232,859 | ||||||||||||||||||||||||||||||||||||
Directors and executive officers as a group (25 persons): | 1,145,712 | 424,544 | 1,570,256 | 111,813 | 1,682,069 |
* | Includes options exercisable within 60 days of February 1, 2019 and common stock units that may vest or pay out within 60 days of February 1, 2019. |
** | Fornon-employee directors, includes cash-payable common stock units credited to their accounts pursuant to deferrals made under the Directors Deferred Compensation Plan and predecessor plans and cash-payable common stock units granted under the Outside Directors Deferred Stock Unit Plan used fornon-employee director equity-based grants prior to 2017. For executive officers, includes cash-payable common stock units credited under our DCP and SISP. These units are not considered beneficially owned under SEC rules. |
82 THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
*** | As of |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 79
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
(1) | Includes shares owned by spouse. |
(2) | Includes shares held in a trust. |
(3) | Includes shares held jointly with spouse. |
(4) | Includes shares held in our incentive savings |
Security ownership of certain beneficial owners
BasedThe table below sets forth information regarding the entities that beneficially own more than five percent of our common stock, based on a review as of February 16, 2016, of Schedules 13D and 13G filed with the SEC the following entities beneficially own more than five percentas of our common stock.February 14, 2019. The numbers shownincluded in the table
on the table below represent each entity’s holdings as of December 31, 2015 provided2018, as disclosed in the applicable Schedule 13G filed with the SEC, and should be interpreted in light of the relatedaccompanying footnotes.
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Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | 27,642,474 | (1) | 6.0% | |||||
Capital World Investors 333 South Hope Street, 55th Floor Los Angeles, CA 90071 | 25,130,096 | (2) | 5.4% | |||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 | 33,539,808 | (3) | 7.3% | |||||
Wellington Management Group LLP c/o Wellington Management Company LLP 280 Congress Street Boston, MA 02210 | 28,921,506 | (4) | 6.3% |
(1) | According to the Schedule |
(2) | According to the Schedule 13G filed by Capital World Investors with the SEC on February 14, 2019, Capital World Investors has beneficial ownership of 25,130,096 shares of our common stock. Capital World Investors reported (1) sole dispositive power with respect to 25,130,096 shares, (2) shared dispositive power with respect to 0 shares, (3) sole voting power with respect to 25,130,096 shares and (4) shared voting power with respect to 0 shares. Capital World Investors divisions of Capital Research and Management Company and Capital International Limited collectively provide investment management services under the name Capital World Investors, and Capital World Investors is deemed to be the beneficial owner of our common stock as a result of such provision of services. |
(3) | According to the Schedule 13G/A filed by The Vanguard Group, Inc. with the SEC on February |
According to the Schedule |
80 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 83
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 2)
Under the Audit Committee’s charter, the Audit Committee is responsible for the selection, appointment, compensation, retention, and oversight of PNC’sour independent auditors. In connection with this responsibility, the Audit Committee evaluates and monitors the auditors’ qualifications, performance and independence. This responsibility includesindependence, including a review and evaluation of the lead audit partner. The Audit Committee approves all audit engagement fees and terms associated with the retention of the independent auditors. The Audit Committee has selected PricewaterhouseCoopers LLP (PwC) as PNC’s independent auditors for 2016. PwC has been PNC’s independent auditors since 2007. The Audit Committee carefully considered the selection of PwC as our independent auditors. In connection with this selection, the Audit Committee considered whether there should be a rotation of the independent audit firm.
The Audit Committee charter requires the Audit Committee to consider, not less frequently than when the lead audit partner is rotated, whether PNC should adopt a policy of regular rotation of the independent audit firm. In addition to assuring the required rotation of the lead audit partner, the Audit Committee oversees the selection of the new lead audit partner and the AuditChair of the Committee chair participates directly in the selection of the new lead audit partner.
The Audit Committee has selected PricewaterhouseCoopers LLP (“PwC”) as our independent auditors for 2019. PwC has been our independent auditors since 2007. The Committee carefully considered the selection of PwC as our independent auditors, including whether there should be a rotation of the independent audit firm. On February 11, 2016,13, 2019, the Audit Committee presented its conclusions regarding the selection
and appointment of PwC as theour independent auditors to our
the Board, of Directors, including a determination that the selection of PwC as our independent auditors is in the best interests of PNC. Following this presentation, the Board voted unanimously to recommend that shareholders vote to ratify the Audit Committee’s selection of PwC as PNC’sour independent registered public accounting firm for 2016.2019. The Audit Committee and the Board of Directors believe that the continued retention of PwC as PNC’sour independent auditors is in the best interestsinterest of PNC.
The Audit Committee and the Board of Directors have adopted a policy that if the ratification of the independent auditors does not receive a majority of the votes cast at the annual meeting, is against ratification, the Audit Committee will reconsider its selection of PwC. The Auditindependent auditors. However, the Committee will be under no obligation however, to select new independent auditors. If the Audit Committee does select new independent auditors for 2016,2019, we will not seek shareholder ratification of the new selection.
We expect representatives of PwC to be available at the annual meeting. They will have an opportunity to make a statement and respond to appropriate questions.
You can learn more about the Audit Committee’s responsibilities with respect to the independent auditors in the Committee’s charter, which is posted onin the corporate governance section of our corporate website atwww.pnc.com/corporategovernance.
Audit, audit-related and permittednon-audit fees
In considering the nature of the services provided by our independent auditors, the Audit Committee determined that the services are compatible with the provision of independent audit services. The Committee discussed these services with the independent auditors and our management to
determine that they are permitted under the SEC
rules and regulations concerning auditor independence.
The following table summarizes the total fees for professional services rendered by PwC to PNC for 20152018 and 2014:2017:
Category | 2015 (in millions) | 2014 (in millions) | 2018 (in millions) | 2017 (in millions) | ||||||||||||
Audit fees | $ | 19.0 | $ | 19.1 | $ | 20.0 | $ | 20.0 | ||||||||
Audit-related fees* | $ | 1.8 | $ | 1.9 | $ | 2.6 | $ | 2.1 | ||||||||
Tax fees | $ | 0.2 | $ | 0.3 | $ | 0.1 | $ | 0.1 | ||||||||
All other fees | - | $ | 0.5 | $ | 0.5 | $ | – | |||||||||
TOTAL FEES BILLED | $ | 21.0 | $ | 21.8 | $ | 23.2 | $ | 22.2 |
* | Excludes fees of |
84 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 81
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 2)
Audit fees. These fees consisted primarily of the audit of PNC’sour annual consolidated financial statements, reviews of PNC’sour quarterly consolidated financial statements included in Form10-Q filings, comfort letter procedures, other services related to SEC matters and required attestation services.
Audit-related fees. These fees consisted primarily of SSAE 16 and18, compliance and internal control reviews.
Tax fees. These fees were primarily attributable to federal and state tax compliance services, including tax return preparation and review, and assistance with tax planning services.examinations.
All other fees. These fees consisted primarily consisted of consulting services related to various regulatory matters.fees for review and analysis of technology and subscription-based services.
Procedures forpre-approving audit services, audit-related services and permittednon-audit services
The Audit Committee is responsible forpre-approving audit services, audit-related services and permittednon-audit services (such as tax) to be provided to us by our independent auditors. The Committee is given this responsibility to confirm that providing services will not impair our auditors’ independence. The Committee performs this function for us and our subsidiaries.
The Audit Committee’s responsibility also includespre-approval of the fees for such services (although SEC regulations do not require thepre-approval of fees) and the other terms of the engagement. The Committee may eitherpre-approve specific fees or a methodology for determining fees. Any proposed increase in fees that exceedexceeds thepre-approved amounts requirerequires the Committee’s approval.
Pre-approval may be general (categories of services) or specific (individual services). If the Audit Committeepre-approves a general category of services, it will review the scope of services related to such generalpre-approval at least annually. The Committee is responsible for approving any fee or other compensation arrangements for services covered by apre-approval of a general category of services.
The full Audit Committee may exercisepre-approval authority, or the ChairmanChair of the Committee may exercise the authority as required between meetings. The Committee may also delegate this authority, in whole or in part, to one or more Committee members. Any person exercising
delegated authority reports on thepre-approvals at the next scheduled meeting of the Committee, which will be reflected in the meeting minutes.
The Audit Committee may not delegate itspre-approval authority to any other person, including any member of our management or other PNC employee or agent.
The written request forpre-approval includes, at a minimum, a description of the nature of the engagement, the proposed fee for the services and a statement that the services to be performed by the independent auditor that the provision of the services isare consistent with SEC and other applicable rules on auditor independence. In addition, eachpre-approval request is reviewed by the independent auditor to confirm the provision of services is consistent with SEC and other applicable auditor independence rules. All requests forpre-approval of services are reviewed by management to ensure the services are permitted under SEC regulations and the Audit Committee charter and include a recommendation of the proposal by the Chief Financial Officer or the Controller and the General Auditor. In reviewing apre-approval request, the Committee or Chairmanthe Chair of the Committee may request that members of our management to provide their views on auditor independence questions.
The Controller or a designee of the Controller reports to the Audit Committee at least quarterly as to the status of services that hadhave beenpre-approved and the related fees.
All audit services, audit-related services and permitted non-audit services and related fees disclosed above were pre-approved by the Audit Committee. The Audit Committee may amend these procedures from time to time.
All audit services, audit-related services and permittednon-audit services and related fees disclosed above werepre-approved by the Audit Committee.
82 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 85
The Audit Committee’s job is one of oversight, as set forth in its charter. It is not the duty of the Audit Committee to prepare PNC’s consolidated financial statements, to plan or conduct audits, or to determine that PNC’s consolidated financial statements are complete and accurate and are in accordance with generally accepted accounting principles. PNC’s management is responsible for preparing PNC’s consolidated financial statements and for establishing and maintaining effective internal control over financial reporting. PNC’s management is also responsible for its assessment of the effectiveness of internal control over financial reporting. The independent auditors are responsible for the audit of PNC’s consolidated financial statements and the audit of the effectiveness of PNC’s internal control over financial reporting. In addition, the independent auditors are responsible for the audit of management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2015.
The Audit Committee has reviewed and discussed PNC’s audited consolidated financial statements with management and with PricewaterhouseCoopers LLP (PwC)(“PwC”), PNC’s Independent Registered Public Accounting Firmindependent registered public accounting firm for 2015.2018. The Audit Committee has selected PwC as PNC’s independent auditors for 20162019, subject to shareholder ratification. A portion of the Audit Committee’s review and discussion of PNC’s audited consolidated financial statements with PwC occurred in private sessions, without PNC management present.
The Audit Committee has discussed with PwC the matters required to be discussed by Statement on Auditing StandardStandards No. 16,1301, “Communications with Audit Committees”,Committees,” as adopted by the Public Company Accounting Oversight Board.
The Audit Committee has received the written disclosures and the letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed PwC’s independence with representatives of PwC.
Based on the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited consolidated financial statements be included in PNC’s Annual Report on Form10-K for the year ended December 31, 2015,2018, for filing with the Securities and Exchange Commission.
The Audit Committee of the Board of Directors of The PNC Financial Services Group, Inc.
Richard B. Kelson,Chair
Paul W. ChellgrenJoseph Alvarado
Marjorie Rodgers CheshireDebra A. Cafaro
Richard J. Harshman
Martin Pfinsgraff
Donald J. Shepard
Gregory D. Wasson
In accordance with SEC regulations, the Report of the Audit Committee is not incorporated by reference into any of our future filings made under the Securities Exchange Act of 1934 or the Securities Act of 1933. The report is not deemed to be soliciting material or to be filed with the SEC under the Exchange Act or the Securities Act.
The Board of Directors recommends a vote FOR the ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for 2016.2019.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 83
APPROVAL OF 2016 INCENTIVE AWARD PLAN (ITEM 3)
On March 3, 2016, our Board of Directors adopted, subject to shareholder approval, the PNC Financial Services Group, Inc. 2016 Incentive Award Plan (2016 Plan) and directed that the 2016 Plan be submitted to our shareholders for approval at the 2016 annual meeting. If approved by shareholders, the 2016 Plan will become effective as of April 26, 2016.
The Board believes that approval of the 2016 Plan will further PNC’s ability to attract, retain and motivate top-quality management, employees, officers and non-employee directors of PNC and its subsidiaries, upon whose judgment and efforts we rely to promote the long-term growth and financial success of PNC and its subsidiaries.
PNC has a well-designed compensation program and strong governance principles. Shares received under an award granted from the 2016 Plan would be subject to our policy which prohibits any of our employees or directors from hedging or pledging PNC securities or selling PNC securities short. In addition, our executive officers and other key executives are subject to executive stock ownership requirements. As new awards vest under the 2016 Plan (excluding stock options), designated employees need to retain a portion of the vested award, which they must hold until they retire or leave PNC.
The independent compensation consultant to the Board’s Personnel and Compensation Committee, Meridian Compensation Partners, reviewed and provided feedback on the 2016 Plan. In approving
the 2016 Plan, the Board considered the importance of long-term incentives in supporting the key objectives of PNC’s equity compensation program and aligning employees’ interests with those of our shareholders as well as our understanding of our shareholders’ perspective with respect to equity-based compensation. We also took into consideration our stock price, business performance, competitive pay practices, regulatory requirements, and our use of equity-based awards to determine the number of shares needed. Based on these considerations, the Board approved the 2016 Plan, with the proposed shares available for issuance under the 2016 Plan of 30,000,000, representing approximately 6.0% of our outstanding common stock as of December 31, 2015, plus the balance of shares authorized but unissued (including such shares subject to outstanding awards) available under the 2006 Incentive Award Plan (as amended, the “Prior Plan”). Under the 2016 Plan, each share issued pursuant to awards, other than options or share appreciation rights (SARs), will be counted against the 2016 Plan reserve as 2.5 shares. Shares issued pursuant to options or SARs count against the 2016 Plan reserve on a one-for-one basis.
“Burn rate” and dilution. Burn rate and potential dilution are two common measures used in assessing a company’s equity compensation program. Burn rate measures the annual usage of shares available for grant under an equity compensation plan. Potential dilution is used to measure the dilutive impact of equity programs on existing shareholders.
84 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
APPROVAL OF 2016 INCENTIVE AWARD PLAN (ITEM 3)
We have historically demonstrated a prudent use of shares for equity compensation purposes. As shown in the charts below, for the fiscal years ended December 31, 2013, 2014, and 2015, respectively, our burn rates and dilution rates have decreased each year:
The material terms of the 2016 Plan are summarized below. This summary is qualified in its entirety by the actual text of the 2016 Plan, which is attached to this proxy statement as Annex B. We will not grant any awards under the 2016 Plan prior to obtaining shareholder approval.
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 85
APPROVAL OF 2016 INCENTIVE AWARD PLAN (ITEM 3)
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Material Terms of the 2016 Plan
Purpose. The purpose of the 2016 Plan is to promote the success and enhance the value of PNC by linking the personal interests of those persons eligible to receive awards under the 2016 Plan to the interests of PNC’s shareholders.
Administration. The 2016 Plan is administered and interpreted by a Board committee comprised entirely of independent directors (Committee).
For purposes of awards granted to employees, the “Committee” means the Personnel and Compensation Committee or its delegate.
For purposes of awards granted to non-employee directors, the “Committee” means the Nominating and Governance Committee or its delegate.
Subject to the terms of the 2016 Plan, the Committee has the authority to determine the individuals to whom awards will be made under the 2016 Plan and to establish the type, size, and other terms of awards under the 2016 Plan, including applicable performance criteria and restrictions on awards, as well as to construe and interpret the 2016 Plan and applicable award agreements. Subject to certain limitations, the Committee may delegate its authority under the 2016 Plan to certain officers, directors or managers of PNC.
Eligibility. Awards under the Plan may be granted to employees of PNC and its subsidiaries and to
non-employee members of the Board. As of December 31, 2015, approximately 8,000 employees and 12 non-employee directors who are standing for re-election at the 2016 annual meeting will be eligible to receive awards under the 2016 Plan. The selection of participants eligible under the 2016 Plan is subject to the Committee’s discretion and not all eligible participants may receive awards in any given year.
Shares available. Subject to adjustment in certain circumstances as described below, the 2016 Plan authorizes up to 30,000,000 shares of common stock for issuance, plus the balance of shares authorized but unissued (including such shares subject to outstanding awards, which awards will continue to be governed in accordance with their existing terms) available under the Prior Plan. As of December 31, 2015, the Prior Plan had 14,026,308 shares of common stock remaining available for issuance, which amount includes shares reserved for our annual awards granted in February 2016 and any other awards granted under the Prior Plan through April 25, 2016.
Each share issued pursuant to awards, other than options or SARs, will be counted against the 2016 Plan reserve as 2.5 shares. Shares issued pursuant to options or SARs count against the 2016 Plan reserve on a one-for-one basis.
86 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
APPROVAL OF 2016 INCENTIVE AWARD PLAN (ITEM 3)
Under any of the following circumstances, shares underlying an award, including with respect to Prior Plan awards, will be re-credited to the 2016 Plan share reserve and once again become available for future awards if:
an award lapses, expires, terminates or is canceled or forfeited without the underlying shares (or any portion thereof) being issued;
the Committee determines that all or a portion of shares underlying an award may not be issued because the conditions for such issuance were not or will not be satisfied;
an award, or any portion thereof, is settled for cash; or
such shares are issued pursuant to an award but are subsequently reacquired by PNC (for example, as a result of PNC exercising clawback rights).
Shares re-credited to the 2016 Plan share reserve due to a reacquisition by PNC will not increase the aggregate number of shares that may be issued pursuant to incentive stock options.
Furthermore, shares retained or reacquired by PNC, including Prior Plan shares, will not be re-credited to the 2016 Plan’s share reserve if such shares are:
delivered in payment of the option exercise price, base price of a SAR or other exercise price of an award;
delivered to or withheld by PNC to satisfy federal, state or local tax withholding obligations;
purchased by PNC using proceeds from option exercises; or
not issued or delivered as a result of a net settlement of an outstanding option or SAR.
