| | | | | Place: Prudential Financial’s office
located at 751 Broad Street
Newark, NJ 07102 Date: May 10, 2022 Time: 2:00 p.m. | | | | Agenda: 1. Election of 13 directors named in the Proxy Statement; 2. Ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022; 3. Advisory vote to approve named executive officer compensation; 4. Shareholder proposal to adopt the right to act by written consent; and 5. Shareholders also will act on such other business as may properly come before the meeting or any adjournment or postponement thereof. Record date: You can vote if you were a shareholder of record on March 11, 2022. | Prudential’s Corporate Headquarters
751 Broad Street
Newark, NJ 07102
Date:
May 8, 2018
Time:
2:00 p.m.
| | | | AGENDA:
• Election of 12 directors named in the Proxy Statement;
• Ratification of appointment of PricewaterhouseCoopers LLP
as our independent registered public accounting firm for 2018;
• Advisory vote to approve named executive officer compensation;
• Shareholder proposal regarding an independent Board Chairman,
if properly presented at the meeting; and
• Shareholders also will act on such other business as may
properly come before the meeting or any adjournment or
postponement thereof.
| | | | | Record date: You can vote if you were a shareholder of record on March 9, 2018.
If you are attending the meeting, you will be asked to present your admission ticket and valid, government-issued photo identification, such as a driver’s license, as described in the Proxy Statement.
By Order of the Board of Directors,
Margaret M. Foran
Chief Governance Officer,
Senior Vice President and Corporate Secretary
March 22, 2018
Prudential Financial, Inc.
751 Broad Street
Newark, NJ 07102
|
| | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 5 |
| | | 
| | | We encourage you to vote your shares before the Annual Meeting. If you are attending the meeting, you will be asked to present your admission ticket and valid, government-issued photo identification, such as a driver’s license, and comply with the special precautions we are taking in light of COVID-19, as described in the Proxy Statement. By Order of the Board of Directors, 
Margaret M. Foran Chief Governance Officer, Senior Vice President and Corporate Secretary March 24, 2022 Prudential Financial, Inc. |
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| | | | | 
| | Summary Information |
To assist you in reviewing the proposals to be acted upon at the Annual Meeting, we call your attention to the following information about the Company. The following description is only a summary. Annual Meeting Proposals | | | | | | Proposal | | Recommendation of Board | | | | | | | Election of directors | | FOR each of the nominees | | | | | | | Ratification of independent auditor | | FOR | | | | | | Advisory vote to approve named executive officer compensation | | FOR | | | | | | Shareholder proposal to adopt the right to act by written consent | | AGAINST | | |
The Year 2021 for Prudential | Amid the challenges of the ongoing pandemic, Prudential continued to deliver purpose-driven outcomes for its shareholders, customers, employees and other stakeholders in 2021. We made significant progress executing on our transformation strategy to become a higher growth, less market sensitive and more nimble business, including repricing products and pivoting to less interest rate sensitive solutions that are tailored to meet our customers’ financial needs. In support of our transformation, we completed the sale of our Taiwan insurance business and signed definitive agreements to sell our Full Service Retirement business as well as a portion of our traditional variable annuities. We also meaningfully advanced our cost-savings program, where we remain on track to achieve $750 million in savings by the end of 2023. Backed by these actions and the Company’s financial strength, Prudential remains well positioned to execute its strategic priorities. |
2021 Total Shareholder Return The chart on the right shows our absolute Total Shareholder Return (“TSR”) and percentile ranking relative to the 20 companies in our Compensation Peer Group over the three time periods indicated. | | | | | | | | | | | | | | | | 1-Year | | | 3-Year | | | 5-Year | | | | | | Cumulative TSR | | | 45% | | | | 55% | | | | 29% | | | | | | Annualized TSR | | | 45% | | | | 16% | | | | 5% | | | | | | Percentile Rank | | | 77% | | | | 37% | | | | 23% | |
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| | | | | | | Summary Information To assist you in reviewing the proposals to be acted upon at the Annual Meeting, we call your attention to the following information about the Company’s 2017 financial performance and key executive compensation actions and decisions, and our key corporate governance policies and practices. The following description is only a summary. For more complete information about these topics, please review the Company’s Annual Report on Form10-K and this Proxy Statement.
Business Highlights
| | | | | | | | | | | We reported net income of $7.86 billion, or $17.86 per share of Common Stock in 2017, compared to $4.37 billion, or $9.71 per share, in 2016, based on U.S. generally accepted accounting principles (“GAAP”).
Net income in 2017 includes a benefit of $2.87 billion, or $6.64 per share of Common Stock, as a result of the enactment of the Tax Cuts and Jobs Act.
| | 
| | | | | We reportedafter-tax adjusted operating income of $4.65 billion, or $10.58 per share in 2017, compared to $4.11 billion, or $9.13 per share, in 2016.(1)
| | 
| | | | | | | | | | | | We reported GAAP book value of $125.24 per share of Common Stock as of December 31, 2017, compared to $104.91 per share as ofyear-end 2016.
Adjusted book value amounted to $88.28 per share of Common Stock as of December 31, 2017 compared to $78.95 per share as ofyear-end 2016.(1)
GAAP book value per share and adjusted book value per share as of December 31, 2017, include benefits of $6.59 and $2.74, respectively, as a result of the enactment of the Tax Cuts and Jobs Act.
| | 
| | |
| | | We reported return on average equity based on net income of 16% for 2017, compared to 8.8% for 2016.
We reported operating return on average equity of 13% for 2017, compared to 12% for 2016.(1)
| | 
|
(1) | Consolidated adjusted operating income (“AOI”) and operating return on average equity arenon-GAAP measures of financial performance. Adjusted book value is anon-GAAP measure of financial position. We use earnings per share (“EPS”) based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. For a discussion of these measures and for reconciliations to the nearest comparable GAAP measures, see Appendix A to this Proxy Statement. |
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| | |
| | Summary Information
|
| | | | | Assets under management reached $1.394 trillion at December 31, 2017, an increase from $1.264 trillion a year earlier.
Corporate Governance In 2021, management and Board members engaged with shareholders who hold a majority of our shares. During these discussions, shareholders were encouraged to identify potential Board candidates and share feedback on the Company and our Board structure, governance and environmental practices and policies, and our compensation framework and programs. The Corporate Governance and Business Ethics Committee from time to time reviews outside commitments of all directors to ensure each director has the capacity to fully meet his or her Board responsibilities. All nominees are independent except for Robert M. Falzon and Charles F. Lowrey. Board of Directors Nominees and Committees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Committee Membership | | | | | | Name | | Age | | Independent | | Director Since | | | Executive | | Compensation | | Investment | | Finance | | Risk | | Corporate
Governance &
Business Ethics | | Audit | | Other
Public
Boards | | | | | | | | | | | | | | Thomas J. Baltimore | | 58 | | Yes | | | 10/2008 | | | ● | | ● | | C | | | | ● | | | | | | | 2 | | | | | | | | | | | | | | Gilbert F. Casellas | | 69 | | Yes | | | 01/2001 | | | ● | | | | | | | | ● | | C | | | | | 0 | | | | | | | | | | | | | | Robert M. Falzon | | 62 | | No | | | 08/2019 | | | | | | | | | | | | | | | | | | 0 | | | | | | | | | | | | | | Martina Hund-Mejean | | 61 | | Yes | | | 10/2010 | | | ● | | | | | | | | ● | | | | C | | | 2 | | | | | | | | | | | | | | Wendy E. Jones | | 56 | | Yes | | | 01/2021 | | | | | | | | | | | | | | | ● | | | 0 | | | | | | | | | | | | | | Karl J. Krapek | | 73 | | Yes | | | 01/2004 | | | | | ● | | | | | | | | | | | | | 2 | | | | | | | | | | | | | | Peter R. Lighte | | 73 | | Yes | | | 03/2016 | | | | | | | ● | | | | | | ● | | | | | 0 | | | | | | | | | | | | | | Charles F. Lowrey | | 64 | | No | | | 12/2018 | | | ● | | | | | | | | | | | | | | | 0 | | | | | | | | | | | | | | George Paz | | 66 | | Yes | | | 03/2016 | | | | | | | | | ● | | | | | | ● | | | 1 | | | | | | | | | | | | | | Sandra Pianalto | | 67 | | Yes | | | 07/2015 | | | | | | | | | ● | | | | ● | | | | | 2 | | | | | | | | | | | | | | Christine A. Poon Lead Independent Director (since 2020) | | 69 | | Yes | | | 09/2006 | | | C | | | | ● | | C | | ● | | | | | | | 2 | | | | | | | | | | | | | | Douglas A. Scovanner | | 66 | | Yes | | | 11/2013 | | | ● | | | | | | | | C | | | | ● | | | 0 | | | | | | | | | | | | | | Michael A. Todman | | 64 | | Yes | | | 03/2016 | | | ● | | C | | | | ● | | ● | | | | | | | 3 | |
● Member C Chair | | 
|
| | | We paid quarterly Common Stock dividends totaling $3.00 per share during 2017, an increase of 7% from 2016.
| | 
|
COMPENSATION HIGHLIGHTS
The Compensation Committee has instituted a number of changes to our executive compensation program over the last several years to align with evolving competitive and governance practices and to strengthen the link to performance and rigor of our program. Highlights of our program include:
We establish both target and maximum award levels under our annual incentive program.
We use three equally weighted performance metrics to determine annual incentive awards: EPS achieved versus guidance; annual growth in EPS; and ROE relative to peer life insurance companies.
90% or more of our named executive officers’ (“NEOs”) total direct compensation is performance based.
Our NEOs are required to defer 30% of their annual incentive awards into our Book Value Performance Program.
The performance metrics under our annual incentive and long-term incentive programs balance our absolute performance and our relative performance versus peer life insurance companies.
We maintain a clawback policy for our executive officers covering all incentive-based awards and addressing
| | material financial restatements and misconduct (including failure to report), which includes a robust disclosure policy if such events occur.
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• | | The Compensation Committee closely monitors the risks associated with our compensation program and individual executive compensation decisions to ensure they do not encourage excessive risk-taking. | |
• | | The stock ownership guideline for our CEO is 700% of base salary. | |
• | | In addition to stock ownership guidelines, we have stock retention requirements covering shares acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. | |
• | | Each year we engage with our shareholders and share their feedback with the Compensation Committee and the Board. | |
For additional information, see the Compensation Discussion and Analysis (“CD&A”) in this Proxy Statement.
The compensation of our NEOs reflects both our 2017 performance and the rigor of our executive compensation program.
| | | | | | | | | | | | | | | | | Named Executive Officer | | 2017 Base Salary
($) | | | 2017 Annual Incentive
Award (as adjusted for
mandatory deferrals)(1)
($) | | | 2017 Long-Term
Incentive Award Value(2)
($) | | | 2017 Total
Direct Compensation
($) | | John R. Strangfeld | | $ | 1,400,000 | | | $ | 4,662,000 | | | $ | 11,998,000 | | | $ | 18,060,000 | | Robert M. Falzon | | $ | 770,000 | | | $ | 2,331,000 | | | $ | 4,999,000 | | | $ | 8,100,000 | | Mark B. Grier | | $ | 1,190,000 | | | $ | 3,962,000 | | | $ | 9,698,000 | | | $ | 14,850,000 | | Charles F. Lowrey | | $ | 770,000 | | | $ | 3,108,000 | | | $ | 6,082,000 | | | $ | 9,960,000 | | Stephen Pelletier | | $ | 770,000 | | | $ | 3,290,000 | | | $ | 6,160,000 | | | $ | 10,220,000 | |
1 | The following amounts are not included in the 2017 Annual Incentive Award column because they have been mandatorily deferred into our Book Value Performance Program: $1,998,000 for Mr. Strangfeld, $999,000 for Mr. Falzon, $1,698,000 for Mr. Grier, $1,332,000 for Mr. Lowrey, and $1,410,000 for Mr. Pelletier. |
2 | Represents long-term incentive awards granted in 2018 for 2017 performance. Amounts include portions of the 2017 Annual Incentive Awards mandatorily deferred into our Book Value Performance Program. |
Response to advisory vote and shareholder feedback
Approximately 93% of the votes cast at the 2017 Annual Meeting of Shareholders on thenon-binding advisory vote on the compensation of our named executive officers were voted in support of our executive compensation program. Consistent with its strong commitment to engagement, communication, and transparency, the Compensation Committee continues to regularly receive feedback from our shareholders and review our executive compensation program to ensure alignment between the interests of our senior executives and shareholders. In part based on feedback received in our ongoing conversations with our shareholders, and, in part, in response to changing market practices, we have made several modifications to the compensation program for our NEOs over the last two years, as discussed above and in more detail in the CD&A.
| | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 7 |
| | |
Corporate Governance Highlights
In 2017, management and Board members engaged with shareholders who hold a majority of our shares. During these discussions, shareholders were encouraged to identify potential Board candidates and share feedback on the Company, our Board structure, our governance practices and policies, and our compensation framework and programs. Our 2017 corporate governance highlights include:
| | | • | | Executive Compensation Program.Received 93% shareholder support in 2017. | |
| • | | Shareholder Engagement.ContentsIn 2017, management and Board members met with shareholders who own a majority of our shares. | |
| • | | Board Refreshment.Elected four new directors since 2015, including three in 2016, enhancing the Board’s breadth and depth of experience and diversity. Our average Board tenure is seven years. | |
| • | | Board Recognition.We received the Governing Board Diversity Champion Award from the California Department of Insurance for our leadership and innovative approach to diversifying our Board. | |
Board of Directors Nominees and Committees
| | | | | | | | | | | Name/Age
| | Independent
| | Director Since
| | Committee Membership
| | Other Public Boards
| Thomas J. Baltimore, 54
| | Yes
| | Oct. 2008
| | • Executive (Chair)
• Compensation
• Lead Independent Director (since 2017)
| | • Investment (Chair)
• Risk (Chair)
| | 1
| Gilbert F. Casellas, 65
| | Yes
| | Jan. 2001
| | • Corporate Governance &
Business Ethics (Chair)
| | • Executive
• Risk
| | 0
| Mark B. Grier, 65
| | No
| | Jan. 2008
| | • Risk
| | | | 0
| Martina Hund-Mejean, 57
| | Yes
| | Oct. 2010
| | • Audit
| | | | 0
| Karl J. Krapek, 69
| | Yes
| | Jan. 2004
| | • Compensation (Chair)
| | • Executive
• Risk
| | 2
| Peter R. Lighte, 69
| | Yes
| | Mar. 2016
| | • Corporate Governance & Business Ethics
| | • Investment
| | 0
| George Paz, 62
| | Yes
| | Mar. 2016
| | • Audit
| | | | 2
| Sandra Pianalto, 63
| | Yes
| | Jul. 2015
| | • Corporate Governance & Business Ethics
| | • Finance
| | 3
| Christine A. Poon, 65
| | Yes
| | Sep. 2006
| | • Executive
• Finance (Chair)
| | • Investment
• Risk
| | 3
| Douglas A. Scovanner, 62
| | Yes
| | Nov. 2013
| | • Audit (Chair)
• Executive
| | • Risk
| | 0
| John R. Strangfeld, 64
| | No
| | Jan. 2008
| | • Executive
| | | | 0
| Michael A. Todman, 60
| | Yes
| | Mar. 2016
| | • Compensation
| | • Finance
| | 2
|
Annual Meeting Proposals
| | | Proposal
| | Recommendation of Board
| Election of Directors
| | FOR each of the nominees
| Ratification of Auditors
| | FOR
| Advisory vote to approve named executive officer compensation
| | FOR
| Shareholder proposal regarding an independent Board Chairman
| | AGAINST
|
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| | |
| | Contents
|
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 9 |
| | | | | APPOINTMENT OF THE INDEPENDENT
AUDITORS FOR 2018—RATIFICATION
Proxy Statement
The Board of Directors (the “Board”) of Prudential Financial, Inc. (“Prudential Financial” or the “Company”) is providing this Proxy Statement in connection with the Annual Meeting of Shareholders to be held on May 8, 2018, at 2:00 p.m., at Prudential Financial’s Corporate Headquarters, 751 Broad Street, Newark, NJ 07102, and at any adjournment or postponement thereof. Proxy materials or a Notice of Internet Availability were first sent to shareholders on or about March 22, 2018.
ADVISORY VOTE TO APPROVE NAMED
EXECUTIVE OFFICER COMPENSATION
AND CD&A
SHAREHOLDER PROPOSAL REGARDING AN INDEPENDENT BOARD CHAIRMAN
| | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 9 |
Item 1–1 Election of Directors Our Board of Directors has nominated 12 directors for election at this Annual Meeting to hold office until the next annual meeting and the election of their successors. All of the nominees are currently directors. Each agreed to be named in this Proxy Statement and to serve if elected. All of the nominees are expected to attend the 2018 Annual Meeting. All 12 directors attended the 2017 Annual Meeting.
We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.
Director Criteria, Qualifications, Experience and Tenure
Prudential Financial is a financial services company that offers a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. The Corporate Governance and Business Ethics Committee performs an assessment of the skills and the experience needed to properly oversee the interests of the Company. Generally, the Committee reviews both the short- and long-term strategies of the Company to determine what current and future skills and experience are required of the Board in exercising its oversight function. The Committee then compares those skills to the skills of the current directors and potential director candidates. The Committee conducts targeted efforts to identify and recruit individuals who have the qualifications identified through this process, keeping in mind its commitment to diversity.
BOARD HIGHLIGHTS
|
Our Board of Directors has nominated 13 directors for election at this Annual Meeting to hold office until the next annual meeting and the election of their successors. All of the nominees are currently directors. Each agreed to be named in this Proxy Statement and serve if elected. We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors. Director Criteria, Qualifications, Experience and Tenure Prudential Financial is a financial services company that offers a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. The Corporate Governance and Business Ethics Committee performs an assessment of the skills and the experience needed to properly oversee the interests of the Company. Generally, the Committee reviews both the short- and long-term strategies of the Company to determine what current and future skills and experience are required of the Board in exercising its oversight function and in the context of the Company’s strategic priorities. The Committee then compares those skills to those of the current directors and potential director candidates. The Committee conducts targeted efforts to identify and recruit individuals who have the qualifications identified through this process, keeping in mind its commitment to diversity. As described in our Corporate Governance Principles and Practices, the Board requires a diverse candidate pool for all director searches and evaluates a nominee’s experience, gender, race, ethnicity, skills and other qualities in the context of the full Board. Board Highlights Board Diversity | | | While the Company does not have a formal policy on Board diversity, ourOur Corporate Governance Principles and Practices place great emphasis on diversity, and, pursuant to our Principles and Practices, the Committee actively considers diversity in recruitment and nominations of directors.directors and assesses its effectiveness in this regard when reviewing the composition of the Board. The current composition of our Board reflects those efforts and the importance of diversity to the Board:Board.
| |  |
Board tenure for 2022 nominees | | | Two-thirdsOur directors’ expertise combines to provide a broad mix of skills, qualifications and proven leadership abilities.
The Corporate Governance and Business Ethics Committee practices a long-term approach to board refreshment. With the assistance of an independent search firm, the Committee regularly identifies individuals who have expertise that would complement and enhance the current Board’s skills and experience. In addition, as part of our Board is diverseshareholder engagement dialogue, we routinely ask our investors for input regarding director recommendations. | |  |
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| | | | | | | Item 1 Election of Directors | | 
|
In addition, the Committee reviews each current director and evaluates their candidacy for recommendation. A review of attendance, skills, participation and time commitment, shareholder votes, among other factors, is considered. Further, the Board feels strongly that the composition of the Board should be balanced and include longer tenured directors who have seen several financial cycles; mid-term tenured directors; and newer directors. Our Board believes that a balance of director experience, diversity and tenure is a strategic asset to our investors. The range of our Board’s tenure encompasses directors who have historic institutional knowledge of Prudential and the competitive environment, complemented by newer directors with varied backgrounds and skills. This robustness of our refreshment strategy combines experience and continuity with new perspectives. It is of critical importance to the Company that the Committee recruit directors who help achieve the goal of a well-rounded, diverse Board that functions respectfully as a unit. The Committee expects each of the Company’s directors to have proven leadership skills, sound judgment, integrity and a commitment to the success of the Company. In evaluating director candidates and considering incumbent directors for nomination to the Board, the Committee considers each nominee’s independence, financial literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors also include attendance, past performance on the Board, time commitments/other board responsibilities and contributions to the Board and their respective committees. As part of the Corporate Governance and Business Ethics Committee’s annual review, the Committee considered Mr. Baltimore’s obligations outside of Prudential, including his directorship on other public company boards, and his role as a public company executive officer. The Committee determined that he has demonstrated an ability to fulfill his responsibilities to our Board due to his exemplary leadership and vision, especially in the context of the Company’s diversity and inclusion and succession planning and practices, oversight of Prudential’s transformation strategy, active engagement at all Board meetings and Committee meetings (for Committees where Mr. Baltimore is a member), and Mr. Baltimore’s independent judgment, accountability and collaboration with his peers as reflected in the annual Board evaluation. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 80%Summary of Director
Qualifications and Experience | | | |  | |  | |  | |  | |  | |  | |  | |  | |  | |  | |  | |  | |  | | | | | | | | | | | | | | | | Academia/Education Brings perspective regarding organizational management and academic research relevant to our business and strategy | | | | | | | | | | | | | | | | ● | | ● | | | | ● | | ● | | | | | | | | | | | | | | | | | | | | Business Ethics Play a critical role in the success of our businesses | | | | | | ● | | ● | | | | | | | | | | ● | | | | | | ● | | | | | | | | | | | | | | | | | | | | non-employeeBusiness Head/Administration Directors with administration experience typically possess strong leadership qualities and the ability to identify and develop those qualities in others
| | | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | | | | | | | | | | | | | | | Business Operations A practical understanding of developing, implementing and assessing our operating plan and business strategy | | | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | | | | | | | | | | | | | | | Corporate Governance Supports our goals of strong Board and management accountability, transparency and protection of shareholder interests | | | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | | | | | | | | | | | | | | | Environmental/Sustainability/Climate Change Strengthens the Board’s oversight and assures that strategic business imperatives and long term value creation are achieved within a sustainable, environmentally focused model. | | | | | | ● | | ● | | | | | | | | | | ● | | | | | | | | | | | | | | | | | | | | | | | | | | Finance/Capital Allocation For evaluating our financial statements and capital structure | | | | ● | | | | ● | | ● | | | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | | | | | | | | | | | | | | | Financial Expertise/Literacy Assists our directors arein understanding and overseeing our financial reporting and internal controls | | | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | | | | | | | | | | | | | | | Financial Services Industry For understanding and reviewing our business and strategy | | | | | | | | ● | | ● | | | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | | | | | | | | | | | | | | | | | Government/Public Policy The Company operates in a heavily regulated industry that is directly affected by governmental actions | | | | | | ● | | ● | | | | | | ● | | ● | | | | ● | | ● | | | | | | ● | | | | | | | | | | | | | | | | Human Capital Management/Talent/Inclusion and Diversity For oversight of the implementation of a successful framework for workforce acquisition, workforce management and workforce optimization that results in the attraction, development and retention of top candidates with diverse skills and backgrounds. | | | | | | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | | | | | | | | | | | | | | | Insurance Industry For understanding and reviewing our business and strategy | | | | | | | | ● | | | | | | ● | | ● | | ● | | ● | | | | | | | | | | | | | | | | | | | | | | | | International For understanding and reviewing our business and strategy | | | | | | | | ● | | ● | | ● | | ● | | ● | | ● | | | | | | ● | | | | ● | | | | | | | | | | | | | | | | Investments For evaluating our financial statements and investment strategy | | | | ● | | ● | | ● | | ● | | | | | | ● | | ● | | | | | | ● | | ● | | | | | | | | | | | | | | | | | | Marketing/Sales Relevant to the Company as it seeks to identify and develop new markets for its financial products and services | | | | | | | | ● | | | | ● | | ● | | | | | | ● | | | | ● | | | | ● | | | | | | | | | | | | | | | | Real Estate For understanding and reviewing our business and strategy | | | | ● | | | | ● | | | | | | ● | | | | ● | | | | | | | | ● | | | | | | | | | | | | | | | | | | Risk Management Critical to the Board’s role in overseeing the risks facing the Company | | | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | ● | | | | | | | | | | | | | | | | Technology/Systems/Cybersecurity Relevant to the Company as it looks for ways to enhance the customer experience and internal operations and oversee cybersecurity risk | | | | | | | | ● | | ● | | ● | | ● | | | | | | ● | | | | | | | 4 | | | director nominees haveworked outside
the United States
| | 2
| | | director nominees areAfrican-American
| | 1
| | | director nominee isAsian-American
| | 2
| | | director nominees areHispanic
| | 3
| | | director nominees areWomen
| | 1
| | | director nominee isLGBT
| | 12
| | | Total number of director nominees
|
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 11 | | | 10 |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |
| | | 
| | Item 1—Election of Directors:Director Nominees
|
Item 1 Election of Directors | |
It is of critical importance to the Company that the Committee recruit directors who help achieve the goal of a well-rounded, diverse Board that functions respectfully as a unit.
The Committee expects each of the Company’s directors to have proven leadership skills, sound judgment, integrity and a commitment to the success of the Company. In evaluating director candidates and considering incumbent directors for nomination to the Board, the Committee considers each nominee’s independence, financial literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors also include attendance, past performance on the Board and contributions to the Board and their respective committees.
|
Below each nominee’s biography, we have included an assessment of the skills and experience of such nominee. We have also included a chart that covers the assessment for the full Board.
Director Nominees | | The Board of Directors recommends that shareholders vote“FOR” each of the nominees. |
| | | | | | | | | | | | | |  | | Thomas J. Baltimore
Age:54
Director Since:October 2008
Lead Independent Director since May 2017
| | Prudential Committees:
• Executive (Chair)
• Compensation
• Investment (Chair)
• Risk (Chair)
Former Directorships Held During the Past Five Years:
• | | | | | | | | | 
| | Thomas J. Baltimore Age: 58 Director Since: October 2008 | | Prudential Committees: ● Executive ● Compensation ● Investment (Chair) ● Risk | | Public Directorships: ● Park Hotels & Resorts, Inc. ● The American Express Company | | | | | | Former Directorships Held During the Past Five Years: ● AutoNation, Inc. (January 2021) ● Duke Realty Corporation (April 2017) • RLJ Lodging Trust (May 2016)
| | Public Directorships:
• Park Hotels & Resorts, Inc.
| | | | | | | | | | |
| |
Mr. Baltimorehas been the Chairman, President and Chief Executive Officer (CEO)CEO of Park Hotels & Resorts, Inc. (a(an NYSE-listed lodging real estate investment trust) since January 2017. Between May 2016 and January 2017, Mr. Baltimore was the President and CEO of the planned Hilton Real Estate Investment Trust. Previously, he was President and CEO of RLJ Lodging Trust (a(an NYSE-listed real estate investment company) from May 2011 to May 2016. He served asCo-Founder and President of RLJ Development, LLC (RLJ Lodging’s predecessor company) from 2000 to May 2011. He served as VP, Gaming Acquisitions, of Hilton Hotels Corporation from 1997 to 1998and later as VP, Development and Finance, from 1999 to 2000. He alsoPreviously, Mr. Baltimore served in various management positions withat Hilton Hotels Corporation and Host Marriott Services, including VP, Business Development, from 1994 to 1996. Skills & Qualifications
Business Head/Administration
Business Operations
Corporate Governance
Investments
Real Estate
Talent Management
| | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 11 |
| | |
| | Item 1—Election of Directors:Director NomineesServices.
|
| | | | | | | | | | | | | |  | | Gilbert F. Casellas
Age:65
Director Since:January 2001
(Director of Prudential Insurance since
April 1998)
| | Prudential Committees:
• Corporate Governance and Business Ethics (Chair)
• Executive
• Risk
| | | | | | | | | | | | |
| | Gilbert F. Casellas Age: 69 Director Since: January 2001 (Director of Prudential Insurance since April 1998) | | Prudential Committees: ● Corporate Governance and Business Ethics (Chair) ● Executive ● Risk | | | | | | Mr. Casellas has been served as Chairman of OMNITRU (a consulting and investment firm) since 2011.from 2011 to 2017. He was the VP, Corporate Responsibility, of Dell Inc. (a global computer manufacturer) from 2007 to 2010. He served as a Member of Mintz Levin Cohn Ferris Glovsky & Popeo, PC from June 2005 to October 2007. He served as President of Casellas & Associates, LLC (a consulting firm) from 2001 to 2005. During 2001, he served as President and CEO ofQ-linx, Inc. He served as the President and COO of The Swarthmore Group, Inc. from January 1999 to December 2000. Mr. Casellas served as Chairman, U.S. EEOC from 1994 to 1998 and General Counsel, U.S. Department of the Air Force, from 1993 to 1994. | 
| | | • Business Ethics
• Business Head/Administration
• Business Operations
• Corporate Governance
• Environmental/Sustainability/Corporate Responsibility
• Government/Public Policy
• Investments
| | • Risk Management
• Talent Management
|
| | | | | | | | | | | | | |  | | Mark B. GrierRobert M. Falzon Age:65
Director Since:January 2008
| | Prudential Committees:
• Risk
| | | | | | | | | | | | |
Age: 62 Director Since: August 2019 | | | | | | | | Mr. Grier Falzon has served asbeen Vice Chairman since 2007 and a member of the Office of the Chairman of Prudential Financial since August 2002. From April 2007 through January 2008,December 2018 and oversees the finance, risk, investments, actuarial, communications, information & technology, and corporate social responsibility functions. Previously, he served as Vice Chairman overseeing the International InsuranceEVP and Investments divisions and Global Marketing and Communications. Mr. Grier was Chief Financial Officer (CFO)CFO of Prudential InsuranceFinancial from 19952013 to 19972018, and has served in various executive roles. Prior to joining Prudential, Mr. Grier was an executive with Chase Manhattan Corporation. Skills & Qualifications
| | | • Business Ethics
• Business Head/Administration
• Business Operations
• Corporate Governance
• Environmental/Sustainability/Corporate Responsibility
• Finance/Capital Allocation
| | • Financial Services Industry
• Government/Public Policy
• Insurance Industry
• International
• Risk Management
• Talent Management
• Technology/Systems
|
| | | | | | | | | | | | | |  | | Martina Hund-Mejean
Age:57
Director Since:October 2010
| | Prudential Committees:
• Audit
| | | | | | | | | | | | |
Ms. Hund-Mejean has served as the CFO andbeen a member of the Company’s Executive Committee at Mastercard Worldwide (a global transaction processingLeadership Team since 2013. Mr. Falzon also served as SVP and consulting services company)Treasurer of Prudential Financial from 2010 to 2013. Mr. Falzon has been with Prudential since 2007. 1983, serving in various positions.
| 
| | Martina Hund-Mejean Age: 61 Director Since: October 2010 | | Prudential Committees: ● Audit (Chair) ● Executive ● Risk | | Public Directorships: ● Colgate-Palmolive Company ● Shell plc | | | | Ms. Hund-Mejean served as Senior Vice President (SVP)CFO and as a member of the Management Committee at MasterCard Worldwide (a technology company in the global payments industry) from 2007 to 2019. Ms. Hund-Mejean served as SVP and Corporate Treasurer at Tyco International Ltd. from 2003 to 2007; SVP and Treasurer at Lucent Technologies from 2000 to 2002; and held management positions at General Motors Company from 1988 to 2000. Ms. Hund-Mejean began her career as a credit analyst at Dow Chemical in Frankfurt, Germany. | |
|
| | | | 12 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Skills & QualificationsItem 1 Election of Directors
| |
|
| | | | | | | | | • Business Head/Administration
• Business Operations
• Corporate Governance
• Finance/Capital Allocation
• Financial Services Industry
• International
• Investments
| | • Risk Management
• Talent Management
|
| | | | | 12 | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |
| | |
| | Item 1—Election of Directors:Director Nominees
|
| | | | | | | | | | | | | |  | | Karl J. Krapek
Age:69
Director Since:January 2004
| | Prudential Committees:
• Compensation (Chair)
• Executive
• Risk
| | Public Directorships:
• Northrop Grumman
Corporation
• Pensare Acquisitions Corp.
| | | | | | | | | | |
| | Mr. Krapek
Wendy E. Jones Age: 56 Director Since: January 2021 | | Prudential Committees: ● Audit | | | | | | Ms. Jones served as SVP, Global Operations at eBay, Inc. (a multi-national e-commerce corporation) from October 2016 to December 2020, and was responsible for eBay’s customer service, risk, trust, payment operations and workplace resources functions around the world. During that time, Ms. Jones also served as Chair of eBay’s Operating Committee, which managed the firm’s intersection of product and business teams and oversaw the development and execution of the company’s annual business road map. Prior to that time, she served in various other leadership positions and focused much of her career on eBay’s global presence, including launching eBay in markets such as Brazil, Russia and Mexico and spearheading eBay’s cross-border trade efforts. Prior to joining eBay, Ms. Jones worked in various leadership roles at State Street Bank, Land Rover NA, and for iSKY, Inc. | 
| | Karl J. Krapek Age: 73 Director Since: January 2004 | | Prudential Committees: ● Compensation | | Public Directorships: ● American Virtual Cloud Technologies, Inc. ● Northrop Grumman Corporation | | | | Mr. Krapek served as President and COO of United Technologies Corporation (UTC) from 1999 until his retirement in January 2002. Prior to that time, Mr. Krapek held other management positions at UTC, which he joined in 1982. Mr. Krapek is also theco-founder of The Keystone Companies, which was founded in 2002, and develops residential and commercial real estate. | | | | • Business Head/Administration
• Business Operations
• Corporate Governance
• Environmental/Sustainability/Corporate Responsibility
• Finance/Capital Allocation
• International
• Real Estate
| | • Risk Management
• Talent Management
• Technology/Systems
|
| | | | | | | | | | | | | |  | | Peter R. Lighte Age:69
Director Since:March 2016
| | Prudential Committees:
• Corporate Governance and Business Ethics
• Investment
| | | | | | | | | | | | |
Age: 73 Director Since: March 2016 | | Prudential Committees: ● Corporate Governance and Business Ethics ● Investment | | | | | | Mr. Lighteserved as the Vice Chairman, J.P. Morgan Corporate Bank, China (a global financial services company), from 2010 to 2014, and the founding Chairman of J.P. Morgan Chase Bank China, from 2007 to 2010. Prior to that, he headed the Company’s International Client Coverage for Treasury and Securities Services in J.P. Morgan’s European Global Operating Services Division and was instrumental inre-establishing its corporate bank in London. Mr. Lighte previously served as the President of Chase Trust Bank in Tokyo from 2000 to 2002. He was also the founding representative in Beijing of Manufacturers Hanover Trust Company. Mr. Lighte has also taught at several academic institutions, including Middlebury College and the University of Santa Clara. | 
| | Charles F. Lowrey | | | • Academia/Education
• Business Head/Administration
• Business Operations
• Corporate Governance
• Finance/Capital Allocation
• Financial Services Industry
• Government/Public Policy
| | • Insurance Industry
• International
• Investments
• Risk Management
• Talent Management
Age: 64 Director Since: December 2018 | | Prudential Committees: ● Executive | | | | | | | Mr. Lowrey has been Chairman and CEO of Prudential Financial, Inc. since December 2018. Prior to assuming his current roles, Mr. Lowrey served as EVP and Chief Operating Officer of Prudential’s International businesses from 2014 to 2018. Previously, he was EVP and Chief Operating Officer of Prudential’s U.S. Businesses from 2011 to 2014. Mr. Lowrey also served as President and CEO of PGIM, Prudential’s global investment management business, and as CEO of its real estate investment business, PGIM Real Estate. Before joining Prudential in 2001, he was a managing director and head of the Americas for J.P. Morgan’s Real Estate and Lodging Investment Banking group, where he began his investment banking career in 1988. Earlier, he spent four years as a managing partner of an architecture firm he founded in New York City. During this time, he became a registered New York architect. |
| | | | | | | | | | | | | | |  
| | George Paz
Age:62
Director Since:March 2016
| | Prudential Committees:
• Audit
| | Public Directorships:
• Express Scripts Holding Company
• Honeywell International, Inc.
| | | | | | | | | | |
George Paz Age: 66 Director Since: March 2016 | | Prudential Committees: ● Audit ● Finance Former Directorships Held during the Past Five Years: ● Express Scripts Holding Company
(December 2018) | | Public Directorships: ● Honeywell International, Inc. | | | | | | | Mr. Pazis the was Non-Executive Chairman of Express Scripts Holding Company (Express Scripts), a prescription benefit management company, from May 2016 to December 2018 and served as theChairman and CEO of Express Scripts from April 2005May 2006 to May 2016. Mr. Paz also served as the President of Express Scripts from October 2003 to February 2014 and has been a director since January 2004. He joined Express Scripts2016 after being appointed CEO in 1998 as SVP and CFO.April 2005. Prior to joining Express Scripts, Mr. Paz was a partner at Coopers and Lybrand from 1988 to 1993 and 1996 to 1998 and served as Executive Vice PresidentEVP and CFO for Life Partners Group from 1993 to 1995. Skills & Qualifications
| | | • Business Head/Administration
• Business Operations
• Corporate Governance
• Finance/Capital Allocation
• Financial Services Industry
• Government/Public Policy
• Insurance Industry
| | • Risk Management
• Talent Management
|
| | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 13 |
| | |
| | Item 1—Election of Directors:Director Nominees
|
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 13 |
| | | | | | | Item 1 Election of Directors | |
|
| | | | | | | | | | | | | |  | | Sandra Pianalto
Age:63
Director Since:July 2015
| | Prudential Committees:
• Corporate Governance and Business Ethics
• Finance
| | Public Directorships:
• Eaton Corporation plc
• FirstEnergy Corp.