Individual limitations. Subject to the adjustment provisions of the 2016 Plan, as described below, the maximum number of shares underlying awards that may be granted to any individual during a calendar year is limited to 2,000,000 shares. Furthermore, no individual may be granted in any one calendar year:
options or SARs for more than 2,000,000 shares (and no more than 1,000,000 shares in the case of incentive stock options);
qualified performance-based compensation (payable in shares), other than options or SARs, for more than 1,000,000 shares, based on a target award level on the grant date; and
qualified performance-based compensation (payable in cash by the terms of the award) for more than an amount equal to 1,000,000 shares, based on a target award level on the grant date and calculated based on the fair market value of a share of PNC’s common stock on the grant date.
Additionally, non-employee directors may not receive, in any one calendar year, awards with an aggregate maximum value, calculated as of the grant date based on the fair market value of each award, of more than $500,000.
The following briefly describes the principal features of the various awards that may be granted under the 2016 Plan. Awards under the 2016 Plan may be settled in cash, shares of PNC common stock, units, or a combination of the foregoing, as provided in each award agreement.
Options. The Committee may grant (1) options that qualify as incentive stock options within the meaning of Section 422 of the Code (ISOs), (2) “nonqualified” stock options that are not intended to qualify as ISOs (NQSOs), or (3) any combination of ISOs and NQSOs. Anyone eligible to participate in the 2016 Plan may receive a grant of NQSOs. Only employees of PNC and certain of its subsidiaries may receive a grant of ISOs.
The Committee fixes the share exercise price for ISOs and NQSOs as of the grant date. The exercise price of any option may not be less than the fair market value of a share of common stock on the date of grant.
The Committee determines all terms and conditions of each option, including the number of shares subject to the option and the applicable vesting period. Except in the event of death or disability, or as otherwise provided in the award agreement, the
vesting period for options cannot be less than 12 months. Generally, the term of an option may not exceed 10 years from the date of grant. Options may be exercised while the participant is employed by or providing service to PNC or within a specified period of time after termination of employment or service, as determined by the Committee. The Committee may at any time substitute SARs for options granted under the 2016 Plan, if so provided in the applicable award agreement.
A participant may exercise an option by delivering a properly executed notice of exercise to PNC or its designated agent. The participant will pay the exercise price and any withholding taxes for the option in cash or by check, or, if provided in the agreement, by (1) delivering shares of common stock already owned by the participant, (2) a broker-assisted cashless exercise, or (3) such other method as the Committee may approve, to the extent permitted by applicable law.
Share appreciation rights. The Committee may grant SARs to any eligible participant in the 2016 Plan. SARs may be granted in connection with, or independent of, other awards. Upon exercise of a SAR, the participant will receive an amount equal to the excess of the fair market value of PNC’s
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common stock on the date the SAR is exercised over the base amount of the SAR, as set forth in the applicable award agreement. The base amount of a SAR may not be less than the fair market value of a share of PNC common stock on the date of grant. Except in the event of death or disability, or as otherwise provided in the award agreement, a SAR may not be exercised until the expiration of at least 12 months from the date of grant. SARs may be exercised while the participant is employed by or providing services to PNC or within a specified period of time after termination of such employment or service, as determined by the Committee. Generally, the term of a SAR award may not exceed 10 years from the date of grant.
Share units and restricted share units. The Committee may grant share units to any eligible participant in the 2016 Plan. Each share unit provides the participant with the right to receive a share of common stock or an amount based on the value of a share of common stock at a future date. Share units issued pursuant to a share unit award may be subject to restrictions (“restricted share units”) or may be unrestricted, as determined by the Committee. Share units may be granted in connection with, or independent of, other awards. The Committee determines the number of share units that will be granted, restrictions applicable to restricted share units, and the other terms and conditions applicable to the share units; provided, however, that the restrictions applicable to restricted share units may not lapse until at least 12 months from the date of grant, except in the event of death or disability or as otherwise permitted by the award agreement. Share units may be paid at the end of a specified period or deferred to a date authorized by the Committee in accordance with the deferral requirements set forth in Section 409A of the Code, to the extent applicable. Payments with respect to share units may be made in cash, in shares, or a combination of both. Specific vesting and payment provisions applicable to current awards to executive officers are described on pages 74 to 76.
Share awards and restricted shares. The Committee may grant share awards to any eligible participant in the 2016 Plan. Shares issued pursuant to a share award may be subject to restrictions (“restricted shares”) or may be unrestricted, as determined by the Committee. The Committee determines the conditions under which restrictions on restricted shares may lapse (i.e., over time, or pursuant to such other criteria as the Committee deems appropriate, including performance-based criteria); provided, however, that no restrictions may lapse prior to 12 months from the date of grant, except in the event of death or disability, or as otherwise permitted by the award agreement.
Performance awards.Performance awards may be granted to any eligible participant under the 2016 Plan, and may be payable in cash, shares, or a combination thereof, as determined by the Committee. Vesting or payment of performance awards may be based on the satisfaction of performance criteria as established by the Committee or any other criteria that the Committee, in its sole discretion, may determine, and may be particular to an eligible person or to the department, branch, subsidiary or other unit in which the eligible participant works, or may be based on the performance of PNC or of a specified portion or portions of PNC and its subsidiaries generally. Specific vesting and payment provisions applicable to current awards to executive officers are described on page 65 and pages 74 to 76.
If the Committee determines that the award is intended to meet the requirements of “qualified performance based compensation” under Section 162(m) of the Code, then the performance criteria for vesting or payment of the award will be based on any one or more of the following:
earnings measures (including earnings per share, net income, net interest income, non-interest income) or earnings growth measures, revenue or cash flow;
market or market-related measures (including stock price, dividends or dividend yield, total shareholder return, market to book value, price / earnings ratio);
improvement or maintenance of financial or credit ratings;
return or use of capital measures (including return on assets, equity or investment) or other capital or liquidity measures or objectives (including measures or objectives related to economic capital, cost of capital);
other measures of operating or profitability margin or performance (including net interest margin, operating or profit margin, productivity ratios) or risk adjusted profitability measures;
regulatory compliance (including Tier 1 capital ratios or Basel III objectives) or internal or external regulatory capital, liquidity, risk or other regulatory-related requirements, expectations, goals or objectives;
satisfactory internal or external audits;
achievement of balance sheet, income statement, or other financial objectives (including objectives related to capital management, assets, loans, charge-offs, allowance for loan and lease losses, other reserves, reduction of nonperforming assets, asset quality levels, investments, deposits, deposit mix, interest sensitivity gap levels);
expense measures (including objectives related to expense management, operating efficiencies, efficiency ratios, non-interest expense);
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on or off-balance sheet portfolio objectives (including those related to servicing portfolios, securitizations, assets under administration or management, loan originations or sales);
achievement of asset quality objectives or credit quality objectives;
achievement of risk management objectives, strategic objectives or goals (including workforce objectives or goals), technology or innovation objectives, product, customer or market-related objectives (including sales, product revenues, revenue mix, product growth, customer growth, number or type of customer relationships, customer satisfaction, cross-selling goals, associate satisfaction, market share, branding);
consummation of acquisitions, dispositions, projects or other specific events or transactions or acquisition integration or disposition management goals or objectives; and
any other objective goals established by the Committee.
The Committee may specify that the performance criteria under an award of qualified performance-based compensation will include adjustments to include or exclude the effect of certain events, including any of the following events: litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; severance, contract termination and other costs related to exiting certain business activities; gains or losses from the disposition of businesses or assets or from the early extinguishment of debt; or charges for unusual or non-recurring items of loss or expense, such as expenses related to goodwill and other intangible assets, stock offerings, stock repurchases and loan loss provisions.
As specified by the Committee, performance criteria may be measured annually or for a shorter or longer performance period, on an absolute basis or relative to an established target, to previous years or other
comparable period or periods’ results, to a designated comparison group or groups, or to one or more designated external or internal indices or benchmarks.
The Committee will determine whether, and the extent to which, the applicable performance goals have been achieved or satisfied. Except as otherwise provided in an award agreement, performance awards will be distributed only after the completion of the relevant performance period. The length of a performance period will be determined by the Committee upon the grant of each performance award and will be at least 12 months in duration, except as otherwise specified in the award agreement. Performance awards may be paid in a lump sum, in installments, or on a deferred basis.
Other share-based awards (including dividend equivalents). The Committee may grant other types of share-based awards that would not otherwise constitute options, SARs, share units, share awards, or performance awards, such as dividend equivalent rights. The Committee may grant other share-based awards to any eligible participant in the 2016 Plan based on or measured by shares of common stock,
and the terms and conditions for these awards will be determined by the Committee. Dividend equivalents will not be granted with respect to options or SARs. Dividend equivalents granted with respect to a performance award will not be distributed during the applicable performance period or to the extent any such award is otherwise unearned.
Dollar-denominated awards. The Committee may grant dollar-denominated awards to eligible participants in the 2016 Plan, which may be based upon the achievement of performance criteria or other conditions, as determined by the Committee. Such awards may be payable in cash, shares, or a combination of both, as determined by the Committee.
The Committee may establish rules to permit or require participants to defer receipt of the payment of cash or the delivery of shares of common stock that would otherwise be due to the participant in
connection with a grant under the 2016 Plan in accordance with Section 409A of the Code, if applicable.
If there is any change in the number or kind of shares of common stock by reason of a corporate transaction involving PNC, including share dividend, share split, spinoff, recapitalization, merger, consolidations or reorganizations, then (1) the number and class of shares subject to each outstanding award, (2) the exercise price, base price or other purchase price for an award, (3) the total
number and class of shares for which future awards may be made or paid, (4) the limit on the number of shares of common stock which any individual may receive pursuant to awards in any year, or (5) any other aspect of any award, in each case, as the Committee in its sole discretion deems appropriate to reflect such transaction so that the rights of a grantee are neither enlarged nor diminished as a
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result of the transaction. This includes, without limitation, (1) measuring the value per share unit of any award authorized for payment to grantee by reference to the per share value of the consideration payable to a common shareholder of PNC in connection with such transactions and (2) authorizing payment of the entire value of any award authorized for payment to grantee to be paid in cash.
Change of control. Adjustments in connection with a change of control of PNC are generally not covered by the foregoing adjustment provisions. Treatment of adjustments in connection with a change of control of PNC is at the discretion of the Committee, as provided in the applicable award agreement.
The 2016 Plan permits the Committee to provide for special terms for awards to grantees who are foreign nationals, who are employed by PNC or any subsidiary outside of the United States, who provide services to PNC under an agreement with a foreign nation or agency, or as the Committee may consider necessary or appropriate. Moreover, the Committee has the authority to approve such supplements to or amendments, restatements, or alternative
versions of the 2016 Plan (including, without limitation, sub-plans) as it may consider necessary or appropriate; provided that no such special terms, supplements, amendments or restatements will include any provisions that are inconsistent with the terms of the 2016 Plan as then in effect unless the 2016 Plan could have been amended to eliminate such inconsistency without further approval by PNC’s shareholders.
Amendment and Termination of the Plan
The Board or the Committee may amend or terminate the 2016 Plan in any respect, and at any time; provided, however, that no amendment, alteration or termination of the 2016 Plan will be made by the Board or the Committee without approval of (1) PNC’s shareholders, to the extent shareholder approval of the amendment is required by applicable law or regulations or the requirements of the principal exchange or interdealer quotation system on which the common stock is listed or
quoted, and (2) each affected participant if such amendment, alteration or termination would adversely affect, in a material way, his or her rights or obligations under any grant or award made prior to the date of such amendment, alteration or termination except as otherwise permitted under 2016 Plan. No awards may be granted under the 2016 Plan after April 25, 2026 (and no ISOs may be granted after March 3, 2026).
Federal Income Tax Consequences
The following is a brief summary of the principal United States federal income tax consequences applicable to 2016 Plan participants and PNC, and is based upon an interpretation of present federal tax laws and regulations and may be inapplicable if such laws and regulations are changed. This summary is not intended to be exhaustive or constitute tax advice, nor does it describe state, local or foreign tax consequences. The 2016 Plan is not subject the Employee Retirement Income Security Act of 1974 and is not qualified under Section 401(a) of the Code.
Incentive stock options. Options issued under the 2016 Plan and designated as incentive stock options are intended to qualify as such under Section 422 of the Code. In this regard, an optionee who has been granted an incentive stock option will not recognize income and PNC will not be entitled to a deduction at the time of the grant or exercise of the option; provided, however, that the difference between the
value of the common stock received on the exercise date and the exercise price paid is an item of tax preference for purposes of determining the optionee’s alternative minimum tax. The taxation of gain or loss upon the sale of the common stock acquired upon exercise of an incentive stock option depends, in part, on whether the holding period of the common stock is at least (1) two years from the date the option was granted and (2) one year from the date the option was exercised. If these holding period requirements are satisfied, any gain or loss realized on a subsequent disposition of the common stock will be treated as a long-term capital gain or loss. If these holding period requirements are not met, then, upon such “disqualifying disposition” of the common stock, the optionee will realize compensation, taxable as ordinary income, in an amount equal to the excess of the fair market value of the common stock at the time of exercise over the exercise price, limited to the gain on sale. Any further gain (or loss) realized by the optionee
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generally will be taxed as short-term or long-term capital gain (or loss) depending on the holding period. If the optionee recognizes ordinary income upon a disqualifying disposition, PNC generally will be entitled to a tax deduction in the same amount. If, however, the optionee meets the applicable holding period, PNC generally will not be entitled to a tax deduction with respect to capital gains recognized by the optionee. If an incentive stock option is exercised at a time when it no longer qualifies as an incentive stock option, the option will be treated as a nonqualified stock option.
Nonqualified stock options and share appreciation rights. A participant generally will not recognize income at the time a nonqualified stock option or share appreciation right is granted. Rather, the participant with respect to such an award recognizes compensation income only when the nonqualified stock option or share appreciation right is exercised. The amount of income recognized upon the exercise of a nonqualified stock option is equal to the excess of the fair market value of the common stock received over the sum of the exercise price plus the amount, if any, paid by the participant for such option. Upon the exercise of the share appreciation right, the participant will recognize compensation taxable as ordinary income equal to either: (1) the cash received upon the exercise; or (2) if common stock is received upon the exercise of the share appreciation right, the fair market value of the common stock received. In either case, PNC is generally entitled to a tax deduction in an amount equal to the compensation income recognized by the participant. Upon a subsequent disposition of the common stock acquired under a nonqualified stock option, the participant will realize short-term or long-term capital gain (or loss) depending on the holding period. The capital gain (or loss) will be short-term if the common stock is disposed of within one year after the nonqualified stock option is exercised, and long-term if the common stock was held more than one year, as of the sale date.
Restricted shares. A participant that receives a restricted share award under the 2016 Plan normally will not be required to recognize income for federal income tax purposes at the time of grant, nor is PNC entitled to any deduction, to the extent that the common stock awarded has not vested (i.e., is no longer subject to a substantial risk of forfeiture). When any part of a restricted share award vests, the participant will realize compensation taxable as ordinary income in an amount equal to the fair market value of the vested common stock on the vesting date (less the amount, if any, paid for the stock). The participant may, however, make an election, referred to as a Section 83(b) election, within 30 days following the grant of the restricted share award, to be taxed at the time of the grant of the award based on the fair market value of the common stock on the grant date. A participant who
makes a Section 83(b) election will recognize ordinary taxable income on the grant date equal to the fair market value of the shares as if the shares were unrestricted. If the shares subject to such election are subsequently forfeited, the recipient will not be entitled to any deduction, refund or loss for tax purposes with respect to the forfeited shares. If a Section 83(b) election has not been made, any dividends received with respect to the restricted share award prior to the lapse of the restrictions will be treated as additional compensation that is taxable as ordinary income to the participant. PNC will be entitled to a deduction in the same amount and at the same time that the participant recognizes ordinary income. Upon the sale of the vested common stock, the participant will realize short-term or long-term capital gain or loss depending on the holding period. The holding period generally begins when the restriction period expires. If the recipient timely made a Section 83(b) election, the holding period commences on the date of the grant.
Restricted share units. A recipient of restricted share units will not be required to recognize any income for federal income tax purposes, and PNC is not entitled to a deduction, at the time of grant. Rather, upon the settlement of units, the recipient of such units generally will be subject to tax at ordinary income rates on the fair market value of any common stock issued or cash paid in settlement of the award of such units, and PNC generally will be entitled to a deduction equal to the amount of the ordinary income realized by the recipient. If the recipient receives shares of common stock upon settlement then, upon disposition of such shares, appreciation or depreciation after the settlement date is treated as either short-term or long-term capital gain or loss, depending on how long the shares have been held.
Performance awards. A participant generally will not recognize income upon the grant of a performance award. Upon payment of the performance award, the participant will recognize ordinary income in an amount equal to the cash received or, if the performance award is payable in common stock, the fair market value of the common stock received. When the participant recognizes ordinary income upon payment of a performance award, PNC generally will be entitled to a tax deduction in the same amount.
Unrestricted shares, dollar-denominated awards and other share-based awards. The tax consequences of receiving common stock pursuant to an unrestricted share award or cash pursuant to a dollar-denominated award under the 2016 Plan is similar to receiving cash compensation from PNC. In such event, the participant must recognize ordinary income equal to the cash received or the fair market value of the common stock received, less any amount paid for common stock. PNC generally is entitled to a tax deduction for compensation paid to a participant at the same time and in the same
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amount as the participant recognizes ordinary income. The federal income tax consequences of other incentive awards will depend on how the awards are structured. Generally, PNC will be entitled to a deduction with respect to other incentive awards only to the extent that the recipient realizes compensation income in connection with such awards.
Consequences of change of control. If a change of control of PNC causes awards under the 2016 Plan to accelerate vesting or is deemed to result in the attainment of performance goals, the participants could, in some cases, be considered to have received “excess parachute payments,” which could subject participants to a 20% excise tax on the excess parachute payments and result in a disallowance of PNC’s deductions under Section 280G of the Code.
Section 409A.Section 409A of the Code (“Section 409A”) applies to compensation that individuals earn in one year but that is not paid until a future year. This is referred to as nonqualified deferred compensation. If a deferred compensation arrangement does not meet either an exemption from, or the requirements of, Section 409A, the compensation may be subject to accelerated taxation in the year in which such compensation is no longer subject to a substantial risk of forfeiture and certain additional taxes, interest and penalties, including a 20% additional income tax. Section 409A does not impose any penalties on PNC and does limit PNC’s deduction with respect to compensation paid to a participant. Awards under the Plan are intended to comply with Section 409A or an exception thereto. Notwithstanding, Section
409A may impose upon a participant certain taxes or interest charges for which the participant is responsible.
Section 162(m). Section 162(m) of the Code limits the deductibility of compensation paid to each of PNC’s CEO and the three other highest compensated officers, other than the CFO (collectively, the “covered employees”), in any one year to $1,000,000, unless the compensation is “qualified performance-based compensation.” Among other requirements, for compensation to be “performance-based” for purposes of Section 162(m), the performance goals must be pre-approved and objective. The 2016 Plan has been
structured in a manner that enables PNC to grant awards to covered employees that are designed to be “qualified performance-based compensation.”
Shareholders are being asked to approve the 2016 Plan and, specifically, the material terms of the performance goals under which an award of qualified performance-based compensation may be granted in the 2016 Plan, in order to preserve PNC’s ability to deduct compensation paid to covered employees pursuant to any qualified performance-based compensation that may be made in the future under the 2016 Plan. However, nothing in this proposal precludes the Committee from granting, and the Committee reserves the right to grant, awards that do not qualify as qualified performance-based compensation under Section 162(m). Additionally, there is no guarantee that awards intended to qualify as qualified performance-based compensation under Section 162(m) ultimately will be deductible by PNC.
No benefits or amounts have been granted, awarded or received under the 2016 Plan. Benefits under the Plan generally will be granted at the discretion of the applicable Committee and are
therefore not currently determinable. The closing market price of PNC’s common stock on March 3, 2016 was $86.58 per share.
The Board of Directors recommends that you vote FOR the approval of the 2016 Incentive Award Plan.
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The table below sets forth the number of outstanding awards and securities remaining available for future issuance under the 2006 Incentive Award Plan and our other equity-based plans.
Equity Compensation Plan Information
(At December 31, 2015)
(a) | (b) | (c) | ||||||||||
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
Equity compensation plans approved by security holders | 10,183,983 | (1) | $ 55.49 | 14,877,217(2) | ||||||||
Equity compensation plans not approved by security holders(3) | 1,819,801 | $519.71 | — | |||||||||
Total | 12,003,784 | 14,877,217 |
The 1997 Long-Term Incentive Award Plan
After shareholder approval of the 2006 Incentive Plan at the 2006 annual meeting of PNC’s shareholders on April 25, 2006 (see paragraph
below), no further awards were permitted under the 1997 Long-Term Incentive Award Plan, with certain exceptions that are no longer applicable.
The 2006 Incentive Plan was approved by PNC shareholders on April 25, 2006, and was amended and restated effective as of March 11, 2011 upon shareholder approval on that date. The 2006 Incentive Plan (as amended and restated) originally
authorized up to 46,000,000 shares of common stock for issuance, subject to adjustment in certain circumstances. Shares available for issuance under this plan are also reduced by the number of any shares used in payment of bonuses under the 1996 Executive Incentive Award Plan.
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Under the 2006 Incentive Plan, awards or portions of awards that, by their terms, are payable only in cash do not reduce the number of shares that remain available for issuance under the plan (the number in column (c) of theEquity Compensation Plan Information table on page 93). During 2015, a total of 429,679 cash-payable share units (adjusted to reflect the maximum number of share units that
could be paid out in cash pursuant to the terms and conditions in the grant agreements) plus cash-payable dividend equivalents with respect to 364,731 of those share units were granted under the plan.
If the 2016 Plan is approved by shareholders at the 2016 annual meeting, no further awards will be made under the 2006 Incentive Plan.
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ON EXECUTIVE COMPENSATION (ITEM 4)3)
What is the purpose of this item?
We describe this item as an advisory vote on executive compensation, but it is more commonly known as “say-on-pay.“say-on-pay.” We provide this vote under the federal securities laws (Section 14A of the Securities Exchange Act of 1934) and in recognition of our shareholders’ vote in 20112017 recommending that we hold an advisory vote on executive compensation each year. After our shareholders voted in 2011,2017, the Board affirmed that recommendation and elected to hold future “say-on-pay”“say-on-pay” advisory votes on an annual basis, until the
the next shareholder vote on “say-on-pay”“say-on-pay” frequency. We expect to conduct ourthe next shareholder vote on “say-on-pay”“say-on-pay” frequency at our 20172023 annual meeting of shareholders.
With this item, shareholders may submit an advisory vote on the compensation of our CEO and the other four executive officers named in theSummary compensation table on page 58. That60. The Summary compensation table provides an annual snapshot of the compensation paid or granted to our NEOs.
What does it mean to have a “say-on-pay”“say-on-pay” advisory vote?
As an advisory vote, the outcome will not bind PNC or ourthe Board. We will disclose how many shareholders voted “For” or “Against” the resolution and how many shareholders abstained from voting.
We believe in soliciting input from our investorsshareholders throughout the year on a variety of issues, and this advisory vote fits within our broader shareholder engagement efforts. We first provided a “say-on-pay” vote in 2009, voluntarily provided the vote again in 2010, provided the vote as required by the federal securities laws in 2011 and as recommended by our shareholders annually since then. We have averaged 92%approximately 95% support insay-on-pay votes over the past five years.
While this vote isnon-binding, our the Board values the opinions of shareholders and will carefully consider the results when making future compensation
decisions. In considering an overall executive compensation program, “say-on-pay”“say-on-pay” cannot convey a shareholder’s view on a discrete element of our compensation program or a specific decision made by our Board’sthe Personnel and Compensation Committee. From 2009 through 2015,Each year, the Committee receivedreceives reports on the outcome of the “say-on-pay”“say-on-pay” vote, how PNCour“say-on-pay” vote compared to itsour peer group and other large public companies, and whether any changes to the compensation program were being consideredrecommended for the Committee’s consideration in light of the results. The Committee expects to undertake a similar evaluation this year.
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Where can I find more information on executive compensation?
We describe our executive compensation program and the compensation awarded under that program in the CD&A, the Compensation Tables,compensation tables and the related disclosure contained in this proxy statement. See pages 3940 to 78.81 for additional information.
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What are some of the performance and compensation program highlights for 2015?2018?
Please review ourthe CD&A, which begins on page 39,40, as well as the accompanying compensation tables and the related disclosure beginning on page 58.60. Performance and compensation program highlights for 2018, which are also included in ourthe CD&A, should be read in connectionconjunction with the full CD&A, the Compensation Tablescompensation tables and the related disclosure contained in this proxy statement.
The Board of Directors recommends a vote FOR the following advisory resolution:
“RESOLVED, that the holders of the common stock and the voting preferred stock of The PNC Financial Services Group, Inc. (the “Company”)(PNC), voting together as a single class, approve the compensation of the Company’s fivePNC’s named executive officers named in the Summary compensation table of the Company’s proxy statement for the 2016 Annual Meeting of Shareholders (the “2016 Proxy Statement”), as described in the Compensation Discussion and Analysis, the Compensation Tablescompensation tables and the related disclosure contained in PNC’s proxy statement for the 2016 Proxy Statement.2019 Annual Meeting of Shareholders.”
9688 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement
PNCWe will hold itsour annual meeting of shareholders on Tuesday, April 26, 2016.23, 2019.
This proxy statement includes information about PNC, describes the proposals to be considered at the meeting and explains the voting process. We encourage you to read it carefully.
This section of the proxy statement reviews important technical points,topics such as how to attend the meeting, how to access our proxy materials, how to vote and how a proposal gets approved and how shareholder proposals can be brought beforeapproved.
Although ourBy-laws provide that we may hold a meeting.virtual-only annual meeting of shareholders, we
currently have no intention to conduct our annual meeting of shareholders in that format.
In this section, we sometimes discuss differences between “registered” and “street name” shareholders. For purposes of reviewing the proxy materials and voting shares, this distinction is important. We refer to those owningwho own PNC shares in their own name as “registered” holders or “shareholders of record.” We refer to those who own PNC shares through an account at an intermediary—such as a brokerage firm or bank—as holding our shares in “street name” or as “beneficial owners.” For purposes of reviewing the proxy materials and voting your shares, this distinction is important.
OurThe annual meeting of shareholders will be held on Tuesday, April 26, 201623, 2019 in the James E. Rohr Auditorium in The Tower at PNC Plaza, 300 Fifth Avenue, Pittsburgh, Pennsylvania 15222. The meeting will begin at 11:00 a.m., Eastern time.Time. Directions to the meeting are available atwww.pnc.com/annualmeeting.
General requirements
You must be a PNC shareholder on the record date of January 29, 2016,February 1, 2019, or hold a valid legal proxy, to attend the annual meeting in person. Each shareholder may bring one guest.
All shareholders, guests of shareholders and persons holding legal proxies must present a valid form of photo identification, such as a driver’s license, to be admitted to the annual meeting.
Additional requirements
In addition to presenting a valid form of photo identification, please follow these instructions to be admitted to the meeting:
Registered shareholder. Present one of the following: (i) proxy card admission ticket, (ii) Notice of Internet Availability of Proxy Materials or (iii) admission ticket that you printed if you voted electronically.
Street name shareholder. Present one of the following: (i) brokerage statement or letter from your bankbroker or brokerbank demonstrating PNC share ownership as of ourthe record date of January 29, 2016,February 1, 2019, (ii) voting instruction form or copy, (iii) Notice of Internet Availability of Proxy Materials or (iv) a written legal proxy issued by your broker or bank.
Proxy for registered shareholder. Present a written legal proxy to you signed by the registered shareholder and one of the following: (i) proxy card admission ticket, (ii) Notice of Internet Availability of Proxy Materials or (iii) printed admission ticket if the registered shareholder voted electronically.
Proxy for street name shareholder. Present a written legal proxy from a broker or bank to the street name holder, in assignable form, and a written legal proxy from the street name holder to you and one of the following: (i) a brokerage statement or letter from the street name holder’s bankbroker or brokerbank demonstrating PNC share ownership as of ourthe record date of January 29, 2016,February 1, 2019, (ii) voting instruction form or copy, or (iii) Notice of Internet Availability of Proxy Materials.Materials or (iv) written legal proxy issued by the street name holder’s broker or bank to the street name holder, in assignable form.
A shareholder representative (for example, a person representing an entity that is a shareholder) must present satisfactory documentation evidencing his or her authority with respect to the shares in addition to complying with the general and additional requirements.requirements discussed above.
We will decide in our sole discretion whether the documentation presented for admission meets the above requirements.
Everyone attendingAnyone who attends the annual meeting agrees to abide by the regulations for conduct forat the meeting. These regulations for conduct are included in Annex CB to this proxy statement and will also be printed on the meeting agenda and distributed and reviewed at the meeting.
No cameras, mobile phones, laptops, tablets or recording equipment are permitted in the meeting room. In addition, large bags, backpacks, briefcases and similar items are not permitted in the meeting room.
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GENERAL INFORMATION
If you cannot attend the annual meeting in person, you can listen to the meeting by using the webcast or conference call options that are described on theNotice of Annual Meeting of Shareholders on page 11.10. However, those using the webcast or dial-in numbersconference call options will not be able to vote or ask questions.
Please visit the websitewww.pnc.com/annualmeeting orwww.pnc.com/investorevents orwww.pnc.com/annualmeeting aheadbefore the start of timethe meeting to register, and download any necessary software and to view or print related materials.
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GENERAL INFORMATION
Mailing date. We provided access to our proxy materials beginning on Tuesday, March 15, 2016.12, 2019. On that day, we mailed the Notice of Availability of Proxy Materials, began mailing paper copies of thisthe proxy statement and proxy card and our 20152018 Annual Report to registered shareholders, began mailing the Notice of Internet Availability of Proxy Materials and deliveredbegan delivering proxy materials electronically to registered shareholders who previously consented to that type ofelectronic delivery. Please note that our 20152018 Annual Report is not considered part of our proxy solicitation materials.
Accessing proxy materials. The SEC allows us to deliver proxy materials to shareholders over the Internet. We believe that this offers a convenient way for shareholders to review our information. It also reduces printing expenses and lessens the environmental impact of paper copies.
Shareholders may access our proxy materials electronically. Upon request, we will continue to provide email or paper copies of proxy materials to shareholders for the current annual meeting or for future meetings.
If you hold PNC shares in street name, we generally cannot mail our materials to you directly. Your broker or bank must provide you with the Notice of Internet Availability of Proxy Materials or the proxy statement and a voting instruction form, and must also explain the voting process to you.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 26, 2016:23, 2019: This Notice of Annual Meeting and Proxy Statement and the 20152018 Annual Report are available at:
www.envisionreports.com/PNC
Have you received more than one set of proxy materials? If two or more PNC shareholders live in your household, or you maintain more than one shareholder account on the books of our transfer agent, you may have received more than one set of our proxy materials.
In order to reduce duplicate packages and lower expenses, we rely on Securities and Exchange CommissionSEC rules allowingthat allow delivery of one set of proxy materials to multiple shareholders sharing the same address and the same last name, who consent in a mannerif this type of delivery has been consented to as provided by these rules. This is referred to as “householding.”“householding” of the proxy materials. Even if you consent to householding, we will always deliver a separate proxy card or Notice of Internet Availability of Proxy Materials for each account. Householding will not affect your right or ability to vote.
If you would like to opt out of or into householding in the future, or would like to receive a separate copy of the proxy materials, please write or call Computershare Trust Company, N.A., our stock transfer agent, at the address or phone number below:
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
800-982-7652
You may also receive more than one set of our proxy materials if you have more than one brokerage account. Our householding process does not include accounts that you maintain at a brokerage firm or bank. Some brokerage firms and banks offer householding—please contact your broker or bank directly if you are interested.
We want our shareholders, as the owners of PNC, to consider the important matters before them and exercise their right to vote. OurThe Board of Directors is asking for, or soliciting, a proxy from our shareholders. This section describes the different aspects of the voting process and how proxy voting works.
Who can vote? You are entitled to vote if you were a PNC shareholder as of the record date of January 29, 2016.February 1, 2019.
What is a proxy? For shareholdersIf you are unable to attend and vote at the annual meeting in person, you can tell us exactly how you want to vote your shares and then allow an officer to vote on your behalf. ThatThis is calledreferred to as giving us a “proxy.” By allowinginstructing a proxy to carry out your wishes, you can ensure that your vote counts.is counted.
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Soliciting your proxy. OurThe Board of Directors is soliciting your proxy to make sure that your vote is properly submitted and received on time, and to improve the efficiency of the annual meeting. We may ask for, or solicit proxies using several methods.
We may solicit proxiesmethods, including by mail, personal interviews, telephone or fax. We may also use the Internet to solicit proxies.
PNC officers or employees may solicit proxies, but will not receive any special compensation for doing so.
We will ask brokerage houses, banks and other custodians of PNC stock to forward proxy materials to their clients who hold PNC stock. Westock, and we will pay for theirthe expenses they incur to do so.
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We hired In addition, we have retained Morrow & Co.,Sodali, LLC, 470 West Ave., Stamford, CT 06902, a proxy soliciting firm, to helpassist us with the solicitation of proxies for the 2016 annual meeting. We will pay Morrowmeeting for a fee of $15,000, plus its reimbursement of reasonableout-of-pocket expenses, to provide information to our shareholders and to assist with distributing proxy materials. expenses.
Revoking your proxy. What if you change your mind after you give us your proxy to vote? You can amend your voting decisions in several ways. We callrefer to this as “revoking” your proxy.
To revoke your current proxy and replace it with a new proxy, we must receive the newly executed proxy before the applicable deadline. If you revoke by mail, we must receive the new proxy card before the annual meeting begins. Please make sure you have provided enough time for the replacementnew proxy card
to reach us. If you revoke by using the telephone or Internet voting options, we must receive your revocation by 1:00 a.m., Eastern timeTime on April 26, 2016.23, 2019.
After the above deadlines have passed, you can only revoke your proxy in person. You cannot useperson at the annual meeting. If you listen to the annual meeting using the webcast or conference call options, you will be unable to revoke your proxy.proxy during the meeting. Once the polls close at the annual meeting, the right to revoke your proxy ends. If you have not properly revoked your proxy by that time, we will vote your shares in accordance with your most recent valid proxy.
If you hold PNC shares in street name, follow the instructions provided by your broker or bank to revoke your voting instructions or otherwise change your vote.
How to vote. If your shares are registered in your name, you may vote in person by submitting a ballot at the annual meeting. We will distribute ballots at the meeting. To make it convenient and simple for you, we also offer a number of other ways to vote your shares. We include votingVoting instructions are included in the Notice of Internet Availability of Proxy Materials and the proxy card.
For registered holders, we offer the following methods to vote your shares and give us your proxy:
Internet | Go towww.envisionreports.com/PNC and follow the instructions. This voting system has been designed to provide security for the voting process and to confirm that your vote has been recorded accurately. | |
Telephone | Follow the instructions on the proxy card. | |
Complete, sign and date the proxy card and return it in the envelope provided if you were mailed paper copies of the proxy materials. The envelope requires no postage if mailed in the United States. |
If you hold PNC shares in street name, you will receive information on how to give voting instructions to your brokerage firmbroker or bank. Note that if you hold PNC shares in street name and plan to vote at the annual meeting, you must present a written legal proxy from your broker or bank authorizing you to vote the shares it holds for you in its name.
PNC is incorporated inunder the laws of Pennsylvania. Pennsylvania law allows properly authenticated proxies to be transmittedsubmitted by electronic transmission, including by telephone or over the Internet. Pennsylvania law alsoInternet, and permits a shareholder of record, such as a brokerage firm or bank, to communicate a vote by telephone or Internet foron behalf of a beneficial owner.
Brokers voting your shares. If you hold PNC shares in street name, you must give instructions to your broker onor bank regarding how you would like your shares to be voted. If you do not provide any instructions, your broker has discretionary authority to vote your shares ononly with respect to proposals that are “routine” items. New York Stock Exchange (NYSE)NYSE rules define which items are “routine” or “non-routine.“non-routine.” We discuss below underVotes required for approvalwhether the itemsproposals to be acted upon at the
annual meeting are “routine” or “non-routine.”“non-routine” items below underHow a proposal gets approved—Vote required for approval.