• The J.M. Smucker Company
| | | | | | | | | | |
| | Sandra Pianalto Age: 67 Director Since: July 2015 | | Prudential Committees: ● Corporate Governance and
Business Ethics ● Finance Former Directorships Held during the Past Five Years: ● FirstEnergy Corp. (May 2021) | | Public Directorships: ● Eaton Corporation plc ● The J.M. Smucker Company | | | | | | | Ms. Pianaltoserved as the President and CEO of the Federal Reserve Bank of Cleveland (the Cleveland Fed) from February 2003 until her retirement in May 2014. She was the First Vice President and COO of the Cleveland Fed from 1993 to 2003 and served as its VP and Secretary to the Board of Directors from 1988 to 1993. Ms. Pianalto also served in various executive and supervisory roles at the Cleveland Fed from 1983 to 1988.1983. Prior to joining the Cleveland Fed, Ms. Pianalto was an economist at the Board of Governors of the Federal Reserve System and served on the staff of the Budget Committee of the U.S. House of Representatives. | 
| | Christine A. Poon | | | • Academia/Education
• Business Head/Administration
• Business Operations
• Corporate Governance
• Finance/Capital Allocation
• Financial Services Industry
• Government/Public Policy
Age: 69 Director Since: September 2006 Lead Independent Director Since: May 2020 | | • Risk Management
• Talent Management
|
| | | | | | | | | | | | | |  | | Christine A. PoonPrudential Committees: Age:65
Director Since:September 2006
| | Prudential Committees:
• Executive
• Finance (Chair)
• Investment
• Risk
| | Public Directorships:
• Koninklijke Philips NV
• Regeneron Pharmaceuticals
• The Sherwin-Williams Company
| | | | | | | | | | |
● Executive (Chair) ● Finance (Chair) ● Investment ● Risk Former Directorships Held during the Past Five Years: ● Decibel Therapeutics, Inc. (December 2021) ● Koninklijke Philips NV (May 2021) | | Public Directorships: ● Regeneron Pharmaceuticals ● The Sherwin-Williams Company | | | | | Ms. Poon served as Executive in Residence at The Max M. Fisher College of Business at The Ohio State University (“Fisher College of Business”) from 2015 until her retirement in 2020 and served as Professor of Management and Human Resources at The Fisher College of Business from October 2014 to September 2015. Ms. Poon previously served as Dean ofand John W. Berry, Sr. Chair in Business at The Fisher College of Business at The Ohio State University from MayApril 2009 until November 2014 and is now a member of the faculty.October 2014. She served as Vice Chairman and a memberMember of the Board of Directors of Johnson & Johnson from 2005 until her retirement in March 2009. Ms. Poon joined Johnson & Johnson in 2000 as Company Group Chair in the Pharmaceuticals Group. She became a Membermember of Johnson & Johnson’s Executive Committee and Worldwide Chair, Pharmaceuticals Group, in 2001, and served as Worldwide Chair, Medicines and Nutritionals, from 2003 to 2005. PriortoPrior to joining Johnson & Johnson, she served in various management positions at Bristol-Myers Squibb for 15 years. Skills & Qualifications
Academia/Education
Business Head/Administration
Business Operations
Corporate Governance
International
Marketing/Sales
Talent Management
| | | | | | | | | | | | | | |  
| | Douglas A. Scovanner
Age:62
Director Since:November 2013
| | Prudential Committees:
• Audit (Chair)
• Executive
• Risk
| | | | | | | | | | | | |
Douglas A. Scovanner Age: 66 Director Since: November 2013 | | Prudential Committees: ● Audit ● Executive ● Risk (Chair) | | | | | | | | | Mr. Scovannerhas been the Founder and Managing Member of Comprehensive Financial Strategies, LLC, a management consulting firm, since October 2013. Previously, he served as the CFO (1994 to 2012) and Executive Vice PresidentEVP (2000 to 2012) of the Target Corporation (a North American retailer). Prior to joining the Target Corporation, Mr. Scovanner held various management positions at The Fleming Companies, Inc., Coca-Cola Enterprises, Inc., The Coca-Cola Company and the Ford Motor Company from 1979 to 1994. Skills & Qualifications
| | | • Business Head/Administration
• Business Operations
• Corporate Governance
• Finance/Capital Allocation
• Financial Services Industry
• Investments
• Real Estate
| | • Risk Management
• Talent Management
|
| | | | | 14 | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |
| | |
| | Item 1—Election of Directors:Director NomineesCompany.
|
| | Michael A. Todman Age: 64 | | | | | | | Director Since: March 2016 | | Prudential Committees: ● Compensation (Chair) ● Executive ● Finance ● Risk | | Public Directorships: ● Brown-Forman Corporation ● Carrier Global Corporation ● Mondelēz International, Inc. | | | | | | | |  | | John R. Strangfeld
Age:64
Director Since:January 2008
(Elected Chairman May 2008)
| | Prudential Committees:
• Executive
| | | | | | | | | | Former Directorships Held during the Past Five Years: ● Newell Brands (May 2020) | | |
| | | | | Mr. Strangfeldhas served as CEO and President of Prudential Financial since January 2008 and Chairman of the Board since May 2008. Mr. Strangfeld is a member of the Office of the Chairman of Prudential Financial and served as Vice Chairman of Prudential Financial from 2002 through 2007, overseeing the U.S. Insurance and Investment divisions. Prior to his position as Vice Chairman, Mr. Strangfeld held a variety of senior investment positions at Prudential, both within the U.S. and abroad.
Skills & Qualifications
| | | • Business Ethics
• Business Head/Administration
• Business Operations
• Corporate Governance
• Environmental/Sustainability/Corporate Responsibility
• Finance/Capital Allocation
• Financial Services Industry
• Insurance Industry
| | • International
• Investments
• Risk Management
• Talent Management
• Technology/Systems
|
| | | | | | | | | | | | | |  | | Michael A. Todman
Age:60
Director Since:March 2016
| | Prudential Committees:
• Compensation
• Finance
| | Public Directorships:
• Brown-Forman Corporation
• Newell Rubbermaid, Inc.
| | | | | | | | | | |
Mr. Todmanserved as Vice Chairman of the Whirlpool Corporation (Whirlpool), a global manufacturer of home appliances, from November 2014 to December 2015. Mr. Todman previously served as President of Whirlpool International from 2006 to 2007 and 2010 to 2014, as well as President, Whirlpool North America, from 2007 to 2010. Mr. Todman held several senior positions including Executive Vice President and President ofwith Whirlpool Europe from 2001 to 2005 and Executive Vice President, Whirlpool North America, in 2001. Prior to joining Whirlpool, Mr. Todman served in a variety of leadership positions at Wang Laboratories Inc. and Price Waterhouse and Co. Skills & Qualificationsover his career.
| | | • Business Head/Administration
• Business Operations
• Corporate Governance
• Finance/Capital Allocation
• Government/Public Policy
• International
• Marketing/Sales
| | • Risk Management
• Talent Management
|
| | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 15 |
| | |
| | Item 1—Election of Directors:Director Nominees
|
| | | | | 16 | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |
| | | | 14 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
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| | | Corporate Governance |
The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company is governed by a Board of Directors and committees of the Board that meet throughout the year. Directors discharge their responsibilities at Board and committee meetings through ongoing communication with each other and with management throughout the year. Directors discharge their responsibilities at Board and committee meetings through ongoing communication with one another and management. The Board has adopted Corporate Governance Principles and Practices to provide a framework for the effective governance of the Company. The Corporate Governance Principles and Practices are reviewed regularly and updated as appropriate. The full text of the Corporate Governance Principles and Practices, which includes the definition of independence adopted by the Board, the charters of the Corporate Governance and Business Ethics, Compensation and Audit Committees, the Lead Independent Director Charter, the Code of Business Conduct and Ethics and the Related Party Transaction Approval Policy can be found at www.prudential.com/governance. Copies of these documents also may be obtained from the Chief Governance Officer and Corporate Secretary. Governance is a continuing focus at the Company, starting with the Board and extending to management and all employees. Therefore, the Board reviews the Company’s policies and business strategies and advises and counsels the CEO and the other executive officers who manage the Company’s businesses, including actively overseeing and reviewing, on at least an annual basis, the Company’s strategic plans. In addition, we solicit feedback from shareholders on corporate governance and executive compensation practices, among other items, and engage in discussions with various groups and individuals on these matters. Process for Selecting Directors The Corporate Governance and Business Ethics Committee screens and recommends candidates for nomination by the full Board. The Company’s By-laws provide that the size of the Board may range from 10 to 15 members, reflecting the Board’s current view of its optimal size. The Committee is assisted with its recruitment efforts by an independent third-party search firm, which recommends candidates who manage the Company’s businesses, including reviewing, on at least an annual basis, the Company’s strategic plans. In addition, we solicit feedback from shareholders on governance and executive compensation practices and engage in discussions with various groups and individuals on governance issues and improvements.
Process for Selecting Directors
The Corporate Governance and Business Ethics Committee screens and recommends candidates for nomination by the full Board. The Company’sBy-laws provide that the size of the Board may range from 10 to 15 members, reflecting the Board’s current view of its optimal size. The Committee is assisted with its recruitment efforts by an independent third party search firm, which recommends candidates that satisfy the Board’s criteria. The search firm also provides research and pertinent information regarding candidates, as requested.
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| | Corporate GovernanceShareholder Nominations and Recommendations of Director Candidates Our By-laws permit a group of up to 20 shareholders who have owned at least 3% of our outstanding capital stock for at least three years to submit director nominees for up to 20% of our Board seats for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in our By-laws. Shareholders who wish to nominate directors for inclusion in our Proxy Statement or directly at an Annual Meeting in accordance with the procedures in our By-laws should follow the instructions under “Submission of Shareholder Proposals and Director Nominations” in this Proxy Statement. Shareholders who wish to recommend candidates for consideration should send their recommendations to the attention of Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, at 751 Broad Street, Newark, NJ 07102. The Committee will consider director candidates recommended by shareholders in accordance with the criteria for director selection described under “Director Criteria, Qualifications, Experience and Tenure.” Director Attendance During 2021, the Board of Directors held eleven meetings. Together, the directors attended 99% of the meetings of the full Board and the committees on which they served in 2021. Directors are expected to attend the annual meeting of shareholders. All directors at that time were present for the 2021 annual meeting of shareholders. Director Independence The current Board consists of 13 directors, two of whom are currently employed by the Company (Messrs. Lowrey and Falzon). The Board conducted an annual review and affirmatively determined that all of the non-employee directors (Mses. Hund-Mejean, Jones, Pianalto and Poon, and Messrs. Baltimore, Casellas, Krapek, Lighte, Paz, Scovanner and Todman) are “independent” as that term is defined in the listing standards of the NYSE and in Prudential’s Corporate Governance Principles and Practices. Independent Director Meetings The independent directors generally meet in an executive session at both the beginning and end of each regularly scheduled Board meeting, with the Lead Independent Director serving as Chair. Comprehensive Steps to Achieve Board Effectiveness The Board is committed to a rigorous self-evaluation process. Through evaluation, directors review the Board’s performance, including areas where the Board feels it functions effectively, and importantly, areas where the Board believes it can improve. 
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| | | Shareholder Nominations and
Recommendations of Director Candidates
OurBy-laws permit a group of up to 20 shareholders who have owned at least 3% of our outstanding capital stock for at least three years to submit director nominees for up to 20% of the Board for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in ourBy-laws.
Shareholders who wish to nominate directors for inclusion in our Proxy Statement or directly at an Annual Meeting in accordance with the procedures in ourBy-laws should follow the instructions under “Submission of Shareholder Proposals and Director Nominations” in this Proxy Statement.
Shareholders who wish to recommend candidates for consideration should send their recommendations to the attention of Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, at 751 Broad Street, Newark, NJ 07102. The Committee will consider director candidates recommended by shareholders in accordance with the criteria for director selection described under “Director Criteria, Qualifications, Experience and Tenure.”
Director Attendance
During 2017, the Board of Directors held nine meetings. Together, the directors attended 99% of the combined total meetings of the full Board and the committees on which they served in 2017. All directors attended each Board meeting and all directors, except one, attended each of their Committee meetings. That director missed one meeting due to an unavoidable conflict.
Director Independence
The current Board consists of 12 directors, two of whom are currently employed by the Company (Messrs. Strangfeld and Grier). The Board conducted an annual review and affirmatively determined that all of thenon-employee directors (Mses. Hund-Mejean, Pianalto and Poon, and Messrs. Baltimore, Casellas, Krapek, Lighte, Paz, Scovanner and Todman) are “independent” as that term is defined in the listing standards of the NYSE and in Prudential Financial’s Corporate Governance Principles and Practices. In addition, the Board previously determined that Mr. Cullen, who did not stand forre-election at our 2017 Annual Meeting, was an “independent” director.
Independent Director Meetings
The independent directors generally meet in an executive session at both the beginning and the end of each regularly scheduled Board meeting, with the Lead Independent Director serving as Chair.
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| | Corporate GovernanceLeadership
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Board Leadership
Currently, our Board leadership structure consists of a Lead Independent Director, a Chairman (who is also our CEO) and strong committee chairs. The Board believes that our structure provides independent Board leadership and engagement while providing the benefit of having our CEO, the individual with primary responsibility for managing the Company’sday-to-day operations, chair regular Board meetings as key business and strategic issues are discussed. At this time, The Board regularly reviews its leadership structure and it thoroughly evaluated whether to continue to combine or to split the chair and CEO roles. After considering the perspectives of the independent directors, the views of our significant shareholders, voting results of recent independent chair proposals, academic research, practical experience at peer companies, and benchmarking and performance data, the Board believesin 2021 determined that the Company is best served by having the same individual as both Chairman of the Board and CEO but considersis in the continuedbest interests of the Company and its shareholders. The Board will continue to monitor the appropriateness of this structure at least annually. In addition, in the event of a successor to the position of CEO, the independent directors will also review the leadership structure. | | | | In 2017, independent directors2021, our Lead Independent Director, chair of the Corporate Governance and Business Ethics Committee, Chair of the Finance Committee, Vice Chairman, Chief Human Resources Officer and our Chief Governance Officer engaged with shareholders who hold a majority of our shares on their thoughtsviews on our Board leadership structure. Our Lead Independent Directorstructure, human capital management and our chair of the Corporate Governance and Business Ethics Committee also met with certain of our shareholders in 2017.environmental sustainability. The discussions and feedback from these meetings have been given toshared with the Board and will be considered during the Board’s annual review of the appropriateness of the Boardits leadership structure. |
| | | Lead Independent Director Under our Corporate Governance Principles and Practices, the independent directors annually elect a Chairman of the Board and, if the individual elected as Chairman of the Board is the CEO, they also elect an independent director to serve as Lead Independent Director. The Lead Independent Director is generally expected to serve for a term of at least one year, but for no more than three years. Mr. Baltimore was electedMs. Poon has served as Lead Independent Director since her initial election in May 2017. The responsibilities and authority2020. Key Responsibilities | ● Calls meetings of the Lead Independent Director include:independent directors. presiding● Presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; authorization to call meetings of● Facilitates communication between the independent directors; serving● Provides independent Board leadership. ● Elected annually and may serve no more than three years. ● Approves the agenda for all Board meetings and all Board materials. ● Communicates with shareholders and other key constituents, as a liaison betweenappropriate. | | ● Meets directly with the Chairmanmanagement and thenon-management employees of our firm. ● Engages with our other independent directors; approving information sentdirectors to the Board, including the quality, quantity, appropriateness and timeliness of such information;
approving meeting agendas for the Board;
approving meeting schedules to assure there is sufficient timeidentify matters for discussion at executive sessions of all agenda items;
independent directors and advises our Chairman of any decisions reached, and suggestions made at the executive sessions. authorization● In collaboration with the Corporate Governance and Business Ethics Committee, addresses Board effectiveness, performance and composition. ● Authorized to retain outside advisors and consultants who report directly to the Board on Board-wide issues; andissues. |
ensuring that he/she be available, if requested by shareholders, when appropriate, for consultation and direct communication.
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Shareholder Engagement at Prudential 
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A Message to Our Shareholders from Prudential’s Lead Independent Director, Christine A. Poon As your Lead Independent Director, it is an honor to work with our Board on behalf of Prudential’s stakeholders. This past year, the Company made significant progress against our transformation strategy for long-term growth even as we all continue to navigate the unprecedented challenges of the pandemic. Through it all, we have been guided by our commitment to making lives better by solving the financial challenges of our ever-changing world. The Board continues to be agile, adapting to changing circumstances. I attribute this to our directors’ skills, varied experiences, and diversity. Our 13 directors maintain broad and deep experience in strategy development, operational excellence, human capital and culture, sustainability, finance, and other important areas that are directly relevant to Prudential’s strategic priorities. In addition to bringing important skills, our Board members represent a wide range of backgrounds and individual experiences, which we believe are reflective of our global operations and diverse consumer base. Of our 13 director nominees, 11 are independent. Eighty two percent of our independent directors are diverse. Our average Board tenure is approximately nine years. We are proud of the continuing evolution of our Board and track record of refreshment. Regular shareholder feedback informs the Board’s thinking and allows us to continually broaden our perspective. I met with a number of our institutional investors throughout 2021. Our dialogue covered a broad range of topics, including the Board’s diverse composition and breadth of experience, the role of the Lead Independent Director, the Board’s oversight of our Company’s transformation strategy, our Company’s environmental commitment and commitment to stakeholders, and the Board’s oversight of our human capital and diversity initiatives. Investors’ viewpoints are shared with the entire Board, enhancing our decision-making. To enable shareholders to hear directly from our Board, we continue to release director video interviews in conjunction with our proxy statement. This year, we are featuring Wendy E. Jones, member of the Board’s Audit Committee, Gilbert F. Casellas, Chairman of Prudential’s Corporate Governance and Business Ethics Committee, and Robert Falzon, our Vice Chairman. While more work lies ahead, we are pleased with the Company’s progress against our transformation objectives. The Board recognizes that continued strong performance requires vigilant focus on our core business principles, including exceptional client service, operational excellence, and a culture that cultivates strong performing teams. Through our oversight of the Company’s strategic planning process, the Board and management are accountable for abiding by these principles. On behalf of the Board, thank you for your continuing trust and investment in Prudential. Christine A. Poon Lead Independent Director | | |
Christine A. Poon Prudential Lead Independent Director | | Ms. Poon was elected by Prudential’s independent directors to serve as Lead Independent Director effective May 12, 2020. She brings significant experience and knowledge to the Lead Independent Director role. Ms. Poon has served as a Prudential director since 2006. She currently chairs the Executive and Finance Committees and sits on the Investment and Risk Committees. Due to her Board experience and leadership, Ms. Poon understands the Company’s long-term strategic priorities. In addition, she possesses a deep understanding of Prudential and its industry’s legal, regulatory, and competitive frameworks. |
| PRUDENTIAL FOLLOWS THE INVESTOR STEWARDSHIP GROUP’S (ISG) CORPORATE GOVERNANCE FRAMEWORK FOR U.S. LISTED COMPANIES
| | | ISG Principle | | Prudential Practice | Principle 1:
Boards are accountable to shareholders.
| | • All directors stand for election annually
• Proxy access with market terms
• Board and Lead Independent Director letters and videos provide large and small investors insight into Board strategy and oversight objectives, and corporate governance practices
| Principle 2:
Shareholders should be entitled to voting rights in proportion to their economic interest.
| | • Majority voting in uncontested director elections, and directors not receiving majority support must tender their resignation for consideration by the Board
| Principle 3:
Boards should be responsive to shareholders and
be proactive in order to understand their perspectives.
| | • Management and Board members met with investors owning a majority of shares outstanding in 2017
• Engagement topics included environmental, sustainability and social strategy, Board composition and refreshment, succession planning, and executive compensation program
| Principle 4:
Boards should have a strong, independent leadership structure.
| | • Strong Lead Independent Director with clearly defined duties that are disclosed to shareholders
• Board considers appropriateness of its leadership structure at least annually
• Strong Independent Committee Chairs
• Proxy discloses why Board believes current leadership structure is appropriate
| Principle 5:
Boards should adopt structures and practices that enhance their effectiveness.
| | • 83% of Board members are independent
• Two-thirds of Board members are diverse
• Annual Board evaluation by independent third party; results and next steps disclosed in proxy
• Active Board refreshment plan; 42% refreshment in last five years
• Directors attended 99% of combined total Board and applicable committee meetings in 2017, and all directors attended the 2017 Annual Meeting
| Principle 6:
Boards should develop management incentive structures that are aligned with the long-term strategy of the company.
| | • Executive Compensation program received over 93% support in 2017
• Compensation Committee annually reviews and approves incentive program design, goals and objectives for alignment with compensation and business strategies
• Annual and long-term incentive programs are designed to reward financial and operational performance that furthers short- and long-term strategic objectives
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| | A Message to our Shareholders from Prudential’sLead Independent Director
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Culture at Prudential 
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| | Corporate GovernanceRemote work arrangements for most employees in 2021 continued to present a challenging landscape for workplace culture, but Prudential has continued to connect our workforce by building engagement programs that inspire our employees to live our purpose and embrace virtual team environments. These programs included new pro bono opportunities for our Business Resource Groups to solve challenges for nonprofits while simultaneously building their skills and connecting them to the company’s purpose. Another new engagement platform called Missions enables multi-faceted, virtual opportunities focused on topics such as health & wellness, civic engagement and sustainability, based on employee interests. Additionally, to help prepare for our hybrid workplace of the future, we equipped leaders with resources, tip sheets and presentations focused on creating behaviors that allow all five of our cultural aspirations—customer obsessed, outcomes driven, risk smart, tech forward and inclusive—to serve as guides towards creating a high-performing workplace where employees feel valued and interconnected.
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Board Risk Oversight
The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole Board and through its committees. At least annually, the Board reviews strategic risks and opportunities facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees that report back to the full Board. In general, the committees oversee the following risks:
Audit Committee:insurance risk and operational risks, including model risk, as well as risks related to financial controls, legal, regulatory and compliance risks, and the overall risk management governance structure and risk management function;
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Board Risk Oversight The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, through both the whole Board and its committees. At least annually, the Board reviews strategic risks and opportunities facing the Company and its businesses. Other important categories of risk are assigned to designated Board committees that report back to the full Board. In general, the committees oversee the following risks:  In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, Board committees hold joint meetings when appropriate and address certain issues at the full Board level. During 2021, the Risk Committee received updates from the Chief Risk Officer on the important strategic issues and risks facing the Company, including a discussion on the Own Risk and Solvency Assessment (“ORSA”) and the Company’s current and future initiatives to address climate and environmental related risks. In addition, the Board and committees review the performance and functioning of the Company’s overall risk management function. The Risk Committee currently includes the chairs of each of the other Board committees as well as another independent director who serves as Chair of the Committee. The principal activities of the Risk Committee are to: oversee the Company’s assessment and reporting of material risks by reviewing the metrics used by management to quantify risk, applicable risk limit structures and risk mitigation strategies; review the Company’s processes and procedures for risk assessment and risk management, including the related assumptions used across the Company’s businesses and material risk types; and receive reports from management on material and emerging risk topics that are reviewed by the Company’s internal management committees. The Company, under the Board’s oversight, is organized to promote a strong risk awareness and management culture. The Chief Risk Officer sits on many management committees and heads an independent enterprise risk management department; the General Counsel and Chief Compliance Officer also sit on key management committees and the functions they oversee operate independently of the businesses to separate management and oversight. Also, our employees are evaluated with respect to risk and ethics. | | | | 20 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Corporate Governance and Business Ethics Committee:the Company’s overall ethical culture, political contributions, lobbying expenses and overall political strategy, as well as the Company’s environmental (which includes climate risk), sustainability and corporate social responsibility to minimize reputational risk and focus on future sustainability; | | Finance Committee: liquidity risk, risks involving our capital management, the incurrence and repayment of borrowings, the capital structure of the enterprise, funding of benefit plans and statutory insurance reserves;
Investment Committee:investment risk, market risk and the strength of the investment function; and
Risk Committee: the governance of significant risks throughout the Company, the establishment and ongoing monitoring of our risk profile, risk capacity and risk appetite, and coordination of the risk oversight functions of the other Board committees.
In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, committees hold joint meetings when appropriate and address certain issues at the full Board level. During 2017, the full Board received a report from the Chief Risk Officer on the important strategic issues and risks facing the Company. In addition, the Board and committees review the performance and functioning of the Company’s overall risk management function.
The Risk Committee is comprised of the chairs of each of the other Board committees and our Vice Chairman, who supervises the Chief Risk Officer of the Company. The principal activities of the Risk Committee are to: oversee the Company’s assessment and reporting of material risks by reviewing the metrics used by management to quantify risk, applicable risk limit structures and risk mitigation strategies; review the Company’s processes and procedures for risk assessment and risk management, including the related assumptions used across the Company’s businesses and material risk types; and receive reports from management on material and emerging risk topics that are reviewed by the Company’s internal management committees.
The Company, under the Board’s oversight, is organized to promote a strong risk awareness and management culture. The Chief Risk Officer sits on many management committees and heads an independent enterprise risk management department; the General Counsel and Chief Compliance Officer also sit on key management committees and the functions they oversee operate independently of the businesses to separate management and oversight. Employee appraisals evaluate employees with respect to risk and ethics.
In addition, the Board oversees the Company’s cyber risk management program. In order to respond to the threat of security breaches and cyber attacks,
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Cybersecurity Risk Oversight In addition, the Board oversees the Company’s Information Security program. In order to respond to the threat of security breaches and cyberattacks, we have developed a program, overseen by the Company’s Chief Information Security Officer and our Information Security Office, that is designed to protect and preserve the confidentiality, integrity and continued availability of all information owned by, or in the care of, the Company. This program also includes a cyber incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident. Prudential has not had a material data security breach in three years. The Audit Committee, which is tasked with oversight of certain risk issues, including cybersecurity, receives reports from the Chief Information Security Officer, the Chief Information Officer and the Global Head of Operational Risk throughout the year. At least annually, the Board and the Audit Committee also receive updates about the results of program reviews, including exercises and response readiness assessments led by outside advisors who provide a third-party independent assessment of our technical program and internal response preparedness. The Audit Committee regularly briefs the full Board on these matters, and the full Board also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues. Cybersecurity Governance Highlights | ● | | Comprehensive reporting to our Board and Risk Committee by our Chief Information Security Officer and our Information Security Office that is designedin response to protect and preserve the confidentiality, integrity and continued availability of all information owned by, or in the care of, the Company. This program also includes a cyber incident response plan. The Audit Committee, which is tasked with oversight of certain risk issues, receives periodic reports from the Chief Information Security Officer, the Chief Information Officer and the Head of Operational Risk. The Board and the Audit Committee also receive updates about the results of periodic exercises and response readiness assessments led by outside advisors who provide a third-party independent assessment of our technical program and our internal response preparedness. The Audit Committee regularly briefs the full Board on these matters, and the full Board also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues. We monitor the risks associated with our compensation program and individual executive compensation decisions on an ongoing basis. Each year management undertakes a review of the Company’s various compensation programs to assess the risks arising from our compensation policies and practices. Management presents these risk assessments to the Compensation Committee. The risk assessments have included a review of the primary design features of the Company’s compensation plans, the process to determine compensation pools and awards for employees and an analysis of how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s compensation plans allow for discretionary negative adjustments to the ultimate outcomes, which serves to mitigate risk-taking.
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| | Corporate Governance
key developments |
| ● | | Cross-functional approach to addressing cybersecurity risk, with Global Technology & Operations, Risk, Legal, and Corporate Audit functions presenting on key topics |
| ● | | Global presence with 24/7 cyber threat operations centers |
| ● | | All employees with access to our Company’s systems receive comprehensive annual training on responsible information security, data security, and cybersecurity practices and how to protect data against cyber threats |
| ● | | Relevant cybersecurity controls related to financial reporting are considered by our external auditor in the context of Prudential’s annual external integrated audit |
Executive Compensation Risk Oversight We monitor the risks associated with our compensation programs and individual executive compensation decisions on an ongoing basis. Each year, management undertakes a review of the Company’s various compensation programs to assess the risks arising from our compensation policies and practices. Management presents these risk assessments to the Compensation Committee. The risk assessments have included a review of the primary design features of the Company’s compensation plans, the process to determine compensation pools and awards for employees and an analysis of how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s annual incentive plan allows for discretionary negative adjustments to the ultimate outcomes, which serves to mitigate risk-taking. Moreover, senior management is subject to share ownership and retention policies, and historically, a large percentage of senior management compensation has been paid in the form of long-term equity awards. In addition, senior management compensation is paid over a multiple-year cycle, a compensation structure that is intended to align incentives with appropriate risk-taking. The Company’s general risk management controls also serve to preclude decision-makers from taking excessive risk to earn the incentives provided under our compensation plans. The Compensation Committee agreed with the conclusion that the identified risks were within our ability to effectively monitor and manage, and that our compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company. Environmental Sustainability Environmental Sustainability is overseen by the Board of Directors and its Corporate Governance and Business Ethics Committee. The Company’s sustainability strategy is led by Prudential’s senior leaders, including Prudential’s Vice Chairman, as the enterprise wide sustainability Executive Sponsor. The Corporate Governance and Business Ethics Committee discusses environmental sustainability, ESG and climate objectives and strategy at least quarterly. This regular engagement gives the Board insight into the Company’s climate change strategy and environmental stewardship initiatives. In addition, the full Board also receives periodic briefings and education on core concepts and trends that impact our businesses and society as well as regular discussions in the Investment and Risk Committees. The Company also has a Climate Change Steering Committee, led by Prudential’s Vice Chairman, that guides climate policy for the enterprise. In November 2021, we announced our commitment to achieve net-zero emissions across our primary domestic and international home office operations by 2050. To accelerate the Company’s longstanding commitment to mitigate the impacts of climate change, we also set an interim goal to become carbon neutral by 2040. These actions are aligned with the latest climate science of limiting global warming to 1.5 degrees Celsius or lower, as specified in the Paris Climate Accord. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 21 |
| | | | | | | Moreover, senior management is subject to a share retention policy, and historically a large percentage of senior management compensation has been paid in the form of long-term equity awards. In addition, senior management compensation is paid over a multiple-year cycle, a compensation structure that is intended to align incentives with appropriate risk-taking. The Company’s general risk management controls also serve to preclude decision-makers from taking excessive risk to earn the incentives provided under our compensation plans. The Compensation Committee agreed with the conclusion that the identified risks were within our ability to effectively monitor and manage, and that our compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company.Corporate Governance
| | Succession Planning
The Board is actively engaged and involved in talent management. The Board reviews the Company’s “people strategy” in support of its business strategy at least annually and frequently discusses talent issues at its meetings. This includes a detailed discussion of the Company’s global leadership bench and succession plans with a focus on key positions at the senior officer level.
In addition, the committees of the Board regularly discuss the talent pipeline for specific critical roles. High potential
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Human Capital Management and Succession Planning The Board believes that human capital management and succession planning, including inclusion and diversity, are paramount to the Company’s success and central to our long-term strategy. Our Company’s Corporate Social Responsibility Oversight Committee, comprising Board members and Prudential senior executives, in addition to the full Board, evaluates the Company’s commitment to inclusion and diversity and actively suggests policy enhancements. The Board has primary responsibility for CEO succession planning. In addition, the Board reviews the Company’s “people strategy” in support of its business strategy at least annually and frequently discusses talent issues at its meetings. This includes a detailed discussion of the Company’s global leadership bench and succession plans with a focus on key positions at the senior officer levels. In support of our commitment to talent development, throughout the year, high-potential leaders are given exposure and visibility to Board members through formal presentations and at informal events. This engagement gives the Board insight into the Company’s talent pool and our leaders’ succession plans. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs. Preliminary 2021 Consolidated U.S. Employer Information Report (EEO-1) The summary table below displays Prudential’s U.S. workforce by EEO-1 job category as of December 31, 2021. The preliminary results in the table are supplied in advance of the official EEO-1 filing, which will be filed in April 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Male | | | | Female | | | | SECTION D - EMPLOYMENT DATA JOB CATEGORIES | | Hispanic or Latino | | | | | | Native
Hawaiian
or Other
Pacific Islander | | | | | | Two or
more races | | | | | | | | Native
Hawaiian
or Other
Pacific Islander | | | | | | Two or
more races | | | | | Male | | Female | | White | | Black | | Asian | | Indian | | White | | Black | | Asian | | Indian | | Total | | | | | | | | | | | | | | | | | | | Executive/Senior Level Officials and Managers | | | | 23 | | | | | 9 | | | | | 336 | | | | | 15 | | | | | 0 | | | | | 44 | | | | | 0 | | | | | 3 | | | | | | | | | | 162 | | | | | 13 | | | | | 0 | | | | | 23 | | | | | 0 | | | | | 4 | | | | | 632 | | | | | | | | | | | | | | | | | | | First/Mid-Level Officials and Managers | | | | 150 | | | | | 93 | | | | | 2,269 | | | | | 105 | | | | | 5 | | | | | 519 | | | | | 3 | | | | | 35 | | | | | | | | | | 1,345 | | | | | 117 | | | | | 5 | | | | | 352 | | | | | 6 | | | | | 25 | | | | | 5,029 | | | | | | | | | | | | | | | | | | | Professionals | | | | 241 | | | | | 313 | | | | | 2,084 | | | | | 220 | | | | | 9 | | | | | 459 | | | | | 1 | | | | | 56 | | | | | | | | | | 2,746 | | | | | 550 | | | | | 8 | | | | | 492 | | | | | 4 | | | | | 68 | | | | | 7,251 | | | | | | | | | | | | | | | | | | | Sales Workers | | | | 73 | | | | | 44 | | | | | 655 | | | | | 131 | | | | | 1 | | | | | 53 | | | | | 7 | | | | | 31 | | | | | | | | | | 302 | | | | | 119 | | | | | 1 | | | | | 46 | | | | | 5 | | | | | 32 | | | | | 1,500 | | | | | | | | | | | | | | | | | | | Administrative Support Workers | | | | 83 | | | | | 226 | | | | | 365 | | | | | 101 | | | | | 1 | | | | | 26 | | | | | 0 | | | | | 7 | | | | | | | | | | 965 | | | | | 368 | | | | | 2 | | | | | 64 | | | | | 5 | | | | | 52 | | | | | 2,265 | | | | | | | | | | | | | | | | | | | Service Workers | | | | 4 | | | | | 4 | | | | | 8 | | | | | 7 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | | | | | | 1 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 24 | | | | | | | | | | | | | | | | | | | TOTAL | | | | 574 | | | | | 689 | | | | | 5,717 | | | | | 579 | | | | | 16 | | | | | 1,101 | | | | | 11 | | | | | 132 | | | | | | | | | | 5,521 | | | | | 1,167 | | | | | 16 | | | | | 977 | | | | | 20 | | | | | 181 | | | | | 16,701 | |
Communication with Directors Shareholders and other interested parties may communicate with any of the independent directors, including Committee Chairs and the Lead Independent Director, by using the following address: Prudential Financial, Inc. Board of Directors c/o Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary 751 Broad Street Newark, NJ 07102 Email: independentdirectors@ prudential.com Feedback on Executive Compensation: You can also provide feedback on executive compensation at the following website: www.prudential.com/ executivecomp.
The Chief Governance Officer, Senior Vice President and Corporate Secretary of the Company reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Corporate Chief Ethics Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain tonon-financial matters will be forwarded promptly. Items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitationsolicitations or advertisements; product-related inquiries; junk mail or mass mailings; resumes or otherjob-related inquiries; or spam and overly or overtly hostile, threatening, potentially illegal or similarly unsuitable communications. SHAREHOLDER ENGAGEMENTFeedback on Executive Compensation:
This year, we continued our practice of engagement, communication, and transparency in a variety of ways, including You can also provide feedback on executive compensation at the following:following website: www.prudential.com/ executivecomp.
| • | | released two videos featuring Board members, Thomas J. Baltimore, our Lead Independent Director, and Christine A. Poon, Chair of our Finance Committee, sharing their views on Prudential’s Board and corporate governance practices; | |
| • | | provided multiple avenues for shareholders to communicate with the Company and the Board. We have received almost 17,000 shareholder comments in the last seven years. Shareholders also continued to use the mechanisms available through www.prudential.com/ governance to provide input; | |
| • | | promoted greater communication with our institutional shareholders on corporate governance issues by engaging with shareholders who collectively hold a majority of our shares; and | |
| • | | advanced open Board communication by facilitating interaction between our directors and shareholders. | |
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Corporate Governance | | Corporate Governance
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Committees of the Board of Directors The Board has established various committees to assist in discharging its duties, including: Audit, Compensation, Corporate Governance and Business Ethics, Executive, Finance, Investment and Risk. The primary responsibilities of each of the committees are set forth below, together with their current membership and the number of meetings held in 2017.2021. Committee charters can be found on our website at www.prudential.com/governance. Each member of the Audit, Compensation, and Corporate Governance and Business Ethics Committees has been determined by the Board to be independent for purposes of the NYSE Corporate Governance listing standards. In addition, directors who serve on the Audit Committee and the Compensation Committee meet additional, heightened independence and qualification criteria applicable to directors serving on these committees under the NYSE listing standards. | | | | | | | | Committees | | Current Members in 2017 | | Description | | | | | | | Audit
Audit Committee Meetings in 2017:2021: 10 | | Douglas Scovanner (Chair)
Martina-Hund Mejean (Chair) Wendy E. Jones Douglas A. Scovanner George Paz | | The Audit Committee provides oversight of the Company’s accounting and financial reporting and disclosure processes, the adequacy of the systems of disclosure and internal control established by management, and the audit of the Company’s financial statements. The Audit Committee oversees insurance risk and operational risks, risks related to financial controls, and legal, regulatory, cybersecurity and compliance matters, and oversees the overall risk management governance structure and risk management function. | | Among other things, the Audit Committee: (1) appoints the independent auditor and evaluates its qualifications, independence and performance; (2) reviews the audit plans for and results of the independent audit and internal audits; and (3) reviews reports related to processes established by management to provide compliance with legal and regulatory requirements. The Board has determined that all of our Audit Committee members are financially literate and are audit committee financial experts as defined by the SEC. | | | | Compensation Committee Meetings in 2017: 72021: 6 | | Karl J. KrapekMichael A. Todman (Chair)
Thomas J. Baltimore Michael A. TodmanKarl J. Krapek
| | The Compensation Committee oversees the Company’s compensation and benefits policies and programs. For more information on the responsibilities and activities of the Compensation Committee, including the Committee’s processes for determining executive compensation, see the CD&A. | | | | Corporate Governance Governance & Business Ethics Committee
Meetings in 2017:2021: 7 | | Gilbert F. Casellas (Chair) Peter R. Lighte Sandra Pianalto | | The Corporate Governance and Business Ethics Committee oversees the Board’s corporate governance procedures and practices, including the recommendations of individuals for the Board, making recommendations to the Board regarding director compensation and overseeing the Company’s ethics and conflict of interestconflict-of-interest policies, its political contributions and lobbying expenses policy, and its strategy and reputation regarding ESG issues, including environmental stewardship, sustainability, climate, human capital management issues, including inclusion and sustainabilitydiversity, and corporate social responsibility throughout the Company’s global businesses. | | | | Executive Committee Meetings in 2017:2021: 0 | | Christine A. Poon (Chair) Thomas J. Baltimore (Chair) Gilbert F. Casellas Karl J. KrapekMartina Hund-Mejean
Christine A. PoonCharles F. Lowrey
Douglas A. Scovanner John R. StrangfeldMichael A. Todman
| | The Executive Committee is authorized to exercise the corporate powers of the Company between meetings of the Board, except for those powers reserved to the Board by ourBy-laws or otherwise. | | | | Finance Committee Meetings in 2017:2021: 6 | | Christine A. Poon (Chair) George Paz Sandra Pianalto Michael A. Todman | | The Finance Committee oversees, takes actions, and approves policies with respect to capital, liquidity, borrowing levels, reserves, market riskbenefit plan funding and major capital expenditures. | | | | Investment
Committee
Meetings in 2017:2021: 4 | | Thomas J. Baltimore (Chair) Peter R. Lighte Christine A. Poon | | The Investment Committee oversees and takes actions with respect to the acquisition, management and disposition of invested assets; reviews the investment performance of the pension plan and funded employee benefit plans; and reviews investment risks and exposures, as well as the investment performance of products and accounts managed on behalf of third parties. | | | | Risk Committee Meetings in 2017: 62021: 5 | | Douglas A. Scovanner (Chair) Thomas J. Baltimore (Chair) Gilbert F. Casellas Mark B. Grier
Karl J. KrapekMartina Hund-Mejean
Christine A. Poon DouglasMichael A. ScovannerTodman
| | The Risk Committee oversees the governance of significant risks throughout the enterprise including by coordinating the risk oversight functions of each Board committee and seeing that matters are appropriately elevated to the Board. |
In addition to the above Committee meetings, the Board held nineeleven meetings in 2017.2021. | | | | | 24 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement23 |
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Corporate Governance | | Corporate Governance
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Certain Relationships and Related Party Transactions The Company has adopted a written Related Party Transaction Approval Policy that applies: to any transaction or series of transactions in which the Company or a subsidiary is a participant;
| ● | | to any transaction or series of transactions in which the Company or a subsidiary is a participant; |
when the amount involved exceeds $120,000; and
| ● | | when the amount involved exceeds $120,000; and |
when a related party (a director or executive officer of the Company, any nominee for director, any shareholder owning an excess of 5% of the total equity of the Company and any immediate family member of any such person) has a direct or indirect material interest (other than solely as a result of being a director or trustee or in any similar position or a less than 10 percent beneficial owner of another entity).
| ● | | when a related party (a director or executive officer of the Company, any nominee for director, any shareholder owning an excess of 5% of the total equity of the Company and any immediate family member of any such person) has a direct or indirect material interest (other than solely as a result of being a director or trustee or in any similar position or a less-than-10% beneficial owner of another entity). |
The policy is administered by the Corporate Governance and Business Ethics Committee. The Committee, which will consider relevant facts and circumstances in determining whether or not to approve or ratify such a transaction, and will approve or ratify only those transactions that are, in the Committee’sits judgment, appropriate or desirable under the circumstances. In the ordinary course of business, we may from time to time engage in transactions with other corporations or financial institutions whose officers or directors are also directors of Prudential Financial. In all cases, these transactions are conducted on anarm’s-length basis. In addition, from time to time executive officers and directors of Prudential Financial may engage in transactions in the ordinary course of business involving services we offer, such as insurance and investment services, on terms similar to those extended to employees of Prudential Financial and its subsidiaries and affiliates generally. The Corporate Governance and Business Ethics Committee has determined that certain types of transactions do not create or involve a direct or indirect material interest, including (i) any sales of financial services or products to a related party in the ordinary course of business on terms and conditions generally available in the market placemarketplace (or at ordinary employee discounts, if applicable) and in accordance with applicable law and (ii) all business relationships between the Company and a 5% shareholder or a business affiliated with a director, director nominee or immediate family member of a director or director nominee made in the ordinary course of business on terms and conditions generally available in the market placemarketplace and in accordance with applicable law. Pursuant to our policy, the Corporate Governance and Business Ethics Committee determined that there were two transactions that qualifiedqualify as related party transactions since the beginning of 2017. The brother2021: Brett Sleyster, the son of Robert Falzon,Scott Sleyster, our Executive Vice President and Chief Financial Officer, Head of International Businesses, is employed as an Associate for PruVen Capital Partners GP, LLC (“PruVen Capital’’) and performs services for PruVen Capital and other affiliated and associated entities. Prudential provides 99% of PruVen Capital’s investable capital. Over a contract term of sixteen months, Brett Sleyster’s total expected compensation will be less than $190,000 and is similar to the compensation of other employees holding equivalent positions. Michael F. Falzon, the brother of Robert M. Falzon, our Vice Chairman, is employed as a Vice President, Design and Development Solutions.Information Systems. In 2017,2021, the total compensation paid to Michael Falzon, including salary, bonus and the grant date value of long-term incentive awards, was less than $560,000. Theson-in-law of Barbara Koster, our Senior Vice President and Chief Information Officer, Joshua D. Howard, is an associate in Quantitative Management Associates, a subsidiary of the Company. In 2017, the total compensation paid to Mr. Howard, including salary and bonus, was less than $155,000. In both cases the$540,000. Michael Falzon’s compensation is similar to the compensation of other employees holding equivalent positions. Neither individual is in the reporting chain of the executive officer. | | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 25 |
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| | Corporate Governance
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Policy on Shareholder Rights Plan We do not have a shareholder rights plan. The Board will obtain shareholder approval prior to adopting a future shareholder rights plan unless the Board, in the exercise of its fiduciary duties, determines that under the circumstances then existing, it would be in the best interests of the Company and our shareholders to adopt a rights plan without prior shareholder approval. If a rights plan is adopted by the Board without prior shareholder approval, the plan must provide that it will expire within one year of adoption unless ratified by shareholders. Political Contributions and Lobbying Expenditure Oversight and Disclosure The Corporate Governance and Business Ethics Committee reviews and approves an annual report on political activities, contributions and lobbying expenses. It monitors and evaluates the Company’s ongoing political strategy as it relates to overall public policy objectives for the next year and provides guidance to the Board. We provide on our website a description of our oversight process for political contributions and a summary of Political Action Committee, or PAC, contributions. We also include semi-annualdisclose semiannual information on dues, assessments and contributions of $15,000$10,000 or more to trade associations andtax-exempt advocacy groups and a summary of Company policies and procedures for political activity. This disclosure is available at www.prudential.com/governance under the heading “Political Activity & Contributions.” | The 2021 CPA-Zicklin Index of Corporate Political Disclosure and Accountability ranked Prudential as a Trendsetter company, the highest distinction. This is the seventh consecutive year that Prudential has been recognized for its disclosure, accountability, and political spending oversight. |
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| | | | | | | Corporate Governance | |
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The 2017 CPA-Zicklin Index of Corporate Political Disclosure and Accountability ranked Prudential as a First Tier company. This is the third consecutive year Prudential received this honor, which recognizes companies for their disclosure, accountability, and political spending oversight.
Environmental, Sustainability and Corporate Social Responsibility The Corporate Governance and Business Ethics Committee has oversight of environmental and climate issues and policies. In addition, three of our independent Board members sit on the Board’sour Corporate Social Responsibility Oversight Committee. These directors informThis Committee, in addition to inclusion and diversity, oversees the Company’s social responsibility efforts in impact investing, for financial and social returns, strategic philanthropy, employee engagement and corporate community involvement. 2017 investmentsOur 2021 activities in these areas include:  
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| | Item 2 Item 2–Ratification of the Appointment of the Appointment of the
Independent Registered Public Accounting Firm | |
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers” or “PwC”) as the Company’s independent registered public accounting firm (“independent auditor”) for 2018.2022. We are not required to have the shareholders ratify the selection of PricewaterhouseCoopers as our independent auditor. We nonetheless are doing so because we believe it is a matter of good corporate practice. If the shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers but may nevertheless retain it as the Company’s independent auditor. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of Prudential Financial and its shareholders. Representatives of PricewaterhouseCoopers will be present at the Annual Meeting and will have the opportunity to make a statement and be available to respond to appropriate questions by shareholders. FEES PAID TO PRICEWATERHOUSECOOPERSFees Paid to PricewaterhouseCoopers
The following is a summary and description of fees for services provided by PricewaterhouseCoopers in 20172021 and 2016.2020. Worldwide Fees (In Millions)(in millions) | | | | | | | | | Service | | 2017 | | | 2016 | | Audit(A) | | $ | 52 | | | $ | 51 | | Audit-Related(B) | | $ | 5 | | | $ | 4 | | Tax(C) | | $ | 3 | | | $ | 3 | | All Other(D) | | $ | 1 | | | | — | | Total | | $ | 61 | | | $ | 58 | |
| | | | | | | | Service | | 2021 | | | 2020 | Audit (1) | | $ | 54 | | | $ 55 | Audit-Related (2) | | $ | 10 | | | $ 8 | Tax (3) | | $ | 2 | | | $ 2 | All Other | | $ | 0 | | | $ 0 | Total | | $ | 66 | | | $ 65 |
(A) | (1) | The aggregate fees for professional services rendered for the integrated audit of the consolidated financial statements of Prudential Financial and, as required, audits of various domestic and international subsidiaries, the issuance of comfort letters, agreed-upon proceduresattest services required by regulation, consents and assistance with review of documents filed with the SEC. |
(B) | (2) | The aggregate fees for assurance and related services, including internal control and financial compliance reports, agreed-upon proceduresattest services not required by regulation, and accounting consultation on new accounting standards, acquisitions and potential financial reporting requirements. |
(C) | (3) | The aggregate fees for services rendered for tax return preparation, tax advice related to mergers and acquisitions and other international, federal and state projects and requests for rulings. In 2017,2021, tax compliance and preparation fees totaled $1.9Mapproximately $1.3 million and tax advisory fees totaled $1.5M, and in 2016,approximately $0.4 million. In 2020, tax compliance and preparation fees totaled $1.4Mapproximately $1.5 million and tax advisory fees totaled $1.1M.approximately $0.5 million. |
(D) | The aggregate fees for all other services rendered, including for 2017 fees for business advisory services. |
PricewaterhouseCoopers also provides services to domestic and international mutual funds and limited partnershipsinvestment vehicles, not consolidated by Prudential Financial, but which are managed by Prudential Financial. PricewaterhouseCoopers identified fees related to audit, audit-related, tax and taxall other services paid by these entities of $14M$27 million in 20172021 and $14M$25 million in 2016.2020. The Audit Committee has advised the Board of Directors that in its opinion thenon-audit services rendered by PricewaterhouseCoopers during the most recent fiscal year are compatible with maintaining its independence. PwCPricewaterhouseCoopers has been the Company’s independent auditor since it became a public company in 2001 and prior to that, from 1996.
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| | | | | | | Item 2—2 Ratification of the Appointment of the Independent Registered Public Accounting Firm | |
|
In determining whether to reappoint the independent auditor, the Audit Committee annually considers several factors, including:
the length of time the firm has been engaged;
the firm’s independence and objectivity;
PwC’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the lead audit partner;
historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee, and the results of a management survey of PwC’s overall performance;
data related to audit quality and performance, including recent Public Company Accounting Oversight Board inspection reports on the firm; and
the appropriateness of PwC’s fees, both on an absolute basis and as compared with its peers.
| | | | In determining whether to reappoint PwC as Prudential Financial’s independent auditor, the Audit Committee annually considers several factors, including: | ● the length of time the firm has been engaged; ● the firm’s independence and objectivity; ● the firm’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the Lead Audit Partner; ● the extent and quality of the firm’s communications with the Audit Committee; | | ● the results of a management survey of PwC’s overall performance; ● other data related to audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) inspection reports; and ● the appropriateness of the firm’s fees, both on an absolute basis and as compared with the Company’s peers. |
In accordance with SECSecurities and Exchange Commission (“SEC”) rules, independent audit partners are subject to rotation requirements limiting their number of consecutive years of service to our Company to no more than five. TheAs a result, in 2021, Prudential’s Audit Committee oversaw a rigorous process forof selecting the Company’sa new Lead Audit Partner with PwC. PwC provided a list of qualified potential lead audit partner includes Companypartners and the candidates were assessed based on their related experience and industry expertise. Interviews were conducted by senior management and the Audit Committee Chair vettingmet with and interviewed the independent auditor’s candidates.final candidate. The fullnew Lead Audit Partner selected was approved by the Audit Committee is consulted in connection with the final selectionand will assume oversight of the leadexternal audit partner.of Prudential Financial effective for the 2022 audit. AUDIT COMMITTEEAudit Committee PRE-APPROVALPre-Approval POLICIES AND PROCEDURESPolicies and Procedures
The Audit Committee has established a policy requiring itspre-approval of all audit and permissiblenon-audit services provided by the independent auditor. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services to ensureso that the independent auditor’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and thenon-audit services that may not be performed; and sets forth thepre-approval requirements for all permitted services. The policy provides for the generalpre-approval of specific types of Audit, Audit-Related and Tax services and a limited fee estimate range for such services on an annual basis. The policy requires specificpre-approval of all other permitted services. The independent auditor is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with theirpre-approval and the fees for the services performed to date. The Audit Committee’s policy delegates to its Chair the authority to address requests forpre-approval of services with fees up to a maximum of $250,000 between Audit Committee meetings if the Company’s Chief Auditor deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee, and the Chair must report anypre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibility topre-approve permitted services of the independent auditor. All Audit, Audit-Related, Tax and All Other services described above were approved by the Audit Committee before services were rendered. | The Board of Directors recommends that shareholders vote “FOR” ratification of the appointment of PricewaterhouseCoopers as the Company’s Independent Auditor for 2022. |
The Board of Directors recommends that shareholders vote“FOR” ratification of the appointment of PricewaterhouseCoopers as the Company’s Independent Auditor for 2018.
ENHANCING COMMUNICATION THROUGH AUDIT COMMITTEE REPORTING
The Center for Audit Quality and a group of nationally recognized U.S. corporate governance and policy organizations jointly released a paper entitled “Enhancing the Audit Committee Report: A Call to Action,” which encouraged audit committees of public companies to proactively consider strengthening their public disclosures to more effectively convey the critical work of audit committees to investors and stakeholders. Prudential was featured as an example of a company exhibiting voluntary practices strengthening audit committee disclosures.
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| | | | | | | Item 2—2 Ratification of the Appointment of the Independent Registered Public Accounting Firm | |
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REPORT OF THE AUDIT COMMITTEEReport of The Audit Committee
ThreeFour independent directors comprise the Audit Committee. The Committee operates under a written charter adopted by the Board.
In addition, the Board has determined that all of our Audit Committee members, Messrs. Paz and Scovanner and Ms.Mses. Hund-Mejean and Jones, satisfy the financial expertise requirements of the NYSE and havethat each of Messrs. Paz and Scovanner and Mses. Hund-Mejean and Jones has the requisite experience to be designated an audit committee financial expert as that term is defined by rules of the SEC. Management is responsible for the preparation, presentation and integrity of the financial statements of Prudential Financial and for maintaining appropriate accounting and financial reporting policies and practices, andas well as internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Prudential Financial’s independent registered public accounting firm (independent auditor),auditor, PricewaterhouseCoopers, is responsible for auditing the consolidated financial statements of Prudential Financial and expressing an opinion as to their conformity with generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting in accordance with the requirements of the Public Company Accounting Oversight Board (“PCAOB”).PCAOB. In performing its oversight function, the Audit Committee reviewed and discussed the audited consolidated financial statements of Prudential Financial as of and for the year ended December 31, 20172021 and Management’s Annual Report on Internal Control Over Financial Reporting with management and Prudential Financial’s independent auditor. The Audit Committee also discussed with Prudential Financial’s independent auditor the matters required to be discussed by the independent auditor with the Audit Committee under the rules adopted by the PCAOB.PCAOB and the SEC, including the independent auditor’s communication of its Audit Report to the Audit Committee. This report includes critical audit matters, which are audit matters that were communicated or required to be communicated to the Audit Committee relating to accounts or disclosures that are material to Prudential Financial’s financial statements and that involved especially challenging, subjective or complex auditor judgment. The Audit Committee received from the independent auditor the written disclosures and the letters required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence and has discussed with the independent auditor its independence. The Audit Committee has discussed with, and received regular status reports from, Prudential Financial’s Chief Auditor and independent auditor on the overall scope and plans for their audits of Prudential Financial, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. The Audit Committee meets with the Chief Auditor and the independent auditor, with and without management present, to discuss the results of their respective audits, in addition to private meetings with the Chief Financial Officer, Chief Risk Officer, General Counsel, Chief Actuary and Chief Compliance Officer. In determining whether to reappoint PricewaterhouseCoopers as Prudential Financial’s independent auditor, the Audit Committee took into consideration a number of factors, including the length of time the firm has been engaged, the firm’s independence and objectivity, PwC’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the Lead Audit Partner, historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee, and the results of a management survey of PwC’s overall performance, data related to audit quality and performance, including recent PCAOB inspection reports on the firm, and the appropriateness of PwC’s fees, both on an absolute basis and as compared with itsPrudential Financial’s peers. In addition, the Audit Committee reviewed and amended its Charter and received reports as required by its policy for the receipt, retention and treatment of financial reporting concerns received from external and internal sources.
Based on the reports and discussions described in this report and subject to the limitations on the roles and responsibilities of the Audit Committee referred to above and in its Charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of Prudential Financial and Management’s Annual Report on Internal Control Over Financial Reporting be included in the Annual Report on Form10-K for the fiscal year ended December 31, 20172021 for filing with the SEC. THE AUDIT COMMITTEEThe Audit Committee
Martina Hund-Mejean (Chair) Wendy E. Jones George Paz Douglas A. Scovanner (Chair) Martina Hund-Mejean
George Paz
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28 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
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| | Item 3 Advisory Vote to Approve Named Executive Officer Compensation |
Item 3–Advisory Vote to Approve
Named Executive Officer Compensation
The Board is committed to excellence in governance and recognizes our shareholders’ interest in our executive compensation program. As a part of that commitment, and in accordance with SEC rules, our shareholders are being asked to approve anon-binding nonbinding advisory resolution on the compensation of our named executive officers, as reported in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to endorse or not endorse our 20172021 executive compensation program and policies for our named executive officers through the following resolution: RESOLVED, that the shareholders of Prudential approve, on an advisory basis, the compensation of the Company’s named executive officers set forth in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in this Proxy Statement. This vote is not intended to address any specific item of compensation, but rather our overall compensation policies and practices relating to our named executive officers. Accordingly, your vote will not directly affect or otherwise limit any existing compensation or award arrangement of any of our named executive officers. Because your vote is advisory, it will not be binding upon the Board. The Board and the Compensation Committee will, however, as it hasthey have done in prior years, take into account the outcome of the “Say on Pay” vote when considering future compensation arrangements. TheAt the 2017 Annual Meeting, shareholders approved, on an advisory basis, holding “Say on Pay” votes annually, and the Board has adopted a policy providing for annual “Say on Pay” votes. Accordingly, the next “Say on Pay” vote will occur in 2019.2023.
The Board of Directors recommends that shareholders vote“FOR” the advisory vote to approve our named executive officer compensation.
| The Board of Directors recommends that shareholders vote “FOR” the advisory vote to approve our named executive officer compensation. |
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| | | Item 4 Shareholder Proposal to Adopt the Right to Act by Written Consent |
Item 4–Shareholder Proposal Regarding an
Independent Board Chairman
In accordance with SEC rules, we have set forth below a shareholder proposal, along with the supporting statement of the shareholder proponent. The Company is not responsible for any inaccuracies it may contain. The shareholder proposal is required to be voted on at our Annual Meeting only if properly presented. As explained below, our Board unanimously recommends that you vote“AGAINST” the shareholder proposal. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California, 90278, beneficial owner of 80 shares of Common Stock, is the proponent of the following shareholder proposal. The proponent has advised us that a representative will present the proposal and related supporting statement at the Annual Meeting. Independent Board ChairmanProposal 4—Shareholder Right to Act by Written Consent
Shareholders request that our Boardboard of Directors to adopt as policy, and amend our governing documents as necessary, to require henceforth that the Chair of the Board of Directors, whenever possible, to be an independent member of the Board. The Board would have the discretion to phase in this policy for the next CEO transition, implemented so it does not violate any existing agreement. If the Board determines that a Chair who was independent when selected is no longer independent, the Board shall select a new Chair who satisfies the requirements of the policy within a reasonable amount of time. Compliance with this policy is waived if no independent director is available and willing to serve as Chairman. This proposal requests that alldirectors take the necessary steps to permit written consent by the shareholders entitled to cast the minimum number of votes that would be takennecessary to accomplishauthorize the above.action at a meeting at which all shareholders entitled to vote thereon were present and voting.
Caterpillar is an exampleHundreds of a company recently changing course and naming an independent board chairman. Caterpillar had strongly opposed amajor companies enable shareholder proposal for an independent board chairman as recently as its 2016 annual meeting. Wells Fargo also reversed itself and named an independent board chairman in 2016.
It was reported that 53% of the Standard & Poors 1,500 firms separate these 2 positions (2015 report).action by written consent. This proposal topic won 50%-plusmajority shareholder support at 5 major U.S.13 large companies in 2013 including 73%a single year. This included 67%-support at Netflix.
A number of institutional investors said that a strong, objective board leader can best provide the necessary oversight of management. Thus, the California Public Employees’ Retirement System’s Global Principles of Accountable Corporate Governance recommends that a company’s board should be chaired by anboth Allstate and Sprint. This proposal topic also won 63%-support at Cigna Corp. in 2019. This proposal topic would have received higher votes than 63% to 67% at these companies if more shareholders had access to independent director, as does the Council of Institutional Investors. An independent director serving as chairman can help ensure the functioning of an effective board.proxy voting advice.
This proposal topic also won impressive 43%-support85% support at our 2017the 2021 Conagra annual meeting.meeting without any special effort by the proponent. Taking action by written consent in place of a meeting is also a means shareholders can use to raise important matters outside the normal annual meeting cycle like the election of a new director. For instance the replacement of the director who received the most against votes. Mr. Thomas Baltimore received 67 million against votes in 2021 which equaled a negative percentage of 29%. This 43%-support wouldwas up to 40-times the negative votes of other Prudential directors. Mr. Charles Lowrey, Prudential Chairman and CEO, received the third highest negative votes of any Prudential director in 2021. If shareholders have been higher (perhaps 48%) if small shareholders had the same accessright to corporate governance information as large shareholders. This proposal rocketed from 23% support in 2012 to 43% support in 2017 (both votes with the same CEO). 2017 was the first time this topic was on our ballot since 2012.
This proposal is more important atact by written consent, Mr. Baltimore and Prudential because with Karl Krapek as Lead Director we may be lacking an important assetinspired to correct the factors behind Mr. Baltimore’s against votes and other directors might avoid getting in a Lead Director—independence.the situation Mr. Krapek had the 2nd longest tenure on our board and received our highest negative votes. Long-tenure can impair the independence of a director. Plus Mr. Krapek controlled 33% of the Executive Pay Committee.Baltimore is in.
Please vote yes: Shareholder Right to enhance the oversight of our CEO: Independent Board Chairman—Act by Written Consent—Proposal 4 
| | | | 30 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Item 4 Shareholder Proposal to Adopt the Right to Act by Written Consent | |
|
| Board of Directors’ Statement in Opposition to the Proposal Your Board recommends a vote against this proposal because it believes that the written consent process, as required by the proposal, is less transparent and less democratic than a shareholder meeting and deprives shareholders of a forum for discussion or the opportunity for them to make inquiries about proposed actions. Matters that are sufficiently important to require shareholder approval should be communicated in advance so they can be considered and voted upon by all shareholders. This proposal would allow a group of shareholders to take action by written consent without prior communication to all shareholders of the proposed actions or the reasons for the actions. We believe this proposal disenfranchises shareholders who would not have the opportunity to participate in the proposed process. Permitting shareholder action by written consent has the potential to create confusion, and the Board does not believe it is appropriate for a widely held public company. Our Board believes that every shareholder should have the opportunity to consider and vote upon shareholder actions. Our shareholders have the right to call a special meeting at a 10% threshold. This right, as well as our established shareholder communication and engagement mechanisms, provides shareholders the opportunity to raise important matters outside the annual meeting process. The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company has a strong governance structure in place, and the Board’s philosophy and policies are responsive to shareholders. In addition to the unrestricted right for shareholders to call special meetings at a 10% threshold, the Company has many other governance provisions in place that empower shareholders, including: ● a majority voting standard in uncontested director elections; ● no Shareholder Rights Plan; ● an annually elected Board; ● no supermajority voting provisions; ● independent board leadership, including a strong Lead Independent Director and strong committee chairs; and ● proxy access. Requiring that all shareholder business be acted upon at a meeting helps to confirm complete information is presented to shareholders to obtain their approval and is more democratic. The Board believes that the risk of abuse associated with the right to act by written consent, including bypassing procedural protections that offer transparency and advance notice, both of which are afforded with a shareholder meeting, make this proposal not in the best interest of all shareholders. In summary, the Board believes the adoption of this proposal is unnecessary because of our commitment to good corporate governance and the right of shareholders to call a special meeting at a 10% threshold. Furthermore, the Board believes that the written consent proposal would circumvent the protections, procedural safeguards and advantages provided to all shareholders by shareholder meetings. |
| Therefore, Your Board Recommends That You Vote “AGAINST” This Proposal. |
| | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | | 31 | |
| | | | | Item 4—Shareholder Proposal Regarding an
| | | Independent Board ChairmanVoting Securities and Principal Holders
|
Board of Directors’ Statement in Opposition to the Proposal
Your Board recommends a vote against this proposal because it believes that it is in the best interest of our shareholders for the Board to have the flexibility to determine the best person to serve as Board Chair, whether that person is an independent director or the CEO.
Independent Oversight of Board Structure
As documented in Prudential’s Corporate Governance Principles and Practices, at a minimum of one executive session per year, independent directors review the Board’s leadership structure and discuss whether the position of Chairman of the Board should be held by the CEO or by an independent director. In addition, in the event of a successor to the position of CEO, the independent directors will also review the leadership structure. When making this decision, the Board takes into consideration governance best practices, the facts and circumstances of our Board and feedback that we receive from our shareholders. The Committee has most recently determined that Board leadership is provided through the combination of a unified Chair and CEO, a clearly defined and significant Lead Independent Director role, active and strong committee chairs, and independent-minded, skilled, engaged, diverse and committed directors. This decision included the aspect that as a highly regulated company, as well as being a Systemically Important Financial Institution subject to group-wide supervision, there are additional benefits to a combined CEO and Chair.
Our Board proactively asks for feedback from our shareholders and regularly meets with our shareholders in various settings. In 2017, directors, as well as the Company’s Chief Governance Officer, engaged with investors regarding many issues including our Board leadership structure. This feedback was presented to the Board. Many of our shareholders have expressed the opinion that there is no “one size fits all” solution and that the Board’s fiduciary responsibility is best fulfilled by retaining the flexibility to choose the most effective leadership structure for the particular set of facts facing the Company at any point in time. For the past two years, a majority of our shareholders have voted against proposals that would mandate the Company’s leadership structure and eliminate Board discretion.
Lead Independent Director
Our Board believes that its current structure and governance allows it to provide effective oversight of management. Specifically, Thomas Baltimore, our Lead Independent Director, who was elected by the independent directors last May, has significant responsibilities that are described in detail in this Proxy Statement, including approval of all Board agendas and information sent to the Board, shareholder engagement, oversight of the annual Board evaluation process by an independent third party, Board refreshment and succession planning, and guiding the Board’s overall governance processes.
We also refer you to the Lead Independent Director’s letter which is contained in this Proxy Statement, as well as the Lead Independent Director’s video and Lead Independent Director Charter at www.prudential.com/governance. Mr. Baltimore’s skills, experience, commitment and the time he devotes to serve his role all make him well qualified to serve as our Lead Independent Director.
Our independent directors meet regularly in executive sessions, at the beginning and end of each Board meeting. These are chaired by our Lead Independent Director with no member of management present. Independent directors use these executive sessions to discuss matters of concern, as well as evaluations of the CEO and senior management, management and Board successions, talent planning, matters to be included on Board agendas, and additional information the Board would like management to provide to them, as well as other relevant matters.
Independent Committee Chairs
The Chairs of our Board committees are strong, independent directors. These Chairs shape the agenda and information presented to their committees. Oversight of critical issues within these committees is owned by the independent directors.
All directors have full access to all members of management and all employees on a confidential basis.
The proposed policy would unduly impair the Board’s flexibility to annually elect the individual it deems best suited to serve as Board Chair. Shareholders of Prudential are best served when the Board has the flexibility to elect the individual it deems best suited to serve as Board Chair at any particular time, depending on the circumstances. Our Board believes that a clearly defined and significant Lead Independent Director role, independent and strong committee chairs, experienced, diverse and committed directors, and frequent executive sessions provide a framework for effective direction and oversight by the Board.