AIf a proposal is considered anon-routine item under NYSE rules and you do not provide voting instructions to your broker “non-vote” occurs when the shareholder providesor bank, no instructionsvote will be cast on your behalf with respect to that proposal. This is referred to as a “brokernon-vote” and the item is non-routine. In determining whetherit will not be counted as a vote was cast for a proposal, we will not count broker non-votes.on the proposal. In some cases, street name holders may need to take additional precautions to ensure that their shares are voted.
Our voting recommendations. If your shares are registered in your name and you sign, date and return your proxy card but do not giveprovide voting instructions, or if you use Internet or telephone
voting and do not provide voting instructions for each proposal, we will vote your shares will be voted as follows:
FOR each of the Board’s 13 nominees for director
FOR the ratification of the selection of PricewaterhouseCoopers LLP as PNC’sour independent registered public accounting firm for 20162019
FOR the 2016 Incentive Award Plan
FOR the advisory resolution on executive compensation
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Confidential voting. We keep votes confidential and do not disclose them to our directors, officers or employees, except:
As necessary to meet legal requirements or to pursue or defend legal actions.
To allow the Judge of Election to certify the voting results.
When expressly requested by a shareholder or benefit plan participant.
If there is a contested proxy solicitation.
OurThe Board has adopted a “confidential voting” policy. With the exceptions described above,below, this policy states that all proxies, ballots, voting instructions from employee benefit plan participants and voting tabulations that identify the particular vote of a particular shareholder or benefit plan participant be kept permanently confidential and not be disclosed. We keep votes confidential and do not disclose them to our directors, officers, or employees, except:
Computershare Trust Company, N.A., our independent vote tabulator and Judge of Election for the 2016 annual meeting, confirmed that its procedures will be consistent with this policy.
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GENERAL INFORMATION
On the record date, we had over 500 million outstanding shares of common stock, as well as additional shares of preferred stock.Quorum. Under Pennsylvania law, we must have a quorum before we can consider proposals at an annual meeting. A quorum is“quorum” refers to the minimum number of shares that must be present at the meeting. In determining if a quorum exists, we count the number of shares represented by shareholders in person as well as the number of shares represented by proxies.
To have a quorum for the annual meeting, we need the presence of PNC shareholders or their proxies who are entitled to cast atleast a majority of the votes that all shareholders are entitled to cast.
In determining if a quorum exists, we count the number of shares represented by shareholders in person at the annual meeting and the number of shares represented by proxies. If you return a proxy, whether you vote for or against a proposal, abstain from voting or only sign and date your proxy card, your holdingsshares will be counted toward the quorum.
Once a quorum is achieved, different proposals may require different standards of approval. Street name holders may need to take additional precautions to ensure that their vote counts. We discuss the mechanics of proposal approval below.
Issued and outstanding shares. ThisOn February 1, 2019, the record date for the annual meeting, we had approximately 453 million shares of common stock outstanding, as well as additional shares of preferred stock. The table below shows the number of issued and outstanding shares of our common and preferred stock entitled to vote on January 29, 2016, the record date. We have additional issued and outstanding series of preferred stock that are not entitled to vote at the meeting. The table also shows the number of votes for each share for the matters brought before this meeting. The number of votes shown for each share of voting preferred stock equals the number of full shares of PNC common stock that can be acquired upon the conversion of a share of preferred stock. At the meeting, holders of common and preferred stock entitled to vote will vote together as a single class. There is no cumulative voting.
Class | Issued and Outstanding Shares Entitled to Vote | Votes Per Share | Effective Voting Power | Issued and Outstanding Shares Entitled to Vote | Votes Per Share | Effective Voting Power | ||||||||||||||||||
Common | 502,399,069 | 1 | 502,399,069 | 453,046,877 | 1 | 453,046,877 | ||||||||||||||||||
Preferred – Series B | 615 | 8 | 4,920 | |||||||||||||||||||||
Preferred—Series B | 615 | 8 | 4,920 |
VotesVote required for approval. Different proposals may have different voting requirements for approval.
This section provides information regarding the vote required for approval of each proposal presented in the proxy statement and additional details regarding the mechanics of proposal approval.
Under Pennsylvania law, if you abstain from voting itor fail to vote, your shares will not countbe counted as a vote “cast.”votes cast on the proposal. To abstain, you must check the “Abstain” box on your proxy card, or select the appropriate option when voting by Internet or telephone. A brokernon-vote is treated as a failure to vote. Therefore, if you do not provide instructions to your broker or bank regarding how to vote on a proposal that is anon-routine item, your shares will not be counted as votes cast on that proposal. If you are a shareholder of record and you sign, date and return your proxy card but do not provide voting instructions, or if you submit your proxy by Internet or telephone and do not provide voting instructions, when voting over the Internet, we will vote your shares represented
by that proxy as recommended by ourthe Board of Directors and this votethose shares will countbe counted as a votevotes cast. A broker non-vote will also be treated as a failure to record a vote and will not count as a vote cast.
Election of directors (Item 1). UnlessUnder Pennsylvania law, unless a company’s articles of incorporation orby-laws provide otherwise, Pennsylvania law contemplates election of directors are elected by a plurality of the votes cast. In 2009, PNC amended its OurBy-laws to include an eligibility requirement for director nominees in uncontested elections, whereby an incumbent director will offer to resign from the Board if he or she does not receive a majority of the votes cast. To receive a majority of the votes cast, the shares voted “for” a director’s election must exceed 50% of the total number of shares voted with respect to that director’s election. OurBy-laws and corporate governance guidelines describe this majority voting requirement and the related procedure in the event that requires an incumbenta director tomust tender his or her resignation to the Board. To receiveThis is considered a majority of the votes cast means that the shares voted “for” a director’s election exceed 50% of the number of votes castnon-routine item, so there may be brokernon-votes with respect to that director’s election. This will be considered a non-routine item. As a non-routine item, there may be broker non-votes. Any broker this proposal. Brokernon-votes or and abstentions will not be included in the total votes cast and will not affect the results.results of the vote on this proposal.
Ratification of independent registered public accounting firm (Item 2). A majority of the votes
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cast will be required to approve the ratification of ourthe Audit Committee’s selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2016.2019. This will beis considered a routine item, andso brokers will have the discretion to vote uninstructed shares on behalf of clients. Asbeneficial owners with respect to this proposal. Therefore, brokernon-votes are not expected to exist for this proposal, although a routine item, there will be no broker non-votes, although brokers may otherwise fail to submit a vote. Any failuresFailures by brokers to vote orand abstentions will not be included in the total votes cast and will not affect the results.
Approval of 2016 Incentive Award Plan (Item 3). A majorityresults of the votes cast will be required to approve the 2016 Incentive Award Plan. This will be considered a non-routine item. As a non-routine item, there may be broker non-votes. Any broker non-votes or abstentions will not be included in the total votes cast and will not affect the results.vote on this proposal.
“Say-on-pay”: advisory Advisory vote on executive compensation (Item 4)3). A majority of the votes cast will be required to approve this item, an advisory vote on the compensation of our named executive compensation.officers. Because your vote is advisory, it will not be binding on the Board or PNC. This will beis considered anon-routine item. As a non-routine item, so there may be broker non-votes. Any broker non-votes or with respect to this proposal. Brokernon-votes and abstentions will not be included in the total votes cast and will not affect the results.results of the vote on this proposal.
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THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 10193
SHAREHOLDER PROPOSALS FOR THE 20172020 ANNUAL MEETING
SEC Rule14a-8. If you are a shareholder who would like us to include your proposal in ourthe notice of the 2017our 2020 annual meeting of shareholders and related proxy materials, you must followcomply with SEC Rule 14a-8. In submitting14a-8, including with respect to submission of your proposal ourby the applicable deadline. Our Corporate Secretary must receive your proposal in writing at our principal executive offices no later than November 15, 2016.13, 2019. If your proposal is not received by the deadline or you do not followotherwise comply with Rule14a-8, we will not consider your proposal for inclusion in next year’s proxy statement.materials.
Advance notice procedures. Under ourBy-laws, a shareholder who wishes to shareholders may nominate an individual for election to the Board of Directorsor propose other business to be brought directly at an annual meeting or to propose any business to be considered at an annual meeting, must deliverof shareholders by giving advance notice of such nomination or business to PNC. TheTo be eligible to do so, a shareholder must be a shareholder of record as of the date the notice is delivered to PNC and at the time of the annual meeting, and must be entitled to vote at the meeting. Theannual meeting and must comply with the notice and other applicable procedures set forth in ourBy-laws.
A shareholder’s notice of a nomination or other business must be in writing and contain the information specified in ourBy-laws, for and must be delivered on a director nomination or other business.
The company’s 2017timely basis. To be timely, a shareholder’s written notice related to our 2020 annual meeting is currently scheduled to be held on April 25, 2017, and to be timely, the written noticeof shareholders must be delivered to the Corporate Secretary at our principal executive offices not earlier than December 27, 201625, 2019 (the 120th120th day prior to the first anniversary of this year’s annual meeting) and not later than January 26, 201724, 2020 (the 90th90th day prior to the first anniversary of this year’s annual meeting) to the Corporate Secretary at our principal executive offices by mail or facsimile..
These advance notice procedures are separate from the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal included in our proxy materials pursuant to SEC Rule14a-8 referred to above, and from the procedures you must follow to submit a director nominee for consideration by the Nominating and Governance Committee for recommendation to the Board for election as described underCorporate Governance—Board committees—Nominating and Governance Committee—How we identify new directors on page 25.
Proxy access procedures. OurBy-laws permit a shareholder, or a group of up to 20 shareholders, who has continuously owned at least 3% of the outstanding shares entitled to vote in the election of directors for at least three years to nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of
two directors or 20% of the number of directors serving on the Board on the last day on which notice of a nomination may be delivered (known generally as “proxy access”).
The proxy access notice must be in writing and contain the information specified in ourBy-laws for a proxy access nomination, and must be delivered on a timely basis. To be timely, a proxy access notice regarding a nomination for our 2020 annual meeting of shareholders must be delivered to the Corporate Secretary at our principal executive offices not earlier than October 14, 2019 (the 150th day prior to the first anniversary of the filing date of the definitive proxy statement for this year’s annual meeting) and not later than November 13, 2019 (the 120th day prior to the first anniversary of the filing date of the definitive proxy statement for this year’s annual meeting).
These proxy access procedures are separate from the advance notice procedures referred to above, from the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal included in our proxy statementmaterials pursuant to SEC Rule14a-8 referred to above.above, and from the procedures you must follow to submit a director nominee for consideration by the Nominating and Governance Committee for recommendation to the Board for election as described underCorporate Governance—Board committees—Nominating and Governance Committee—How we identify new directors on page 25.
General.The proxies we appoint for the 20172020 annual meeting of shareholders may exercise their discretionary authority to vote on any shareholder proposal timely received and presented at the meeting. Our proxy statement for the 2020 annual meeting must advise shareholders of theany such proposal and how our proxies intend to vote. A shareholder may mail a separate proxy statement to our shareholders and satisfy certain other requirements to remove discretionary voting authority from our proxies.
The Chairperson or other officer presiding at the annual meeting has the sole authority to determine whether any nomination or other business proposed to be brought before the annual meeting was made or proposed in accordance with ourBy-laws, and to declare that a defective proposal or nomination be disregarded.
Please direct any notices or questions about the requirements or noticesdiscussed in this section to our Corporate Secretary at the address givenprovided on page 18.
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OurThe Board of Directors does not know of any other business to be presented at the annual meeting. If any other business should properly come before the meeting, or if there is any meeting adjournment, proxies will be voted in accordance with the best judgment of the persons named in the proxies.
March | By Order of the Board of Directors, | |
Corporate Secretary |
102 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 95
ANNEX A (NON-GAAP TO GAAP RECONCILIATIONS)
We provide information below to reconcile to GAAP those financial metrics used by the Personnel and Compensation Committee that are eithernon-GAAP financial metrics or reflect adjustments approved by the Personnel and Compensation Committee (as described in footnote 1 to the tableCommittee.
Net Interest Income
Year ended December 31, | ||||||||||||
Dollars in millions | 2018 | 2017 | % change | |||||||||
Net interest income | $ | 9,721 | $ | 9,108 | 6.7% | |||||||
Personnel and Compensation Committee approved adjustments(a) | – | 26 | ||||||||||
Net interest income, as adjusted(Non-GAAP) | $ | 9,721 | $ | 9,134 | 6.4% |
(a) | Adjustment as a result of the Tax Cuts and Jobs Act. |
Diluted Earnings per Common Share
Year ended December 31, | ||||||||||||
Dollars in millions | 2018 | 2017 | % change | |||||||||
Diluted earnings per common share | $ | 10.71 | $ | 10.36 | 3.4% | |||||||
Personnel and Compensation Committee approved adjustments(a) | (0.02 | ) | (2.34 | ) | ||||||||
Diluted earnings per common share, as adjusted(Non-GAAP) | $ | 10.69 | $ | 8.02 | 33.3% |
(a) | 2018 reflects adjustment in the amount of $(9) million, or $(0.02) per common share, due to the addition of provision for credit losses and subtraction of net charge-offs. 2017 reflects adjustments in the amount of $26 million to net interest income, or $0.05 per share, and $(1,155) million to income tax, or $(2.37) per common share, due to the Tax Cuts and Jobs Act, and an adjustment in the amount of $(10) million, or $(0.02) per common share, due to the addition of provision for credit losses and subtraction of net charge-offs. |
Return on pages 39 and 40). Financial metrics disclosed in the tableEquity
Year ended December 31, | ||||||||||||
Dollars in millions | 2018 | 2017 | % change | |||||||||
Net income | $ | 5,346 | $ | 5,388 | ||||||||
Personnel and Compensation Committee approved adjustments(a) | (9 | ) | (1,139 | ) | ||||||||
Net income, as adjusted(Non-GAAP) | $ | 5,337 | $ | 4,249 | ||||||||
Average total shareholders’ equity | $ | 46,825 | $ | 46,281 | ||||||||
Return on equity(b) | 11.42% | 11.64% | (1.9%) | |||||||||
Return on equity, as adjusted(Non-GAAP)(c) | 11.40% | 9.18% | 24.2% |
(a) | 2018 reflects adjustment in the amount of $(9) million due to the addition of provision for credit losses and subtraction of net charge-offs. 2017 reflects adjustments in the amount of $26 million to net interest income and $(1,155) million to income tax due to the Tax Cuts and Jobs Act, and an adjustment in the amount of $(10) million due to the addition of provision for credit losses and subtraction of net charge-offs. |
(b) | This metric was calculated by dividing net income by average total shareholders’ equity. |
(c) | This metric was calculated by dividing adjusted net income by average total shareholders’ equity. |
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ANNEX A (NON-GAAP TO GAAP RECONCILIATIONS)
Return on pages 39 and 40 that are not discussed below areAssets
Year ended December 31, | ||||||||||||
Dollars in millions | 2018 | 2017 | % change | |||||||||
Net income | $ | 5,346 | $ | 5,388 | ||||||||
Personnel and Compensation Committee approved adjustments(a) | (9 | ) | (1,139 | ) | ||||||||
Net Income, as adjusted(Non-GAAP) | $ | 5,337 | $ | 4,249 | ||||||||
Average Assets | $ | 378,235 | $ | 371,769 | ||||||||
Return on Assets(b) | 1.41% | 1.45% | (2.8)% | |||||||||
Return on Assets, as adjusted(Non-GAAP)(c) | 1.41% | 1.14% | 23.7% |
(a) | 2018 adjustment due to the addition of provision for credit losses and subtraction of net charge-offs. 2017 reflects adjustments in the amount of $26 million to net interest income and $(1,155) million to income tax due to the Tax Cuts and Jobs Act, and an adjustment in the amount of $(10) million due to the addition of provision for credit losses and subtraction of net charge-offs. |
(b) | This metric was calculated by dividing net income by average assets. |
(c) | This metric was calculated by dividing adjusted net income by average assets. |
Risk-adjusted Efficiency Ratio
Year ended December 31, | ||||||||||||
Dollars in millions | 2018 | 2017 | % change | |||||||||
Revenue | $ | 17,132 | $ | 16,329 | ||||||||
Personnel and Compensation Committee approved adjustments(a) | – | 26 | ||||||||||
Revenue, as adjusted(Non-GAAP) | $ | 17,132 | $ | 16,355 | ||||||||
Noninterest Expense | $ | 10,296 | $ | 10,398 | ||||||||
Personnel and Compensation Committee approved adjustments(b) | 420 | 457 | ||||||||||
Noninterest Expense, as adjusted(Non-GAAP) | $ | 10,716 | $ | 10,855 | ||||||||
Efficiency Ratio(c) | 60.10% | 63.68% | 5.6%(e) | |||||||||
Efficiency Ratio, as adjusted(Non-GAAP)(d) | 62.55% | 66.37% | 5.8%(e) |
(a) | 2017 adjustment due to the Tax Cuts and Jobs Act. |
(b) | 2018 and 2017 adjustment due to the addition of net charge-offs. |
(c) | This metric was calculated by dividing noninterest expense by revenue. |
(d) | This metric was calculated by dividing adjusted noninterest expense by adjusted revenue. |
(e) | As a smaller efficiency ratio is better than a larger one, we have presented the reduction in each of the efficiency ratio and the adjusted efficiency ratio as a positive change when compared to the prior year’s results. |
Tangible Book Value per Common Share
Year ended December 31, | ||||||||
Dollars in millions, except per share data | 2018 | 2017 | ||||||
Book value per common share | $ | 95.72 | $ | 91.94 | ||||
Tangible book value per common share | ||||||||
Common shareholders’ equity | $ | 43,742 | $ | 43,530 | ||||
Goodwill and Other Intangible Assets | (9,467 | ) | (9,498) | |||||
Deferred tax liabilities on Goodwill and Other Intangible Assets | 190 | 191 | ||||||
Tangible common shareholders’ equity | $ | 34,465 | $ | 34,223 | ||||
Period-end common shares outstanding (in millions) | 457 | 473 | ||||||
Tangible book value per common share(Non-GAAP) | $ | 75.42 | $ | 72.28 |
THE PNC FINANCIAL SERVICES GROUP, INC. - 2019 Proxy Statement 97
ANNEX A (NON-GAAP TO GAAP metrics that were not affected by the Personnel and Compensation Committee approved adjustments in 2014 and 2015.RECONCILIATIONS)
Return on Common Equity without Goodwill
Year ended December 31 | Year ended December 31, | |||||||||||||||
Dollars in millions | 2015 | 2014 | 2018 | 2017 | ||||||||||||
Net income attributable to common shareholders | $ | 3,881 | $ | 3,947 | $ | 5,061 | $ | 5,076 | ||||||||
Personnel and Compensation Committee approved adjustments(a) | (28 | ) | (947) | |||||||||||||
Net income attributable to common shareholders, as adjusted(Non-GAAP) | $ | 5,033 | $ | 4,129 | ||||||||||||
Average common shareholders’ equity | $ | 40,873 | $ | 39,820 | $ | 42,779 | $ | 41,985 | ||||||||
Average goodwill | $ | 9,103 | $ | 9,082 | 9,213 | 9,146 | ||||||||||
Average common shareholders’ equity less average goodwill | $ | 31,770 | $ | 30,738 | ||||||||||||
Return on common equity (a) | 9.50% | 9.91% | ||||||||||||||
Return on common equity without goodwill (b) | 12.22% | 12.84% | ||||||||||||||
Average common shareholders’ equity less average goodwill(Non-GAAP) | $ | 33,566 | $ | 32,839 | ||||||||||||
Return on common equity(b) | 11.83% | 12.09% | ||||||||||||||
Return on common equity without goodwill(Non-GAAP)(c) | 15.00% | 12.57% |
(a) | 2018 adjustment due to net Visa activity. 2017 adjustments in the amount of $26 million to net interest income and $(1,155) million to income tax due to the Tax Cuts and Jobs Act, and an adjustment in the amount of $182 million due to net Visa activity. |
(b) | This metric was calculated by dividing net income attributable to common shareholders by average common shareholders’ equity. |
This metric was calculated by dividing adjusted net income attributable to common shareholders by average common shareholders’ equity less average goodwill. |
Tangible Book Value per Common ShareFee Income
Year ended December 31 | ||||||||
Dollars in millions, except per share data | 2015 | 2014 | ||||||
Book value per common share | $ | 81.84 | $ | 77.61 | ||||
Tangible book value per common share | ||||||||
Common shareholders’ equity | $ | 41,258 | $ | 40,605 | ||||
Goodwill and Other Intangible Assets (a) | (9,482 | ) | (9,595) | |||||
Deferred tax liabilities on Goodwill and Other Intangible Assets (a) | 310 | 320 | ||||||
Tangible common shareholders’ equity | $ | 32,086 | $ | 31,330 | ||||
Period-end common shares outstanding (in millions) | 504 | 523 | ||||||
Tangible book value per common share | $ | 63.65 | $ | 59.88 |
Return on Economic Capital vs. Cost of Capital
Year ended December 31 | ||||||||
Dollars in millions | 2015 | 2014 | ||||||
Net income | $ | 4,143 | $ | 4,207 | ||||
Personnel and Compensation Committee approved adjustments, on an after-tax basis | $ | (110 | ) | $ | (117) | |||
Net income, as adjusted | $ | 4,033 | $ | 4,090 | ||||
Average economic capital | $ | 31,450 | $ | 32,202 | ||||
Plan-specified cost of capital hurdle | 7.76% | 7.68% | ||||||
Return on economic capital less cost of capital hurdle (a) | 5.41% | 5.38% | ||||||
Return on economic capital less cost of capital hurdle, as adjusted (b) | 5.06% | 5.02% |
Year ended December 31 | ||||||||||||
Dollars in millions | 2018 | 2017 | % Change | |||||||||
Noninterest income | ||||||||||||
Asset management | $ | 1,825 | $ | 1,942 | ||||||||
Consumer services | 1,502 | 1,415 | ||||||||||
Corporate services | 1,849 | 1,742 | ||||||||||
Residential mortgage | 316 | 350 | ||||||||||
Service charges on deposits | 714 | 695 | ||||||||||
Total fee income | 6,206 | 6,144 | 1% | |||||||||
Other | 1,205 | 1,077 | ||||||||||
Total noninterest income | $ | 7,411 | $ | 7,221 | 3% |
98 THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 103
ANNEX B (PROPOSED 2016 INCENTIVE AWARD PLAN)
The PNC Financial Services Group, Inc.