THEREFORE, YOUR BOARD RECOMMENDS THAT YOU VOTE“AGAINST” THIS PROPOSAL.
| | | | | 32 | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |
Voting Securities and Principal Holders
Beneficial Ownership The following table shows allthose entities that are the beneficial owners of more than 5% of the Company’s Common Stock: | | | | | | | | | Name and Address of Beneficial Owner Owner | | Amount and Nature | | | Percent of Class | | | | | The Vanguard Group 100 Vanguard Boulevard
Malvern, PA 19355 | | | Percent of Class
30,542,505(1) | | | | 8.08% | | | | | BlackRock, Inc. 55 East 52nd Street
New York, NY 10055 | |
| 29,984,04531,718,312(2)
| (1)
| | | 7.1%
| | The Vanguard Group
100 Vanguard Boulevard, Malvern, PA 19355
| |
| 30,620,961
| (2)
8.4% | | | 7.22%
| |
| (1) | Based on information as of December 31, 20172021 contained in a Schedule 13G/A filed with the SEC on January 29, 2018February 10, 2022 by The Vanguard Group. |
| The Schedule 13G/A indicates that The Vanguard Group has sole dispositive power with respect to 28,977,425 of the shares, shared dispositive power with respect to 1,565,080 of the shares, sole voting power with respect to none of the shares, and shared voting power with respect to 607,485 of the shares. |
| (2) | Based on information as of December 31, 2021 contained in a Schedule 13G/A filed with the SEC on February 3, 2022 by BlackRock, Inc. The Schedule 13G/A indicates that BlackRock, Inc. has sole dispositive power with respect to all of the shares, sole voting power with respect to 25,031,47827,292,112 of the shares, and shared dispositive and voting power with respect to none of the shares. |
(2) | Based on information as of December 31, 2017 contained in a Schedule 13G/A filed with the SEC on February 12, 2018 by The Vanguard Group. The Schedule 13G/A indicates that The Vanguard Group has sole dispositive power with respect to 29,945,849 of the shares, shared dispositive power with respect to 675,112 of the shares, sole voting power with respect to 597,982 of the shares, and shared voting power with respect to 93,625 of the shares. |
To our knowledge, except as noted above, no person or entity is the beneficial owner of more than 5% of our Common Stock. The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 9, 2018,11, 2022, by: each Director and Named Executive Officer, and
all Directors and Executive officers of Prudential Financial as a group.
| | | | | | | | | | | | | | | | | | | | | Name of Beneficial Owner | | Common Stock | | | Number of shares
Subject to
Exercisable Options | | | Total Number of Shares
Beneficially Owned1 | | | Director Deferred Stock
Units / Additional
Underlying Units2,3,4 | | | Total Shares
Beneficially Owned
Plus Underlying
Units | | | Thomas J. Baltimore, Jr. | | | 250 | | | | | | | | 250 | | | | 42,020 | | | | 42,270 | | | Gilbert F. Casellas | | | 500 | | | | | | | | 500 | | | | 29,942 | | | | 30,442 | | | Martina Hund-Mejean | | | 128 | | | | | | | | 128 | | | | 17,356 | | | | 17,484 | | | Karl J. Krapek | | | 1,000 | | | | | | | | 1,000 | | | | 49,293 | | | | 50,293 | | | Peter R. Lighte | | | 80 | | | | | | | | 80 | | | | 5,715 | | | | 5,795 | | | George Paz | | | 500 | | | | | | | | 500 | | | | 5,712 | | | | 6,212 | | | Sandra Pianalto | | | 201 | | | | | | | | 201 | | | | 5,289 | | | | 5,490 | | | Christine A. Poon | | | 11,583 | | | | | | | | 11,583 | | | | 13,156 | | | | 24,739 | | | Douglas A. Scovanner | | | 12,000 | | | | | | | | 12,000 | | | | 13,299 | | | | 25,299 | | | Michael A.Todman | | | 450 | | | | | | | | 450 | | | | 5,715 | | | | 6,165 | | | John R. Strangfeld | | | 281,331 | 5 | | | 738,934 | | | | 1,020,265 | | | | 293,483 | | | | 1,313,748 | | | Mark B. Grier | | | 382,193 | | | | 411,832 | | | | 794,025 | | | | 200,620 | | | | 994,645 | | | Robert Falzon | | | 52,936 | | | | 71,181 | | | | 124,117 | | | | 100,311 | | | | 224,428 | | | Charles F. Lowrey | | | 44,818 | | | | 116,687 | | | | 161,505 | | | | 121,057 | | | | 282,562 | | | Stephen Pelletier | | | 9,114 | | | | 11,041 | | | | 20,155 | | | | 147,788 | | | | 167,943 | | All directors and executive officers as a group (22 persons) | | | 913,537 | | | | 1,658,922 | | | | 2,572,459 | | | | 1,314,062 | | | | 3,886,521 | |
| ● | | each Director and Named Executive Officer; and |
(1)● | | all current Directors and Executive Officers of Prudential Financial as a group. |
| | | | | | | | | | | | | | | | | | | | | | Name of Beneficial Owner | | Common
Stock | | | Number of Shares
Subject to Exercisable
Options | | | Total Number of Shares
Beneficially Owned1 | | | Director Deferred Stock
Units / Additional
Underlying Units2,3,4,5 | | | Total Shares Beneficially
Owned Plus Underlying
Units | | | | | | | | Thomas J. Baltimore, Jr. | | | 500 | | | | | | | | 500 | | | | 69,578 | | | | 70,078 | | | | | | | | Gilbert F. Casellas | | | 500 | | | | | | | | 500 | | | | 36,155 | | | | 36,655 | | | | | | | | Martina Hund-Mejean | | | 128 | | | | | | | | 128 | | | | 29,181 | | | | 29,309 | | | | | | | | Wendy E. Jones | | | 1,000 | | | | | | | | 1,000 | | | | 4,284 | | | | 5,284 | | | | | | | | Karl J. Krapek | | | 38,455 | | | | | | | | 38,455 | | | | 7,309 | | | | 45,764 | | | | | | | | Peter R. Lighte | | | 80 | | | | | | | | 80 | | | | 15,028 | | | | 15,108 | | | | | | | | George Paz | | | 500 | | | | | | | | 500 | | | | 15,024 | | | | 15,524 | | | | | | | | Sandra Pianalto | | | 451 | | | | | | | | 451 | | | | 14,510 | | | | 14,961 | | | | | | | | Christine A. Poon | | | 11,583 | | | | | | | | 11,583 | | | | 15,747 | | | | 27,330 | | | | | | | | Douglas A. Scovanner | | | 14,398 | | | | | | | | 14,398 | | | | 21,800 | | | | 36,198 | | | | | | | | Michael A. Todman | | | 3,325 | | | | | | | | 3,325 | | | | 15,028 | | | | 18,353 | | | | | | | | Charles F. Lowrey | | | 87,571 | | | | 213,253 | | | | 300,824 | | | | 313,336 | | | | 614,160 | | | | | | | | Robert M. Falzon | | | 122,008 | 6 | | | 171,202 | | | | 293,210 | | | | 249,817 | | | | 543,027 | | | | | | | | Scott G. Sleyster | | | 80,525 | | | | 143,534 | | | | 224,059 | | | | 140,419 | | | | 364,478 | | | | | | | | Andrew F. Sullivan | | | 13,989 | | | | 21,685 | | | | 35,674 | | | | 122,860 | | | | 158,534 | | | | | | | | Kenneth Y. Tanji | | | 4,141 | | | | 73,749 | | | | 77,890 | | | | 96,682 | | | | 174,572 | | | | | | | | | All directors and executive officers as a group (22 persons) | | | 430,092 | | | | 750,892 | | | | 1,180,984 | | | | 1,464,517 | | | | 2,645,501 | |
| 1 | Individual directors and executive officers, as well as all directors and executive officers as a group, beneficially own less than 1% of the shares of Common Stock outstanding, as of March 9, 2018.11, 2022. |
(2)2 | Includes the following number of shares or share equivalents in deferred units through the Deferred Compensation Plan for Non-Employee Directors and the Prudential Insurance Company of America Deferred Compensation Plan, as to which no voting or investment power exists: Mr. Baltimore 42,020;69,578; Mr. Casellas, 29,942;36,155; Ms. Hund-Mejean, 17,356;29,181; Ms. Jones 4,284; Mr. Krapek 49,293;7,309; Mr. Lighte, 5,715;15,028; Mr. Paz, 5,712;15,024; Ms. Pianalto, 5,289;14,510; Ms. Poon, 13,156;15,747; Mr. Scovanner, 13,299;21,800; Mr. Todman, 5,715;15,028; Mr. Strangfeld, 42,709;Sleyster 16,573; and Mr. Pelletier, 32,697.Sullivan 4,021. |
(3)3 | Includes the following shares representing the target number of shares to be received upon the attainment of ROE goals under the performance share program described under “Compensation Discussion and Analysis”: Mr. Strangfeld, 94,619; Mr. Grier, 75,695;Lowrey, 233,293; Mr. Falzon, 37,848;186,015; Mr. Lowrey, 45,655;Sleyster, 91,508; Mr. Sullivan 88,378; and Mr. Pelletier, 43,194.Tanji 71,685. |
(4)4 | Includes the following unvested stock options: Mr. Strangfeld, 156,155; Mr. Grier, 124,925;Lowrey, 31,157; Mr. Falzon, 62,463;24,775; Mr. Lowrey, 75,402;Sleyster, 14,265; Mr. Sullivan 12,388; and Mr. Pelletier, 71,897.Tanji 9,760. |
(5)5 | Includes 4,400the following unvested restricted stock units: Mr. Lowrey, 48,886; Mr. Falzon, 39,027; Mr. Sleyster, 18,073; Mr. Sullivan 18,073; and Mr. Tanji 15,237. |
| 6 | Includes 1,100 shares held by the John and Mary K. StrangfeldThe Falzon Family Private Foundation. |
Compliance With Section 16(a) of the Exchange Act
Each Director, executive officer of the Company and greater than 10% beneficial owner of Common Stock is required to report to the SEC, by a specified date, his or her transactions involving our Common Stock. Based solely on a review of the copies of reports furnished to the Company and written representations that no other reports were required to be filed, the Company
believes that for transactions during 2017 all reports required by Section 16(a) were timely filed, except that a report for Lucien Alziari, Senior Vice President and Chief Human Resources Officer, reporting an award of restricted stock units was not timely filed due to an administrative oversight.
| | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |
32 | | 33 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | |
| |
| | | Compensation of Directors |
Compensation of Directors
The Corporate Governance and Business Ethics Committee reviews the compensation of ournon-employee nonemployee directors periodically (generally every three years) and recommends changes to the Board when it deems appropriate. In 2017, the Committee engaged James F. Reda, an independent compensation consultant of Arthur J. Gallagher & Co., to review the existing Director compensation program as the program had last been evaluated in 2013. It was determined that no changes to the compensation program were warranted. The following table describes the components of thenon-employee nonemployee directors’ compensation for 2017:2021: | | | Compensation Element | | Director Compensation Program | | | | Annual Cash Retainer | | $150,000, which may be deferred, at the director’s option | | | | Annual Equity Retainer | | $150,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting) | | | | Board and Committee Fees | | None | | | | Chair Fee | | $35,000 for the Audit and Risk Committees $30,000 for the Compensation Committee $20,000 for all other committees* committees(1) | | | | Lead Independent Director Fee | | $50,000 | | | Meeting Fee for membersMembers of the Company’s Corporate Social Responsibility Oversight Committee**Committee(2) | | $1,250 per meeting (fee contingent on meeting attendance) | | | | New Director Equity Award(one-time grant) | | $150,000 in restricted stock units that vest after one year | | | | Stock Ownership Guideline | | Ownership of Common Stock or deferred stock units that have a value equivalent to six times the annual cash retainer to be satisfied within six years of joining the Board*** Board(3) |
*(1) | Includes other standing committees and anynon-standing committee of the Board that may be established from time to time, but excludingexcludes the Executive Committee. |
**(2) | This is a committee comprised ofcomprising members of management and the Board. This Committeecommittee typically meets on a separate day following the Board and Board committee meetings. Thenon-employee nonemployee directors on this Committeecommittee currently consist of Mr.Messrs. Casellas Ms. Pianaltoand Lighte and Ms. Poon.Pianalto. The Corporate Social Responsibility Oversight Committee met three times in 2017.2021. |
***(3) | As of December 31, 2017,2021, each of ournon-employee nonemployee directors satisfied this guideline, with the exception of Ms. Pianalto,Jones, who joined the Board in July 2015, and Messrs. Lighte, Paz and Todman, whoJanuary 2021. Ms. Jones has six years from the date she joined the Board in March 2016, each of whom has six years to satisfyfulfill the guideline after he or she joined the Board.stock ownership requirement. For purposes of the stock ownership guideline, once anon-employee nonemployee director satisfies his or her stock ownership level, the director will be deemed to continue to satisfy the guideline without regard to fluctuation in the value of the Common Stock owned by the director. |
We maintain a Deferred Compensation Plan forNon-Employee Nonemployee Directors (the “Plan”). Since 2011, 50% of the annual Board and committee retainer has been awarded in restricted stock units that vest after one year (or if earlier, on the date of the next Annual Meeting). Anon-employee nonemployee director can elect to invest theany cash portion of his or her retainer, fees andvested equity retainer upon vesting in accounts under the Plan that replicate investments in either shares of our Common Stock or the Fixed Rate Fund. The Fixed Rate Fund which accrues interest in the same manner as funds invested in the Fixed Rate Fund offered under the Prudential Employee Savings Plan (“PESP”). As elected by the director, the Plan provides for distributions to commence upon or following termination of Board service or while a director remains on the Board. Each director receives dividend equivalents on the restricted stock units contained in his or her deferral account under the Plan, which are equal in value to the dividends paid on our Common Stock. The dividend equivalents credited to the account are then reinvested in the form of additional sharestock units. Under our director compensation program, if anon-employee nonemployee director satisfies the stock ownership guideline, the restricted stock units granted as the annual equity retainer are payable upon vesting in cash or shares of our Common Stock (at the director’s option), and may be deferred beyond vesting at the director’s election. If a director does not satisfy the stock ownership guideline, the restricted stock units are automatically deferred until termination of Board service. DIRECTOR STOCK OWNERSHIP GUIDELINE
Each director is expected, within six years of joining the Board, to own Common Stock or deferred stock units that have a value equivalent to six times his or her annual cash retainer.
| | | | | 34 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement33 |
| | | | |
| | Compensation of Directors | |
|
20172021 Director Compensation Table
| | | | | | | | | | | | Fees Earned or Paid in | | | | | | | | | Fees Earned or Paid in | | | | | | | | | Name | | Cash($) | | | Stock Awards($)(1) | | | All Other Compensation($)(2) | | | Total($) | | | Cash($) | | | Stock Awards($)(1) | | | All Other Compensation($)(2) | | | Total($) | | | Thomas J. Baltimore | | | 224,643 | | | | 150,000 | | | | | | 374,643 | | | $ | 170,000 | | | | $150,000 | | | | | $ | 320,000 | | | Gilbert F. Casellas | | | 173,750 | | | | 150,000 | | | | 4,100 | | | | 327,850 | | | $ | 173,750 | | | | $150,000 | | | | | $ | 323,750 | | James G. Cullen3 | | | 62,500 | | | | 0 | | | | | | 62,500 | | | | Martina Hund-Mejean | | | 150,000 | | | | 150,000 | | | | 5,000 | | | | 305,000 | | | $ | 185,000 | | | | $150,000 | | | | | $ | 335,000 | | | Wendy E. Jones(3) | | | $ | 150,000 | | | | $300,000 | | | | | $ | 450,000 | | | Karl J. Krapek | | | 218,368 | | | | 150,000 | | | | 5,000 | | | | 373,368 | | | $ | 150,000 | | | | $150,000 | | | | | $ | 300,000 | | | Peter R. Lighte | | | 150,000 | | | | 150,000 | | | | | | 300,000 | | | $ | 153,750 | | | | $150,000 | | | | | $ | 303,750 | | | George Paz | | | 150,000 | | | | 150,000 | | | | 5,000 | | | | 305,000 | | | $ | 150,000 | | | | $150,000 | | | | $5,000 | | | $ | 305,000 | | | Sandra Pianalto | | | 153,750 | | | | 150,000 | | | | 5,000 | | | | 308,750 | | | $ | 153,750 | | | | $150,000 | | | | $5,000 | | | $ | 308,750 | | | Christine A. Poon | | | 173,750 | | | | 150,000 | | | | | | 323,750 | | | $ | 225,000 | | | | $150,000 | | | | | $ | 375,000 | | | Douglas A. Scovanner | | | 185,000 | | | | 150,000 | | | | | | 335,000 | | | $ | 185,000 | | | | $150,000 | | | | | $ | 335,000 | | | Michael A. Todman | | | 150,000 | | | | 150,000 | | | | 5,000 | | | | 305,000 | | | $ | 180,000 | | | | $150,000 | | | | | $ | 330,000 | |
| (1) | Represents amounts that are in units of our Common Stock. The amounts reported represent the aggregate grant date fair value of the restricted stock units granted during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Codification Topic 718.718 (“ASC Topic 718”). Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Stock on the date of grant, which is then recognized, subject to market value changes, over the requisite service period of the award. The aggregate balance in each of the non-employeenonemployee directors’ accounts in the Deferred Compensation Plan denominated in units (which includes all deferrals from prior years and earned units deferred in 2017)2021) and their value as of December 31, 2021 were as follows: Mr. Baltimore: 42,02069,578 and $4,831,460;$7,531,123 ; Mr. Casellas: 29,94236,155 and $3,442,731;$3,913,417; Ms. Hund-Mejean: 17,35629,213 and $1,995,593;$3,162,015; Ms. Jones: 2,230 and $241,375; Mr. Krapek: 49,2937,309 and $5,667,709;$791,126; Mr. Lighte: 5,71515,028 and $657,111;$1,626,631; Mr. Paz: 5,71215,024 and $656,766;$1,626,198; Ms. Pianalto: 5,28914,546 and $608,129;$1,574,459; Ms. Poon: 13,15615,747 and $1,512,677;$1,704,455; Mr. Scovanner: 13,29923,113 and $1,529,119;$2,501,751; and Mr. Todman: 5,71515,028 and $657,111.$1,626,631. |
| (2) | Represents amounts for 2017Amounts represent matching charitable contributions. |
| (3) | Mr. Cullen retired fromMs. Jones received a grant of restricted stock units valued at $150,000 upon joining the Board on May 9, 2017.in January 2021. |
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| Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 35Compensation
Discussion and Analysis |
Compensation Discussion and Analysis
In this section, we describe the material components of our executive compensation program for our NEOs, whose compensation is set forth in the 20172021 Summary Compensation Table and other compensation tables contained in this Proxy Statement. We also provide an overview of our executive compensation philosophy and our executive compensation program. In addition, we explain how and why the Compensation Committee of our Board (the “Committee”) arrived at the specific compensation decisions involving the NEOs for 2017. NAMED EXECUTIVE OFFICERS (NEOS)
John R. Strangfeld, our Chairman and Chief Executive Officer;
Robert M. Falzon, our Executive Vice President and Chief Financial Officer;
Mark B. Grier, our Vice Chairman;
Charles F. Lowrey, our Executive Vice President and Chief Operating Officer, International Businesses; and
Stephen Pelletier, our Executive Vice President and Chief Operating Officer, U.S. Businesses.
Executive Summary
Business Highlights
OUR BUSINESS
We are a global financial services business with $1.394 trillion of assets under management as of December 31, 2017, and with operations in the United States, Asia, Europe, and Latin America. Through our subsidiaries and affiliates, we offer a wide array of financial products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management. For more information about our business, please see “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form10-K filed with the SEC on February 16, 2018.
2017 BUSINESS HIGHLIGHTS
The year 2017 was a successful one for the Company, as our business mix and solid fundamentals led to strong results. During the year, we continued to focus on our balanced business mix, the effective execution of our business strategies, capital deployment and disciplined risk management. Consequently, we were able to deliver strong results, despite a low interest rate environment in key markets, while continuing to seize new business opportunities and further differentiating ourselves from the competition.
We achieved the following accomplishments in 2017:2021.
| | | | | | | | | We reported net income of $7.86 billion, or $17.86 per share of Common Stock in 2017, compared to $4.37 billion, or $9.71 per share, in 2016, based on U.S. generally accepted accounting principles (“GAAP”).
Net income in 2017 includes a benefit of $2.87 billion, or $6.64 per share, as a result of the enactment of the Tax Cuts and Jobs Act.
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| | | | | We reportedafter-tax adjusted operating income of $4.65 billion, or $10.58 per share of Common Stock in 2017, compared to $4.11 billion, or $9.13 per share, in 2016.(1)
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| | | 2021 Named Executive Officers (NEOs)
| | For the purposes of this CD&A, the Summary Compensation DiscussionTable, and Analysis: Executive Summary other tables set forth in this Proxy Statement, our NEOs for the 2021 fiscal year were: |
| | | | | | | | Charles F. Lowrey | | Kenneth Y. Tanji | | Robert M. Falzon | | Scott G. Sleyster | | Andrew F. Sullivan | | Chairman & CEO | | Executive Vice President & CFO | | Vice Chairman | | We reported GAAP book valueExecutive Vice
President & Head of $125.24 per share of Common Stock as of December 31, 2017, compared to $104.91 per share as ofyear-end 2016.
Adjusted book value amounted to $88.28 per share of Common Stock as of December 31, 2017, compared to $78.95 per share as ofyear-end 2016.(1)
GAAP book value per share and adjusted book value per share as of December 31, 2017 include benefits of $6.59 and $2.74, respectively, as a result of the enactment of the Tax Cuts and Jobs Act.
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Businesses
| | Executive Vice
President & Head of
U.S. Businesses |
Compensation Highlights | ● | | Pay for Performance. Incentive program payouts were consistent with company performance. Our annual incentive program paid out above target (reflecting strong results in 2021). The Performance Share component of our Long-Term Incentive Program delivered less than the target number of shares (corresponding to less strong ROE performance over the 2019-2021 period). |
| ● | | Balanced Metrics Supporting the Execution of Our Strategy. In 2021, the design of our annual incentive program incorporated a new metric related to our cost savings commitments, we incorporated Book Value per Share into our Performance Share Program, and we expanded the list of companies against which we measure relative performance to better capture our competition in the current marketplace. |
| ● | | Performance Emphasis in Pay Mix. On average, 91% of our NEOs’ total direct compensation for 2021 was performance based. |
| ● | | Inclusion and Diversity Performance Modifier. Following the successful achievement of our goal to increase diverse representation among our senior management over 2018-2020 by 5%, we again incentivized Prudential’s senior leadership to increase Company diversity over 2021-2023 using a modifier within our long-term incentive program, this time with multiple diversity goals, greater reach within the organization, an emphasis on Black and LatinX representation, and additional focus on improving the lived experience of our Black colleagues. |
| ● | | Ensuring Compensation Motivates and Rewards Strong Performance.Upon reviewing the compensation packages for our Chairman & CEO and Vice Chairman versus their external peers, the Committee decided that their 2021 results and outstanding leadership warranted increases to their base salaries and target incentive compensation levels for 2022. |
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| | | | | | | | We reported return on average equity based on net income of 16% for 2017, compared to 8.8% for 2016.
We reported operating return on average equity of 13% for 2017, compared to 12% for 2016.(1)Compensation Discussion and Analysis
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2021 NEOs’ Total Direct Compensation at a Glance (thousands) The following illustrations depict the amount and mix of pay delivered to our CEO and other NEOs for the 2021 performance year, including salary paid in 2021 and incentive awards granted in February 2022 for 2021 performance. 
(1) Represents averages for the NEOs as a group, excluding Mr. Lowrey. | | | Assets under management reached $1.394 trillion at December 31, 2017, an increase from $1.264 trillion a year earlier.
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| | | We paid quarterly Common Stock dividends totaling $3.00 per share during 2017, an increase of 7% from 2016.
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(1) | Consolidated adjusted operating income (“AOI”) and operating return on average equity arenon-GAAP measures of financial performance. Adjusted book value is anon-GAAP measure of financial position. We use earnings per share (“EPS”) based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. For a discussion of these measures and for reconciliations to the nearest comparable GAAP measures, see Appendix A to this Proxy Statement. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
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| | Compensation Discussion and Analysis: Executive Summary
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Executive Compensation Highlights
The Compensation Committee has instituted a number of changes to our executive compensation program over the last several years to align with evolving competitive and governance practices, respond to feedback from our shareholders and strengthen the link to performance and rigor of our program. These changes have included:
• | | Strengthening the rigor of our Annual Incentive Program by setting target and maximum awards for senior executives, including the NEOs. | |
• | | Establishing Long-Term Incentive Target Opportunities for NEOs. | |
• | | Requiring deferral of 30% of each NEO’s annual incentive award into the Book Value Performance Program. | |
• | | Beginning in 2018, adding a modifier to the Performance Shares Program that will increase (or decrease) the number of shares and units earned by up to 10% depending on the increase (or decrease) in the representation of diverse persons among our senior management during the 2018 through 2020 performance period. | |
• | | Increasing our CEO’s stock ownership guideline from five to seven times base salary. | |
• | | Expanding the clawback policy for executive officers to cover all incentive-based awards, to address a material financial restatement or misconduct, and to require disclosure to shareholders of action taken with regard to compensation recovery following a material financial restatement or misconduct. | |
• | | Diversifying the performance metrics used to determine awards under our Annual Incentive Program and applying a greater weight to relative ROE performance versus peer companies as a factor under our Annual Incentive Program beginning in 2016 and Performance Share Program in 2017. | |
• | | Excluding earnings from specified classes ofnon-coupon investments outside of a range of-10% to +10% of the earnings on these investments that are included in the Company’s EPS guidance range from the performance measures in our Annual Incentive Plan beginning in 2016 and Performance Shares Program in 2017. | |
Total Direct Compensation Summary
| | | Consistent with our compensation philosophy, approximately 92% of our CEO’s total direct compensation for 2017 was performance-based.
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(1) | Performance-based compensation |
(2) | Includes mandatory deferral of 30% of annual incentive |
(3) | Based on average amounts |
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| | | | | | | | | | | | | | WHAT WE DOCompensation Discussion and Analysis
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| | Establish target and maximum awards under our Annual Incentive Program.
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| | CEO participation in our severance plan.
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| | Establish target awards in our Long-Term Incentive Program.
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| | Executive officer severance payments and benefits exceeding 2.99 times salary and cash bonus without shareholder approval.
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| | Apply a formulaic framework based on the Company’s financial results relative topre-established targets for each incentive program.
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| | Exercise limited or no discretion to increase formulaic incentive compensation awards.
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| | Excise tax“gross-ups” upon change in control.
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| | Use balanced performance metricsfor annual incentive and performance share/unit awards that consider both the Company’s absolute performance and its relative performance versus peers.
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| | Discounting, reloading orre-pricing of stock options without shareholder approval.
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| | Rigorous goal setting aligned to our externally disclosed annual and multi-year financial targets.
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| | “Single-trigger” accelerated vesting of equity-based awards upon change in control.
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| | 90% or more of our NEOs’ total direct compensation is performance based.
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| | Multi-year guaranteed incentive awards for senior executives.
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| | Defer 30% of our NEOs�� annual incentive awards into the Book Value Performance Program.
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| | Employment agreements with NEOs
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| | Impose stock ownership requirements, and retention of 50% of equity based awards.
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| | Employee hedging or pledging of Company securities.
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| | Maintain an enhanced clawback policy covering all executive officer incentive-based awards for material financial restatements and misconduct.
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| | Limit perquisitesto items that serve a reasonable business purpose.
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| | Closely monitor risks associated with our compensation program and individual compensation decisions to ensure they do not encourage excessive risk taking.
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| | Tie long-term diversity improvement to our performance share and unit awards.
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Consideration of Most Recent “Say on Pay” Vote | | | Following our 20172021 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on executiveNEO compensation (the “Say on Pay” Vote) that was held at the meeting with respect to the 20162020 compensation actions and decisions for Mr. StrangfeldLowrey and the other NEOs. Approximately 93%92.1% of the votes cast on the proposal were voted in support of the compensation of our NEOs. After careful consideration, and given the recent extensive changes we have made, in the recent past, the Committee did not make any changes to our executive compensation program and policies as a result of the most recent Say on Pay vote. | |  |
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| | Compensation Discussion and Analysis: Executive Summary 92.1%
of the votes cast on the proposal were voted in support of the compensation of our NEOs. |
Opportunity for Shareholder Feedback The Committee carefully considers feedback from our shareholders regarding our executive compensation program. Shareholders are invited to express their views to the Committee as described under “Communication with Directors” in this Proxy Statement. In addition, the advisory vote on the compensation of theour NEOs provides shareholders with an opportunity to communicate their views on our executive compensation program. You should read this CD&A in conjunction with the advisory vote that we are conducting on the compensation of theour NEOs (see “Item 3—Advisory Vote to Approve Named Executive Officer Compensation”). This CD&A, as well as the accompanying compensation tables, contains information that is relevant to your voting decision. | | | | | 40 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement37 |
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| | Compensation Discussion and Analysis | |
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Philosophy and Objectives of Our Executive Compensation Program The philosophy underlying our executive compensation program is to provide an attractive, flexible, and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of executive officers and other key employees necessary to deliver sustained high performance to our shareholders, customers, and communities where we have a strong presence.communities. Our executive compensation program is an important component of these overall human resources policies. Equally important, we view compensation practices as a means for communicating our goals and standards of conduct and performance and for motivating and rewarding employees in relation to their achievements. Overall, the same principles that govern the compensation of all our salaried employees apply to the compensation of our executive officers. Within this framework, we observe the following principles: Retain and hiretop-caliber executives: Executive officers should have base salaries and employee benefits that are market competitive and that permit us to hire and retain world-class talent in our crital roles and high-caliber individuals at all levels;
| ● | | Hire and retain top-caliber executives: Executive officers should have base salaries and employee benefits that are market-competitive and that facilitate hiring and retention of world-class talent in our critical roles and high-caliber individuals at all levels; |
| ● | | Pay for performance: A significant portion of the compensation of our executive officers should vary with business performance and each individual’s contribution to that performance; |
Pay for performance: A significant portion of the annual compensation of our executive officers should vary with annual business performance and each individual’s contribution to that performance;
| ● | | Reward long-term growth and profitability: Executive officers should be rewarded for achieving long-term results; |
Reward long-term growth and profitability: Executive officers should be rewarded for achieving long-term results;
Tie compensation to business performance:A significant portion of our executive officers’ compensation should be tied to measures of performance of our businesses;
| ● | | Align compensation with shareholder interests: The interests of our executive officers should be linked with those of our shareholders through the risks and rewards of the ownership of our Common Stock; and |
Align compensation with shareholder interests: The interests of our executive officers should be linked with those of our shareholders through the risks and rewards of the ownership of our Common Stock; and
Reinforce succession planning process: The overall compensation program for our executive officers should reinforce our robust succession planning process.
| ● | | Reinforce succession planning process: The overall compensation program for our executive officers should reinforce our robust succession planning process. |
2017 Incentive Compensation Programs
To ensurecreate a strong link between our incentive compensation opportunities and our short-term and longer-term objectives, we use two specific programs: our Annual Incentive Program and our Long-Term Incentive Program. Each year we review the metrics and design of both programs to ensure they are closely linked to our business strategy, are easily understood by employees, and are aligned with shareholder interests. Annual Incentive Program. The| ● | | Annual Incentive Program. Our Annual Incentive Program is designed to reward strong financial and operational performance that furthers our short-term strategic objectives. For 2021 and 2022, financial and operational performance is determined based on the following three equally weighted annual performance metrics: |
| – | | EPS as compared to our pre-established EPS target; |
| – | | Cost savings, on a run-rate basis, from our transformation initiatives as compared to a pre-established target; and |
| – | | ROE relative to the median ROE of the Performance Peer Group. |
| ● | | Long-Term Incentive Program. Our Long-Term Incentive Program ties the majority of our executives’ target total compensation to the achievement of our multiyear financial results and other goals related to long-term value creation. For grants made in February 2021 and February 2022, we awarded: |
| – | | performance shares that reward the achievement of our ROE performance versus our peers, increases in adjusted book value per share (“BVPS”) and increases in the market value of our Common Stock; and |
| – | | restricted stock units (“RSUs”) that reward increases in the market value of our Common Stock. |
Grants prior to reward strong financial and operational performance that furthersFebruary 2021 under our short-term strategic objectives. Financial performance is primarily determined based on three equally-weighted performance metrics: (i) EPS achievement relative to our externally disclosed EPS targets; (ii) year-over-year growth in EPS; and (iii) relative ROE as compared to a group of peer companies. Long-Term Incentive Program. Our Long-Term Incentive Program, consistssome of three parts that incent long-term value creation:which are still outstanding, were made in the form of performance shares, stock options, and units that reward the achievement of our long-term ROE goals and increases in the market value of our Common Stock;cash-settled book value units that reward increases in book value per share; and stock options that reward increases in the market value of our Common Stock.units. | Inclusion and Diversity We view inclusion and dimensions of diversity as a moral and business imperative and a long-standing source of competitive advantage. As such, we also include goals related to our commitments to advance inclusion, diversity, and racial equity as metrics within grants of performance shares in certain years. This inclusion and diversity metric applies a modifier of plus or minus 10% to our Company performance results. The performance shares granted to all U.S.-based recipients in February 2021 contain an inclusion and diversity modifier that holds Prudential leaders accountable to advance diverse representation across our organization and improve the lived experience of our Black colleagues. |
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| | Compensation Discussion and Analysis |
The figure below illustrates the portions of our NEO’s 2017 target total direct compensation that are driven by the various performance metrics under our incentive programs*. Our programs are designed to align the interests of our executives with the interests of our shareholders and to link the drivers of short-term and long-term value creation with our executive compensation.
*The image above is a graphical representation of the components and drivers of total direct compensation. The illustration represents the average target compensation values for our NEOs.
**Represents Book Value Performance Program (11%) and 30% mandatory deferral of Annual Incentive Awards (equates to 11.4% of total direct compensation).
Our Annual Incentive Program and Long-Term Incentive Program share one common performance measure: our relativereturn-on-equity (“ROE”), that is, our ROE as compared to the ROE of the North American Life Insurance subset of our peer group. The Committee believes that our relative ROE is a core value proposition for our shareholders and, accordingly, that relative ROE performance over both the short-term and long-term merits inclusion as a performance measure in each of our incentive programs.
ANNUAL COMPENSATION-RELATED RISK EVALUATION
We monitor the risks associated with our compensation program, as well as the components of our program and individual executive compensation decisions, on an ongoing basis. Our compensation risk assessment occurs in two parts: a review of the Company’s compensation programs and a review of compensation decisions and payments, with a focus on our senior executives. In January 2018, our Chief Risk Officer presented to the Committee a review of Prudential’s compensation programs, including the executive compensation program, to assess the risks arising from our compensation policies and practices. The Committee agreed with the review’s findings that these risks were within our ability to effectively monitor and manage and that these compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company. Also, in June 2017, our Chief Risk Officer presented a study of the payouts under the compensation programs. The Committee agreed with the study’s findings that our compensation practices, including payouts, adhere to best market practices and do not encourage undue or excessive risk-taking.
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How We Make Compensation Decisions
Role of the Compensation Committee
The Committee is responsible to our Board for overseeing the development and administration of our compensation and benefits policies and programs. The Committee, which consists of three independent directors, is responsible for the review and approval of all aspects of our executive compensation program. Among its duties, the Committee is responsible for formulating the compensation recommendations for our CEO and approving all compensation recommendations for our officers at the senior vice president level and above, including:
annual review and approval of incentive program design, goals and objectives for alignment with our compensation and business strategies;
evaluation of individual performance results in light of these goals and objectives;
evaluation of the competitiveness of each executive officer’s total compensation package; and
approval of any changes to the total compensation package, including, but not limited to, base salary, annual and long-term incentive award opportunities, payouts, and retention programs.
Following review and discussion, the Committee submits its recommendations for compensation for these executive officers to the independent members of our Board for approval.
The Committee is supported in its work by our Chief Human Resources Officer, his staff, and the Committee’s executive Compensation Consultant, as described below.
The Committee’s charter, which sets out its duties and responsibilities and addresses other matters, can be found on our website at www.prudential.com/governance.
Role of the Chief Executive Officer
Within the framework of the compensation programs approved by the Committee and based on management’s review of market competitive positions, each year our CEO recommends the level of base salary increase (if any), the annual incentive award, and the long-term incentive award value for our officers at the senior vice president level and above, including the other NEOs. These recommendations are based upon his assessment of each executive officer’s performance, the performance of the individual’s respective business or function, and retention considerations. The Committee reviews our CEO’s recommendations and approves any compensation changes affecting our executive officers as it determines in its sole discretion.
Our CEO does not play any role with respect to any matter affecting his own compensation, and is not present when the Committee discusses and formulates his compensation recommendation.
Role of the Compensation Consultant
The Committee has retained Frederic W. Cook & Co., Inc. as its executive Compensation Consultant. The Compensation Consultant reports directly to the Committee and the Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Committee, as requested, and communicates with the Committee Chair between meetings.
The Compensation Consultant provides various executive compensation services to the Committee pursuant to a written consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program design and our award values in relationship to performance.
During 2017, the Compensation Consultant performed the following specific services:
Provided a presentation on executive compensation trends and external developments.
Provided an annual competitive evaluation of total compensation for the NEOs, as well as overall compensation program share usage, dilution, and fair value expense.
Provided recommendations on CEO total direct compensation to the Committee at its February meeting, without prior review by our CEO.
Reviewed with our CEO his compensation recommendations with respect to the other NEOs.
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Reviewed Committee agendas and supporting materials in advance of each meeting, and raised questions/issues with management and the Committee Chair, as appropriate.
Reviewed drafts and commented on the CD&A and related compensation tables for the Proxy Statement.
Reviewed the compensation peer group used for competitive analyses.
Attended Committee meetings when requested by the Committee Chair.
The Compensation Consultant provided no services to management during 2017.
The Committee retains sole authority to hire the Compensation Consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.
The total amount of fees paid to the Compensation Consultant for services to the Committee in 2017 was $121,264. The Compensation Consultant received no other fees or compensation from us, except for $3,400 to participate in a general industry survey of long-term compensation. The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to the listing standards of The New York Stock Exchange and SEC rules and concluded that no conflict of interest exists that would prevent the Compensation Consultant from serving as an independent consultant to the Compensation Committee.
Compensation Peer Group The Committee uses compensation data compiled from a group of peer companies in the insurance, asset management, and other diversified financial services industries generally selected from the Standard & Poor’sS&P 500 Financials Indexindex (the “Peer“Compensation Peer Group”). The Committee periodically reviews and updates the Compensation Peer Group, as necessary, upon recommendation of the Compensation Consultant. For 2017, the Committee, along with the Compensation Consultant, reviewed the implications of the spin-off of Brighthouse Financial, Inc. from MetLife, Inc. in considering the composition of the Peer Group and determined that no changes to the Peer Group were warranted at this time.its compensation consultant. We believe the Compensation Peer Group represents the industries with which we currently compete for executive talent, and also includes our principal business competitors.talent. | | | | | | | | | | | | | | | | | | | | Although included within the broad financial services sector, we exclude from the Compensation Peer Group companies such as property and casualty insurers and investment banking firms that predominantly offer different products, have substantially different business models and with whom we have less direct competition for executive talent. For 2017, theOur Compensation Peer Group consistedwas unchanged in 2021, consisting of the following 20 companies:
| | | | | | | | | North American Life Insurance Companies | | Consumer Finance
Companies
| | Consumer Finance Companies | | | | Asset Management and
Custody Banks | | | | Diversified Banks | | | | | Diversified Banks●
| | | | | | | | • AFLAC,Incorporated Inc.
• LincolnNational● Lincoln National
• ManulifeFinancial ● Manulife Financial
Corporation
•● MetLife,Inc.
• PrincipalFinancial● Principal Financial Group
• SunLife● Sun Life Financial Inc.
| | | | • AmericanExpress
● American Express
Company • CapitalOne● Capital One Financial
Corporation
| | | | • AmeripriseFinancial,
● Ameriprise Financial, Inc. • TheBank● The Bank of New York
Mellon Corporation
•● BlackRock,Inc.
• FranklinResources,● Franklin Resources, Inc.
• NorthernTrust● Northern Trust
Corporation
• StateStreet● State Street Corporation
| | | | • Bankof
● Bank of America Corporation • CitigroupInc.● Citigroup Inc.
• JPMorganChase● JPMorgan Chase & Co.
• PNCFinancial● PNC Financial Services Group, Inc.
• U.S.Bancorp● U.S. Bancorp
• WellsFargo● Wells Fargo & Company
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Performance Peer Group ROE performance versus peers is a key performance measure under our Annual Incentive Program and our Performance Shares Program. For performance year 2020, we measured our relative ROE performance against the North American Life Insurance subset of the Compensation Peer Group (as listed above). In the 2021 performance year, the Committee expanded our Performance Peer Group to better reflect our competitors in the current marketplace for the purpose of measuring relative ROE for Performance Shares and Annual Incentive Awards. For the 2021 performance year the Performance Peer Group is shown below. For performance year 2022, Athene was removed from the Performance Peer Group due to its merger with Apollo. | | | | | | | | | | | | | ● AFLAC, Inc. ● American Equity Investment Life
Insurance Co. ● Athene ● Equitable Holdings ● Brighthouse Financial | | ● CNO Financial Group ● Globe Life ● Lincoln National ● MetLife, Inc. | | ● Principal Financial Group ● Reinsurance Group of America ● Unum Group ● Voya Financial |
Use of Competitive Data We compete in several different businesses, most of which are involved in helping individuals and institutions grow and protect their assets. These businesses draw their key employees from different segments of the marketplace. Our executive compensation program is designed with the flexibility to be competitive and motivational within the various marketplaces in which we compete for executive talent, while being subject to centralized design, approval, and control.
The Committee relies on various sources of compensation information to ascertain the competitive market for our executive officers, including the NEOs. | | | | | 44 | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |
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To assess the competitiveness of our executive compensation program, we analyze Peer Grouppeer group compensation data obtained from peer company proxy materials, as well as compensation and benefits survey data provided by national compensation consulting firms, such as Willis Towers Watson, McLagan Partners and Mercer. As part of this process, we measure actual pay levels within each compensation component and in the aggregate. We also review themarket practices related to pay mix, of our compensation components with respect to fixed versus variable, short-term versus long-term,incentive program design, and cash versus equity-based pay. This information is then presented to the Committee for its reviewother compensation-related policies and use.practices. The Committee generally comparesreviews the compensation of each NEOexecutives in relation to both the 50th and the 75th percentiles of theour Compensation Peer Group at least once per year. A broad range of data is considered for similar positions, as wethe Committee to ascertain whether the NEOs are significantlyappropriately positioned above or below the median of the Peer Group in terms of size. In addition, the Committee takes into accountto properly reflect various factors, such as our performance, within the Peer Group, the unique characteristics of the individual’seach position, and anyapplicable succession and retention considerations. In general, compensation levels for an executive officer who is new to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance who are viewed as critical to retain would be positioned at the higher end of the competitive range. Generally, differences in the levels of total direct compensation among the NEOs are primarily driven by tenure and an established track record of performance in their current and prior roles, along with the scope of their responsibilities, differences in the competitive market pay range for similar positions, and considerations of internal equity. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 39 |
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ComponentsHow We Make Compensation Decisions
In addition to rigorous policies, which are structured to create a strong and direct link between pay and performance, we are committed to protect and further our shareholders’ interests. Feedback obtained each year through engagement with our shareholders is incorporated into compensation-related decision-making. Our pay governance processes hold the three independent directors who comprise the Compensation Committee responsible for the oversight and approval of Ourvarious activities and decisions.(1) These activities and decisions are guided by the recommendations and advice of both management (including our CEO, Chief Human Resources Officer, and the Executive Compensation Program The principal components of ourLeadership Team (“ELT”)) and the Committee’s independent executive compensation program, purpose, key characteristic and type of performance measured (if applicable) are presented in the following table. We measure the program’s competitiveness both by comparing relevant market data with the target and actual amounts paid at each executive officer positionconsultant (FW Cook), as well as by salary grades, which are composed of many positions that we consider to have similar responsibilities.
Total Direct Compensationoutlined below:
| | | | | | | Compensation ComponentActivity
| | Levels Impacted | | Management’s
Role | | PurposeCompensation
| | Key CharacteristicConsultant’s Role
| | Performance Measured
| Base SalarySet Competitive Target Compensation
| | • Compensate executive officers fairly for the responsibility of the position heldCEO / Vice Chair
| | Fixed
None(2) | | Individual
Recommend | Annual Incentive Awards
| ELT | | • Motivate and reward executive officers for achieving our short-term business objectives
• Provide balance by rewarding performance relative to our Peer Group
Recommend | | Variable
Advise | | SVPs | | Corporate and Individual
| Long-Term Incentive Awards
Recommend | | • Motivate executive officers by linking incentives to the achievement of our multi-year financial goals, our relative performance, and the performance of our Common Stock and book value over the long term
• Reinforce the link between the interests of our executive officers and shareholders
| | Variable
| | Corporate
Advise upon Request | Other Forms of Compensation
| Compensation Component
| | Purpose
| | Key Characteristic
| | | Health & Welfare, and Retirement Plans
| | • Provide benefits that promote employee health and support employees in attaining financial security
| | Fixed
| | | PerquisitesMake Performance Based Compensation Decisions, Including Long-Term Incentive Grants and Other Personal BenefitsApproving Cash/Stock Payouts(3)
| | • Provide a business-related benefit to our Company, and assist in attracting and retaining executives
CEO / Vice Chair | | Fixed
None(2) | | Recommend | | ELT | | Recommend | | Advise | | SVPs | | Recommend | | Review | | | | | Post-Employment CompensationOversee Incentive Program Design, Terms and Conditions, Performance and Funding
| | CEO / Vice Chair | | None(2) | | Advise on Design | | ELT | | Recommend | | Advise on Design | | SVPs | | Recommend | | Review | | | | | • Provide temporary income following an executive’s involuntary termination of employment, and in the case of a change of control, also provide continuity of managementPromote/Appoint Employees to Senior Executive Positions(3)
| | CEO / Vice Chair
ELT & SVPs | | N/A
FixedRecommend
| | Advise
Advise upon Request | | | | | Incorporate Evolving Competitive and World-Class Governance Practices in Our Program | | N/A | | Adopt and Enforce | | Advise and/or Recommend |
| (1) | The Committee’s charter, which sets out its full list of duties and responsibilities and addresses other matters, can be found on our website at www.prudential.com/governance. |
| (2) | Our CEO and Vice Chairman do not play any role with respect to matters affecting their own compensation and are not present when the Committee discusses their recommendations. |
| (3) | In addition to Compensation Committee approval of the items listed, additional approval by the full Board of Directors is also required for awards, payouts, and appointments to senior executive positions. |
In keeping with our commitmentThe compensation consultant reports directly to diversitythe Committee and inclusionprovided no services to management in practice, the performance shares and units awarded in February 2018 to executives at the senior vice president level and above, and equivalents, are subject to a performance objective intended to improve the representation of diverse persons among our senior management over the 2018 through 2020 performance period:2021. The compensation consultant’s advisory services primarily include:
If we meet our goal| ● | | providing expert input on industry trends, as well as executive compensation developments from a broader perspective; |
| ● | | assessing the extent to which our pay levels and practices are competitively aligned with market practice; and |
| ● | | facilitating objective, data-based compensation decisions in succession and annual pay planning processes. |
The Committee retains sole authority to hire the compensation consultant, approve its compensation, determine the nature and scope of increased representationits services, evaluate its performance, and terminate and replace (or supplement) its engagement with an alternative consultant at any time. The total amount of diverse persons by 5 percentage pointsfees paid to the compensation consultant for services to the Committee in 2021 was $166,426. The compensation consultant received no other fees or more over this period, payouts will be increased by upcompensation from us. The Committee has assessed the independence of the compensation consultant pursuant to 10%.the listing standards of the NYSE and SEC rules and concluded that no conflict of interest exists that would prevent the compensation consultant from serving as an independent consultant to the Committee. If there is no change in representation, payouts will be decreased by 5%.
If such representation decreases over this period, payouts will be decreased by up to 10%.
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The following discussion contains information regarding certain performance measures and goals. These measures and goals are disclosed in the limited context of our executive compensation program. Shareholders should not apply these performance measures and goals to other contexts.
FORMULAIC FRAMEWORK FOR INCENTIVE PROGRAMSFormulaic Framework for Incentive Programs
Awards underThe determination of award levels for each of our incentive programs are funded at the level determinedis formulaically driven by our financial and operating results relative topre-established targets and performance relative to peer companies under formulas for each incentive program.companies. The Board believes it generally should exercise limited or no discretion to increase our NEOs’ formula-based awards. Each year, the Compensation Committee reviews the metrics underlying the formulaic approach of both our annual and long-term incentive programs and makes changes as appropriate to align with business strategy and shareholder interests. The metrics approved by the Committee for awards granted, earned, paid out, or still outstanding are described throughout this CD&A. For the annualpurposes of our incentive program, the formula uses three equally weightedprograms:
| ● | | EPS is Earnings Per Share of Common Stock (diluted), based on after-tax adjusted operating income (“AOI”); |
| ● | | ROE is operating return on average equity (and for peer companies is based on a comparable financial metric determined from quarterly financial reports); and |
| ● | | Adjusted book value per share, or BVPS, is based on Prudential Financial’s total equity excluding certain balance sheet items. |
| ● | | Cost savings is the cumulative cost savings, measured on a run-rate basis, that we have achieved from our transformation initiatives. |
The EPS, ROE and BVPS compensation performance metrics: (i) EPS results relative tometrics are non-GAAP financial measures. Please see Appendix A for our externally disclosed EPS targets; (ii) year-over-year growth in EPS;calculation of these measures and (iii) relative ROE as compareda reconciliation to the North American Life Insurance subset of our Peer Group. Similarly, under our performance shares program beginning with awards made in 2017, payments are determined based on our average ROE results over the three-year performance period, as compared to both a performance scale set at the start of the period and the ROE results of the North American Life Insurance subset of our Peer Group over that period, giving equal weight to each. The Book Value Performance Program tracks our adjusted book value per share. Adjusted book value per share excludes the impact on attributed equity of accumulated other comprehensive income and of foreign currency exchange rate remeasurement included in net income or loss, as described in Appendix A to this Proxy Statement.most directly comparable GAAP financial measures. To more accurately reflect the operating performance of our business, the Committee has approved apre-determined predetermined framework of adjustments to our reported financial results for incentive program purposes. Generally, these adjustments are made to excludeone-time or unusual items and external factors that are inconsistent with the assumptions reflected in our financial plans. The standard adjustments to reported financial results under our formulaic framework may vary from year to year and may have either a favorable or unfavorable impact on the funding of the Annual Incentive Award Poolmeasures used in our annual and may affect other performance measures, such as the calculation of adjusted book value per share under our Book Value Performance Program. long-term incentive programs. Standard adjustments to reported financial results are made: to exclude the impact of market unlockings in our individual annuities business (including, for 2017, adjustments to reflect updated estimates of profitability based on market performance in relation to our assumptions);
| ● | | to exclude the impact of changes in our assumptions for investment returns, actuarial experience, and customer behavioral expectations (e.g., mortality, morbidity, lapse, and similar factors and reserve refinements); | |
to exclude the impact of changes in our assumptions for investment returns, actuarial experience, and customer behavioral expectations (mortality, morbidity, lapse, and similar factors and reserve refinements);
| ● | | to exclude integration costs or make other adjustments related to unplanned merger and acquisition activity (for 2021, we added back the earnings that were included in our 2021 plan attributable to our Full Service Retirement business that was held for sale and excluded the gain on the sale of PGIM’s joint venture in Italy); |
to exclude integration costs associated with merger and acquisition activity (none in 2017);
for accounting changes not included in our annual operating plan (none in 2017);
to exclude earnings from specified classes ofnon-coupon investments outside of a range of-10% to
| ● | | to exclude variable investment income (i.e., earnings from non-coupon investments and prepayment fee and call premium income from fixed maturity | |
| | | +10% investments) outside of the earnings on these investmentsa range of -10% to +10% of this income that areis included in the Company’s EPS guidance rangeour annual financial plan (this resulted in an adjustment for 2017,2021, as earnings on these investmentsthis income exceeded our EPS guidance expectations by more than 10%); and
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for other items not considered representative of the results of operations for the period or not included in guidance, as approved by the Committee:
| ¡ | | for 2017, we excluded from EPS the additional tax expense resulting from the limitation on the deductibility of executive compensation costs under the Tax Cuts and Jobs Act, which was adopted subsequent to the issuance of guidance, and |
| | ¡● | | for accounting-related changes not included in our annual operating plan (there were none in 2021); and | |
| ● | | for other items not considered representative of the results of operations for the period and not included in our financial plan, as approved by the Committee (for 2021, we excluded from adjusted book value per share asunplanned costs relating to a debt reduction initiative and underwriting losses due to COVID-19 outside of year-end 2017 for purposesa range of our Book Value Performance Program the positive impact attributable to the adoption of the Tax Cuts and Jobs Act.forecasted mortality results). | |
Direct Compensation Components Annually, the Compensation Committee reviews thea competitive analysis of total direct compensation for the NEOs. Based on this evaluation, the Committee may selectively adjust the base salary, annual incentive award target, and long-term award target amounts of the NEOs. In determining any adjustments, the Committee takes into account the following factors: level of experience and impact in the role; changes in market data; and compensation positioning overall and by component. Executives new to their current roles are positioned towards the lower end of their competitive range while executives with more experience are generally positioned at the higher end of the range. BASE SALARYBase Salary
Base salary is the principal fixed component of the total direct compensation of our executive officers, including the NEOs, and is determined by considering the relative importance of the position, the competitive marketplace, and the individual’s performance and contributions. Base salaries | | | | | | | | 46 | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |
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are reviewed annually and, typically, are increased infrequently and then mostly at the time of a change in position or assumption of new responsibilities. SALARY DECISIONS
None of the NEOsEffective February 28, 2022, Messrs. Lowrey and Falzon received an increase to base salary for the 2017 performance year.increases of $100,000 and $40,000, respectively, in recognition of their time in role and 2021 performance. Neither had received a salary increase since their promotion to their current positions on December 1, 2018.
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Annual Incentive Awards At least once a year,The Committee reviews the Committee reviewsstructure of the Annual Incentive Program at least once per year, including the enterprise-wide metrics, targets, and makes changes as needed.standard adjustments that comprise our formulaic framework. The Committee approvedselects metrics that it believes provide a balanced view of the 2017 Annual Incentive Program for our most senior executives, includingCompany’s performance each year, with targets that are linked to the NEOs, on the following termsCompany’s financial plan and conditions.
TARGET AWARD OPPORTUNITIESstrategic objectives.
The Committee left unchanged the target and maximum annual incentive award opportunity for each of the NEOs for 2017, which were as follows: | | | | | | | | | | Named Executive Officers | | Target Annual Incentive Award
Opportunity | | | Maximum Annual Incentive Award Opportunity | | John R. Strangfeld | | | $6,000,000 | | | | $12,000,000 | | Robert M. Falzon | | | $3,000,000 | | | | $ 6,000,000 | | Mark B. Grier | | | $5,100,000 | | | | $10,200,000 | | Charles F. Lowrey | | | $4,000,000 | | | | $ 8,000,000 | | Stephen Pelletier | | | $4,000,000 | | | | $ 8,000,000 | |
Each year, the Committee establishes an annual Performance Factor that is the primary driver in determining the amountfunding of the annual incentive award for each NEO and most of our U.S.-based, non-investment professional population is determined by applying the Final Performance Factor to each individual’s annual incentive target for the performance year. The Final Performance Factor is derived from a formulaic calculation using the metrics and targets established by the Committee at the outset of the performance period.
Guided by our “pay for performance” philosophy, each individual’s actual annual incentive award may be higher or lower than the calculated level of funding, recognizing differences in individual performance. At the most senior levels, including and especially for our NEOs, we typically apply less differentiation, reflecting our belief that our senior leadership team has a collective responsibility for the performance outcomes selected by the Committee for the year. Each NEO’s award opportunity range is $0 to a maximum of 1.5 times the individual’s target for each performance year. For the 2022 performance year, the target annual incentive awards for Messrs. Lowrey and Falzon have been increased from their 2021 targets to $3,750,000 and $3,000,000, respectively, in recognition of their outstanding leadership in areas such as the execution of our NEOs.transformation and positioning Prudential at the forefront of efforts to drive change in societal issues such as racial equity. Pre-Established 2021 and 2022 Annual Incentive Award Opportunity Ranges 
For 2017, we used the following process2021 performance year, each NEO’s annual incentive award is equal to determine thishis target multiplied by the 2021 Final Performance Factor:Factor. Establish InitialCalculating the 2021 Final Performance Factor
Consistent with the formulaic framework for our Annual Incentive Program
The Committee’s principal consideration in determining annual incentive awards was the Committee established an Initial2021 Final Performance Factor based onof 1.215, representing the followingaverage of three financial metrics, giving equal weight to each (i.e., each metric is weightedone-third):metrics: EPS for 2017, on an AOI basis, assessed relative to our EPS target range (the “EPS Target Factor”);
| ● | | EPS, on an AOI basis, assessed relative to our EPS target range (the “EPS Target Factor”); |
Growth in EPS, on an AOI basis, for 2017 as compared to 2016 (the “EPS Growth Factor”); and
| ● | | Cost savings, on a run-rate basis, from transformation initiatives, assessed relative to our target for cumulative cost savings achieved by year-end 2021 (the “Cost Savings Factor”); and |
ROE for 2017 as compared to the median ROE for 2017 achieved by the North American Life Insurance subset of the Peer Group (the “Relative ROE Factor”).
The Initial Performance Factor was applied to the target annual incentive award opportunity for each NEO to determine that NEO’s annual incentive funding.
| ● | | ROE as compared to the median ROE achieved by the Performance Peer Group (the “Relative ROE Factor”). |
For purposes of the 2017 Annual Incentive Program, we use information for 2021 AOI, EPS and ROE were calculatedand cumulative cost savings that we estimate as follows: EPS is Earnings Per Share of Common Stock (diluted), based onafter-tax adjusted operating income (“AOI”).
ROE is determined usingafter-tax AOI divided by adjusted book value, and for our peer companies is determined based on the comparable financial metric from each peer company’s quarterly financial reports, in each case, based on a rolling quarterly average for the four quarters ended September 30, 2017.
For more information regarding our 2017 annual measures of EPS, AOI, ROE, and adjusted book value, see Appendix A to this Proxy Statement.
We applied ourpre-set formulaic framework to our January 2018 estimate of our 2017 reported AOI, EPS, and ROE.2022.
Standard Adjustments We make standard adjustments to estimated AOI, EPS, and ROE under our formulaic framework that may vary from year to year and may have either a favorablenet positive or unfavorablenegative impact on the funding of the Annual Incentive Award Pool.our estimates. For 2017,2021, these standard adjustments resulted in the following changesa net negative impact to EPS: | | | | | EPS (January Estimate)
| | $ | 10.42 | | Market Unlockings
| | | -0.22 | | Actuarial Assumptions
| | | +0.91 | | Non-Coupon Investments
| | | -0.06 | | Other Items
| | | +0.03 | | EPS (Annual Incentive Program)
| | $ | 11.08 | |
The market unlockings adjusted our reported results for our Individual Annuities business to exclude the impact of actual equity market performance relative to our plan assumption. The adjustment for 2017 market unlockings reducedAOI, EPS under the Annual Incentive Program by approximately $0.22.and ROE.
Annually, based on Company-specific data, industry data, and the current long-term economic outlook, we update our actuarial assumptions on long-term market returns (equity and fixed income) and customer behavioral expectations (e.g., mortality, morbidity, and | | | | 42 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
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lapses). These updates and related refinements result in a cumulative revaluation of our reserves and the carrying values of our deferred acquisition costs. While GAAP requires these updates to be reported in the current period, they are not representative of annual performance since they relate to outcomes in both prior and future years. For these reasons, they are excluded from EPS under the Annual Incentive Program (regardless of whether they are positive or negative). In 2017,2021, the adjustments to account for these updates increased EPS under the Annual Incentive Program by approximately $0.91.$0.06. We also excludelimit the impact of variable investment income on the calculation of EPS under the Annual Incentive Program. We do so by excluding earnings from specified classes ofnon-coupon investments and prepayment fee and call premium income that are outside of a range of-10% to +10% of the earnings on these investmentsfrom that are includedassumed in our EPS guidance range.annual financial plan. For 2017,2021, this | | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 47 |
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adjustment reduceddecreased EPS under the Annual Incentive Program by approximately $0.06,$3.07 as these earnings on these investmentssignificantly exceeded our expectations. In 2021, our financial plan included a full year of earnings attributable to our Full Service Retirement business that we subsequently agreed to sell and reported in divested and run-off businesses. We added back those earnings that were excluded from EPS guidance expectationsas a result. We also excluded from EPS the earnings impact from the unplanned sale of PGIM’s joint venture in Italy. As a result of these M&A adjustments, we decreased EPS under the Annual Incentive Program by more than 10%.approximately $0.07. Other items not considered representative of operating results or included in our 2017 EPS guidance rangeannual financial plan are also excluded from EPS under the program. In 2017,2021, we added back to EPS unplanned costs relating to a debt reduction initiative and excluded the additional tax expense resulting from the limitation on the deductibilityEPS underwriting losses due to COVID-19 outside of executive compensation costs under the Tax Cuts and Jobs Act, which was adopted subsequent to the issuancea forecasted range of guidance. This adjustmentmortality results. These adjustments increased EPS under the Annual Incentive Program by approximately $0.03.$1.39. TheseIn the aggregate, these standard adjustments under ourpre-set preset formulaic framework had a net positivenegative effect of $0.66 to$1.69 on EPS under the Annual Incentive Program.
| | | | | | | | | | | | | EPS (January Estimate) | | $ | 14.37 | | | | Actuarial Assumption Updates | | | +0.06 | | | | Variable Investment Income | | | -3.07 | | | | M&A Adjustments | | | -0.07 | | | | Other Items | | | +1.39 | | | | EPS (Annual Incentive Program) | | $ | 12.68 | |
Using EPS and ROE as adjusted above, we take the following steps to calculate the Final Performance Factor: Step 1: Establish EPS Target Factor The following table on the right depicts the EPS scale target range for 2017. This target range2021 which is aligned to our publicly disclosedpre-established EPS guidance range.target. Our adjusted EPS for 20172021 of $11.08$12.68 per share of Common Stock corresponds to an EPS Target Factor of 1.117.1.228. | | | | | | | | | | 2021 EPS | | | EPS Target Factor(1) | | | | | | | | $14.56 or above | | | 1.50 | | | | | | | $11.45 | | | 1.05 | | | | Target Range | | | $11.20 | | | 1.00 | | | | | | | | $10.95 | | | 0.95 | | | | | | | | $7.83 or below | | | 0.50 |
| | | | | | | | | | | | 2017 EPS(1) | | | EPS Target Factor(2) | | | | | | $7.28 or below | | | | 0.50 | | | | | $10.15 | | | | 0.95 | | | Target Range | | | $10.40 | | | | 1.00 | | | | | | $10.65 | | | | 1.05 | | | | | | $13.52 or above | | | | 1.50 | |
(1) | Determined on an AOI basis, subject to certain adjustments. |
(2) | The EPS Target Factor is interpolated on a straight-line basis between the EPS data points. |
Step 2: Establish EPS GrowthCost Savings Factor The table on the right depicts a range of potential cost savings aligned to our pre-established target of $500 million of cumulative cost savings from transformation initiatives to be achieved by year-end 2021. Our adjusted EPS for 2017run-rate cost savings achieved by year-end 2021 was $11.08 per share of Common Stock, an increase of $1.35 per share from our adjusted EPS of $9.73 for 2016. This$625 million, which corresponds to an EPS Growtha Cost Savings Factor of 1.139.1.375. | | | | Cost Savings (in millions) | | Cost Savings Factor(1) | | | $650 or More | | 1.500 | | | $600 | | 1.250 | | | $500 | | 1.000 | | | $400 | | 0.500 | | | Below $400 | | 0.000 |
Step 3: Establish Relative ROE Factor Our adjusted ROE for 20172021 was 13.9%12.9%, which is 0.90.5 percentage points higher than the median 20172021 ROE for the North American Life Insurance subset of thePerformance Peer Group. This corresponds to a Relative ROE Factor of 1.075 based1.042. | | | | ROE +/-Peer Median | | Relative ROE Factor(1) | | | 4% or more | | 1.50 | | | 3% | | 1.25 | | | 0% | | 1.00 | | | -3% | | 0.75 | | | 4% or less | | 0.00 |
(1) Interpolated on a straight-line basis between the scale depicted below.data points displayed. | | | | | | | | | | | | ROE +/- Peer Median(1) | | | | Relative ROE Factor(2) | | | | | | 3% | | | | 1.25 | | | | | | 2% | | | | 1.17 | | | | | | 1% | | | | 1.08 | | | | | | 0% | | | | 1.00 | | | | | | -1% | | | | 0.92 | | | | | | -2% | | | | 0.83 | | | | | | -3% | | | | 0.75 | | |
(1) | Determined on an AOI basis, subject to certain adjustments as discussed above. |
(2) | The Relative ROE Factor is interpolated on a straight-line basis between the ROE +/- Peer Median data points. |
Step 4: Determine Final Performance Factor.
Weighting each of the EPS Target Factor (1.117), the EPS Growth Factor (1.139), and the Relative ROE Factor (1.075) byone-third, we arrived at an Initial Performance Factor of 1.110.
Once the Initial Performance Factor is determined, the Board believes it generally should not exercise meaningful discretion to increase the Performance Factor for strategic or other considerations. For the last four years, the Committee has not made any discretionary adjustments based on these considerations.
Based on the foregoing, the Final Performance Factor for 2017 was determined to be 1.110. This factor was then applied to the target award opportunity for each NEO to determine that NEO’s annual incentive award, with minor adjustments primarily due to rounding.
The following table summarizes the calculation of the Final Performance Factor.
Summary of 2017 Performance Factor Mechanics
| | | | | Step 1: Establish EPS Target Factor
| | | | 2017 EPS (on AOI basis)
| | $ | 10.42 | | Standard adjustments
| | $ | 0.66 | | EPS under Annual Incentive Program
| | $ | 11.08 | | EPS of $11.08 translates to an EPS Target Factor of
| | | 1.117(1) | | Step 2: Establish EPS Growth Factor
| | | | 2017 EPS (on AOI basis)
| | $ | 10.42 | | Standard adjustments
| | $ | 0.66 | | EPS under Annual Incentive Program
| | $ | 11.08 | | 2016 EPS under Annual Incentive Program
| | $ | 9.73 | | EPS Growth under Annual Incentive Program
| | $ | 1.35 | | EPS Growth of $1.35 translates to an EPS Growth Factor of
| | | 1.139 | | Step 3 : Establish Relative ROE Factor
| | | | 2017 ROE Performance
| | | 13.9% | | 2017 Peer Median ROE Performance
| | | 13.0% | | ROE performance as compared to median ROE performance for life insurer peers
| | | 0.9% | | Favorable ROE of 0.9% translates to a Relative ROE Factor of
| | | 1.075(1) | | Step 4: Determine Final Performance Factor
| | | | EPS Target Factor (1.117) times 1/3
| | | 0.372 | | EPS Growth Factor (1.139) times 1/3
| | | 0.380 | | Relative ROE Factor (1.075) times 1/3
| | | 0.358 | | Initial Performance Factor
| | | 1.110 | | | | | | | Discretionary Adjustments made by Committee for 2017 | | | None | | Final Performance Factor | | 1.110 | |
(1) | Based on interpolation on the scales above. |
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Annual Incentive Award Decisions for 2017
The principal driver of the actual annual incentive awards for the NEOs is the Final Performance Factor. The Committee also considers individual performance and contributions in determining final awards.
At the beginning of 2017, our CEO met with each of the other NEOs to outline and discuss with them the key factors for determining awards under our Annual Incentive Program and their expected contributions to that performance.
| | | | | | | | | | | | | | Mr. StrangfeldCompensation Discussion and Analysis
| | | | | | | | | | | | | | | | | | | | | |  | | | | ANNUAL INCENTIVE AWARD DECISION
Based on the Final Performance Factor and the Committee’s evaluation of his performance, in February 2018, the Committee recommended, and the independent members of our Board approved, an annual incentive award of $6,660,000 for Mr. Strangfeld for 2017, or approximately 1.11 times his target
award amount. This award compares to an annual incentive
award of $5,976,000 for 2016, representing an increase of 11.4%.
Of the $6,660,000, $1,998,000 was mandatorily deferred into the
Book Value Performance Program.
| | | | | | | | | | | | | | | | | | KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Strangfeld, our CEO, the Committee, and the independent members of our Board, considered the evaluation of his performance that was conducted by the Lead Independent Director of our Board and the Committee Chair. This evaluation identified and examined a broad range of corporate and individual performance factors, including:
| | | | |
Determination of 2021 Final Performance Factor The table on the right summarizes the calculation of the Final Performance Factor for 2021. | | | | | | | • After-tax AOI of $4.65 billion and EPS, based onafter-tax AOI, of $10.58 in 2017, reflecting strong core performance from our businesses. EPS, based onafter-tax AOI, increased 16% versus 2016;
• Operating return on average equity of 13% for 2017, at the high-end of our objective of 12% to 13% over the near to intermediate term;EPS Target Factor
• Growth in adjusted book value per share of our Common Stock to $88.28 at December 31, 2017 versus $78.95 per share at December 31, 2016, an increase of $9.33, or 12%, after payment of four quarterly dividends totaling $3.00 per share;*
• Returned $2.6 billion of capital to shareholders, including $1.3 billion through our share repurchase program and $1.3 billion in the form of Common Stock dividends. The Company has one of the highest dividend yields among its peers and targets the allocation of 65% of earnings over time towards capital distributions and accretive actions;
• Retirement account values of $429 billion at December 31, 2017, up 11% from a year earlier;
• Individual Annuities account values of $169 billion at December 31, 2017, up 8% from a year earlier;
• Investment Management’s assets under management of $1.155 trillion at December 31, 2017, up 11% from a year earlier;
| | | | • Group Insurancepre-tax adjusted operating income of $253 million for 2017, up 15% from 2016;
| 1.228 | • Continued business growth in the International Insurance Division, including new and existing markets, with constant dollar insurance revenues up 4% from 2016;
• Implementation of a new organizational structure for our U.S. businesses that better reflects our focus on leveraging our mix of businesses and our digital and customer engagement capabilities;
• Introduction of new products and rebalancing of
product mix in order to adapt to changing market conditions, diversify risks and maintain appropriate returns;
• Meaningful progress in our short-term and long-term
leadership, talent, and succession planning priorities;
• The Company’s ongoing constructive engagement with the Federal Reserve and international and U.S. state regulators; and
• The Company’s leadership in efforts to revitalize Newark, NJ, making progress transforming the city into a more vibrant community. In the last decade alone, the Company has committed more than $1 billion to Newark.
| | | | | | | * This increase includes a benefit of $2.74 per share as a result of the enactment of the Tax Cuts and Jobs Act in 2017.
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Cost Savings Factor
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| | Compensation Discussion and Analysis
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OTHER NEOS
In the case of the other NEOs, Mr. Strangfeld formulated recommendations for each individual based on the Final Performance Factor and his assessment of their performance, and presented these recommendations to the Committee for its consideration. Based on the Final Performance Factor, as well as these recommendations and its own evaluation of their performance, the Committee recommended, and the independent members of our Board approved, the following annual incentive awards for each of the other NEOs:
| | | | | | | | | | | Mr. Falzon
| | | | | | | | | | | | | | | | | |  | | | | ANNUAL INCENTIVE AWARD DECISION
Consistent with the Final Performance Factor, Mr. Falzon’s annual incentive award was $3,330,000 or approximately 1.11 times his target award amount. This award compares to an annual incentive award of $2,990,000 for 2016, representing an increase of 11.37%. Of the $3,330,000, $999,000 was mandatorily deferred into the
Book Value Performance Program.
| | | | | | | | | | | | | 1.375 | KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Falzon, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | | | | • After-tax AOI of $4.65 billion and EPS, based onafter-tax AOI, of $10.58 in 2017, reflecting strong core performance from our businesses. EPS, based onafter-tax AOI, increased 16% versus 2016;
• Operating return on average equity of 13% for 2017, at the high-end of our objective of 12% to 13% over the near to intermediate term;
• His acumen in capital management and cash flow planning, including the return of $2.6 billion to shareholders during 2017, through our share repurchase program and Common Stock dividends. The Company has one of the highest dividend yields among its peers and targets the allocation of 65% of earnings over time towards capital distributions and accretive actions;
• His leadership on initiatives to reduce the Company’s use of financial leverage, resulting in a reduction of total debt outstanding by $600 million in 2017, while extending existing debt at a reduced cost;
| | | | • His effective oversight of our liquidity position, including the maintenance of $4.4 billion of highly liquid assets* at the parent company level at December 31, 2017;
• His key role in management of the statutory capital position of our insurance companies, resulting in a risk-based capital ratio of 410% for Prudential Insurance, 1,034% for PALAC, and a composite risk-based capital ratio for our major U.S. insurance subsidiaries of 529%, as of December 31, 2017 and strong solvency margins at our international insurance subsidiaries as
of that date;
• His leadership of talent management and succession planning initiatives for the Finance organization;
• His effective supervision of internal financial and accounting functions; and
• His leadership in the Company’s ongoing engagement with the Federal Reserve and international and U.S. state regulators, as well as advocacy on new U.S. federal tax legislation.
| | | | | * Predominantly includes cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds; excludes cash held in an intra-company liquidity account at Prudential Financial, Inc.