2016 Incentive Award Plan
As used in this Plan and/or an Agreement, the following terms shall have the meanings set forth below.
1.1 “10% Shareholder” means an employee or officer of PNC who, as of the date on which an Incentive Stock Option is granted to such employee or officer, owns more than 10% of the total combined voting power of all classes of Shares then issued by the Corporation or any of its Subsidiaries.
1.2 “Agreement” means an agreement in Writing between the Corporation and the Grantee evidencing a grant of an Award under the Plan.
1.3 “Approval Date” means March 3, 2016, the date this Plan was approved by the Board.
1.4 “Award” means an Option, Share Award, Restricted Share, Share Unit, Share Appreciation Right, Restricted Share Unit, Performance Award, Other Share-Based Award or Dollar-Denominated Award.
1.5 “Base Price” means the grant price of a Share Appreciation Right as determined by the Committee on or before the Grant Date, which price shall not be less than the Fair Market Value of a Share on the Grant Date.
1.6 “Board” means the Board of Directors of the Corporation.
1.7 “Cause” means, except as otherwise provided in the applicable Agreement:
(i) the willful and continued failure of Grantee to substantially perform Grantee’s duties with PNC (other than any such failure resulting from incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to Grantee by PNC that specifically identifies the manner in which it is believed that Grantee has not substantially performed Grantee’s duties;
(ii) a material breach by Grantee of (a) any code of conduct of PNC or any code of conduct of a Subsidiary that is applicable to Grantee or (b) other written policy of PNC or other written policy of a Subsidiary that is applicable to Grantee, in either case as required by law or established to maintain compliance with applicable law;
(iii) any act of fraud, misappropriation, material dishonesty, or embezzlement by Grantee against PNC or any of its Subsidiaries or any client or customer of PNC or any of its Subsidiaries;
(iv) any conviction (including a plea of guilty or of nolo contendere) of Grantee for, or entry by Grantee into a pre-trial disposition with respect to, the commission of a felony; or
(v) entry of any order against Grantee, by any governmental body having regulatory authority with respect to the business of PNC or any of its Subsidiaries, that relates to or arises out of Grantee’s employment or other service relationship with PNC.
The cessation of employment of Grantee shall be deemed to have been a termination of Grantee’s employment with PNC for Cause for purposes of the Plan and the Agreement only if and when PNC, by PNC’s CEO or his or her designee (or, if Grantee is the CEO, the Board, or if Grantee is another “officer” of the Corporation, as defined in Section 16 of the Exchange Act (and the rules thereunder), the Board or the Board’s Personnel and Compensation Committee), determines that Grantee is guilty of conduct described in clause (i), (ii) or (iii) above or that an event described in clause (iv) or (v) above has occurred with respect to Grantee and, if so, determines that the termination of Grantee’s employment with PNC shall be deemed to have been for Cause.
1.8 “CEO” means the chief executive officer of the Corporation.
1.9 “Chair” means the chairperson of the Board’s Personnel and Compensation Committee (or any successor position).
1.10 “Committee” means (i) in the case of Employee Awards, the Board’s Personnel and Compensation Committee, or such other committee or designee appointed by the Board or the Personnel and Compensation Committee to manage Employee Awards generally or specific individual or groups of
104 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
Employee Awards, and (ii) in the case of Awards made to Directors, the Board’s Nominating and Governance Committee, unless otherwise determined by the Board. Except where the context otherwise requires, references in the Plan to the “Committee” also shall be deemed to refer to the Chair and to any delegate of the Committee while acting within the scope of such delegation. Notwithstanding the foregoing, to the extent deemed appropriate by the Board, the Committee shall be composed of not less than two individuals who are “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code, “non-employee directors” within the meaning of Section 16 of the Exchange Act (and the rules thereunder) and “independent directors” within the meaning of Section 303A of the New York Stock Exchange Listing Company Manual.
1.11 “Common Stock” means the common stock, par value $5.00 per share, of the Corporation.
1.12 “Corporate Transactions” means corporate transactions involving the Corporation, including, without limitation, Share dividends, Share splits, spin-offs, split offs, recapitalizations, mergers, consolidations or reorganizations of or by the Corporation.
1.13 “Corporation” means The PNC Financial Services Group, Inc.
1.14 “Director” means any member of the Board who is not also an employee of PNC.
1.15 “Disabled” or “Disability” means, except as otherwise defined in an Agreement, that Grantee’s employment is terminated by PNC other than for Cause and because Grantee either (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving (and has received for at least three months) income replacement benefits under any PNC-sponsored disability benefit plan or (iii) has been determined by the U.S. Social Security Administration to be eligible for U.S. Social Security disability benefits.
1.16 “Dividend Equivalent” means a right granted to an Eligible Person to receive the equivalent value (in cash or Shares) of dividends paid on Common Stock.
1.17 “Dollar-Denominated Award” means an Award denominated in dollars rather than in Shares, pursuant to Article 12, regardless of whether such Award is to be settled in cash or Shares.
1.18 “Effective Date” means the date this Plan is approved by the Corporation’s shareholders following the Approval Date.
1.19 “Eligible Person” means an employee or officer of PNC, or a Director, selected by the Committee as eligible to receive an Award under the Plan.
1.20 “Employee Awards” means Awards made to Eligible Persons other than Directors.
1.21 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
1.22 “Fair Market Value” means, as of any given date, (i) the reported closing price on the New York Stock Exchange (or such successor reporting system as the Corporation may select) for a share of Common Stock on such date, or, if no Common Stock trades have been reported on such exchange for that day, such closing price on the immediately preceding day for which there were reported trades or, if the Committee has so acted, (ii) fair market value as determined using such other reasonable method adopted by the Committee in good faith for such purpose that uses actual transactions in Common Stock as reported by a national securities exchange or the Nasdaq National Market, provided that such method is consistently applied. When determining Fair Market Value for an Award under the Plan held by a Grantee, the Fair Market Value shall be rounded to the nearest cent (provided that such rounding is in compliance with the fair market value pricing rules set forth in Section 409A). Notwithstanding the foregoing, in the case of a broker-assisted exercise of an Option, the Fair Market Value shall be the actual sale price of the Shares issued upon exercise of the Option, as described under Section 3.11(iv).
1.23 “GAAP” or “U.S. generally accepted accounting principles” means accounting principles generally accepted in the United States of America.
1.24 “Grant Date” means the date on which such Award is approved by the Board or the Committee, or such later date specified by the Board or the Committee in authorizing the Award.
1.25 “Grantee” means a person who was an Eligible Person at the time of grant and has been granted an Award under the Plan that remains outstanding, including a person who is no longer an Eligible Person.
1.26 “Incentive Stock Option” means a right to purchase Shares from the Corporation granted pursuant to Article 6 and that qualifies as an incentive stock option under Section 422 of the Internal Revenue Code.
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1.27 “Individual Limit” means the annual per individual limits relating to Awards, as set forth in Section 5.2.
1.28 “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
1.29 “Non-Exempt Employees” means employees whose minimum wages and maximum hours are subject to the requirements imposed under sections 206 and 207 of the Fair Labor Standards Act of 1938, as amended (“FLSA”), and who are not exempted from such requirements under section 213 of the FLSA.
1.30 “Nonstatutory Stock Option” means a right to purchase Shares from the Corporation that is granted pursuant to Article 6 and that is not an Incentive Stock Option.
1.31 “Option” means an Incentive Stock Option or Nonstatutory Stock Option granted pursuant to Article 6.
1.32 “Option Period” means the period during which an Option may be exercised.
1.33 “Option Price” means the price per Share at which an Option may be exercised.
1.34 “Other Share-Based Award” means an Award granted pursuant to Article 11.
1.35 “Performance Award” shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 10.
1.36 “Performance Criteria” means any performance standards selected by the Committee pursuant to Article 10 with respect to a specific Award.
1.37 “Performance Period” means the period or periods, which may be of overlapping durations, during which each Performance Criteria of a Performance Award or Qualified Performance-Based Compensation shall be measured, as specified in the Agreement relating thereto.
1.38 “Performance Share” means any grant pursuant to Article 10 of a unit valued by reference to a designated number of Shares, which value may be paid to the Grantee by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.
1.39 “Performance Unit” means any grant pursuant to Article 10 of a unit valued by reference to a designated amount of cash or other property (other than Shares), which value may be paid to the Grantee by delivery of such property as the Committee shall determine, including cash, Shares or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.
1.40 “Plan” means The PNC Financial Services Group, Inc. 2016 Incentive Award Plan, which is the Plan set forth in this document, as amended from time to time.
1.41 “PNC” means The PNC Financial Services Group, Inc. and its Subsidiaries.
1.42 “Prior Plan” means The PNC Financial Services Group, Inc. 2006 Incentive Award Plan, as amended.
1.43 “Prior Plan Award” means an award granted pursuant to the Prior Plan.
1.44 “Qualified Performance-Based Compensation” means any compensation that is intended to qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Internal Revenue Code.
1.45 “Related Award” means an Award with which an Option, Share Unit or other Right is granted.
1.46 “Related Option” means an Option granted in connection with a specified Award.
1.47 “Related Share Unit” means a Share Unit granted in connection with a specified Award or by amendment of an outstanding Nonstatutory Stock Option or Restricted Share granted under the Plan or the Prior Plan.
1.48 “Related Right” means a Share Appreciation Right granted in connection with a specified Award or by amendment of an outstanding Nonstatutory Stock Option granted under the Plan.
1.49 “Restricted Share” means a Share awarded pursuant to Article 7.
1.50 “Restricted Share Unit” means a Share Unit awarded pursuant to Article 9.
1.51 “Right Period” means the period during which a Share Appreciation Right may be exercised.
1.52 “SEC” means the United States Securities and Exchange Commission, or any successor agency thereto, and shall include the staff of such commission.
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1.53 “Section 409A” means Section 409A of the Internal Revenue Code.
1.54 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.55 “Separation from Service” and “Separate from Service” mean the Grantee’s death, retirement or other termination of employment or service with PNC that constitutes a “separation from service” within the meaning of Section 409A. A Grantee shall be presumed to have experienced a Separation from Service when the level of bona fide services performed permanently decreases to a level less than twenty percent (20%) of the average level of bona fide services performed during the immediately preceding thirty-six (36) month period or such other applicable period as provided by Section 409A.
1.56 “Service Relationship” means engagement of a Grantee by PNC in any capacity for which the Grantee receives compensation from PNC, including the receipt of compensation as an employee, consultant, independent contractor, officer, director or advisory director.
1.57 “Share” means a share of authorized but unissued Common Stock or a reacquired share of Common Stock, including shares purchased by the Corporation on the open market for purposes of the Plan or otherwise.
1.58 “Share Appreciation Right” means a right to receive a payment based upon the appreciation in value of a Share and that is granted pursuant to Article 8.
1.59 “Share Award” means an award of Common Stock pursuant to Article 7.
1.60 “Share Unit” means right to receive a Share, or an amount based on the value of a Share, pursuant to Article 9.
1.61 “Specified Employee” means a key employee (as defined in Section 416(i) of the Internal Revenue Code without regard to paragraph (5) thereof) of PNC as determined in accordance with Section 409A and the procedures established by the Corporation.
1.62 “Subsidiary” means an entity which is a member of a “controlled group” or under “common control” with the Corporation as determined under Section 414(b) or (c) of the Internal Revenue Code except that an entity shall be deemed to be in a controlled group or under common control with the Corporation for this purpose if the Corporation either directly or indirectly owns at least 50% (or 20% with legitimate business criteria) of the total combined voting power of all classes of stock (or similar interests) of such entity or would otherwise satisfy the definition of service recipient under Section 409A.
1.63 “Writing” means any paper or electronic means of documenting the terms of an Agreement or notice of exercise of an Option hereunder, and as applicable, which satisfies such requirements for formality, authenticity and verification of signature and authority as may be established by the Committee or by those persons responsible for performing administrative functions under the Plan.
The purpose of this Plan is to promote the success and enhance the value of the Corporation by linking the personal interests of Eligible Persons to those of the Corporation’s shareholders and by providing flexibility to PNC in its ability to motivate, attract and retain the services of Directors, officers and employees upon whose judgment, interest and/or special effort are necessary to promote PNC’s long-term growth and financial success.