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Relative ROE Factor
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| | | | | | | | | | | | | | | Mr. Grier
| | | | | | | | | | | | | | | | | | | | | |  | | | | ANNUAL INCENTIVE AWARD DECISION
Consistent with the Final Performance Factor, Mr. Grier’s incentive award was $5,660,000 or approximately 1.11 times his target award amount. This award compares to an annual incentive award of $5,080,000 for 2016, representing an
increase of 11.42%. Of the $5,660,000, $1,698,000 was mandatorily deferred into the Book Value Performance Program.
| | | | | | | | | | | | | | | | | 1.042 | KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Grier, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | • After-tax AOI of $4.65 billion and EPS, based onafter-tax AOI, of $10.58 in 2017, reflecting strong core performance from our businesses. EPS, based onafter-tax AOI, increased 16% versus 2016;
• Operating return on average equity of 13% for 2017, at the high-end of our objective of 12% to 13% over the near to intermediate term;
• Growth in adjusted book value per share of our Common Stock, to $88.28 at December 31, 2017 versus $78.95 per share at December 31, 2016, an increase of $9.33, or 12%, after payment of four quarterly dividends totaling $3.00 per share;*
• His leadership in enhanced capital management, including the return of $2.6 billion to shareholders during 2017, through our share repurchase program and Common Stock dividends. The Company has one of the highest dividend yields among its peers and targets the allocation of 65% of earnings towards capital distributions and accretive actions over time;
| | | | • His oversight of risk management, including the implementation of a comprehensive risk appetite framework;
• His acumen in capital deployment and business development, including a key role in the completion of the purchase of a leading provider of group life and personal accident insurance in Brazil, the formation of a life insurance joint venture in Indonesia, and the acquisition of a minority interest in a financial services firm in Ghana; and
• His successful service as our Company’s and an industry spokesperson regarding the evolving regulatory initiatives affecting the insurance and financial services industries, and his leadership in the Company’s ongoing engagement with
the Federal Reserve and international and U.S. state regulators, as well as advocacy on new U.S. federal tax legislation.
| | | | | | | * This increase includes a benefit of $2.74 per share as a result of the enactment of the Tax Cuts and Jobs Act in 2017.
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Initial Performance Factor
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| | | | | | | | | | | | | | | Mr. Lowrey
| | | | | | | | | | | | | | | | | | | | | |  | | | | | ANNUAL INCENTIVE AWARD DECISION
Consistent with the Final Performance Factor, Mr. Lowrey’s incentive award was $4,440,000 or approximately 1.11 times
his target award amount. This award compares to an annual incentive award of $3,985,000 for 2016, representing an increase of 11.42%. Of the $4,440,000, $1,332,000 was mandatorily deferred into the Book Value Performance Program.1.215
| | | | | | | | | | | | | | | | | | (2) KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Lowrey, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | • His leadership of the International Businesses, including comprehensive succession planning;
• His efforts in leading our International Businesses to earnpre-tax AOI of $3.2 billion for 2017, a 4% increase from 2016, excluding the impact of changes in currency exchange rates;
• His leadership in successfully navigating pricing changes necessitated by regulatory actions and maintaining sales levels consistent with last year, including a 15% increase in U.S. dollar product sales in 2017 compared to 2016;*
• His contributions to the successful adaptation to current market conditions of major product lines serving death protection and retirement needs in our key international markets through multiple distribution channels, including a 16% increase in U.S. dollar product sales in Japan in 2017 compared to 2016;*
* Sales are based on annualized new business premiums.
| | | | • His leadership in growing our Life Planner count by 2%, including achieving record levels in Japan and Brazil, and actions to improve Life Consultant standards;
• His leadership of our Latin America operations that experienced continued business momentum in 2017;
• His role in the Company’s constructive engagement with international regulators on emerging issues, including his leadership of an industry group in Japan that provided input
on the development of revised insurance capital standards; and
• His role in helping drive expansion into new growth markets, including a key role in the completion of the purchase of a leading provider of group life and personal accident insurance in Brazil, the formation of a life insurance joint venture in Indonesia, and the acquisition of a minority interest in a financial services firm in Ghana.
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Discretionary Adjustments Made by the Committee
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| | | | | | | | | | | | | | | Mr. Pelletier
| | | | | | | | | | | | | | | | | | | | | | 
| | | None | ANNUAL INCENTIVE AWARD DECISION
Mr. Pelletier’s incentive award was $4,700,000, or approximately 1.18 times his target award amount, reflecting both the Final Performance Factor and the strong performance of our U.S. Businesses in 2017. This award compares to an annual incentive award of $3,985,000 for 2016, representing an increase of 17.94%. Of the $4,700,000, $1,410,000 was mandatorily deferred into the Book Value Performance Program.
| | | | | | | | | | | | | | | | | | KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Pelletier, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | • His leadership of the U.S. Businesses, including developing a more comprehensive customer focused strategy and related organizational structure to better leverage our mix of businesses and our digital and customer engagement capabilities, as well as executing succession plans to support the new organizational structure;
• His efforts in leading our Retirement and Individual Annuities businesses to achieve record account values at December 31, 2017, representing an increase of 11% and 8%, respectively;
• His instrumental role in the continued expansion of our leading position in the pension risk transfer market, including approximately $6 billion of new funded cases and $8 billion of longevity reinsurance cases in 2017;
• Our Retirement business recordedpre-tax adjusted operating income of $1.24 billion for 2017, an increase of 23% from 2016;
• Our Individual Annuities business recordedpre-tax adjusted operating income of $2.2 billion for 2017, an increase of 25% from 2016;
| | | | • His contributions to the success of our Investment Management business, which had $1.155 trillion of assets under management as of December 31, 2017, up 11% from a year earlier, marking the 15th consecutive year of net positive institutional flows;
• Our Investment Management business recordedpre-tax adjusted operating income of $979 million for 2017, an increase of 24% from 2016;
• His role in the improved results of our Group Insurance business, which recordedpre-tax adjusted operating income of $253 million for 2017, an increase of 15% from 2016; and
• His role in the introduction of new products and rebalancing
of product mix in order to adapt to changing market conditions, diversify risks and maintain appropriate returns.
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Final Performance Factor | | Compensation Discussion and Analysis
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(2) Average of EPS Target Factor, Cost Savings Factor and Relative ROE Factor. Long-Term Incentive Program We provide a long-term incentive opportunityIn order to motivate and reward our executive officers for their contributions toward achieving our business objectives, by tying theselong-term incentives comprise the majority of each NEO’s target total compensation opportunity, which is linked to the performance of our multiyear ROE, adjusted book value and Common Stock and book value over the long term, to further reinforce the link between the interests of our executive officers and our shareholders, and to motivate our executive officers to improve our multi-year financial performance.
TARGET AWARD OPPORTUNITIES
In February 2018,2022, the Committee established a target long-term award opportunity for each of the NEOs. To set these long-term award targets, the Committee considered: | ● | | a competitive market analysis of the NEO’s total compensation and the portion of total compensation provided as long-term incentives, relative to similar roles at companies in our Compensation Peer Group; |
| ● | | the Company’s and each NEO’s individual performance and his or her expected future contributions; |
| ● | | the NEO’s level of experience in his or her role; and |
| ● | | retention considerations. |
The values at companies in our compensation peer group; the NEO’s individual performance and his or her expected future contributions;
the NEO’s level of experience in his or her role; and
retention considerations.
The specific long-term target award opportunity for each NEO is as follows:
| | | | | | Named Executive Officers | | Target Long-Term
Award Opportunity | | | John R. Strangfeld | | $ | 10,000,000 | | | Robert M. Falzon | | $ | 4,000,000 | | | Mark B. Grier | | $ | 8,000,000 | | | Charles F. Lowrey | | $ | 4,750,000 | | | Stephen Pelletier | | $ | 4,750,000 | |
Our practice is to grant long-term incentive awards annually in the form of a balanced mix of performance shares and units, stock options, and book value units to our officers at the level of senior vice president and above, including the NEOs, in amounts that are consistent with competitive practice.
The mix of long-term incentives granted to our NEOs in 2017 to the NEOs is shownFebruary 2022 are depicted in the table below:below. 75% of each NEO’s grant was delivered in performance shares and 25% was delivered in restricted stock units (“RSUs”). The number of performance shares (at target) and RSUs awarded to an NEO is determined by dividing the value of the award by the closing market price of our Common Stock on the grant date.
| | | | | | Named Executive Officer | | Target Long-Term Award Opportunity | | | | Charles F. Lowrey | | | $12,500,000 | | | | Kenneth Y. Tanji | | | $ 3,600,000 | | | | Robert M. Falzon | | | $10,000,000 | | | | Scott G. Sleyster | | | $ 4,400,000 | | | | Andrew F. Sullivan | | | $ 4,400,000 | |
Burn Rate In assessing our equity grant practices, including the choice and mix of vehicles to use for long-term incentive awards, the Committee considers various factors including market practice and internal measures such as our burn rate. Burn rate is a measure of share usage and it quantifies the rate at which a company is utilizing its share reserve by expressing the number of equity awards granted as a percentage of the weighted-average undiluted number of shares of Common Stock outstanding during the year. Our burn rate for the 2021 fiscal year with regard to our 2021 Omnibus Plan was 0.92%. Performance Shares Performance shares align the majority of our NEOs’ long-term incentives to the achievement of goals that are established each year to drive long-term performance. The Committee selects metrics for the performance shares program that it believes will provide a balanced indication of the Company’s success over each ensuing three-year period. Prior to 2021, the Committee selected ROE relative to both the Company’s financial plan and the performance of life insurer peers, which provided an opportunity for 0-1.25 times the target number of shares to be earned. Beginning in February 2021, we use growth in adjusted book value per share relative to our financial plan as a performance metric (replacing ROE relative to plan). Also, at that time, we expanded our ROE performance peer group and expanded the opportunity range to 0-1.5 times the target number of shares. Additionally, for performance shares granted in February 2021, we reviewed and expanded our inclusion and diversity goals which apply a +/-10% modifier to the plan for our NEOs and other senior leaders. | | | | 44 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Compensation Discussion and Analysis | |
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Performance Share Awards The NEOs currently have three performance share awards outstanding. In February 2022, the Committee granted the performance share awards for the 2022-2024 performance period. The key features of these outstanding awards are: | | | | | | | | | | | | | | | | | | | | | | Performance Measures, Weights, and Targets | | Method to Determine Number of Shares to be Awarded | | | | | | | | 2020-2022 Performance Period | | | | | | | | | | | | | | | | | | Final payout will be 0-1.25 times the target number of shares based: | | | Absolute ROE | | | | Absolute ROE Factor(1) | | | | | | | | ROE +/-Peer Median | | | | Relative ROE Factor(1) | | | | | 14.0% or more | | | | 1.25 | | | | | | | | 3% or more | | | | 1.25 | | ● ½ on average ROE vs. plan | | | 12.5% | | | | 1.00 | | | | | | | | 0% | | | | 1.00 | | ● ½ on average ROE vs. the median ROE of the North American Life Insurance subset of the Compensation Peer Group | | | 11.0% | | | | 0.75 | | | | | | | | -3% | | | | 0.75 | | | | | 10.0% or less | | | | 0.00 | | | | | | | | -4% or less | | | | 0.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021-2023 Performance Period | | | | | | | | | | | | | | | | | | Final payout will be 0-1.65 times the target number of shares based: | | | BVPS Growth | | | | BVPS Growth Factor(1) | | | | | | | | ROE +/-Peer Median | | | | Relative ROE Factor(1) | | | | | 10.5% or more | | | | 1.50 | | | | | | | | 4% or more | | | | 1.50 | | ● ½ on average annual BVPS growth | | | 7.0% | | | | 1.00 | | | | | | | | 3% | | | | 1.25 | | ● ½ on average ROE vs. the median ROE of the Performance Peer Group ● with an inclusion and diversity modifier of +/-10% based: | | | 3.5% | | | | 0.50 | | | | | | | | 0% | | | | 1.00 | | | | | less than 3.5% | | | | 0.00 | | | | | | | | -3% | | | | 0.75 | | | | | | | | | | | | | | | | | -4% or less | | | | 0.00 | | | | | | | | | | | | | | | | | | | | | | |
| – | | 1/3 on increasing the representation of diverse employees in top positions |
| – | | 1/3 on increasing the representation of diverse employees at one level below Vice President |
| – | | 1/3 on improvements to the lived experience of our Black employees as measured via employee engagement scores |
A positive modifier applies if we achieve or exceed these goals, and a negative modifier applies if we maintain status quo or see a decrease in diverse representation and Black employee engagement, as more fully described and quantified below. | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022-2024 Performance Period | | | | | | | | | | | | | | | | | | Final payout will be 0-1.50 times the target number of shares based: ● ½ on average annual BVPS growth ● ½ on average ROE vs. the median ROE of the Performance Peer Group | | | BVPS Growth | | | | BVPS Growth Factor(1) | | | | | | | | ROE +/-Peer Median | | | | Relative ROE Factor(1) | | | | | 11.5% or more | | | | 1.50 | | | | | | | | 4% or more | | | | 1.50 | | | | | 8% | | | | 1.00 | | | | | | | | 3% | | | | 1.25 | | | | | 4.5% | | | | 0.50 | | | | | | | | 0% | | | | 1.00 | | | | | less than 4.5% | | | | 0.00 | | | | | | | | -3% | | | | 0.75 | | | | | | | | | | | | | | | | | -4% or less | | | | 0.00 | | | | | | | | | | | | | | | | | | | | | | |
2021-2023 Inclusion and Diversity Talent Goals Prudential is committed to improving diverse representation at leadership levels and improving the lived experience of our Black colleagues. For 2021-2023, our Inclusion and Diversity Modifier is determined by averaging factors ranging from -10% to +10% for each of three goals: | | | | | | | | | | | | | | | | | | | 1) Increase the diverse(2) representation among the leaders in our top ~600 U.S. positions by 10% As part of this, increase representation of Black/LatinX employees by at least 25% | | Change in Representation(1) | | | | | | | | Change in Black/LatinX Representation(1) | | | | Increase by 10% or more | | | +5% | | | | 
| | | | Increase by 25% or more | | | | +5% | | | | No Change | | | -5% | | | | Increase by 20% or less | | | | 0% | | | | Decrease by 2% or more | | | -10% | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2) Increase the representation of people of color(3) in U.S. positions one level below Vice President by 8% As part of this, increase representation of Black/LatinX employees by at least 25% | | Change in Representation(1) | | | | | | | | Change in Black/LatinX Representation(1) | | | | Increase by 8% or more | | | +5% | | | |
| | | | Increase by 25% or more | | | | +5% | | | | No Change | | | -5% | | | | Increase by 20% or less | | | | 0% | | | | Decrease by 2% or more | | | -10% | | | | | | | | | | | | | |
| | | | | | | | | | | Performance Shares3) Close the gap in the employee engagement quotient (EQ) scores of our Black employees relative to other employees (average of EQ scores measured in 2022 & 2023) | | Gap in EQ Scores of our Black Employees(1) | | | | | | | Improve to 0 points or less | | | +10% | | | | | | | No change (3 points) | | | -2% | | | Decline to 5 points or more | | | -10% | |
| (1) | Interpolated on a straight-line basis between the data points displayed. |
| (2) | Our definition of “diverse” includes people of color, women, LGBTQ+, differently-abled, and Unitsveterans. |
| (3) | Our definition of “people of color” includes Black, Hispanic, Asian, Pacific Islander, Native American, Alaskan natives, and Hawaiian natives. |
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| | | | | | | | 60 | % | Stock OptionsCompensation Discussion and Analysis | | | 20 | % | Book Value Units | | | 20 | %
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Long-term incentive awards may also be granted when an individual
For performance shares, ROE is promoteddetermined using after-tax AOI divided by adjusted book value and is subject to a senior executive position to recognize the increasestandard adjustments described earlier in this CD&A. BVPS growth is defined as the average of the annual growth rates in adjusted book value per share for each year in the scopeperformance period. Our calculation of his or her roleROE and responsibilities. From timeBVPS is shown in Appendix A. Dividend equivalents are paid retroactively on the lower of (i) the final number of performance shares paid out and (ii) the target number of shares. Performance Share Payouts for the 2019–2021 Performance Period In February 2022, the NEOs received payouts with respect to time, we may make specialthe performance share and unit awards that were granted in February 2019 for the 3-year performance period ended December 31, 2021. The Committee decided to settle both the performance share and unit awards in Common Stock (aside from a relatively small portion of performance units that the form of restricted stock unitsNEOs had previously elected to recognize major milestones, or selectivedefer, that remain cash-settled). These awards in situations involving a leadership transition. In addition, for all long-term incentive awards granted in 2017, the total payout amount to any NEO subject to Section 162(m) may not exceed 0.4% of the highestpre-tax AOI reported for any of the three fiscal years ended prior to the year of payment, provided that there is positive AOI inwere paid at least one fiscal year during which the award is outstanding for at least 276 days of that year. For annual incentive payments relating to 2017 there is a separate limit for any NEO subject to Section 162(m) of 0.4% of our 2017pre-tax AOI.
PERFORMANCE SHARES AND UNITS
Performance shares and units align the majority of our long-term incentive values to: (i) the achievement of our ROE objective and (ii) our relative performance as compared to life insurer peers, in each case over a three-year performance period. Award payouts generally range from 0% to 125% of0.937 times the target number of shares and units. For the February 2015 awards with respect to the 2015 to 2017 performance period and the February 2016 awards with respect to the 2016 to 2018 performance period, the preliminary payout isunits initially awarded, based 50% on theour average ROE achievement over the three-year performance period relative to the goalsagainst our financial plan set at the start of the period as established by the Committee, subject to a relative performance modifier. The modifier provides a balance between absolute performance and 50% on our average ROE performance relative to the North American Life Insurance subset of theour Compensation Peer Group and is based on the Company’s three-year performance in ROE, book value per share growth and EPS growth. The modifier increases or decreases the award payment by up to 10% within the 0% to 125% range.Group.
The earnout factor of 0.937 for these awards was determined as follows: | ● | | As of December 31, 2021, our 3-year average ROE was 12.19%, which corresponds to an Absolute ROE Factor of 0.949 based on the scale depicted on the right. |
| | | | Absolute ROE | | Absolute ROE Factor(1) | 14.0% or more | | 1.25 | 12.5% | | 1.00 | 11.0% | | 0.75 | 10.0% or less | | 0.00 |
| ● | | As of September 30, 2021, our 3-year average ROE was 12.5%, which is 0.9 percentage points lower than the median 3-year average ROE for the North American Life Insurance subset of our Compensation Peer Group. This corresponds to a Relative ROE Factor of 0.925 based on the scale depicted on the right. |
| | | | ROE +/-Peer Median | | Relative ROE Factor(1) | 3% or more | | 1.25 | 0% | | 1.00 | -3% | | 0.75 | -4% or less | | 0.00 |
| ● | | The 0.949 and 0.925 factors were averaged to arrive at a 0.937 final earn-out factor. |
The final performance share/unit payouts to the NEOs in February 2022 for the 2019-2021 performance period were: | | | | | | | | Named Executive Officers | | Target Number of
Shares/Units Awarded | | | Actual Number of
Shares/Units Awarded | | | | Charles F. Lowrey | | | 53,342 | | | 49,982 | | | | Kenneth Y. Tanji | | | 16,710 | | | 15,658 | | | | Robert M. Falzon | | | 42,418 | | | 39,747 | | | | Scott G. Sleyster | | | 24,422 | | | 22,884 | | | | Andrew F. Sullivan | | | 8,998 | | | 8,432 |
Restricted Stock Units (RSUs) NEOs receive 25% of their long-term incentive awards in RSUs. One third of the RSUs granted vest in each of the three years following the end of the month in which the grant date occurs. | | | | | 5446 | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
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For theBook Value Performance Program
Beginning with our long-term incentive grants in February 2017 awards with respect to the 2017 to 2019 performance period and the February 2018 awards with respect to the 2018 to 2020 performance period, the preliminary payout is based on two equally weighted financial metrics: (i) average ROE achievement over the three-year performance period relative to the goals set at the start of the period2021, we incorporated adjusted book value per share (“BVPS”) as established by the Committee and (ii) average ROE achievement over the three-year performance period relative to the median ROE results over this period of the North American Life Insurance subset of the Peer Group. This methodology for thea metric in our performance shares and units program further solidifies the balance between absolute performance and performance relative to life insurer peers. Accordingly,with pre-established targets for growth over a three-year period. This replaces the use of cash-settled book value units that were previously granted under our Book Value Performance Program. We also discontinued the mandatory deferral of a relative performance modifier was eliminated starting with the February 2017 awards. In addition, the February 2018portion of annual incentive awards with respectinto book value units. Nevertheless, portions of previously granted book value units vested and were paid to the 2018 to 2020 performance period granted to executives atNEOs in 2021, and additional cash payouts on these book value units will continue through February 2023.
Under the senior vice president level and above and equivalents (including the NEOs) are subject to a modifier that can increase (or decrease) the payout by up to 10% based on the achievement of our diversity and inclusion goals over the three-year performance period. Performance unit awards are denominated in share equivalents and have the same value as the performance share awards on the award payment date. Dividend equivalents are paid retroactively on the final number of performance shares and units paid out, up to the target number of shares and units.
ROE is determined usingafter-tax AOI divided by adjusted book value. The ROE figures are also subject to standard adjustments as part of our formulaic framework. Also, for the February 2018 awards with respect to the 2018 to 2020 performance period, we will incorporate prepayment fee and call premium income into the exclusion we make currently for earnings on non-coupon investments outside of a range of -10% to +10% of these earnings that are assumed in our EPS guidance range. This change is consistent with our external reporting of prepayment fee and call premium income and earnings on non-coupon investments.
While the program allows the Committee to make a discretionary adjustment by up to 15% of the earned shares and units based on quantitative and qualitative factors, the Committee has rarely exercised discretion and did not exercise discretion for the 2015 awards that paid out in February 2018.
STOCK OPTIONS
Stock options provide value based solely on stock price appreciation. Stock options are granted with a maximum term of ten years.One-third of the option grants vest on each of the first three anniversaries of the date of grant. The exercise price is based on the closing market price of a share of our Common Stock on The New York Stock Exchange on the date of grant.
BOOK VALUE PERFORMANCE PROGRAM
The Book Value Performance Program, is intended to link the incentive payments to a measure of book value per share—a key metric in valuing insurance companies, banks, and investment firms that is closely followed by investors. Wewe calculate adjusted book value per shareBVPS by dividing our adjusted book value by the number of shares of our Common Stockdiluted shares outstanding. Our calculations of adjusted book value and adjusted book value per share, as described in Appendix A to this Proxy Statement,BVPS exclude certain balance sheet items that are not, and may never be, reflected in the income statement.statement, as described in Appendix A. Unlike the financial measures based on AOI that are used in other aspects of our executive compensation program, the adjusted book value per shareBVPS metric takes into consideration realized gains and losses in our investment portfolio. The Tax Cuts and Jobs Act enacted in December 2017 had a beneficial impact on our adjusted book value due to the remeasurement of net deferred tax liabilities resulting from the reduction in the U.S. tax rate. The Committee excluded this benefit, amounting to $2.74 per share, from the calculation of adjusted book value per share as of December 31, 2017.
The key features of the Book Value Performance Program for our NEOs are:
Awards are granted and denominated in book value units that are funded from two sources:
| – | | | | | | | | | | | | Change in Adjusted Book Value Per Share (1) | | | | the allocation of 20% of a participant’s long-term incentive award value for the year as determined by the Committee; and | | |
| – | | Adjusted Book Value Per Share 12/31/20 | | | $94.79 | | | BVPS increases (or decreases) as a mandatory deferralresult of 30% of their annual incentive award. |
Once granted, these units track the value of book value per share of Common Stock, excludingthe Company’s net income (or loss). BVPS decreases when the Company pays dividends on its Common Stock. BVPS may also increase or decrease due to other items, including share repurchase activity.(1) Excluding total accumulated other comprehensive income and thenon-economic effects of foreign currency exchange rate remeasurement ofnon-yen liabilities and assets included in net income or loss. One-third of a participant’s annual award of book value units is distributed in cash in each of the three years following the year of grant.
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| | Compensation Discussion and Analysis
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(1) | Excluding total accumulated other comprehensive income, the cumulative impact of gains and losses resulting from foreign currency exchange rate remeasurement and the remeasurement of certain deferred taxes included in net income. |
remeasurement. (2) | Does not include the impact of changes in share count or adjustments to earnings for purposes of calculating diluted earnings per share. |
(3) | Represents a $1.2 billion impact from the enactment of the Tax Cuts and Jobs Act; excludes $1.7 billion, or $3.85 per share reported in net income from the remeasurement of deferred tax assets and liabilities originally established through accumulated other comprehensive income. |
(4) | Includes realized investment gains and losses and related charges and adjustments, and results from divested businesses. |
and run-off businesses, and other impacts. (5) | (4) Includes amounts related to stock based compensation programs and foreign currency exchange rate remeasurement formerly recorded in accumulated other comprehensive income. | | | | | | Adjusted Operating Income(2) | | | $14.58 | | | Other Earnings ltems(3) | | | $4.93 | | | Net lncome(2) | | | $19.51 | | | Dividends | | | $(4.60) | | | Share Repurchases | | | $0.49 | | | Other(4) | | | $(1.47) | | | = Change in Adjusted Book Value Per Share | | | $13.93 | | | Adjusted Book Value Per Share 12/31/21 | | | $108.72 | | | * For a reconciliation of Adjusted Book Value to the most comparable GAAP measure, see Appendix A to this Proxy Statement. | | | | | | | | | | | | | | | | | | | | | | | | | | |
For a reconciliation of Adjusted Book Value to the most comparable GAAP measure, see Appendix A to this Proxy Statement.
The NEOs’ awards, distributions and accumulated holdings under the Book Value Performance Program are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of Book
Value Units
Held at January 1, 2017
(#) | | | Value of Book
Value Units Held at
January 1, 2017¹
($) | | | Value of Book Value
Units
Distributed in 2017²
($) | | | Value of Book
Value Units
Awarded in 2017³
($) | | | Number of Book
Value Units Held at
December 31, 2017
(#) | | | Value of Book
Value Units Held at
December 31,
20174 ($) | | John R. Strangfeld | | | 115,339 | | | | 9,106,014 | | | | 4,764,238 | | | | 3,792,916 | | | | 103,036 | | | | 8,813,699 | | Robert M. Falzon | | | 44,052 | | | | 3,477,905 | | | | 1,701,451 | | | | 1,697,030 | | | | 43,996 | | | | 3,763,418 | | Mark B. Grier | | | 95,643 | | | | 7,551,015 | | | | 3,950,579 | | | | 3,124,052 | | | | 85,174 | | | | 7,285,784 | | Charles F. Lowrey | | | 70,519 | | | | 5,567,475 | | | | 2,951,704 | | | | 2,195,600 | | | | 60,942 | | | | 5,212,979 | | Stephen Pelletier | | | 50,899 | | | | 4,018,476 | | | | 1,878,096 | | | | 2,095,570 | | | | 53,692 | | | | 4,592,814 | |
| | | | | | | | | | | | | | | | | | | | Name | | Number of Book
Value Units Held at January 1, 2021 (#) | | | Value of Book
Value Units Held at
January 1, 2021(1)($) | | | Value of Book
Value Units
Distributed in 2021(2)($) | | | Number of Book
Value Units Held at
December 31, 2021(#) | | | Value of Book
Value Units Held at
December 31, 2021(3)($) | | | | | | | Charles F. Lowrey | | | 58,542 | | | | 5,549,196 | | | | 2,710,994 | | | | 29,942 | | | 3,255,294 | | | | | | | Kenneth Y. Tanji | | | 15,725 | | | | 1,490,573 | | | | 644,572 | | | | 8,925 | | | 970,326 | | | | | | | Robert M. Falzon | | | 46,399 | | | | 4,398,161 | | | | 2,141,117 | | | | 23,811 | | | 2,588,732 | | | | | | | Scott G. Sleyster | | | 25,045 | | | | 2,374,016 | | | | 1,154,921 | | | | 12,861 | | | 1,398,248 | | | | | | | Andrew F. Sullivan | | | 13,749 | | | | 1,303,268 | | | | 596,040 | | | | 7,461 | | | 811,160 |
| (1) | Represents the aggregate market value of the number of book value units held at January 1, 20172021 obtained by multiplying the book value per shareBVPS of $78.95$94.79 as of December 31, 20162020 by the number of book value units outstanding.outstanding for units granted in 2019 and 2020, and multiplying BVPS (adjusted for the Tax Act) of $96.68 by the number of outstanding book value units granted prior to 2018. |
| (2) | Represents the aggregate market value distributed on March 2, 2017 for all NEOsin 2021. |
| (3) | Represents the aggregate market value awarded on February 14, 2017 for all NEOs. |
(4) | Represents the aggregate market value of the number of book value units held at December 31, 20172021 obtained by multiplying the book value per shareBVPS of $85.54$108.72 as of December 31, 20172021 by the number of book value units outstanding. |
LONG-TERM INCENTIVE AWARD DECISIONS FOR 2017
In February 2018, the Committee granted long-term incentive awards to each of the NEOs. The award amount was based upon the competitive analysis of long-term incentive compensation and total direct compensation for each of the NEOs. To determine the amount of the specific long-term incentive award for each NEO, the Committee considered each individual’s performance during 2017 and market data for the comparable executive officer position at the companies in the Peer Group, as well as his or her potential future contributions to the Company, the current value of prior year long-term incentive awards and retention considerations.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | Compensation Discussion and Analysis47
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These awards were granted in the form of performance shares (30%), performance units (30%), stock options (20%), and book value units (20%) under the Book Value Performance Program (in addition to the mandatory deferral of 30% of each NEO’s annual incentive award under this program). The Committee determined that this long-term incentive mix would appropriately reward the NEOs for their 2017 performance, motivate them to work towards achieving our long-term objectives, further reinforce the link between their interests and the interests of our shareholders, and provide a balanced portfolio composed of performance shares and units (which provide value based upon attainment of specific performance goals and performance relative to peers), stock options (which provide value based solely on stock price appreciation) and book value units (which provide value based on changes in our adjusted book value per share).
The following table presents the long-term incentive awards granted to each NEO in February 2018, including our Book Value Performance Program, and includes the mandatory deferrals of 30% of their annual incentive award. Awards are expressed as dollar compensation values in the table. These awards generally will not be reported in the Summary Compensation Table until 2019. For discussion of the long-term incentive awards granted in February 2017 for 2016 performance and included in this year’s Summary Compensation Table, see the CD&A in our 2017 Proxy Statement.
| | | | | | | | | | | | | | | | | | | | | Named Executive Officer | |
| Compensation Value of
Book Value Units(1) |
| |
| Compensation Value of
Stock Options |
| |
| Compensation Value of
Performance Shares |
| |
| Compensation Value of
Performance Units |
| | | Total | | John R. Strangfeld | | | 3,998,000 | | | | 2,000,000 | | | | 3,000,000 | | | | 3,000,000 | | | | 11,998,000 | | Robert M. Falzon | | | 1,799,000 | | | | 800,000 | | | | 1,200,000 | | | | 1,200,000 | | | | 4,999,000 | | Mark B. Grier | | | 3,298,000 | | | | 1,600,000 | | | | 2,400,000 | | | | 2,400,000 | | | | 9,698,000 | | Charles F. Lowrey | | | 2,282,000 | | | | 950,000 | | | | 1,425,000 | | | | 1,425,000 | | | | 6,082,000 | | Stephen Pelletier | | | 2,360,000 | | | | 950,000 | | | | 1,425,000 | | | | 1,425,000 | | | | 6,160,000 | |
(1) | Includes amounts that were mandatorily deferred from the Annual Incentive Program (30%) that total $1,998,000 for Mr. Strangfeld; $999,000 for Mr. Falzon; $1,698,000 for Mr. Grier; $1,332,000 for Mr. Lowrey, and $1,410,000 for Mr. Pelletier. |
PERFORMANCE SHARE AND PERFORMANCE UNIT AWARDS
The NEOs currently have three performance share and unit awards outstanding. In February 2018, the Committee granted the performance share and unit awards for the 2018 to 2020 performance period. The key features of these three awards are as follows:
| | | | | | | | | Performance
Period
| | Performance
Measures
| | Performance Measure
Targets
| | Shares/Units to be Awarded
Relative to Performance
Measure Targets
| | Actual Number of Shares/Units Awarded
| 2016–2018 | | - ROE- Adjusted by a Relative
Performance Modifier, based
on:
ROE
Book value per share growth
EPS growth
| | Average ROE of 13% for the 2016 through 2018 performance period
Relative Performance Modifier:
Weighted average relative performance representing the median for ROE, book value per share growth and EPS growth.
| | 0% at 10.5% ROE or below
100% at target ROE of 13%
125% at 14% ROE or above
In each case assuming a relative performance modifier of zero percent.
| | Between 0% and 125% of the target award opportunity based on average ROE relative to performance measure targets (as shown to the left)
As adjusted by the relative performance modifier.
To be determined by the Committee in February 2019
| 2017–2019 | | - ROEand
- Relative ROE versus life
insurer peer group
Weighted equally
| | Average ROE of 12% for the performance period
and
Average ROE equal to the median performance of the North American Life Insurance subset of the Peer Group for the performance period
| | ROE Measure
0% at 9.5% ROE or below
100% at target ROE of 12%
125% at 13.5% ROE or above
Relative ROE Measure
0% if relative ROE trails peer group by 4% or more
100% if relative ROE equals peer group
125% if relative ROE exceeds peer group by 3% or more
| | Between 0% and 125% of the target award opportunity based on:
• average ROE relative to performance measure targets (as shown to the left)
and
• average ROE relative to the median performance of the North American Life Insurance subset of the Peer Group (as shown to the left)
To be determined by the Committee in February 2020
| 2018–2020 | | - ROEand
- Relative ROE versus life
insurer peer group
Weighted equally
- Diversity and Inclusion
Objective
| | Average ROE of 12.5% for the performance period
and
Average ROE equal to the median performance of the North American Life Insurance subset of the Peer Group for the performance period
Diversity and Inclusion Objective:
Improve representation of diverse persons in senior management by 5 percentage points over 2018 through 2020 performance period
| | ROE Measure
0% at 10% ROE or below
100% at target ROE of 12.5%
125% at 14% ROE or above
Relative ROE Measure
0% if relative ROE trails peer group by 4% or more
100% if relative ROE equals peer group
125% if relative ROE exceeds peer group by 3% or more
Employee Diversity
–10% if representation decreases by 2 percentage points or more
–5% if no change in representation
+10% if representation increases by 5 percentage points or more
| | Between 0% and 137.5% of the target award opportunity based on:
• average ROE relative to performance measure targets (as shown to the left)
and
• average ROE relative to the median performance of the North American Life Insurance subset of the Peer Group (as shown to the left)
and
• change in the representation of diverse persons in senior management (as shown to the left)
To be determined by the Committee in February 2021
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Performance Goals
The Performance Shares and Units Program aligns long-term compensation to the achievement of our multi-year ROE goals and our relative performance as compared to our life insurance peers. Under the 2016-2018 program, our target ROE objective was 13%. Reflecting the effects of a sustained low interest rate environment, our target ROE goal decreased to 12% for the 2017-2019 program. Based on updatedmulti-year ROE projections that consider the estimated impact of the Tax Cuts and Jobs Act, the target ROE objective under the 2018-2020 program was increased to 12.5%. As indicated in the previous table, the threshold level of ROE performance to earn any award, and the ROE achievement required to earn a maximum award, have been aligned to these changes in our multi-year ROE goals.
For awards outstanding as of year-end 2017, the Committee excluded the impact of the Tax Cuts and Jobs Act from the calculation of the Company’s ROE for the fourth quarter of 2017 and expects to similarly exclude this impact from the ROE calculations for the 2018 and 2019 performance periods.