The Plan shall be administered by the Committee. In this regard, in addition to any other powers granted to the Committee, the Committee shall have the following powers, subject to the express provisions of the Plan:
3.1 to determine in its discretion the Eligible Persons or group of Eligible Persons to whom Awards shall be granted;
3.2 to determine the types of Awards to be granted;
3.3 to determine the number of Awards to be granted to an Eligible Person or to a group of Eligible Persons and the number of Shares (or in the case of Dollar-Denominated Awards, the dollar amount) to be subject to each Award or pool of Awards;
3.4 to determine the terms and conditions of any Award, including, but not limited to, the Option Price, grant price, purchase price, Base Price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on considerations as the Committee in its sole discretion determines;
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3.5 to determine all other terms and provisions of each Agreement, which need not be identical;
3.6 to construe and interpret the Agreements and the Plan;
3.7 to require, whether or not provided for in the pertinent Agreement, of any Grantee, the making of any representations or agreements that the Committee may deem necessary or advisable in order to comply with, or qualify for advantageous treatment under, applicable securities, tax, or other laws;
3.8 to provide for satisfaction of statutory withholding and a Grantee’s tax and other withholding liabilities and any amounts required to be accounted for to any tax authority arising in connection with the Plan through, without limitation, retention by the Corporation of Shares otherwise issuable on the exercise of, or pursuant to, an Award (provided that the Share amount retained shall not exceed the minimum applicable required withholding rate for federal (including FICA), state, local or non-United States tax or other liability, except as otherwise determined by the Committee as permitted under applicable law and accounting standards), or through delivery of Common Stock to the Corporation by the Grantee under such terms and conditions as the Committee deems appropriate, including but not limited to a Share attestation procedure, or by delivery of a properly executed notice together with irrevocable instructions to a broker to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the tax and other liabilities;
3.9 to make all other determinations and take all other actions necessary or advisable for the management and administration of the Plan, including but not limited to establishing, adopting or revising any rules and regulations as it may deem necessary;
3.10 to delegate to officers or managers of PNC, or other members of the Board, the authority to make Awards to Eligible Persons, to select such Eligible Persons, and to determine such terms and conditions thereof as may be specified in such delegation, from a pool of Awards authorized by the Committee; and
3.11 without limiting the generality of the foregoing, to provide in its discretion in an Agreement:
(i) for an agreement by the Grantee to render services to PNC upon such terms and conditions as may be specified in the Agreement, provided that the Committee shall not have the power under the Plan to commit PNC to employ or otherwise retain any Grantee;
(ii) for restrictions on the transfer, sale or other disposition of Shares issued to the Grantee;
(iii) for an agreement by the Grantee to resell to the Corporation, under specified conditions, Shares issued in connection with an Award;
(iv) for the payment of the Option Price upon the exercise of an Option otherwise than in cash, including, without limitation, by delivery under such terms and conditions as the Committee deems appropriate, including but not limited to a Share attestation procedure, of Common Stock valued at Fair Market Value on the exercise date of the Option, or a combination of cash and Common Stock; or by delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the Option Price, or to provide for automatic exercise of an Option with an Option Price less than the Fair Market Value per Share of the Corporation’s Common Stock as of the last business day of the applicable term of such Option;
(v) for the deferral of receipt of amounts that otherwise would be distributed upon exercise or payment of an Award, the terms and conditions of any such deferral and any interest or Dividend Equivalent or other payment that shall accrue with respect to deferred distributions, subject to the provisions of Article 14;
(vi) for the effect of a “change of control,” as defined in the Agreement, of the Corporation on the rights of a Grantee with respect to any Award; and
(vii) for Dividend Equivalents as, or in connection with, an Award, under such terms and conditions as the Committee deems appropriate, including whether (a) such Dividend Equivalents shall be paid currently or shall be deferred; (b) deferred Dividend Equivalents shall accrue interest; (c) payout of Dividend Equivalents shall be subject to service and/or performance conditions; and (d) Dividend Equivalents shall be accrued as a cash obligation or converted to Share Units. In no event shall Dividend Equivalents be granted with respect to Options or Share Appreciation Rights. In addition, Dividend Equivalents granted with respect to a Performance Award shall not be distributed during the Performance Period or to the extent any such Award is otherwise unearned. Notwithstanding the foregoing, any deferral of the payment of a Dividend Equivalent shall comply with Section 409A of the Internal Revenue Code.
Notwithstanding the foregoing, certain operational functions under the Plan shall be performed by the CEO or Chief Human Resources Officer, or any of their respective designees; such functions may include, without limitation, documenting and communicating Awards made hereunder, maintaining records concerning such Awards, and satisfying (or assisting Grantees in satisfying) any applicable reporting, disclosure, tax filing or withholding, or other legal requirements concerning Awards.
108 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of PNC, PNC’s independent registered public accounting firm or other certified public accountants, or any executive compensation consultant or other professional retained by the Committee, the CEO or the Chief Human Resources Officer, or any of their respective designees, to assist in the administration of the Plan.
Any determinations or actions made or taken by the Committee pursuant to this Article shall be final, conclusive and binding on the Grantee and the Grantee’s beneficiaries and any other person having or claiming an interest under an Award and/or the Plan.
Subject to the terms of the Plan and the applicable Agreement, the Committee may grant one or more Awards to Eligible Persons; provided, however, that Incentive Stock Options may not be granted to Directors.
5.1 Subject to adjustment under Article 15, the maximum aggregate number of Shares available for issuance under the Plan shall be no more than the sum of (x) 30,000,000 and (y) the number of Shares that are authorized, but not issued (including such Shares subject to outstanding Awards) under the Prior Plan as of the Effective Date. The aggregate number of Shares available with respect to awards under the Plan shall be reduced by one Share for each Share to which an Award relates; provided, however, that each Share issued pursuant to an Award, other than Options or Share Appreciation Rights, shall reduce the aggregate plan limit by 2.5 Shares.
(i) The Plan serves as the successor to the Prior Plan, and no further Prior Plan Awards shall be made after the Effective Date. However, all awards under the Prior Plan outstanding on the Effective Date shall continue in full force and effect in accordance with their terms, and no provision of this Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of those Prior Plan Awards with respect to their acquisition of shares of Common Stock thereunder.
(ii) To the extent any Prior Plan Awards outstanding under the Prior Plan on the Effective Date are forfeited or expire or terminate unexercised, the number of Shares subject to those forfeited, expired or terminated awards at the time of forfeiture, expiration or termination shall be added to the share reserve under this Plan and accordingly shall be available for issuance hereunder.
(i) Grants of Incentive Stock Options under the Plan may not be made with respect to more than 1,000,000 Shares during any calendar year, provided that such limit only applies to the extent consistent with applicable regulations relating to Incentive Stock Options under the Internal Revenue Code.
(ii) Subject to adjustment as provided in Article 15, the maximum number of Shares with respect to which Awards may be granted to any Grantee during a calendar year shall be 2,000,000 Shares, and no Grantee may be granted in any one calendar year: (a) Stock Options or Share Appreciation Rights for more than 2,000,000 Shares; (b) Qualified Performance-Based Compensation (payable in Shares), other than Stock Options or Share Appreciation Rights, for more than 1,000,000 Shares (based on a target Award level on the Grant Date) or (c) Qualified Performance-Based Compensation (payable in cash by the terms of the Award) for more than an amount equal to 1,000,000 Shares (with the cash equivalent determined based on the Fair Market Value per Share, based on a target Award level, on the Grant Date).
(iii) Notwithstanding anything in this Plan to the contrary and subject to adjustment pursuant to Article 15 hereof, no Director may be granted, in any one calendar year, Awards specifically granted under this Plan with an aggregate maximum value, calculated as of their respective grant dates, of more than $500,000.
(iv) The limitations contained in this Section 5.2 shall apply only with respect to Awards granted under this Plan, and limitations on awards granted under any other incentive plan maintained by the Corporation will be governed solely by the terms of such other plan.
5.3Shares Added Back to Reserve. If (i) an Award lapses, expires, terminates, or is cancelled without the Shares underlying the Award being issued (or any portion thereof), (ii) it is determined during or at the conclusion of the term of an Award that all or some portion of the Shares underlying the Award may not be issued on the basis that the conditions for such issuance were not or shall not be satisfied, (iii) any Award (or portion thereof) is settled for cash, (iv) Shares to be issued pursuant to an Award are forfeited, or (v) Shares are issued pursuant to an Award and the Corporation subsequently reacquires such Shares pursuant to rights reserved upon the issuance of such Shares, then, in all such cases, such Shares shall be re-credited to the Plan’s reserve (in the same amount as such Shares depleted the reserve); provided, however, that Shares
THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement 109
re-credited to the Plan pursuant to clause (v) may not increase the number of Shares which may be issued pursuant to Incentive Stock Options.
5.4Shares Not Added Back to Reserve. Notwithstanding the foregoing, in no event shall the following Shares be re-credited to the Plan’s reserve: Shares (i) delivered in payment of the Option Price, Base Price or other exercise price of an Award; (ii) delivered to or withheld by the Corporation to satisfy Federal, state, local or non-United States tax or other withholding obligations; (iii) purchased by the Corporation using proceeds from Option exercises; and (iv) not issued or delivered as a result of a net settlement of an outstanding Option or Share Appreciation Right.
5.5Cash-Only Awards. Awards that do not entitle the Grantee to receive or purchase Shares shall not be counted against the aggregate number of Shares available for Awards under the Plan.
5.6Substitute Awards Relating to Acquired Entities Awards may be granted under the Plan in substitution for an award of a company or business acquired by PNC by virtue of the Corporation’s assumption of the plan or arrangement of the acquired company or business, and any Shares issued or issuable in connection with such substitution shall not be counted against the number of Shares reserved under the Plan.
6.1 Subject to the provisions of the Plan, the Committee is authorized to grant Incentive Stock Options and/or Nonstatutory Stock Options to any employee of PNC (or a parent or subsidiary of PNC within the meaning of Section 424(e) and (f) of the Internal Revenue Code) who is an Eligible Person, and to grant Nonstatutory Stock Options to any Director.
6.2 All Options shall be evidenced by an Agreement. All Agreements granting Incentive Stock Options shall contain a statement that the Option is intended to be an Incentive Stock Option; if no such statement is included in the Agreement, or if the Agreement affirmatively states that the Option is intended to be a Nonstatutory Stock Option, the Option shall be a Nonstatutory Stock Option.
6.3 The Option Period shall be determined by the Committee and specifically set forth in the Agreement, provided that an Option shall not be exercisable after ten years from the Grant Date (or five years from the Grant Date in the case of Incentive Stock Options granted to 10% Shareholders) and shall not be exercisable until the expiration of at least 12 months from the Grant Date, except that this limitation need not apply in the event of the death or Disability of the Grantee or (other than with respect to Grantees who are Non-Exempt Employees) as otherwise permitted by the Agreement.
6.4 All Incentive Stock Options granted under the Plan should comply with the provisions of Section 422 of the Internal Revenue Code and with all other applicable rules and regulations, except to the extent the Committee determines otherwise. If an Option that is intended to be an Incentive Stock Option fails to meet the requirements thereof, the Option shall automatically be treated as a Nonstatutory Stock Option to the extent of such failure. If the aggregate Fair Market Value of the Shares subject to all Incentive Stock Options granted to a Grantee (as determined on the date of grant of each such Option) that become exercisable during a calendar year exceeds the dollar limitation set forth in Section 422(d) of the Internal Revenue Code, then such Incentive Stock Options shall be treated as Nonstatutory Stock Options to the extent such limitation is exceeded.
6.5 The Option Price for any Option shall not be less than the Fair Market Value of a Share on the Grant Date (or 110% of the Fair Market Value in the case of an Incentive Stock Option granted to a 10% Shareholder).
6.6 The Committee shall determine the methods by which the Option Price of an Option may be paid and the form or forms of payment that may be permitted.
6.7 All other terms of Options granted under the Plan shall be determined by the Committee in its sole discretion.
6.8 The Committee may provide in the Agreement evidencing the grant of an Option that the Committee, in its sole discretion, shall have the right to substitute a Share Appreciation Right for such Option at any time prior to or upon exercise of such Option; provided, however, that the substituted Share Appreciation Right shall be exercisable with respect to the same number of Shares for which the Option being replaced would have been exercisable, the Base Price for the substituted Share Appreciation Right shall be the same as the Option Price for the Option being replaced, and the Right Period shall be the same term as the Option Period for the Option being replaced.
6.9 Notwithstanding anything in this Plan to the contrary, other than in connection with capital adjustments as described in Article 15 or in connection with a Corporate Transaction, neither the Committee nor any other person may, without obtaining shareholder approval, (i) amend the terms of outstanding Options to reduce the Option Price of such outstanding Options; (ii) cancel outstanding Options in exchange for Options with an Option Price that is less than the Option Price of the original Options; (iii) cancel
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outstanding Options with an Option Price above the current Share price in exchange for cash or other securities; or (iv) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Shares are traded. In addition, the Committee may not make a grant of an Option with a grant date that is effective prior to the date the Committee takes action to approve such Award.
7.1 Subject to the provisions of the Plan, the Committee is authorized to grant Share Awards to any Eligible Person in such amounts and subject to such terms and conditions as determined by the Committee. All Share Awards shall be evidenced by an Agreement.
7.2 Shares issued pursuant to a Share Award may be issued for consideration or no consideration (except as required by applicable law), and may be subject to restrictions or no restrictions, as determined by the Committee. A Share Award that is issued subject to restrictions is referred to in this Plan as a Restricted Share. The Committee may establish conditions under which restrictions on Restricted Shares shall lapse over time or according to such other criteria as the Committee deems appropriate.
7.3 Restricted Shares shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, restrictions on the right to vote Restricted Shares or the right to receive dividends on Restricted Shares), subject to applicable law. These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of an Award or thereafter, provided that no restrictions shall lapse prior to the expiration of 12 months from the Grant Date, except that this limitation need not apply in the event of the death or Disability of the Grantee or (other than with respect to Grantees who are Non-Exempt Employees) as otherwise permitted by the Agreement.
7.4 Except as otherwise determined by the Committee at the time of the grant of an Award or thereafter, upon termination of employment or service with PNC during the applicable restriction period, Restricted Shares that are at that time subject to restrictions shall be forfeited.
7.5 Restricted Shares granted pursuant to the Plan may be evidenced in such manner as the Committee determines. If certificates representing Restricted Shares are registered in the name of the Grantee, those certificates must bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Shares, and the Corporation may, at its discretion, retain physical possession of certificates until such time as all applicable restrictions lapse.
7.6 If a Grantee makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to a Share Award or Restricted Shares, the Grantee shall file, within 30 days following the date of grant, a copy of such election with PNC and with the Internal Revenue Service in accordance with the regulations under Section 83(b) of the Internal Revenue Code.
8.1 Subject to the provisions of the Plan, the Committee may grant Share Appreciation Rights to any Eligible Person, upon such terms and conditions as the Committee deems appropriate under this Article 8.
8.2 A Share Appreciation Right may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of another Award to an Eligible Person;
(ii) by amendment of an outstanding Nonstatutory Stock Option granted under the Plan to an Eligible Person; or
(iii) independently of any Award granted under the Plan.
A Share Appreciation Right granted under clause (i) or (ii) of the preceding sentence is a Related Right. A Related Right may, in the Committee’s discretion, apply to all or a portion of the Shares subject to the Related Award.
8.3 A Share Appreciation Right may be exercised in whole or in part as provided in the Agreement, and, subject to the provisions of the Agreement, entitles its Grantee to receive, without any payment to the Corporation (other than required tax or other withholding amounts), either cash or that number of Shares (equal to the highest whole number of Shares), or a combination thereof, in an amount or having a Fair Market Value determined as of the date such Award is exercised not to exceed the number of Shares subject to the portion of the Share Appreciation Right exercised multiplied by an amount equal to the excess of the Fair Market Value on the exercise date of the Share Appreciation Right over the Base Price. The Base Price shall not be less than the Fair Market Value as of the Grant Date.
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8.4 The Right Period shall be determined by the Committee and specifically set forth in the Agreement, provided, however:
(i) a Share Appreciation Right may not be exercised until the expiration of at least 12 months from the Grant Date, except that this limitation need not apply in the event of the death or Disability of the Grantee or (other than with respect to Grantees who are Non-Exempt Employees) as otherwise permitted by the Agreement;
(ii) a Share Appreciation Right shall expire no later than the earlier of (A) ten years from the Grant Date, or (B) in the case of a Related Right, the expiration of the Related Award; and
(iii) a Share Appreciation Right that is a Related Right may be exercised only when and to the extent the Related Award is exercisable.
8.5 Notwithstanding anything in this Plan to the contrary, other than in connection with capital adjustments as described in Article 15 or in connection with a Corporate Transaction, neither the Committee nor any other person may, without obtaining shareholder approval, (i) amend the terms of outstanding Share Appreciation Rights to reduce the Base Price of such outstanding Share Appreciation Rights; (ii) cancel outstanding Share Appreciation Rights in exchange for Share Appreciation Rights with an Base Price that is less than the Base Price of the original Share Appreciation Rights; (iii) cancel outstanding Share Appreciation Rights with an Base Price above the current Share price in exchange for cash or other securities; or (iv) take any other action with respect to a Share Appreciation Right that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Shares are traded. In addition, the Committee may not make a grant of a Share Appreciation Right with a grant date that is effective prior to the date the Committee takes action to approve such Award.
9.1 Subject to the provisions of the Plan, the Committee may grant Share Units to any Eligible Person, upon such terms and conditions as the Committee deems appropriate under this Article 9. Each Share Unit shall represent the right of the Grantee to receive a Share or an amount in cash based on the value of a Share upon such terms and conditions as the Committee deems appropriate.
9.2 Share Units may be issued for consideration or no consideration (except as required by applicable law) and may be subject to restrictions or no restrictions, as determined by the Committee. A Share Unit that is issued subject to restrictions is referred to as a Restricted Share Unit. The Committee may establish conditions under which restrictions on Restricted Share Units shall lapse over time or according to such other criteria as the Committee deems appropriate.
9.3 Share Units may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of another Award to an Eligible Person;
(ii) by amendment of an outstanding Nonstatutory Stock Option or Restricted Share granted under the Plan or the Prior Plan to an Eligible Person; or
(iii) independently of any Award granted under the Plan.
A Share Unit granted under subparagraph (i) or (ii) of the preceding sentence is a Related Share Unit. A Related Share Unit may, in the Committee’s discretion, apply to all or a portion of the Shares subject to the Related Award. A Share Unit may not be granted in connection with, or by amendment to, an Incentive Stock Option.
9.4 Share Units may be paid at the end of a specified period, or payment may be deferred to a date authorized by the Committee in accordance with the deferral requirements set forth in Section 409A of the Internal Revenue Code, to the extent applicable, provided that no restrictions shall lapse on Restricted Share Units prior to the expiration of at least 12 months from the Grant Date (except that this limitation need not apply in the event of the death or Disability of the Grantee or as otherwise permitted by the Agreement).
9.5 Payment with respect to Share Units shall be made in cash, in Shares, or in a combination of the two, as determined by the Committee and set forth in the Agreement. The Agreement shall specify the maximum number of Shares (which may be determined by a formula) that shall be paid under the Share Units.
9.6 The Committee shall determine in the Agreement under what circumstances a Grantee may retain Restricted Share Units after termination of the Grantee’s employment or service with PNC, and the circumstances under which Restricted Share Units may be forfeited.
10.1 The Committee is authorized to grant Performance Awards to any Eligible Person payable in cash, Shares, or a combination thereof, on terms and conditions established by the Committee. The amount, terms and conditions of any Performance Award granted under the Plan shall be set forth in an Agreement which
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shall contain provisions determined by the Committee. The Committee may provide in the Agreement that Awards shall be payable, in whole or in part, in the event of the Grantee’s death or Disability, a change of control or under other circumstances consistent with the Treasury regulations and rulings under Section 162(m) of the Internal Revenue Code.
10.2 The performance goals to be achieved during any Performance Period shall be determined by the Committee upon the grant of each Performance Award, may be based upon Performance Criteria or any other criteria that the Committee, in its sole discretion, may determine, and may be particular to an Eligible Person or to the department, branch, Subsidiary or other unit in which the Eligible Person works, or may be based on the performance of the Corporation or of a specified portion or portions of PNC generally. The length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award and shall be at least 12 months in duration, except as otherwise specified in the Agreement.
10.3 The Committee shall determine whether, and the extent to which, the applicable performance goals have been achieved or satisfied and the amount of the Performance Awards that shall be distributed based upon such determination. Except as provided in an Agreement, Performance Awards shall be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in a lump sum or in installments or, in accordance with procedures established by the Committee, on a deferred basis.
10.4 The Committee may determine that an Award or Awards granted to an Eligible Person is or are Qualified Performance-Based Compensation. To the extent an award of Qualified Performance-Based Compensation is made, no such Award may be made as an alternative to another Award that is not also designated as Qualified Performance-Based Compensation.
10.5 (i) When Awards, other than Options or Share Appreciation Rights, are intended to be Qualified Performance-Based Compensation, the Committee shall establish in writing (a) the Performance Criteria that must be met, (b) the Performance Period during which performance shall be measured, (c) the maximum amounts that may be paid if the Performance Criteria are met, and (d) any other conditions that the Committee deems appropriate and consistent with the Plan and the requirements of Section 162(m) of the Internal Revenue Code for “qualified performance-based compensation.”
(ii) For Qualified Performance-Based Compensation, the Performance Criteria shall satisfy the requirements for “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code, including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the Performance Criteria be established in such a manner that a third party with knowledge of the relevant facts could determine whether and to what extent the Performance Criteria have been met.
(iii) The Committee shall not have discretion to increase the maximum amount of compensation pursuant to an award of Qualified Performance-Based Compensation that is payable upon achievement of the designated Performance Criteria, but the Committee may in its discretion reduce the amount of such compensation that is payable to an Eligible Person upon achievement of the designated Performance Criteria.
10.6 (i) The following business or financial performance metrics may form the basis of the Performance Criteria selected by the Committee for Qualified Performance-Based Compensation: (a) earnings measures (including earnings per share, net income, net interest income, non-interest income) or earnings growth measures; (b) revenue; (c) cash flow; (d) market or market-related measures (including stock price, dividends or dividend yield, total shareholder return, market to book value, price / earnings ratio); (e) improvement or maintenance of financial or credit ratings; (f) return or use of capital measures (including return on assets, equity or investment); (g) other capital or liquidity measures or objectives (including measures or objectives related to economic capital, cost of capital); (h) other measures of operating or profitability margin or performance (including net interest margin, operating or profit margin, productivity ratios); (i) risk adjusted profitability measures; (j) regulatory compliance (including Tier 1 capital ratios or Basel III objectives); (k) internal or external regulatory capital, liquidity, risk or other regulatory-related requirements, expectations, goals or objectives; (l) satisfactory internal or external audits; (m) achievement of balance sheet, income statement, or other financial objectives (including objectives related to capital management, assets, loans, charge-offs, allowance for loan and lease losses, other reserves, reduction of nonperforming assets, asset quality levels, investments, deposits, deposit mix, interest sensitivity gap levels); (n) expense measures (including objectives related to expense management, operating efficiencies, efficiency ratios, non-interest expense); (o) on or off-balance sheet portfolio objectives (including those related to servicing portfolios, securitizations, assets under administration or management, loan originations or sales); (p) achievement of asset quality objectives; (q) achievement of credit quality objectives; (r) achievement of risk management objectives; (s) achievement of strategic objectives or goals (including workforce objectives or goals); (t) technology or innovation goals or objectives; (u) consummation of acquisitions, dispositions, projects or
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other specific events or transactions; (v) acquisition integration or disposition management goals or objectives; (w) product, customer or market-related objectives (including sales, product revenues, revenue mix, product growth, customer growth, number or type of customer relationships, customer satisfaction, cross-selling goals, associate satisfaction, market share, branding); (x) and any other objective goals established by the Committee. Where more specific metrics are listed within categories herein, they are intended to be illustrative and are not to be construed as limitations on the more general metrics.
(ii) The Performance Criteria under an award of Qualified Performance-Based Compensation may be applied singly or in combination and may apply to the individual, a Subsidiary, a business unit or portion of PNC, the Corporation, or PNC as a whole, or a combination thereof.
(iii) The Performance Criteria under an award of Qualified Performance-Based Compensation may be measured annually or for a shorter or longer performance period, and may be measured on an absolute basis or relative to an established target, to previous years or other comparable period or periods’ results, to a designated comparison group or groups, or to one or more designated external or internal indices or benchmarks, in each case as or in the manner specified by the Committee.
(iv) The Committee may specify that the Performance Criteria under an award of Qualified Performance-Based Compensation shall include adjustments to include or exclude the effect of certain events, including any of the following events: litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; severance, contract termination and other costs related to exiting certain business activities; gains or losses from the disposition of businesses or assets or from the early extinguishment of debt; or charges for unusual or non-recurring items of loss or expense, such as expenses related to goodwill and other intangible assets, stock offerings, stock repurchases and loan loss provisions.
10.7 The Committee shall establish the Performance Criteria under an award of Qualified Performance-Based Compensation in writing either before the beginning of the Performance Period or during a period ending no later than the earlier of (i) 90 days after the beginning of the Performance Period or (ii) the date on which 25% of the Performance Period has been completed, or such other date as may be required or permitted under applicable regulations under Section 162(m) of the Internal Revenue Code.
10.8 The Committee shall certify the results for the Performance Period under an award of Qualified Performance-Based Compensation to all affected Grantees after the Corporation determines the financial and other relevant performance results for the Performance Period. The Committee shall determine the amount, if any, to be paid pursuant to each Award based on the achievement of the Performance Criteria under an award of Qualified Performance-Based Compensation and the terms of each Agreement.
The Committee may grant Other Share-Based Awards, which are Awards other than those described in Articles 6 through 10 of the Plan, including Dividend Equivalents, to any Eligible Person on such terms and conditions as the Committee determines, provided that the number of OtherShare-Based Awards granted to an Eligible Person during a calendar year shall not exceed the applicable limitations set forth in Article 5 when aggregated with other applicable Awards made to such Eligible Person during that calendar year. Other Share-Based Awards may be awarded subject to the achievement of Performance Criteria or other conditions and may be payable in cash, Shares or any combination of the foregoing, as the Committee determines.
The Committee is authorized to grant Dollar-Denominated Awards entitling Eligible Persons to receive a specified dollar amount (which may be determined by a formula) based upon the achievement of specified Performance Criteria or other conditions, provided that the amount of any Dollar-Denominated Award granted to an Eligible Person during a calendar year shall not exceed the applicable limitations set forth in Article 5 when aggregated with other applicable Awards made to such Eligible Person during that calendar year. The Committee shall determine the terms and conditions of such Awards, which may be payable in cash, Shares or any combination of the foregoing, as the Committee determines.
(i)Exercise of an Award. An Award that is exercisable by the Grantee may, subject to the provisions of the Agreement under which it was granted, be exercised in whole or in part by the delivery to the Corporation or its designated agent of a Writing in such form as the Committee or its designated agent may prescribe. The exercise, however, shall not be effective until the Corporation or its designated agent has received such Writing and shall be subject to receipt by the Corporation of payment of any applicable Option Price or Base Price, if applicable, calculation by the Corporation of the applicable taxes and other amounts required to be withheld or accounted for to any tax authority, and receipt by the Corporation of payment for any such applicable taxes and amounts.
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(ii)Required Withholdings. All Awards under the Plan shall be subject to applicable federal (including FICA), state, local and non-United States tax and other amounts required to be withheld or accounted for to any tax authority. The Corporation is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to a Grantee, amounts required to be withheld or accounted for and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Corporation and the Grantee to satisfy obligations for the payment of such amounts and other tax obligations relating to any Award.
If a Grantee so elects in accordance with the terms of an Agreement, the Grantee may defer any or all of an amount otherwise payable in connection with an Award in accordance with the provisions of a deferred compensation plan maintained by PNC, provided that:
(i) the Grantee makes such election by delivering to the Corporation written notice of such election, at such time and in such form as the Committee may from time to time prescribe in accordance with the deferral requirements set forth in Section 409A of the Internal Revenue Code;
(ii) such election shall be irrevocable;
(iii) such deferred payment shall be made in accordance with the provisions of such deferred compensation plan; and
(iv) the terms of the deferred compensation plan and the election to defer under this Plan comply with Section 409A of the Internal Revenue Code.
Other than in the event of a change of control, which treatment shall be at the discretion of the Committee as provided in the Agreement, if a Corporate Transaction occurs prior to the time, if any, that outstanding Awards are settled, paid or exercised, the Committee or its delegate shall make those adjustments, if any, in (i) the number and class of Shares subject to each outstanding Award, (ii) the Option Price, Base Price or purchase price for any Award using such a price, (iii) the aggregate number and class of Shares for which grants of Awards thereafter may be made or in which Awards may be paid, (iv) the Share-based limits provided for in Article 5 or (v) any other aspect of any Award, in each case, as the Committee in its sole discretion deems appropriate to reflect such Corporate Transactions, such that the rights of a Grantee are neither enlarged nor diminished as a result of such Corporate Transactions, including without limitation (x) measuring the value per share unit of any Award authorized for payment to Grantee by reference to the per share value of the consideration payable to a common shareholder of the Corporation in connection with such Corporate Transactions and (y) authorizing payment of the entire value of any Award authorized for payment to Grantee to be paid in cash. All determinations hereunder shall be made by the Committee or its delegate in its sole discretion and shall be final, binding and conclusive for all purposes on all parties, including without limitation Grantee.
16.1 The Board or the Committee may amend, alter or terminate this Plan in any respect, at any time; provided, however, that, after this Plan has been approved by the shareholders of the Corporation, no amendment, alteration or termination of this Plan shall be made by the Board or the Committee without approval of (i) the Corporation’s shareholders to the extent shareholder approval of the amendment is required by applicable law or regulations or the requirements of the principal exchange or interdealer quotation system on which the Common Stock is listed or quoted, and (ii) each affected Grantee if such amendment, alteration or termination would adversely affect, in a material way, his or her rights or obligations under any grant or award made prior to the date of such amendment, alteration or termination except as otherwise permitted under Articles 14, 17 and 20.
16.2 The effective date of any amendment to the Plan shall be the date specified by the Board or Committee, as applicable. Any amendments to the Plan requiring shareholder approval pursuant to Section 16.1 are subject to approval by vote of the shareholders of the Corporation within 12 months after their adoption by the Board or the Committee. Subject to that approval, any such amendments are effective as of the date on which they are adopted by the Board or the Committee. Awards may be granted or awarded prior to shareholder approval of amendments, but each Award requiring such amendments shall be subject to the approval of the amendments by the shareholders. The date on which any such Award is made prior to shareholder approval of the amendment shall be the Grant Date for all purposes of the Plan as if the Award had not been subject to approval. No Award granted subject to shareholder approval of an amendment may be exercised prior to obtaining such shareholder approval, and any dividends payable thereon are subject to forfeiture if such shareholder approval is not obtained.
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17.1 Subject to the terms and conditions of Section 409A and Section 424 of the Internal Revenue Code and the Plan and within the limitations of the Plan, the Committee may modify, extend or renew outstanding Awards, or accept the surrender of outstanding Awards (to the extent not theretofore exercised where applicable) granted under the Plan or under any other plan of PNC or a company or similar entity acquired by PNC, and authorize the granting of new Awards pursuant to the Plan in substitution therefor (to the extent not theretofore exercised where applicable), and the modified, extended, renewed or substituted Awards may have any provisions that are authorized by the Plan; provided, however, that unless approved by the shareholders of the Corporation, a modified, extended, renewed or substituted Option or Share Appreciation Right Award may not specify a lower Option Price or Base Price than the Option or Share Appreciation Right that is being modified, extended, renewed or replaced. Subject to the terms and conditions and within the limitations of the Plan, the Committee may modify the terms of any outstanding Agreement. Notwithstanding the foregoing, however, no modification of an Award granted under the Plan shall (i) without the consent of the Grantee, adversely affect, in a material manner, the rights or obligations of the Grantee except as otherwise permitted under Articles 14, 17 or 20 or as may be necessary for the Award to qualify as qualified performance-based compensation as provided under Article 10 or (ii) reduce the Option Price or Base Price of an Award where applicable. Adjustments pursuant to Article 15 are not applicable.
17.2 The Committee may make adjustments to the terms and conditions of, and any Performance Criteria included in, Awards in recognition of unusual or non-recurring events (including, without limitation, the events described in Article 15) affecting the Corporation or financial statements of the Corporation or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding upon Grantees, the Corporation, and all other interested persons.
Unless sooner terminated by the Board or the Committee pursuant to Article 17, the Plan shall terminate on April 25, 2026, provided that the Plan shall terminate on March 3, 2026 with respect to Incentive Stock Options, and no new Awards may be granted after the applicable termination date. The termination shall not affect the validity of any Awards outstanding on the date of termination, including any rights in accordance with the applicable Agreement to make new grants in substitution for a Restricted Share or Restricted Share Unit, or a portion thereof, that is forfeited.
In addition to such other rights of indemnification as they may have as directors or as members of the Committee, the members of the Committee and its delegates shall be indemnified by the Corporation against the reasonable expenses, including attorneys’ fees, actually and reasonably incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Awards granted hereunder, and against all amounts reasonably paid by them in settlement thereof or paid by them in satisfaction of a judgment in any such action, suit or proceeding, if such members acted in good faith and in a manner which they believed to be in, and not opposed to, the best interests of the Corporation.
20.1 Notwithstanding any provision of the Plan or an Agreement to the contrary, if any Award or benefit provided under this Plan is subject to the provisions of Section 409A, the provisions of the Plan and any applicable Agreement shall be administered, interpreted and construed in a manner necessary to comply with Section 409A or an exception thereto (or disregarded to the extent such provision cannot be so administered, interpreted or construed). The following provisions shall apply, as applicable:
(i) If a Grantee is a Specified Employee and a payment subject to Section 409A (and not excepted therefrom) is due as a result of the Grantee’s Separation from Service, such payment shall be delayed for a period of six (6) months after the date the Grantee Separates from Service (or, if earlier, the death of the Grantee). Any payment that would otherwise have been due or owing during such six-month period shall be paid immediately following the end of the six-month period in the month following the month containing the six-month anniversary of the date of termination unless another compliant date is specified in the applicable Agreement.
(ii) For purposes of Section 409A, and to the extent applicable to any Award or benefit under the Plan, it is intended that distribution events qualify as permissible distribution events for purposes of Section 409A
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and shall be interpreted and construed accordingly. With respect to payments subject to Section 409A, the Corporation reserves the right to accelerate and/or defer any payment to the extent permitted and consistent with Section 409A. Whether a Grantee has Separated from Service or employment shall be determined based on all of the facts and circumstances and, to the extent applicable to any Award or benefit, in accordance with the guidance issued under Section 409A.
(iii) The Committee, in its discretion, may specify the conditions under which the payment of all or any portion of any Award may be deferred until a later date. Deferrals shall be for such periods or until the occurrence of such events, and upon such terms and conditions, as the Committee shall determine, in its discretion, in accordance with the provisions of Section 409A, the regulations and other binding guidance promulgated thereunder; provided, however, that no deferral shall be permitted with respect to Options and other stock rights subject to Section 409A. An election shall be made by filing an election with the Corporation (on a form provided by the Corporation) on or prior to December 31st of the calendar year immediately preceding the beginning of the calendar year (or other applicable service period) to which such election relates (or at such other date as may be specified by the Committee to the extent consistent with Section 409A) and shall be irrevocable for such applicable calendar year (or other applicable service period).
(iv) The grant of Options and other Share rights subject to Section 409A shall be granted under terms and conditions consistent with Treas. Reg. § 1.409A-1(b)(5) such that any such Award does not constitute a deferral of compensation under Section 409A.
21.1 The establishment of the Plan shall not confer upon any Eligible Person any legal or equitable right against the Corporation, any Subsidiary or the Committee, except as expressly provided in the Plan.
21.2 All grants and awards under the Plan are subject to the condition subsequent that an appropriate Agreement be signed by the parties.
21.3 Neither the Plan nor any Agreement constitutes inducement or consideration for the employment or retention of any Eligible Person, nor are they a contract of employment or retention for a specific term between the Corporation or any Subsidiary and any Eligible Person. Participation in the Plan shall not give an Eligible Person any right to be retained in the service of the Corporation or any Subsidiary as an employee, a director or otherwise.
21.4 The Corporation and its Subsidiaries may assume options, warrants, or rights to purchase shares issued or granted by other corporations whose shares or assets are acquired by the Corporation or its Subsidiaries, or which are merged into or consolidated with the Corporation or its Subsidiaries. Neither the adoption of this Plan, nor its submission to the shareholders, shall be taken to impose any limitations on the powers of the Corporation or its affiliates to issue, grant, or assume options, warrants, or rights otherwise than under this Plan, or to adopt other share option or restricted share plans or other incentives, or to impose any requirement of shareholder approval upon the same.
21.5 Except as the Committee may otherwise provide, or as may otherwise be required by a deferral election pursuant to Article 14, the interests of any Eligible Person under the Plan are not subject to the claims of creditors and no Award and no right under any such Award may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent or distribution. Each Award or right under any Award shall be exercisable during the Grantee’s lifetime only by the Grantee, or if permissible under applicable law, by the Grantee’s guardian, legal representative, or, at the discretion of the Committee, to the Grantee’s designated beneficiary.