2015-2017 Performance Period
In February 2018, the NEOs received payouts with respect to the performance share and unit awards that were granted in
February 2015 for the three-year performance period ended December 31, 2017. These awards were paid at 1.104 times the target number of shares and units initially awarded based on our average ROE relative to our ROE targets for the three- year performance period, and adjusted for the relative performance modifier.
| | | | | | | | Average ROE over
the 2015-2017Compensation Discussion and Analysis
Performance Period
| | Goal:
| | | 13.5%
| | Actual(1):
| | | 13.57%
| | Earnout Factor:
| | | 1.104
| |
(1) | Actual figures are subject to standard adjustments as under the Annual Incentive Program for each year. |
The final award payments to the NEOs in February 2018 for the 2015 to 2017 performance period were:
| | | | | | | | | Named Executive Officers | | Target Number of
Shares/Units Awarded(1) | | | Actual Number of
Shares/Units Awarded(1) | | John R. Strangfeld | | | 62,044 | | | | 68,498 | | Robert M. Falzon | | | 21,898 | | | | 24,176 | | Mark B. Grier | | | 51,096 | | | | 56,410 | | Charles F. Lowrey | | | 32,848 | | | | 36,266 | | Stephen Pelletier | | | 29,198 | | | | 32,236 | |
(1) | Target and actual number of awards are 50% shares and 50% units. |
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Compensation
Supplemental Compensation Analysis
TOTAL DIRECT COMPENSATION
The following table illustrates the Committee’s perspective on the total direct compensation (base salary, annual incentive award, and long-term incentives) of the NEOs for the 2016 and 2017 performance years. This table is not a substitute for the compensation tables required by the SEC and included under “Executive Compensation” contained in this Proxy Statement. However, we believe it provides a more accurate picture of how the Committee viewed its compensation actions for the NEOs based on our performance for each of these two years:
| | | | | | | | | | | | | Named Executive Officer | | 2016
Compensation | | | 2017
Compensation | | | Percentage
Change | | John R. Strangfeld | | | | | | | | | | | | | Base Salary | | $ | 1,400,000 | | | $ | 1,400,000 | | | | 0.00% | | Annual Incentive | | $ | 5,976,000 | (1) | | $ | 6,660,000 | (2) | | | 11.45% | | Long-Term Incentive(3) | | $ | 10,000,000 | | | $ | 10,000,000 | | | | 0.00% | | Total | | $ | 17,376,000 | | | $ | 18,060,000 | | | | 3.94% | | Robert M. Falzon | | | | | | | | | | | | | Base Salary | | $ | 770,000 | | | $ | 770,000 | | | | 0.00% | | Annual Incentive | | $ | 2,990,000 | (1) | | $ | 3,330,000 | (2) | | | 11.37% | | Long-Term Incentive(3) | | $ | 4,000,000 | | | $ | 4,000,000 | | | | 0.00% | | Total | | $ | 7,760,000 | | | $ | 8,100,000 | | | | 4.38% | | Mark B. Grier | | | | | | | | | | | | | Base Salary | | $ | 1,190,000 | | | $ | 1,190,000 | | | | 0.00% | | Annual Incentive | | $ | 5,080,000 | (1) | | $ | 5,660,000 | (2) | | | 11.42% | | Long-Term Incentive(3) | | $ | 8,000,000 | | | $ | 8,000,000 | | | | 0.00% | | Total | | $ | 14,270,000 | | | $ | 14,850,000 | | | | 4.06% | | Charles F. Lowrey | | | | | | | | | | | | | Base Salary | | $ | 770,000 | | | $ | 770,000 | | | | 0.00% | | Annual Incentive | | $ | 3,985,000 | (1) | | $ | 4,440,000 | (2) | | | 11.42% | | Long-Term Incentive(3) | | $ | 5,000,000 | (4) | | $ | 4,750,000 | | | | -5.00% | | Total | | $ | 9,755,000 | | | $ | 9,960,000 | | | | 2.10% | | Stephen Pelletier | | | | | | | | | | | | | Base Salary | | $ | 770,000 | | | $ | 770,000 | | | | 0.00% | | Annual Incentive | | $ | 3,985,000 | (1) | | $ | 4,700,000 | (2) | | | 17.94% | | Long-Term Incentive(3) | | $ | 4,500,000 | | | $ | 4,750,000 | | | | 5.56% | | Total | | $ | 9,255,000 | | | $ | 10,220,000 | | | | 10.43% | |
| (1) | Thirty percent of this amount was mandatorily deferred into the Book Value Performance Program, which is part of the Long-Term Incentive Program. These amounts total $1,792,800 for Mr. Strangfeld, $897,000 for Mr. Falzon, $1,524,000 for Mr. Grier, $1,195,500 for Mr. Lowrey, and $1,195,500 for Mr. Pelletier. | |
| (2) | Thirty percent of this amount was mandatorily deferred into the Book Value Performance Program, which is part of the Long-Term Incentive Program. These amounts total $1,998,000 for Mr. Strangfeld, $999,000 for Mr. Falzon, $1,698,000 for Mr. Grier, $1,332,000 for Mr. Lowrey, and $1,410,000 for Mr. Pelletier. | |
| (3) | Represents the compensation value of long-term awards for each performance year. For example, the long-term values under the “2017 Compensation” column represent awards made in February 2018 for the 2017 performance year, excluding amounts mandatorily deferred from the annual incentive awards. | |
| (4) | 2016 Long-Term Incentive compensation value for Mr. Lowrey includes a special one-time supplemental grant of $250,000 recognizing his contributions on talent development and succession planning. | |
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| | Supplemental Compensation Analysis
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REPORTED CHANGES IN PENSION VALUES
As part of its compensation review, the Committee considered the dollar amount of the change in pension value for Mr. Strangfeld and the other NEOs for 2017. The Company determines the change in pension value using assumptions consistent with those used for financial reporting purposes. For the Company’s financial statements as of and for the year ended December 31, 2017, we refined an assumption relating to the form of benefit payment used in calculating benefits under the Supplemental Retirement Plan. We also changed the interest rate assumption we use to calculate lump sum payments under the plans to more closely align with certain interest rate assumptions used in actuarial modeling for our insurance businesses. The change in the present value of Mr. Strangfeld’s pension for 2017 was $7,972,080, of which $5,172,714 resulted from the changes described above. These changes resulted in less significant increases for the other NEOs. The remainder of the change in the pension value for 2017 for Mr. Strangfeld and the other NEOs is driven by a number of factors, including their respective years of service, age and earnings, as well as changes in the level of interest rates and life expectancy assumptions used to calculate the pension plan obligations.
Pension values may fluctuate significantly from year to year as a result of the factors described above. For example, if interest rates were to rise, it is possible that Mr. Strangfeld’s change in pension value in future years could even be a negative amount (as it has been for certain past years). Given this inherent volatility, the Compensation Committee will continue to monitor future pension accruals for Mr. Strangfeld and the other NEOs. The Traditional Pension Formula that applies to Mr. Strangfeld was closed to employees hired on or after January 1, 2001.
TOTAL SHAREHOLDER RETURN
The chart below shows our absolute Total Shareholder Return (“TSR”) and percentile ranking relative to the 20 companies in our Peer Group over the three time periods indicated.
| | | | | | | | | | | | | | | | Total Shareholder Return | | | | 1-Year | | | 3-Year | | | 5-Year | | Cumulative TSR | | | 14% | | | | 40% | | | | 149% | | Annualized TSR | | | 14% | | | | 12% | | | | 20% | | Percentile Rank | | | 23% | | | | 51% | | | | 66% | |
Prudential is the only life insurer among our Peer Group that is subject to Federal regulation as anon-bank systemically important financial institution (“SIFI”).
The discussion of our SIFI status and our subsequent designation began in 2012 with our designation occurring in 2013. We believe this occurrence, as well as the questions on the additional regulatory requirements that might accompany this designation, among other factors, may have negatively impacted our TSR.
CEO REALIZED AND REALIZABLE PAY ANALYSIS
The total compensation of our NEOs as reported in the 2017 Summary Compensation Table is calculated in accordance with SEC rules. Under these rules, we are required to show the grant date fair value of equity and equity-based awards, even though the ability of our executive officers to realize value from such awards is contingent on the achievement of certain performance conditions (including, in the case of stock options, the sustained increase in our stock price). The accompanying chart compares our CEO’s total compensation, as measured based on actual compensation received (or, with regard to pending awards, realizable pay based on the applicable performance elements and stock value at a relatively current time), to the amounts reported for him in the Summary Compensation Table for the periods shown.
The chart illustrates that our executive compensation program is designed so that the amount of compensation that our CEO actually receives, or is expected to receive, may be higher or lower than the amount we are required to report in the Summary Compensation Table, depending on the performance of our Common Stock and our performance relative to our key financial objectives. It demonstrates the strong alignment of the interests of our executive officers with those of our shareholders.
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| | Supplemental Compensation Analysis
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CEO TOTAL COMPENSATION
Grant Date Fair Value vs. Realized and Realizable Gains (in thousands)
| | |  | |  |
| | | | | • Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, book value units and stock options awarded each year.
• Total compensation based on realized and realizable pay is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2014 and paid in February 2017 based on an earnout factor of 1.25 times target valued at the December 31, 2016 share price of $104.06; performance shares and units awarded in 2015 and 2016 valued at target based on the $104.06 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2016 at $78.95 per unit; and the intrinsic value of stock options awarded in each year based on the $104.06 share price as of December 31, 2016.
• For 2016, a key reason why grant date and realized/realizable pay differ is that the intrinsic value of the stock options and the value of the performance shares and units awarded are significantly higher when valued as of December 31, 2016. The primary reason for the difference between the grant date and realized value for years 2014 and 2015 is that the grant date stock price was significantly higher in 2014 and 2015 than it was as of December 31, 2016.
| | | | • Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, book value units and stock options awarded each year.
• Total compensation based on realized and realizable pay is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2015 and paid in February 2018 based on an earnout factor of 1.104 times target valued at the closing price on December 29, 2017 (the last trading day of 2017), $114.98; performance shares and units awarded in 2016 and 2017 valued at target based on the $114.98 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2017 at $85.54 per unit; and the intrinsic value of stock options awarded in each year based on the $114.98 share price at year end.
• For 2017, a key reason for the difference between grant date and realized/realizable pay is that the intrinsic value of the stock options at year-end is significantly less than the grant date fair value of the options. The primary reason for the difference between the grant date and realized value for years 2015 and 2016 is that the stock price at the end of 2017 was significantly higher than on the grant dates.
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| | |
| | Supplemental Compensation Analysis
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WHY WE USE ADJUSTED OPERATING INCOME (“AOI”) INSTEAD OF GAAP NET INCOME(1)
Why don’t we use GAAP net income as our compensation performance measure?
We seek to compensate our senior executive officers based on their success in building shareholder value through the operation of the Company’s businesses. The Committee and the investment community do not believe GAAP net income optimally measures the creation of shareholder value because it may be significantly affected by items with limited economic impact, or that are otherwise not indicative of ongoing trends.
Why do we use AOI as our compensation performance measure?
The Committee believes AOI is superior to GAAP net income as a measure of our performance because AOI includes only our results of operations from ongoing operations and the related underlying profitability factors, and excludes items that are not indicative of ongoing trends. Among other things, AOI excludes items where the timing of the impact is subject to management discretion, items with limited economic impact, items that we expect to reverse over time, and items that are otherwise not indicative of our ongoing performance.
What are some examples of items included in GAAP net income, but excluded from AOI, and why are they excluded?
Realized investment gains/losses.Sales of general account invested assets may result in a gain or loss that is recognized in GAAP net income. However, the timing of these sales that would result in gains or losses (such as gains or losses related to changes in interest rates) is largely subject to our discretion and influenced by market opportunities as well as our tax and capital profile. Accordingly, we believe gains orlosses on these sales are not indicative of business performance trends.
| • | | Divested businesses.The contribution to GAAP net income or loss of divested businesses that have been or will be sold or exited or are in wind-down status are excluded from AOI since the results of divested businesses are not relevant to an understanding of the Company’s ongoing operations. | |
| (1) | For more information, see Appendix A to this Proxy Statement. |
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Post-Employment Compensation
Retirement Plans We view retirement benefits as a key component of our executive compensation program because they encourage long-term service. Accordingly, we offer our employees, including the NEOs, a comprehensive benefits program that provides the opportunity to accumulate adequate retirement income. This program includes both defined benefit and defined contribution plans, as well as two supplemental retirement plans whichthat allow highly compensated employees (that is, employees whose compensation exceeds the limits established by the Internal Revenue Code for covered compensation and benefit levels) to receive the same benefits they would have earned but for these limitations. Further, we sponsor three supplemental executive retirement plans (“SERPs”) for certain eligible executive officers, including the NEOs, to offset the potential loss or forfeiture of retirement benefits under certain limited circumstances or to provide additional benefits to certain key executives. For descriptions of these plans, including their titles, see “Pension Benefits.” We also maintain the Prudential Insurance Company of America Deferred Compensation Plan (the “Deferred Compensation Plan”). We offer this plan to our executive officers, including the NEOs, as a competitive practice. For a description of this plan, see “Nonqualified Deferred Compensation.” Periodically, we compare the competitiveness of our benefits programs for our employees, including retirement benefits, against other employers with whom we broadly compete for talent. It is our objective to provide our employees with a benefits package that is at or around the median of the competitive market when compared to other employers. Severance and Change in Control Arrangements Our Board has adopted a policy prohibiting us from entering into any severance or change in controlchange-in-control agreement with any of our executive officers, including the NEOs, that provides for payments and benefits that exceed 2.99 times the sum of the executive officer’s base salary and most recently earned cash bonus,annual incentive award, without shareholder approval or ratification. We do not provide excise tax payments, reimbursements, or“gross-ups” to any of our executive officers. While our other executive officers are eligible for severance payments in the event of an involuntary termination of employment without “cause,” our CEO is not a participant in the severance program (discussed below) providing this benefit. To enable us to offer competitive total compensation packages to our executive officers, as well as to ensurepromote the ongoing retention of these individuals when considering potential transactions that may create uncertainty as to their future employment with us, we offer certain post-employment payments and benefits to our executive officers, including the NEOs, upon the occurrence of several specified events. These payments and benefits are provided under two separate programs: the Prudential Severance Plan for Senior Executives (the “Severance Plan”); and
| ● | | the Prudential Severance Plan (the “Severance Plan”); and |
the Prudential Financial Executive Change in Control Severance Program.
| ● | | the Prudential Financial Executive Change in Control Severance Program. |
We have not entered into individual employment agreements with our NEOs. Instead, the rights of our NEOs with respect to post-employment compensation upon specific events, including death, disability, severance or retirement, or a change in control of the Company, are covered by these two programs. We use plans, rather than individually negotiated agreements, to provide severance and change in controlchange-in-control payments and benefits for several reasons. First, a “plan” approach provides us with the flexibility to change the terms of these arrangements from time to time. An employment agreement would require that the affected NEO consent to any changes. Second, this approach is more transparent, both internally and externally. Internal transparency eliminates the need to negotiate severance or other employment separation payments and benefits on acase-by-case basis. In addition, it assures each of our NEOs that the severance payments and benefits he receivesthey receive are comparable to one another. As previously noted, our executive officers, including the NEOs, except for our CEO, are eligible for severance payments and benefits in the event of an involuntary termination of employment without “cause.” These executive officers and our CEO are also eligible for “double trigger”“double-trigger” severance payments and benefits in the event of an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a change in control of the Company. Our equity awards are also designed to be “double trigger,“double-trigger,” so long as such awards are allowed to continue in effect following any change in control transaction on substantially equivalent terms and conditions to those applicable prior to such transaction. | | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 63 |
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The payment of these awards at target achievement rewards the executive officer for his or her expected performance prior to the change in controlchange-in-control transaction. For detailed information on the estimated potential payments and benefits payable to the NEOs in the event of their termination of employment, including following a change in control of the Company, see “Potential Payments Upon Termination or Change in Control.” | | | | 48 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Compensation Discussion and Analysis | |
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Perquisites and Other Personal Benefits We generally do not provide our executive officers, including the NEOs, with perquisites or other personal benefits, except for the use of Company aircraft, Company-provided vehiclescars and drivers, and, in the case of our CEO and Vice Chairman, security services. These items are provided because we believe that they serve a necessary business purpose and represent an immaterial element of our executive compensation program. The cost allocated to the personal use of Company-provided vehiclescars and drivers, including commuting expenses, and the incremental cost associated with the security services, to the extent not reimbursed to us, are reported in the Summary Compensation Table. Our executive officers, including the NEOs, are required to reimburse us for the incremental cost of any personal use of Company aircraft. We do not provide tax reimbursements or any other tax payments with respect to perquisites, including excise tax“gross-ups,” to any of our executive officers. Perquisites and other personal benefits represent an immaterial element of our executive compensation program.
Other Compensation RelatedCompensation-Related Policies In addition to the other components of our executive compensation program, we maintain the policies described below. These policies are consistent with evolving best practices and help ensureconfirm that our executive compensation program does not encourage our executive officers to engage in behaviors that are beyond our ability to effectively identify and manage risk. Clawback Policy Our clawback policy covers all executive officers (including the NEOs), applies to all incentive-based compensation (including stock options and other equity awards) paid to or in respect of an executive officer, and includes separate triggers for material financial restatements and improper conduct (including failure to report). The policy provides that if (i) the Company is required to undertake a material restatement of any financial statements filed with the SEC or (ii) an executive officer engages in improper conduct that either has had, or could reasonably be expected to have, a significant adverse reputational or economic impact on the Company or any of its affiliates or divisions, then the Board may, in its sole discretion, after evaluating the associated costs and benefits, seek to recover all or any portion of the incentive-based compensation paid to any such executive officer during the three-year period preceding the restatement, or the occurrence of the improper conduct, as the case may be. The policy also requires us to disclose to our shareholders, not later than the filing of the next proxy statement, the action taken by the Board, or the Board’s decision not to take action, with regard to compensation recovery following the occurrence of a material restatement or improper conduct, so long as such event has been previously disclosed in our SEC filings. For purposes of the policy, a “restatement” means any material restatement (occurring after the effective date of the policy) of any of the Company’s financial statements that have been filed with the SEC under the Exchange Act or the Securities Act of 1933, as amended. “Improper conduct” means willful misconduct (including, but not limited to, fraud, bribery or other illegal acts) or gross negligence, which, in either case, includes any failure to report properly, or to take appropriate remedial action with respect to, such misconduct or gross negligence by another person. Other Long-Term Compensation Recovery Policies We maintain a “resignation notice period” requirement as part of the terms and conditions of all long-term incentive awards granted to certain designated grades of executives, including the NEOs. The requirement is applicable to awards granted in 2015 and subsequent years. The requirement is intended to reduce the adverse and disruptive effect of a sudden voluntary
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departure of an executive subject to the requirement, and requires him or her to provide notice for a specified period prior to the effective date of a voluntary resignation, or otherwise risk forfeiting his or her outstanding long-term incentive awards. The terms and conditions of long-term incentive awards also provide for forfeiture in the event a recipient violates applicablenon-solicitation ornon-competition noncompetition agreements. Process for Approving Long-Term Incentive Awards
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The Committee approves long-term incentive awards (including stock options, book value units, performance shares, performance units and restricted stock units) on an annual basis at its regularly scheduled February meeting.
The Committee has delegated authority to management to approve long-term incentive awards for new hires, promotions, and retention purposes within specified limits to employees below the level of senior vice president. The Committee approves any long-term incentive awards to newly hired or promoted senior executives.
Under the terms of our 2016 Omnibus Plan, which was approved by shareholders in 2016, stock options are required to be priced at the fair market value of our Common Stock on the date of grant, which is based on the closing market price of our Common Stock on the date of grant. The number of shares of our Common Stock subject to a stock option grant to an individual is determined by dividing the compensation value of the grant by the fair value of each stock option based on the average closing market price of our Common Stock on the NYSE for the final20-day trading period in the month prior to the grant date.
The number of performance shares and units or restricted stock units awarded to an individual is determined by a formula that divides the compensation value of the award by the average closing market price of our Common Stock on the NYSE for the final20-day trading period in the month prior to the grant date.
| | | | | | | Compensation Discussion and Analysis | |
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Stock Ownership Guidelines We have adopted stock ownership guidelines for our executive officers to encourage them to build their ownership position in our Common Stock over time by direct market purchases, making investments available through the PESP and the Deferred Compensation Plan, and retaining shares they earn under their long-term incentive awards. The guidelines are framed in terms of stock value as a percentage of base salary as follows:salary. | | | | | | Position | | Stock Value as a Percentage of Base Salary | | | Chief Executive Officer | | 700% | Chief Executive Officer
| | | 700%
| | Vice Chairman and Executive Vice Presidents President | | 300% | | 300%
| | Senior Vice Presidents President | | | 200% | |
Each of the NEOs meetshas met his individual stock ownership level.guideline. Under the current stock ownership guidelines, once an executive officer attains his or her individual ownership level, he or she will remain in compliance with the guidelines despite future changes in our stock price and base salary, as long as his or her holdings do not decline below the number of shares at the time the stock ownership guidelines were met. Stock Retention Requirements We have adopted stock retention requirements for our executive officers. Each executive officer is required to retain 50% of the net shares (after payment of the applicable exercise price (if any), fees, and taxes) acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. The executive officer is required to hold such shares until the later of one year following the date of acquisition of such shares (even if thisone-year holding period extends beyond termination of employment) or the date that he or she satisfies our stock ownership guidelines. | | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 65 |
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Prohibition of Derivatives Trading, and Hedging and Pledging of Our Securities Our Board has adopted a policy prohibiting all employees, including the NEOs, and members of the Board from engaging in any hedging transactions with respect to any of our equity securities held by them, which includes the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) designed to hedge or offset any decrease in the market value of such equity securities. Our Board has also adopted a policy prohibiting our Section 16 officers and members of the Board from pledging, or using as collateral, our securities to secure personal loans or other obligations, whichand includes holding shares of our Common Stock in a margin account. POLICY ON RULE10b5-1 TRADING PLANS
We have a policy governing the use by executive officers ofpre-established trading plans for sales of our Common Stock and exercises of stock options for shares of our Common Stock. We believe our Rule10b5-1 policy reflects best practice and is effective in ensuring compliance
| Policy on Rule 10b5-1 Trading Plans We have a policy governing the use by executive officers of pre-established trading plans for sales of our Common Stock and exercises of stock options for shares of our Common Stock. We believe our Rule 10b5-1 policy reflects best practice and is effective in complying with legal requirements. Under the policy: | • | | ●All Rule10b5-1 trading plans must bepre-cleared precleared by our law and compliance departments. | |
| • | | ●A trading plan may be entered into, modified or terminated only during an open trading window and while not in possession of materialnon-public nonpublic information. | |
| • | | No trade may occur for the first 30 days after the trading plan is established. No modification or termination of a plan may affect any trade scheduled to occur within 30 days. | |
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
It has been our policy to structure and administer our annual and long-term incentive compensation plans and stock option grants for our CEO and the other NEOs to maximize the tax deductibility of the payments as “performance-based compensation” for purposes of Section 162(m) to the extent practicable. In 2017, all such performance-based compensation was deductible. The Committee may provide compensation that is not tax deductible if it determines that such action is appropriate and in the best interests of the Company.
The 2016 Omnibus Plan contains an overall limit on compensation paid to covered employees to comply with the conditions for determining “performance-based compensation” under Section 162(m). Under the terms of the 2016 Omnibus Plan, payment on annual incentive awards to an NEO who is subject to Section 162(m) in a taxable year may not exceed 0.4% of ourpre-tax AOI for the year ended prior to the year in which payment is due. Awards of restricted stock units, performance shares, performance units and book value units and associated dividend equivalents have a performance condition that ourpre-tax AOI must be positive in at least one fiscal year during which the award is outstanding for at least 276 days of that year, and a maximum limitation that the amount payable in any year may not exceed 0.4% of the highest amount of ourpre-tax AOI for any of the three years ended prior to the year payment on those awards is due. For awards granted prior to May 2016 under the Omnibus Incentive Plan, the total payout on awards of annual incentives, restricted stock units, performance shares, performance units and book value units and associated dividend equivalents for an NEO who is subject to Section 162(m) in a taxable year cannot exceed 0.6% ofpre-tax AOI for the prior year.
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Compensation Discussion and Analysis | |
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| | | | | | | | | | | | Supplemental CEO Pay Analysis | | | | | The total compensation of our NEOs as reported in the 2021 Summary Compensation Table is calculated in accordance with SEC rules. Under these rules, we are required to show the grant date fair value of equity and equity-based awards. The ability of our executive officers to realize value from such awards is contingent on the achievement of certain performance conditions (including, in the case of stock options, the sustained increase in our stock price). The accompanying chart compares our CEO’s total compensation, as measured based on actual compensation received (or, with regard to pending awards, realizable pay based on the applicable performance elements and stock value at a relatively current time), to the amounts reported for him in the Summary Compensation Table for the periods shown. The chart illustrates that our executive compensation program is designed so that the amount of compensation that our CEO actually receives, or is expected to receive, may be higher or lower than the amount we are required to report in the Summary Compensation Table, depending on the performance of our Common Stock and our performance relative to our key financial objectives. It demonstrates the strong alignment of the interests of our executive officers with those of our shareholders. | | | | | | | | | 
| | • Total Compensation Discussionbased on Grant Date Fair Value is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program, as applicable); and Analysisthe grant date fair values of the performance shares and units, restricted stock units, book value units and stock options awarded each year. • Total Compensation based on Realized and Realizable Gains is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the value of the final performance shares and units distributed following the three-year performance period using the closing price at the end of the period (or, if the performance period has not yet completed, the value of the target number of performance shares and units assuming the latest year end share price); the number of RSUs scheduled to vest in February each year assuming the preceding year end share price (for vested shares) or the latest year end share price (for unvested shares); actual payouts for vested tranches of book value units (or estimated values to be paid for unvested tranches assuming the latest year end book value per share); and the intrinsic value of stock options awarded in each year based on the latest year end share price. | | | | | The difference between Mr. Lowrey’s realized/realizable pay vs. grant date fair value for 2021 is primarily attributable to the 33% increase in the fair market value of Prudential Common Stock from the date the awards were granted until the end of the year. Our stock price increased more moderately from the time of grant in 2019 and 2020 to December 31, 2021 (16% and 13%, respectively). Coupled with below-target performance on the 2019-2021 performance share program, this yielded marginal net gains versus grant date fair values. | | |
Deductibility of Executive Compensation The exemption from Section 162(m)’s of the Internal Revenue Code limits a publicly held corporation’s ability to take a tax deduction limit for “performance-based compensation” has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to any “covered employee”certain executive officers (“covered employees”) in excess of $1 million will not be deductible, unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.million. Prior to 2018, for purposescertain performance-based compensation was exempt from the $1 million deduction limit. Notwithstanding changes to the tax deductibility requirements of Section 162(m), a “covered employee” included all NEOs except the CFO. Effective in 2017 (2018 for CFOs) an individual is and will remain a “covered employee” going forward if that individual held the positions of CEO or CFO at any time during a year or the individual is reported as one of the other three highest paid executive officers.Despite our historical efforts to structure our annual and long-term incentive compensation plans and stock option grants for our covered employees to maximize the tax deductibility of the payments, the rules and regulations promulgated under Section 162(m) are complicated, and may change from time to time, and the scope of the transition relief under the legislation amending Section 162(m) is uncertain. As such, there can be no guarantee that compensation paid after 2017 will satisfy the requirements for tax deductibility under Section 162(m). Nevertheless, the Committee continues to believe that a significant portion of our executive officers’ compensation should be tied to measures of performance of our businesses.
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| | | Compensation Committee Report |
COMPENSATION COMMITTEE REPORT
The Compensation Committee of our Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on its review and these discussions, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form10-K for the year endedDecember 31, 2017.2021. The Compensation Committee THE COMPENSATION COMMITTEE
Karl J. KrapekMichael A. Todman (Chair)
Thomas J. Baltimore Michael A. TodmanKarl J. Krapek
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| | | CEO Pay Ratio |
2017 CEO Pay Ratio
In accordance with SEC rules, for 2017, we determined the annual total compensation of our median compensated employee and present a comparison of that annual total compensation to the annual total compensation of our Chairman and CEO, John R. Strangfeld.
| | | | • | | The 2017ratio of our CEO’s annual total compensation of Mr. Strangfeld was $27,120,220. | |
| • | | The 2017 annual total compensation ($19,809,318) to that
of our median compensated employee was $101,067. | |
($114,931) for 2021 was: | • | | Accordingly, the ratio of Mr. Strangfeld’s annual total compensation to the annual total compensation of our median compensated employee for 2017 was 268 to 1*. | |
*This | ratio is a reasonable estimate calculated in a manner consistent
with Item 402(u) of the SEC’s RegulationS-K. | | 172 to 1 |
Calculating the 2017 CEO Pay Ratio
| | | | | | | | | Determining our Global Employee Population
| | Jurisdictions Excluded from Employee Population
(number of employees estimated as of October 1, 2017)
| To calculate thisthe 2021 CEO pay ratio, we began by identifying aused the same median compensated employee that
we used for whom 2017 annual totalpurposes of calculating the CEO pay ratio for 2020, as there has been no change
in our employee population or employee compensation could be ascertained. We determined aarrangements that we believe would
significantly impact the CEO pay ratio. ● In 2020, we identified our median compensated employee by collectingfrom among 40,769 employees
across the eight countries from which we collected compensation data, for all employees, excluding employeesas shown in countries that,the
shaded rows in the aggregate, comprise less than 5%table to the right. This population comprised 95.2% of our estimated
global employee population (considered“de minimis” under SEC rules). We also excluded from this populationof 42,832 employees as of September 30, 2020. These figures exclude
independent contractors and other individuals classified asnon-employees nonemployees in their
respective jurisdictions based on our employment and payroll tax records.jurisdictions. In● We used “Total Cash Pay” as of October 1, 2020 as our compensation measure, which, for
these purposes, includes base salary, short-term incentives (e.g., payments under our
Annual Incentive Program), cash commissions and other similar payments earned. We
annualized Total Cash Pay for employees who were not employed for the entire period, and
we did not make any cost-of-living adjustments.
Our “median compensated employee” is the individual who earned Total Cash Pay at the
midpoint of this group of 40,769 employees. Determining Annual Total Compensation We determined annual total we collected compensation for our median compensated employee by obtaining
compensation data for this employee consistent with the methodology we use to calculate total
compensation as it appears in the 2021 Summary Compensation Table. Accordingly, it includes
base salary earned and paid from January 1, 2021 through December 31, 2021, non-equity
incentive plan payments made for the performance period January 1, 2021 through
December 31, 2021, equity incentives and options awards granted during the fiscal year, and
other compensation earned and/or paid in 2021, such as Company contributions to retirement
savings plans. In addition, for purposes of calculating the CEO pay ratio, SEC rules permit us to
include in annual total compensation any compensation and benefits made available to
employees broadly, such as medical and dental benefits. We elected to include amounts
representing employer medical and dental contributions in six countries, comprising 95.6%determining the annual total
compensation of our global employee population (approximately 43,000 full-time and part-time employees). These six countries are: the United States, Japan, Ireland, Taiwan, Brazil, and Korea. We excluded from the population approximately 2,000 employees from 14 jurisdictions, comprising 4.4% of our global population. The table on the right shows the number of excluded employees in each jurisdiction. As of October 1, 2017, Prudential had an aggregate of 44,857 employees, of which 18,311 were U.S. employees and 26,546 werenon-U.S. employees. This total excludes independent contractors and other individuals classified as non-employees, such as certain sales associates.
| | | | Country median employee.
| | Estimated Employees
as of September 30, 2020 (Estimate)
| | | | | Country | | Poland
| | 406
| | Employees | | | Japan | | Malaysia
| | 381
| | 20,961 | | | United States | | Argentina
| | 357
| | 16,336 | | | Ireland | | Italy
| | 330
| | 1,626 | | | Brazil | | United Kingdom
| | 188
| | 796 | | | Argentina | | Mexico
| | 139
| | 436 | | | United Kingdom | | Singapore
| | 72
| | 321 | | | Mexico | | Germany
| | 58
| | 204 | | | Singapore | | Luxembourg
| | 13
| | 89 | | | Taiwan | | France
| | 10
| | 1,402 | | | Malaysia | | Australia
| | 7
| | 328 | | | India | | Hong Kong
| | 5
| | 195 | | | Germany | | China
| | 2
| | 64 | | | Luxembourg | | India
18 | | France | | 2
17 | | Australia | | 16 | | Hong Kong | | 6 | | Netherlands | | 5 | | Italy | | 5 | | China | | 3 | | Switzerland | | 3 | | Canada | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to apply various methodologies and apply various assumptions and, as a
result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies. We determined annual total compensation for our CEO, Mr. Lowrey, using the amount reported in our 2021 Summary Compensation Table, increased to include an amount representing employer medical and dental contributions for him. | | | | |
Determining the Median Compensated Employee
To identify our median compensated employee, we used “Total Cash Pay” as our compensation measure, which, for these purposes, included base salary, short-term incentive payments (e.g., payments under our Annual Incentive Program), cash commissions and other similar payments. We determined the median compensated employee from our active, global employee population as described above as of October 1, 2017, using Total Cash Pay earned and paid from October 2, 2016 through October 1, 2017. We annualized Total Cash Pay for permanent employees hired during the period and did not make anycost-of-living adjustments. Any Total Cash Pay paid in a foreign currency was converted to U.S. Dollars at prevailing exchange rates as of October 1, 2017.
Our “median compensated employee” is an individual who earned Total Cash Pay at the midpoint, that is, the point at which half of the global employee population earned more Total Cash Pay and half of the global employee population earned less Total Cash Pay.
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| | 2017 CEO Pay RatioExecutive
Compensation |
Determining 2017 Annual Total Compensation
We determined 2017 annual total compensation for our median compensated employee by obtaining compensation data for this employee for 2017 consistent with the methodology we use to calculate total compensation for 2017 as it appears in the 2017 Summary Compensation Table. Accordingly, it includes base salary earned and paid from January 1, 2017 through December 31, 2017,non-equity incentive plan payments made for the performance period January 1, 2017 through December 31, 2017, equity incentives and options awards granted during the fiscal year, and other compensation earned and or paid in 2017, such as Company contributions to retirement savings plans. In addition, for purposes of calculating the CEO pay ratio, SEC rules permit us to include in annual total compensation any compensation and benefits made available to employees broadly, such as medical and dental benefits. We elected to include amounts representing employer medical and dental contributions in determining the 2017 annual total compensation of our median employee.
We determined 2017 annual total compensation for Mr. Strangfeld using the amount reported in our 2017 Summary Compensation Table, increased to include an amount representing employer medical and dental contributions for him.