21.6 The Board or the Committee may, in its sole discretion, delegate authority hereunder not already delegated by the terms hereof, including but not limited to delegating authority to select Eligible Persons, to grant Awards, to establish terms and conditions of Awards, or to amend, manage, administer, interpret, construe or vary the Plan or any Awards or Agreements, to the extent permitted by applicable law or administrative or regulatory rule.
21.7 In order to facilitate the making of any grant or combination of grants under this Plan, the Committee may, without amending the Plan, provide for such special terms for awards to Grantees who are foreign nationals, who are employed by the Corporation or any Subsidiary outside of the United States of America, who provide services to PNC under an agreement with a foreign nation or agency, or as the Committee may consider necessary or appropriate. Moreover, the Committee may approve such supplements to or amendments, restatements, or alternative versions of this Plan (including, without limitation, sub-plans) as it may consider necessary or appropriate for such purposes as the Committee deems appropriate, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Corporation may certify any such document as having been approved and
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adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, shall include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the shareholders of the Corporation.
21.8 Each Grantee agrees to reimburse the Corporation with respect to any Award granted under the Plan (or any Prior Plan Award) to the extent required by any clawback, adjustment or recoupment policy of the Corporation now in effect or as may be adopted by the Corporation from time to time as required by Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of theDodd-Frank Wall Street Reform and Consumer Protection Act, or as otherwise required by applicable law or regulation. By accepting Awards under the Plan, Grantees agree and acknowledge that they are obligated to cooperate with, and provide any and all assistance necessary to, PNC to recover or recoup any Award or amounts paid under the Plan subject to clawback pursuant to such law, government regulation, stock exchange listing requirement or Corporation policy. Such cooperation and assistance shall include, but is not limited to, executing, completing and submitting any documentation necessary to recover or recoup any Award or amounts paid under the Plan from a Grantee’s accounts, or pending or future compensation or Awards.
21.9 Shares acquired by an Eligible Person under this Plan upon the exercise of an Option or Share Appreciation Right, upon a grant of a Restricted Share becoming nonforfeitable or upon settlement of a Restricted Share Unit or Performance Award may be subject to share retention guidelines or minimum holding requirements established by the Corporation.
21.10 The Plan shall be governed, construed and administered in accordance with the laws of the Commonwealth of Pennsylvania, without reference to its conflict of laws provisions, and it is the intention of the Corporation that Incentive Stock Options granted under the Plan qualify as such under Section 422 of the Internal Revenue Code and that Qualified Performance-Based Compensation granted under the Plan qualify as “qualified performance-based compensation” as described in Section 162(m) of the Internal Revenue Code.
21.11 Although it is the intent of PNC that this Plan and Awards hereunder, to the extent the Committee deems appropriate and to the extent applicable, comply with Rule 16b-3 and Sections 162(m), 409A and 422 of the Internal Revenue Code: (i) none of the Corporation, the Board or the Committee warrants that any Award under the Plan shall qualify for favorable tax treatment under any provision of the federal, state, local or non-United States law; and (ii) in no event shall any member of the Board or the Committee or PNC (or its employees, officers or directors) have any liability to any Grantee (or any other person) due to the failure of an Award to satisfy the requirements of Rule 16b-3 or Section 162(m), 409A or 422 of the Internal Revenue Code or for any tax, interest, or penalties the Grantee might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan.
118 THE PNC FINANCIAL SERVICES GROUP, INC. - 2016 Proxy Statement
ANNEX C (REGULATIONS FOR CONDUCT AT ANNUAL MEETING)
In the interest of a fair and orderly meeting, and to accommodate as many shareholders as possible who may wish to speak, we have established the following rules:
1. | Calling the Meeting to Order |
Our CEO will preside as the Chairman of the meeting. The Chairman will call the meeting to order promptly at 1111:00 a.m. The Chairman will conduct the meeting in accordance with the Agendameeting agenda and these Regulations for Conduct. The Chairman retains sole authority to make any and all determinations with respect to the conduct of the meeting.
2. | How to Vote |
If your shares are registered in your name, you may vote in person by submitting a ballot at the meeting. If you hold PNC shares in street name, you may present a written legal proxy from your broker or bank authorizing you to vote the shares it holds for you in its name. The Chairman will announce the opening and closing of the polls. No proxies or ballots will be accepted after the polls have closed. PNC representatives will be on hand to distribute ballots or to accept proxies. If you have already submitted your proxy, your shares will be voted in accordance with the instructions you provided. Unless you want to change your vote or you have not submitted a proxy, you do not need a ballot.
3. | Questions and Comments |
You will have an opportunity to ask questions or make comments about each Agendaagenda item as it is addressed. Your questions or comments must pertain to the Agendaagenda item. We have scheduled a general question and answer session at the conclusion of the meeting to discuss matters not on the Agenda,meeting agenda, but appropriate for discussion.
4. | Procedures for Speaking |
Only shareholders or their proxies may be heard during the meeting. To ask a question or make a comment, please raise your hand and wait to be recognized by the Chairman. All questions or comments must be addressed to the Chairman, once a microphone has been passed to you. Please give your name and state whether you are a shareholder or a proxy for a shareholder. Speaking out of turn or interfering when another speaker has the floor is prohibited. After a shareholder has spoken, the Chairman may respond personally or designate another person to respond.
5. | Speaker Rotation and Time Limits |
The Chairman may limit questions to one at a time. Shareholders who wish to speak will be recognized on a rotating basis. Please keep your comments brief in order to give other shareholders the opportunity to speak. You may speak for up to two minutes on a particular matter and no one person may speak for more than six minutes.
6. | Other Limitations |
The Chairman may refuse to permit a nomination or proposal to be made by a shareholder who has not complied with applicable laws or rules, or the procedures set forth in PNC’sBy-laws. The Chairman may end discussion if it appears that the matter has been adequately addressed or is not appropriate, or for other reasons. Personal matters are not appropriate for discussion. Representatives of PNC will be available following the meeting to address individual shareholder concerns. Rudeness, personal attacks, comments in bad taste and the injection of irrelevant controversy are not permitted at any time.
7. | Mobile Devices, Recording Devices and Briefcases |
No cameras, mobile phones, laptops, tablets or recording equipment are permitted in the meeting room. In addition, large bags, backpacks, briefcases and similar items are not permitted in the meeting room. A staffed coat check for personal belongings is available.
8. | Safety and Security |
Disturbing this meeting is a misdemeanor punishable by imprisonment and fines. 18 Pa. Cons. Stat. §§ 1101, 1104, 5508. Violators will be prosecuted.
A sergeant at arms and/or local law enforcement will be present to enforce compliance with these Regulations for Conduct and all applicable laws at the direction of the Chairman, including removal of noncompliant attendees, as necessary.
Weapons are not permitted in the meeting room and may not be checked in the staffed coat room.
Bags, briefcases or other carried items may be searched.
In the event of an emergency, exit through the doors at the front of the room.
Failure to comply with these Regulations for Conduct or otherwise impeding a fair and orderly
meeting may be grounds for removal from the meeting.
The Annual Meeting of Shareholders is audio-recorded.audio recorded.
THE PNC FINANCIAL SERVICES GROUP, INC. - 20162019 Proxy Statement 11999
Corporate HeadquartersPNC corporate headquarters the PNC financial services group, inc. the tower at pnc plaza 300 fifth avenue Pittsburgh, pa 15222-2401 Mix paper from responsible sources fsc fsc c132107 www.fsc.org 30%
The PNC Financial Services Group, Inc.
The Tower at PNC Plaza
300 Fifth Avenue
Pittsburgh, PA 15222-2401
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Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | ☒ | |||||||||
Your vote matters – here’s how to vote! | ||
You may vote online or by phone instead of mailing this proxy. | ||
Proxies submitted electronically must be received by 1:00 a.m., Eastern Time, on April 23, 2019. | ||
Vote by Internet Go towww.envisionreports.com/PNC or scan the QR code – login details are located in the shaded bar below. | ||
Vote by Telephone Call toll free1-800-652-VOTE (8683) within the USA, US territories and Canada | ||
eDelivery Sign up for electronic delivery at www.envisionreports.com/PNC |
Annual Meeting Proxy Card & Admission Ticket |
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - |
A | Proposals |
1. | Election of Directors: | |||
For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||||||||||||||
01 - Joseph Alvarado | ☐ | ☐ | ☐ | 02 - Charles E. Bunch | 03 - | ☐ | ||||||||||||||||||||||||||||||||||||||
04 - Marjorie Rodgers Cheshire | ☐ | ☐ | ☐ | 05 - William S. Demchak | ☐ | ☐ | ☐ | 06 - Andrew T. Feldstein | ☐ | |||||||||||||||||||||||||||||||||||
07 - Richard J. Harshman | ☐ | ☐ | ☐ | 08 - Daniel R. Hesse | ☐ | ☐ | ☐ | 09 - Richard B. Kelson | ☐ | |||||||||||||||||||||||||||||||||||
10 - | 11 - | 12 - | ☐ | |||||||||||||||||||||||||||||||||||||||||
☐ |
For | Against | Abstain | For | Against | Abstain | |||||||||||||
2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2016. | ¨ | ¨ | ¨ | 4. | Advisory vote to approve named executive officer compensation. | ¨ | ¨ | ¨ | |||||||||
3. | Approval of 2016 Incentive Award Plan. | ¨ | ¨ | ¨ |
For | Against | Abstain | For | Against | Abstain | |||||||||||||
2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2019. | ☐ | ☐ | ☐ | 3. | Advisory vote to approve named executive officer compensation. | ☐ | ☐ | ☐ |
B | Authorized Signatures |
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) | Signature 1 | Signature 2 | ||||||
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IF VOTING BY MAIL, PLEASE COMPLETE SECTIONS A AND B ON THIS CARD.
02YVHC
Notice of Annual Meeting of Shareholders
THE PNC FINANCIAL SERVICES GROUP, INC.
20162019 Annual Meeting of Shareholders
For the purpose of considering and acting upon the election of 13 directors to serve until the next annual meeting of shareholders and until their successors are elected and qualified, the ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2016, the approval of the 2016 Incentive Award Plan,2019, the advisory vote to approve named executive officer compensation and such other business as may properly come before the meeting and any adjournment.
If you sign and date this proxy card in Section B but do not give voting instructions in Section A, this proxy will be voted in accordance with the recommendations of the Board of Directors.
Tuesday, April 26, 201623, 2019 - 11:00 a.m. Eastern Time
The Tower at PNC Plaza - James E. Rohr Auditorium
300 Fifth Avenue
Pittsburgh, Pennsylvania 15222
Upon arrival,To attend the Annual Meeting, please present this admission ticket and valid photo identification at the registration desk.
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Proxy
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This proxy is solicited on behalf of the Board of Directors for the | ||
Annual Meeting of Shareholders on April 23, 2019. | ||
William S. Demchak, Robert Q. Reilly and Alicia G. Powell, and each of them with full power to act alone and with full power of substitution, are hereby authorized to represent the undersigned at The PNC Financial Services Group, Inc. Annual Meeting of Shareholders to be held on April 23, 2019, and at any adjournment, and to vote, as indicated on the reverse side, the shares of common stock and/or preferred stock that the undersigned would be entitled to vote if personally present at said meeting. The above-named individuals are further authorized to vote such stock upon any other business as may properly come before the meeting, and any adjournment, in accordance with their best judgment. | ||
If you are a participant in The PNC Financial Services Group, Inc. Incentive Savings Plan (the ISP or 401(k) plan) with units in the PNC Stock Fund, this proxy also serves as voting instructions to the Trustee of the plan for voting at the Annual Meeting of Shareholders to be held on April 23, 2019, and at any adjournment. You have the right to provide the Trustee with voting instructions for the equivalent shares you hold in your PNC Stock Fund account. Your vote must be received by 11:59 p.m., Eastern Time, on April 18, 2019 to ensure that the Trustee has adequate time to tabulate voting instructions. | ||
The Pennsylvania Business Corporation Law of 1988, as amended, 15 Pa. Cons. Stat. § 1759(b), provides that shareholders voting by means of the telephone or the Internet, as instructed, will be treated as transmitting a properly authenticated proxy for voting purposes. Pennsylvania law permits the use of telephone or Internet voting both when a shareholder of record is voting and when a beneficial owner is communicating its vote to a shareholder of record, such as a securities depositary or brokerage firm. | ||
Please sign and return promptly. |
This proxy is solicited on behalf of the Board of Directors for the
C | Non-Voting Items |
Annual Meeting of Shareholders on April 26, 2016.
William S. Demchak, Robert Q. Reilly and Christi Davis, and each of them with full power to act alone and with full power of substitution, are hereby authorized to represent the undersigned at The PNC Financial Services Group, Inc. Annual Meeting of Shareholders to be held on April 26, 2016, and at any adjournment, and to vote, as indicated on the reverse side, the shares of common stock and/or preferred stock that the undersigned would be entitled to vote if personally present at said meeting. The above-named individuals are further authorized to vote such stock upon any other business as may properly come before the meeting, and any adjournment, in accordance with their best judgment.
If you are a participant in The PNC Financial Services Group, Inc. Incentive Savings Plan (the ISP or 401(k) plan) this proxy also serves as voting instructions to the Trustee of the plan for voting at the Annual Meeting of Shareholders to be held on April 26, 2016, and at any adjournment. You have the right to provide the Trustee with voting instructions for the units you hold in your PNC Stock Fund account. Your vote must be received by 11:59 p.m., Eastern Time, on April 21, 2016 to insure that the Trustee has adequate time to tabulate voting instructions.
The Pennsylvania Business Corporation Law of 1988, as amended, 15 Pa. Cons. Stat. § 1759(b), provides that shareholders voting by means of the telephone or the Internet, as instructed, will be treated as transmitting a properly authenticated proxy for voting purposes. Pennsylvania law permits the use of telephone or Internet voting both when a shareholder of record is voting and when a beneficial owner is communicating its vote to a shareholder of record, such as a securities depositary or brokerage firm.
Please sign and return promptly.
Change of Address – Please print new address below. |
Will attend Meeting | ||||||
☐ |
IF VOTING BY MAIL, PLEASE COMPLETE SECTIONS A AND B ON THIS CARD.
∎ |
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Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | ☒ | |||||
Annual Meeting Proxy Card |
q PLEASE FOLD ALONG THE PERFORATION,IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - |
A | Proposals |
1. | Election of Directors: | |||
For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||||||||||||
01 - Joseph Alvarado | ☐ | ☐ | ☐ | 02 - Charles E. Bunch | 03 - | |||||||||||||||||||||||||||||||||||||
04 - Marjorie Rodgers Cheshire | ☐ | ☐ | ☐ | 05 - William S. Demchak | ☐ | ☐ | ☐ | 06 - Andrew T. Feldstein | ||||||||||||||||||||||||||||||||||
07 - Richard J. Harshman | ☐ | ☐ | ☐ | 08 - Daniel R. Hesse | ☐ | ☐ | ☐ | 09 - Richard B. Kelson | ||||||||||||||||||||||||||||||||||
10 - | 11 - | 12 - | ||||||||||||||||||||||||||||||||||||||||
13 - |
For | Against | Abstain | For | Against | Abstain | |||||||||||||
2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2016. | ¨ | ¨ | ¨ | 4. | Advisory vote to approve named executive officer compensation. | ¨ | ¨ | ¨ | |||||||||
3. | Approval of 2016 Incentive Award Plan. |
For | Against | Abstain | For | Against | Abstain | |||||||||||||
2. | Ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as PNC’s independent registered public accounting firm for 2019. | ☐ | ☐ | ☐ | 3. | Advisory vote to approve named executive officer compensation. | ☐ | ☐ | ☐ |
B | Authorized Signatures |
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) | Signature 1 | Signature 2 | ||||||
/ / |
∎ | 1 U P X 3 9 7 8 6 2 |
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02YVIC
q PLEASE FOLD ALONG THE PERFORATION,IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Proxy – The PNC Financial Services Group, Inc. |
This proxy is solicited on behalf of the Board of Directors for the |
Annual Meeting of Shareholders on April 23, 2019. |
William S. Demchak, Robert Q. Reilly and Alicia G. Powell, and each of them with full power to act alone and with full power of substitution, are hereby authorized to represent the undersigned at The PNC Financial Services Group, Inc. Annual Meeting of Shareholders to be held on April 23, 2019, and at any adjournment, and to vote, as indicated on the reverse side, the shares of common stock and/or preferred stock that the undersigned would be entitled to vote if personally present at said meeting. The above-named individuals are further authorized to vote such stock upon any other business as may properly come before the meeting, and any adjournment, in accordance with their best judgment. |
The Pennsylvania Business Corporation Law of 1988, as amended, 15 Pa. Cons. Stat. § 1759(b), provides that shareholders voting by means of the telephone or the Internet, as instructed, will be treated as transmitting a properly authenticated proxy for voting purposes. Pennsylvania law permits the use of telephone or Internet voting both when a shareholder of record is voting and when a beneficial owner is communicating its vote to a shareholder of record, such as a securities depositary or brokerage firm. |
Please sign and return promptly. |
Proxy — The PNC Financial Services Group, Inc.
This proxy is solicited on behalf of the Board of Directors for the
Annual Meeting of Shareholders on April 26, 2016.
William S. Demchak, Robert Q. Reilly and Christi Davis, and each of them with full power to act alone and with full power of substitution, are hereby authorized to represent the undersigned at The PNC Financial Services Group, Inc. Annual Meeting of Shareholders to be held on April 26, 2016, and at any adjournment, and to vote, as indicated on the reverse side, the shares of common stock and/or preferred stock that the undersigned would be entitled to vote if personally present at said meeting. The above-named individuals are further authorized to vote such stock upon any other business as may properly come before the meeting, and any adjournment, in accordance with their best judgment.
The Pennsylvania Business Corporation Law of 1988, as amended, 15 Pa. Cons. Stat. § 1759(b), provides that shareholders voting by means of the telephone or the Internet, as instructed, will be treated as transmitting a properly authenticated proxy for voting purposes. Pennsylvania law permits the use of telephone or Internet voting both when a shareholder of record is voting and when a beneficial owner is communicating its vote to a shareholder of record, such as a securities depositary or brokerage firm.
Please sign and return promptly.