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Executive Compensation
20172021 Summary Compensation Table
The following table presents,sets forth information regarding fiscal years 2021, 2020 and 2019 compensation for the years ended December 31, 2017, 2016, and 2015, the compensation ofour NEOs, except fiscal year 2019 where Mr. Strangfeld, our principal executive officer, Mr. Falzon, our principal financial officer, and Messrs. Grier, Lowrey and Pelletier, our three most highly compensated executive officers (other than the principal executive officer and principal financial officer) who were serving as executive officers as of December 31, 2017. For information on the role of each compensation component within the total compensation packages of the NEOs, please see the relevant descriptionSullivan is not provided because he was not an NEO in the “Compensation Discussion and Analysis (“CD&A”).” The compensation data in this table is presented in accordance with the SEC disclosure rules. For the Compensation Committee’s view of 2017 performance year compensation, see “Supplemental Compensation Analysis — Total Direct Compensation” in the CD&A.year.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name & Principal Position | | Year | | | Salary ($)(1) | | | Stock Awards
($)(2) | | | Option Awards
($)(3) | | | Non-Equity
Incentive Plan
Compensation
($)(4) | | | Change in
Pension Value
($)(5) | | | All Other
Compensation
($)(6) | | | Total ($) | | Charles F. Lowrey, Chairman and Chief
Executive Officer | | | 2021 | | | | 1,200,000 | | | | 11,300,123 | | | | 0 | | | | 6,425,878 | | | | 781,247 | | | | 92,489 | | | | 19,799,737 | | | | | 2020 | | | | 1,246,154 | | | | 4,980,063 | | | | 1,682,442 | | | | 5,889,715 | | | | 1,133,852 | | | | 58,028 | | | | 14,990,254 | | | | | 2019 | | | | 1,200,000 | | | | 4,980,009 | | | | 1,666,665 | | | | 6,085,252 | | | | 1,128,436 | | | | 72,577 | | | | 15,132,939 | | Kenneth Y. Tanji, Executive Vice President and Chief Financial Officer | | | 2021 | | | | 650,000 | | | | 3,600,102 | | | | 0 | | | | 2,487,048 | | | | 193,827 | | | | 21,963 | | | | 6,952,940 | | | | | 2020 | | | | 623,077 | | | | 1,560,093 | | | | 527,040 | | | | 1,767,572 | | | | 531,777 | | | | 30,821 | | | | 5,040,380 | | | | | 2019 | | | | 600,000 | | | | 1,560,046 | | | | 522,102 | | | | 1,643,475 | | | | 491,659 | | | | 50,093 | | | | 4,867,375 | | Robert M. Falzon, Vice Chairman | | | 2021 | | | | 1,000,000 | | | | 9,000,132 | | | | 0 | | | | 5,119,124 | | | | 371,334 | | | | 37,161 | | | | 15,527,751 | | | | | 2020 | | | | 1,038,461 | | | | 3,960,006 | | | | 1,337,850 | | | | 4,636,117 | | | | 937,141 | | | | 76,941 | | | | 11,986,516 | | | | | | 2019 | | | | 1,000,000 | | | | 3,960,144 | | | | 1,325,304 | | | | 4,754,861 | | | | 938,263 | | | | 104,406 | | | | 12,082,978 | | Scott G. Sleyster, Executive Vice President and
Head of International Businesses | | | 2021 | | | | 700,000 | | | | 4,400,070 | | | | 0 | | | | 3,306,392 | | | | 302,044 | | | | 31,375 | | | | 8,739,881 | | | | | 2020 | | | | 726,923 | | | | 2,280,076 | | | | 770,274 | | | | 2,936,921 | | | | 922,521 | | | | 35,383 | | | | 7,672,098 | | | | | 2019 | | | | 700,000 | | | | 2,280,038 | | | | 763,062 | | | | 2,750,399 | | | | 950,152 | | | | 52,236 | | | | 7,495,887 | | Andrew F. Sullivan, Executive Vice President and
Head of U.S. Businesses | | | 2021 | | | | 700,000 | | | | 4,400,070 | | | | 0 | | | | 2,939,353 | | | | 235,623 | | | | 29,942 | | | | 8,304,988 | | | | | 2020 | | | | 726,923 | | | | 1,980,003 | | | | 668,934 | | | | 2,519,639 | | | | 344,172 | | | | 32,101 | | | | 6,271,772 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1(1) | The amounts reported in theSalary column for 20172021 include elective contributions of a portion of their base salary to the SESP by Messrs. Strangfeld,Lowrey, Tanji, Falzon, Grier, Lowrey,Sleyster and PelletierSullivan in the amounts of $45,200, $20,000, $36,800, $20,000,$36,400, $14,092, $28,400, $16,400 and $20,000,$16,400, respectively. |
2(2) | The amounts reported in theStock Awards column represent the aggregate grant date fair value, foras calculated under ASC 718, of performance shares andat target, performance units at target, and restricted stock units in each respective year. The maximum number of performance shares and performance units payable for 2017, 20162021, 2020, and 2015 are2019 is 1.65, 1.25, and 1.25 times the target amounts. |
| For 2017, the maximum performance shares and units payable and valued at theamounts, respectively. The grant date pricefair value is calculated in the manner described in the Grants of $110.45 to Messrs. Strangfeld, Falzon, Grier, and Lowrey and Pelletier are 71,126 or $7,855,867; 28,450 or $3,142,303; 56,900 or $6,284,605; 35,564 or $3,928,044; and 32,008 or $3,535,284, respectively. |
| For 2016, the maximum performance shares and units payable and valued at the grant date price of $63.59 to Messrs. Strangfeld, Falzon, Grier, and Lowrey and Pelletier are 103,896 or $6,606,747; 41,558 or $2,642,673; 83,116 or $5,285,346; 49,350 or $3,138,167; and 46,754 or $2,973,087, respectively. |
| For 2015, the maximum performance shares and units payable and valued at the grant date price of $78.08 to Messrs. Strangfeld, Falzon, Grier, Lowrey, and Pelletier are 77,556 or $6,055,572; 27,374 or $2,137,362; 63,870 or $4,986,970; 41,060 or $3,205,965; and 36,498 or $2,849,764, respectively. |
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| | |
| | Executive Compensation
Plan-Based Awards table. |
3(3) | The amounts reported in theOptionOptions Awards column represent the aggregate grant date fair value forof stock options granted in each respective year for the prior year’s performance as calculated under ASC Topic 718. The assumptions made in calculating the grant date fair value amounts for these stock options are incorporated herein by reference to the discussion of those assumptions and found below in the Grants of Plan-Based Awards Table. Note that the amounts reported in this column do not necessarily correspond to the actual economic value that will be received by the Named Executive Officers from the options. |
4 | | | | 54 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Executive Compensation | |
|
| (4) | The aggregate amounts reported in theNon-Equity Incentive Plan Compensation column for 2017 represent the sum of (i) the annual incentives paid in February 2018 forfollowing each performance in 2017, excluding 30%year (which do not include the portion of the totalperformance year 2019 annual incentive carved out toincentives mandatorily deferred into the Book Value Performance Program; andProgram); (ii) the value of the book value units paid in February 2018, and additionally in April and December 2017 for Mr. Pelletier; for 2016 represent annual incentives paid in February 2017of each year for performance in 2016, excluding 30% ofover the total annual incentive carved out to the Book Value Performance Program; and the value of theprior 3 years; (iii) offcycle book value units paid in February 2017, and additionally in April 2016November 2020 for Mr. Pelletier; for 2015 represent annual incentives paid in February 2016 for performance in 2015, excluding 30% of the total annual incentive carved out to the Book Value Performance Program;Sullivan; and the value of the book value units paid in February 2016: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 2017 | | | 2016 | | | 2015 | | | Name | | Annual Incentive
Award | | | Book Value Units
Value Paid | | | Annual Incentive
Award | | | Book Value Units
Value Paid | | | Annual Incentive
Award | | | Book Value Units
Value Paid | | | Strangfeld | | $ | 4,662,000 | | | $ | 4,611,376 | | | $ | 4,183,200 | | | $ | 4,764,238 | | | $ | 4,140,500 | | | $ | 4,612,768 | | | Falzon | | $ | 2,331,000 | | | $ | 1,925,249 | | | $ | 2,093,000 | | | $ | 1,701,452 | | | $ | 1,820,000 | | | $ | 1,266,410 | | | Grier | | $ | 3,962,000 | | | $ | 3,816,282 | | | $ | 3,556,000 | | | $ | 3,950,580 | | | $ | 3,570,000 | | | $ | 3,840,736 | | | Lowrey | | $ | 3,108,000 | | | $ | 2,764,738 | | | $ | 2,789,500 | | | $ | 2,951,704 | | | $ | 2,975,000 | | | $ | 2,902,390 | | | Pelletier | | $ | 3,290,000 | | | $ | 2,503,200 | | | $ | 2,789,500 | | | $ | 1,866,128 | | | $ | 2,240,000 | | | $ | 1,341,969 | |
| For Mr. Falzon, 2017, 2016, and 2015 also include the value of(iv) carried interest payments of $3,226, $15,600 and $4,747, respectively. |
| For Mr. Lowrey, 2017, 2016, and 2015 also include the value of carried interest payments of $43,090, $64,393, and $197,029, respectively. |
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| | |
| | Executive Compensation
for Mr.Lowrey, as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | | | | | 2020 | | | | | | 2019 | | | | | Annual Incentive
Award ($) | | | Book Value Units
Value Paid ($) | | | | | | Annual Incentive
Award ($) | | | Book Value Units
Value Paid ($) | | | | | | Annual Incentive
Award ($) | | | Book Value Units
Value Paid ($) | | | | | | | | | | | Charles F. Lowrey | | | 4,253,000 | | | | 2,172,878 | | | | | | | | 3,119,000 | | | | 2,710,994 | | | | | | | | 3,167,500 | | | | 2,780,211 | | | | | | | | | | | Kenneth Y. Tanji | | | 1,883,000 | | | | 604,048 | | | | | | | | 1,123,000 | | | | 644,572 | | | | | | | | 1,169,000 | | | | 474,475 | | | | | | | | | | | Robert M. Falzon | | | 3,402,000 | | | | 1,717,124 | | | | | | | | 2,495,000 | | | | 2,141,117 | | | | | | | | 2,590,000 | | | | 2,164,861 | | | | | | | | | | | Scott G. Sleyster | | | 2,430,000 | | | | 876,392 | | | | | | | | 1,782,000 | | | | 1,154,921 | | | | | | | | 1,620,500 | | | | 1,129,899 | | | | | | | | | | | Andrew F. Sullivan | | | 2,430,000 | | | | 509,353 | | | | | | | | 1,890,000 | | | | 629,639 | | | | | | | | — | | | | — | |
For Mr. Lowrey, 2020 and 2019 include the value of carried interest payments of $59,721 and $137,541, respectively. These carried interest payments relate to carried interest programs in our PGIM business. While Mr. Lowrey is no longer entitled to invest in or be granted new carried interests in these programs, he will continue to receive distributions from these pre-existing arrangements if and when they are earned. | (5) | The carried interest payments relate to carried interest programs in which Mr. Falzon and Mr. Lowrey participate as a result of previous positions held within the Company’s Investment Management Business. While Mr. Falzon and Mr. Lowrey are no longer entitled to invest in or be granted new carried interests in these programs, they will continue to receive distributions if and when they are earned. |
(5) | The amounts reported in theChange in Pension Valuecolumn represent the change in the actuarial present value of each NEO’s accumulated benefit under the Merged Retirement Plan, the Supplemental Retirement Plan, and the SERPs, as applicable, determined using interest rate and mortality rate assumptions consistent with those used for our consolidated financial statements, as well as above-market earnings on December 31, 2014, December 31, 2015, December 31, 2016, and December 31, 2017, as applicable; namely, the RP 2014 generational mortality table with white collar adjustments, and an adjustment to reflect recent Prudential-specific experience for 2014, 2015, 2016 and 2017, an interest discount rate 4.10% for 2014, 4.50% for 2015, 4.15% for 2016 and 3.65% for 2017, a Cash Balance Formula interest crediting rate of 4.25% for 2014, 2015, and 2016, and a rate based on an assumed 30-year Treasury Rate, but not less than 4.25% for 2017, and a PSI Cash Balance Formula interest crediting rate of 5.00% for 2014, 2015, 2016 and 2017. The amounts represented above may fluctuate significantly in a given year dependingcompensation that is deferred on a number of factorsbasis that affect the formula to determine pension benefits, including age, years of service,is not tax-qualified. Messrs. Lowrey, Tanji, Falzon, Sleyster and the measurement of average annual earnings. |
| Messrs. Strangfeld and Pelletier accrue pension benefits under the Traditional Pension Formula and Messrs. Falzon, Grier, and LowreySullivan accrue pension benefits under the Cash Balance Formula (both formulas are described(described in the “Pension Benefits” section of this Proxy Statement). In accordance with the provisions of the Traditional Pension Formula, the years of earnings used for determining Average Eligible Earnings change every two years (most recently on January 1, 2016). |
For 2021, the amounts reported in this column include payments from the Supplemental Retirement Plan for Messrs. Lowrey, Tanji, Falzon, Sleyster, and Sullivan of $23,597, $3,812, $15,613, $8,146, and $3,224, respectively; and above-market interest on the SESP for Messrs. Lowrey, Tanji, Falzon, Sleyster and Sullivan of $10,452, $2,405, $5,766, $7,099, and $1,582, respectively. | (6) | The amounts reported in this column include payments from the Supplemental Retirement Plan of $5,549 for Mr. Falzon, $29,589 for Mr. Grier and $20,597 for Mr. Lowrey in 2015; $10,643 for Mr. Falzon, $31,095 for Mr. Grier and $20,990 for Mr. Lowrey in 2016; and $8,928 for Mr. Falzon, $11,847,072 for Mr. Grier and $17,274 for Mr. Lowrey in 2017; and above-market interest on the SESP of $4,229 for Mr. Strangfeld, $359 for Mr. Falzon, $2,905 for Mr. Grier, $1,235 for Mr. Lowrey and $917 for Mr. Pelletier in 2015; $10,388 for Mr. Strangfeld, $1,138 for Mr. Falzon, $7,239 for Mr. Grier, $3,158 for Mr. Lowrey, and $2,433 for Mr. Pelletier in 2016; and $4,281 for Mr. Strangfeld, $562 for Mr. Falzon, $3,016 for Mr. Grier, $1,341 for Mr. Lowrey, and $1,062 for Mr. Pelletier in 2017. |
| The amounts in this column for 2017 include the change in pension value under the Supplemental Retirement Plan resulting from changes in assumptions regarding interest rates and the form of benefits paid under the Supplemental Retirement Plan of $5,172,714 for Mr. Strangfeld, $54,570 for Mr. Falzon, $306 for Mr. Grier, $46,867 for Mr. Lowrey and $1,351,717 for Mr. Pelletier. |
(6) | The amounts reported in theAll Other Compensation column for 2021 are itemized in the supplemental “All Other Compensation” table below. |
All Other Compensation | | | | | | | | | | | | | | | | | | | | | | | | Year | | | Perquisites(1) | | | PESP Contributions(2) | | | SESP Contributions(2) | | | Total | | John R. Strangfeld | | | 2017 | | | | $64,229 | | | | $10,800 | | | | $45,200 | | | | $120,229 | | | | | 2016 | | | | $47,964 | | | | $ 8,615 | | | | $45,400 | | | | $101,979 | | | | | | 2015 | | | | $32,371 | | | | $ 8,615 | | | | $45,400 | | | | $ 86,386 | | Robert M. Falzon | | | 2017 | | | | $19,358 | | | | $10,800 | | | | $20,000 | | | | $ 50,158 | | | | | 2016 | | | | $17,478 | | | | $ 8,173 | | | | $19,769 | | | | $ 45,420 | | | | | | 2015 | | | | $14,800 | | | | $ 8,308 | | | | $17,092 | | | | $ 40,200 | | Mark B. Grier | | | 2017 | | | | $29,367 | | | | $10,800 | | | | $36,800 | | | | $ 76,967 | | | | | 2016 | | | | $33,041 | | | | $10,600 | | | | $37,000 | | | | $ 80,641 | | | | | | 2015 | | | | $30,175 | | | | $10,600 | | | | $37,000 | | | | $ 77,775 | | Charles F. Lowrey | | | 2017 | | | | $20,053 | | | | $10,800 | | | | $20,000 | | | | $ 50,853 | | | | | 2016 | | | | $17,330 | | | | $10,600 | | | | $20,200 | | | | $ 48,130 | | | | | | 2015 | | | | $14,395 | | | | $10,600 | | | | $20,200 | | | | $ 45,195 | | Stephen Pelletier | | | 2017 | | | | $37,926 | | | | $10,800 | | | | $20,000 | | | | $ 68,726 | | | | | 2016 | | | | $35,806 | | | | $ 8,292 | | | | $20,200 | | | | $ 64,298 | | | | | | 2015 | | | | $29,849 | | | | $ 8,173 | | | | $19,769 | | | | $ 57,791 | |
| | | | | | | | | | | | | | | | | | Name | | Perquisites ($)(1) | | | PESP Contributions ($)(2) | | | SESP Contributions ($)(2) | | | Total ($) | | Charles F. Lowrey | | | 44,489 | | | | 11,600 | | | | 36,400 | | | | 92,489 | | Kenneth Y. Tanji | | | 1,271 | | | | 6,600 | | | | 14,092 | | | | 21,963 | | Robert M. Falzon | | | 2,161 | | | | 6,600 | | | | 28,400 | | | | 37,161 | | Scott G. Sleyster | | | 4,206 | | | | 10,769 | | | | 16,400 | | | | 31,375 | | Andrew F. Sullivan | | | 2,119 | | | | 11,423 | | | | 16,400 | | | | 29,942 | |
| (1) | For Messrs. Strangfeld and Grier,all NEOs, the amounts reported in thePerquisites column for 2017 represent the incremental cost for security services of $36,543 and $5,314 respectively, and the costs associated with Company-provided vehicles for personal and commuting purposes of $27,686 and $24,053, respectively. For Messrs, Falzon, Lowrey and Pelletier, the amounts reported represent the costs of commuting and limited personal use of Company-provided vehicles. The amounts reported in the table for commutingcars and personal use of vehicles reflect our determination of the costs allocable to the actual commuting and personal use of each individual and are based on a formula that takes into account various expenses, including costs associated with the driver and fuel. In addition, the amount reported includes the incremental cost for security services of $40,908 for Mr. Lowrey and $135 for Mr. Falzon. |
| (2) | The amounts reported in thePESP Contributions andSESP Contributions columns represent our contributions to the account of each NEO under (a) The Prudential Employee Savings Plan (the “PESP”), a defined contribution plan whichthat provides employees with the opportunity to contribute up to 50% of eligible earnings in any combination ofbefore-tax, Roth 401(k) and/orafter-tax contributions (subject to Internal Revenue Code limits) and (b) the Prudential Supplemental Employee Savings Plan, anon-qualified plan whichthat provides employees who exceed the Internal Revenue Code earnings limit ($270,000290,000 in 2017)2021) with the opportunity to defer up to 4% of eligible earnings in excess of the earnings limit. We match 100% of the first 4% of an employee’sbefore-tax or Roth 401(k) deferrals under the PESP (after one year of service) and 100% of an employee’s deferrals under the SESP. |
| | | | | 72 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement55 |
| | | | | | |
Executive Compensation | | Executive Compensation
|
Grants of Plan-Based Awards The following table presents, for each of the NEOs, information concerning awards under our Long-TermAnnual Incentive Program (including our Book Value Performance Program)for performance year 2021 and grants of equity awards made during 20172021 for 2016 performance. 2017 Grants of Plan-Based Awards Table2020 performance under our Long-Term Incentive Program.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Grant Date | | | Estimated Future Payouts
UnderNon-Equity Incentive
Plan Awards ($)(1) | | | Estimated Future Payouts
Under Equity Incentive
Plan Awards(2) | | | All Other
Option
Awards;
Number of
Securities
Underlying
Options (#)(3) | | | Exercise
or Base
Price of
Option
Awards
($/Sh) | | | Grant Date
Fair Value of
Stock and
Option
Awards ($)(4) | | | | | | Number
of Book
Value
Units (#) | | | Target
($) | | | Maximum
($) | | | Target
(#) | | | Maximum
(#) | | | | | John R. Strangfeld, Chairman and Chief Executive Officer | |
| Annual
Incentive |
| | | n/a | | | | | | | | 6,000,000 | | | | 12,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/14/2017 | | | | | | | | | | | | | | | | 28,450 | | | | 35,563 | | | | | | | | | | | | 3,142,303 | | | | | PU | | | | 2/14/2017 | | | | | | | | | | | | | | | | 28,450 | | | | 35,563 | | | | | | | | | | | | 3,142,303 | | | | | Option | | | | 2/14/2017 | | | | | | | | | | | | | | | | | | | | | | | | 73,611 | | | | 110.45 | | | | 2,061,108 | | | | | | BVU | | | | 2/14/2017 | | | | 48,042 | | | | 3,792,916 | | | | | | | | | | | | | | | | | | | | | | | | | | Robert M. Falzon, Executive Vice President and Chief Financial Officer | |
| Annual
Incentive |
| | | n/a | | | | | | | | 3,000,000 | | | | 6,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/14/2017 | | | | | | | | | | | | | | | | 11,380 | | | | 14,225 | | | | | | | | | | | | 1,256,921 | | | | | PU | | | | 2/14/2017 | | | | | | | | | | | | | | | | 11,380 | | | | 14,225 | | | | | | | | | | | | 1,256,921 | | | | | Option | | | | 2/14/2017 | | | | | | | | | | | | | | | | | | | | | | | | 29,445 | | | | 110.45 | | | | 824,460 | | | | | | BVU | | | | 2/14/2017 | | | | 21,495 | | | | 1,697,030 | | | | | | | | | | | | — | | | | | | | | | | | | | | Mark B. Grier, Vice Chairman | |
| Annual
Incentive |
| | | n/a | | | | | | | | 5,100,000 | | | | 10,200,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/14/2017 | | | | | | | | | | | | | | | | 22,760 | | | | 28,450 | | | | | | | | | | | | 2,513,842 | | | | | PU | | | | 2/14/2017 | | | | | | | | | | | | | | | | 22,760 | | | | 28,450 | | | | | | | | | | | | 2,513,842 | | | | | Option | | | | 2/14/2017 | | | | | | | | | | | | | | | | | | | | | | | | 58,889 | | | | 110.45 | | | | 1,648,892 | | | | | | BVU | | | | 2/14/2017 | | | | 39,570 | | | | 3,124,052 | | | | | | | | | | | | | | | | | | | | | | | | | | Charles F. Lowrey, Executive Vice President and Chief Operating Officer, International Businesses | |
| Annual
Incentive |
| | | n/a | | | | | | | | 4,000,000 | | | | 8,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/14/2017 | | | | | | | | | | | | | | | | 14,225 | | | | 17,782 | | | | | | | | | | | | 1,571,151 | | | | | PU | | | | 2/14/2017 | | | | | | | | | | | | | | | | 14,225 | | | | 17,782 | | | | | | | | | | | | 1,571,151 | | | | | Option | | | | 2/14/2017 | | | | | | | | | | | | | | | | | | | | | | | | 36,806 | | | | 110.45 | | | | 1,030,568 | | | | | | BVU | | | | 2/14/2017 | | | | 27,810 | | | | 2,195,600 | | | | | | | | | | | | | | | | | | | | | | | | | | Stephen Pelletier,(8) Executive Vice President and Chief Operating Officer, U.S. | |
| Annual
Incentive |
| | | n/a | | | | | | | | 4,000,000 | | | | 8,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/14/2017 | | | | | | | | | | | | | | | | 12,803 | | | | 16,004 | | | | | | | | | | | | 1,414,091 | | | | | PU | | | | 2/14/2017 | | | | | | | | | | | | | | | | 12,803 | | | | 16,004 | | | | | | | | | | | | 1,414,091 | | | | | Option | | | | 2/14/2017 | | | | | | | | | | | | | | | | | | | | | | | | 33,125 | | | | 110.45 | | | | 927,500 | | | | | | BVU | | | | 2/14/2017 | | | | 26,543 | | | | 2,095,570 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards ($)(1) | | | Estimated Future Payouts
Under Equity Incentive
Plan Awards(2) | | | All Other Stock
Awards:
Number of
shares of
stock or units
(#)(3) | | | Grant Date
Fair Value
($/Sh) | | | Grant Date
Fair Value
of Stock
and Option
Awards
($)(3) | | | | | | | | Grant
Date | | | | | | Target
($) | | | Maximum
($) | | | Target
(#) | | | Maximum
(#) | | Charles F. Lowrey | | | AIA | | | | N/A | | | | | | | | 3,500,000 | | | | 5,250,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 104,078 | | | | 171,729 | | | | | | | | 81.43 | | | | 8,475,072 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 34,693 | | | | 81.43 | | | | 2,825,051 | | Kenneth Y. Tanji | | | AIA | | | | N/A | | | | | | | | 1,550,000 | | | | 2,325,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 33,158 | | | | 54,711 | | | | | | | | 81.43 | | | | 2,700,056 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 11,053 | | | | 81.43 | | | | 900,046 | | Robert M. Falzon | | | AIA | | | | N/A | | | | | | | | 2,800,000 | | | | 4,200,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 82,894 | | | | 136,775 | | | | | | | | 81.43 | | | | 6,750,058 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 27,632 | | | | 81.43 | | | | 2,250,074 | | Scott G. Sleyster | | | AIA | | | | N/A | | | | | | | | 2,000,000 | | | | 3,000,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 40,526 | | | | 66,868 | | | | | | | | 81.43 | | | | 3,300,032 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 13,509 | | | | 81.43 | | | | 1,100,038 | | Andrew F. Sullivan | | | AIA | | | | N/A | | | | | | | | 2,000,000 | | | | 3,000,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 40,526 | | | | 66,868 | | | | | | | | 81.43 | | | | 3,300,032 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 13,509 | | | | 81.43 | | | | 1,100,038 | |
| (1) | The amounts reported in the Estimated Future Payouts UnderNon-Equity Incentive Plan Awards columncolumns represent the potential amounts for annual incentives for the 20172021 performance year. Actual amounts earned by the NEOs are reflected in the Summary Compensation Table. In addition, individualTable |
| (2) | The amounts are reported by grant date toin the Estimated Future Payouts Under Equity Incentive Plan Awards columns represent the value of the book value unitsperformance shares awarded to the NEOs under the Omnibus Plan on February 14, 2017, and reflected in 2021. Performance share awards are granted for a three-year performance period with payouts determined at the Numberend of Book Value Units column,the period based on theour ROE performance and growth in adjusted book value per share ofas described in the company of $78.95 as originally reported as of December 31, 2016.CD&A. |
(2)(3) | The amounts reported in the Estimated Future Payouts Under Equity Incentive Plan Awards columnsAll Other Stock Awards: Number of Shares of Stock or Units column represent performance shares and performancerestricted stock units awarded to the NEOs under the Omnibus Plan in 2017. Performance share and performance unit awards are granted for a three-year performance period with payout determined at the end of the period based on our performance against our ROE goals. The ROE goals for the 2017 grant are within a range of 9.5% to 13.5%. |
(3) | The amounts reported2021. RSUs vest in three equal annual installments as described in the All Other Option Awards column represent the number of stock options granted to each Named Executive Officer under the Omnibus Plan in 2017. These stock options vestone-third each year on the anniversary of the grant date. These stock options expire 10 years from their respective grant date. The exercise price for the February 14, 2017 grant of stock options is the closing price of our Common Stock on the grant date of February 14, 2017 ($110.45 per share).CD&A. |
| (4) | The amounts in the Grant Date Fair Value column have been calculated using the number of restricted stock units awarded or in the case of performance shares and performance units as the target number of performance shares, and performance unitsin each case multiplied by the closing price of our Common Stock on the grant date of February 14, 2017 ($110.45 per share).latest year end share price. |
For stock options, the grant date fair values are hypothetical values developed under a binomial option pricing model, which is a complex, mathematical formula to determine fair value of stock options on the date of grant. The binomial option pricing model is a flexible, lattice-based valuation model that takes into consideration transferability, fixed estimate of volatility, and expected life of the options. As such, the amounts reported in the table are hypothetical values and may not reflect the actual economic value a Named Executive Officer would realize upon exercise.
We made the following assumptions when calculating the grant date fair value of the stock option grants: exercise price is equal to our share price on the grant date, and for the grants of February 14, 2017, 5.60 year life expected for each option, expected dividend yield is 2.84%, risk-free rate of return of 2.07%, and expected price volatility of 35.29%.
| | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |56 | | 73 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | |
Executive Compensation | | Executive Compensation
|
Outstanding Equity Awards The following table provides information on the NEOs’ outstanding equity awards as of December 31, 2017.2021. The equity awards reported in the Stock Awards columns consist of performance share awards and restricted stock units. Grants of performance unit awards.shares were made for three-year performance cycles with the 2019 grant as the 2019-2021 performance cycle, the 2020 grant as the 2020-2022 performance cycle and the 2021 grant as the 2021-2023 performance cycle. The equity awards reported in the Option Awards columns consist ofnon-qualified stock options. 2017 Outstanding Equity Awards at FiscalYear-End Table
| | | | | | | Option Awards(1) | | | Stock Awards | | | | | Option Awards1 | | | | | | Stock Awards | | Name | | Grant Date | | | Number of
Securities
Underlying
Unexercised
Options
(# Exercisable) | | | Number of
Securities
Underlying
Unexercised
Options
(# Unexercisable) | | | Option
Exercise
Price ($) | | | Option
Expiration Date | | | Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or
Rights That Have
Not Vested (#)(2) | | | Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Rights That Have
Not Vested ($)(2) | | | Grant Date | | Number of
Securities
Underlying
Unexercised
Options
(# Exercisable) | | Number of
Securities
Underlying
Unexercised
Options
(# Unexercisable) | | Option
Exercise
Price
($) | | Option Expiration Date | | | | Number of
Shares or
Units of
Stock
that Have
Not Vested (#) | | Market
Value of
Shares or
Units of
Stock that
Have Not
Vested ($) | | Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or
Rights that Have
Not Vested (#)2 | | Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Rights that Have
Not Vested ($)2 | | John R. Strangfeld | | | 2/14/2017 | | | | 0 | | | | 73,611 | | | | 110.45 | | | | 2/14/2027 | | | | 71,126 | | | | 8,178,067 | | | Charles F. Lowrey | | | 2/9/2021 | | | | | | | | | | | | | 34,692 | | | 2,825,051 | | | 171,729 | | | 13,983,893 | | | | | 2/11/2020 | | | 31,156 | | | 62,313 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 64,933 | | | 7,028,348 | | | | | 2/12/2019 | | | 55,500 | | | 27,750 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 66,678 | | | 7,217,227 | | | | | 2/13/2018 | | | 30,885 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | | | | | 2/14/2017 | | | | 36,806 | | | | 0 | | | | 110.45 | | | | 2/14/2027 | | | | | | | | | | | | Kenneth Y. Tanji | | | 2/9/2021 | | | | | | | | | | | | | 11,053 | | | 900,046 | | | 54,711 | | | 4,455,117 | | | | | 2/11/2020 | | | 9,760 | | | 19,520 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 20,342 | | | 2,201,818 | | | | | 2/12/2019 | | | 17,386 | | | 8,693 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 20,888 | | | 2,260,917 | | | | | 2/9/2016 | | | | 42,061 | | | | 84,122 | | | | 63.59 | | | | 2/9/2026 | | | | 103,896 | | | | 11,945,962 | | | 2/13/2018 | | | 2,357 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | | | | 2/10/2015 | | | | 57,268 | | | | 28,634 | | | | 78.08 | | | | 2/10/2025 | | | | 77,556 | | | | 8,917,389 | | | 2/14/2017 | | | 2,669 | | | 0 | | | 110.45 | | | 2/14/2027 | | | | | | | | | | | | | | | 2/11/2014 | | | | 73,594 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | 2/9/2016 | | | 8,883 | | | 0 | | | 63.59 | | | 2/9/2026 | | | | | | | | | | | | | | | 2/12/2013 | | | | 247,094 | | | | 0 | | | | 57.00 | | | | 2/12/2023 | | | | | | | 2/10/2015 | | | 9,096 | | | 0 | | | 78.08 | | | 2/10/2025 | | | | | | | | | | | | | | | | 2/14/2012 | | | | 223,685 | | | | 0 | | | | 59.41 | | | | 2/14/2022 | | | | | | | | 2/11/2014 | | | | 5,195 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | | | | | | Robert M. Falzon | | | 2/14/2017 | | | | 0 | | | | 29,445 | | | �� | 110.45 | | | | 2/14/2027 | | | | 28,450 | | | | 3,271,181 | | | 2/9/2021 | | | | | | | | | | | | | 27,632 | | | 2,250,074 | | | 136,775 | | | 11,137,588 | | | | | 2/9/2016 | | | | 16,824 | | | | 33,650 | | | | 63.59 | | | | 2/9/2026 | | | | 41,558 | | | | 4,778,339 | | | 2/11/2020 | | | 24,775 | | | 49,550 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 51,633 | | | 5,588,756 | | | | | 2/10/2015 | | | | 10,106 | | | | 10,107 | | | | 78.08 | | | | 2/10/2025 | | | | 27,374 | | | | 3,147,463 | | | 2/12/2019 | | | 44,132 | | | 22,067 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 53,024 | | | 5,739,318 | | | | | | 2/11/2014 | | | | 7,504 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | 2/13/2018 | | | 26,008 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | Mark B. Grier | | | 2/14/2017 | | | | 0 | | | | 58,889 | | | | 110.45 | | | | 2/14/2027 | | | | 56,900 | | | | 6,542,362 | | | | | | 2/14/2017 | | | 29,445 | | | 0 | | | 110.45 | | | 2/14/2027 | | | | | | | | | | | | | | | 2/9/2016 | | | 50,474 | | | 0 | | | 63.59 | | | 2/9/2026 | | | | | | | | | | | | | | | 2/10/2015 | | | 20,213 | | | 0 | | | 78.08 | | | 2/10/2025 | | | | | | | | | | | | | | | | 2/11/2014 | | | | 7,504 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | | | | | | Scott G. Sleyster | | | 2/9/2021 | | | | | | | | | | | | | 13,509 | | | 1,100,038 | | | 40,526 | | | 3,300,032 | | | | | 2/9/2016 | | | | 33,649 | | | | 67,298 | | | | 63.59 | | | | 2/9/2026 | | | | 83,116 | | | | 9,556,678 | | | 2/11/2020 | | | 14,264 | | | 28,529 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 29,729 | | | 3,217,867 | | | | | 2/10/2015 | | | | 47,162 | | | | 23,581 | | | | 78.08 | | | | 2/10/2025 | | | | 63,870 | | | | 7,343,773 | | | 2/12/2019 | | | 25,410 | | | 12,705 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 30,528 | | | 3,304,351 | | | | | 2/11/2014 | | | | 60,607 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | 2/13/2018 | | | 9,753 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | | | | 2/12/2013 | | | | 135,660 | | | | 0 | | | | 57.00 | | | | 2/12/2023 | | | | | | | 2/14/2017 | | | 9,570 | | | 0 | | | 110.45 | | | 2/14/2027 | | | | | | | | | | | | | | | | 2/14/2012 | | | | 57,895 | | | | 0 | | | | 59.41 | | | | 2/14/2022 | | | | | | | 2/9/2016 | | | 32,808 | | | 0 | | | 63.59 | | | 2/9/2026 | | | | | | | | | | | | Charles F. Lowrey | | | 2/14/2017 | | | | 0 | | | | 36,806 | | | | 110.45 | | | | 2/14/2027 | | | | 35,564 | | | | 4,089,149 | | | | | | 2/9/2016 | | | | 0 | | | | 39,958 | | | | 63.59 | | | | 2/9/2026 | | | | 49,350 | | | | 5,674,263 | | | 2/10/2015 | | | 24,760 | | | 0 | | | 78.08 | | | 2/10/2025 | | | | | | | | | | | | | | | 2/10/2015 | | | | 30,318 | | | | 15,160 | | | | 78.08 | | | | 2/10/2025 | | | | 41,060 | | | | 4,721,079 | | | 2/11/2014 | | | 8,659 | | | 0 | | | 84.53 | | | 2/11/2024 | | | | | | | | | | | | | | | | 2/11/2014 | | | | 38,962 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | | 2/12/2013 | | | | 23,983 | | | | 0 | | | | 57.00 | | | | 2/12/2023 | | | | | | | | | | | | Stephen Pelletier | | | 2/14/2017 | | | | 0 | | | | 33,125 | | | | 110.45 | | | | 2/14/2027 | | | | 32,008 | | | | 3,680,280 | | | Andrew F. Sullivan | | | 2/9/2021 | | | | | | | | | | | | | 13,509 | | | 1,100,038 | | | 40,526 | | | 3,300,032 | | | | | 2/9/2016 | | | | 0 | | | | 37,856 | | | | 63.59 | | | | 2/9/2026 | | | | 46,754 | | | | 5,375,775 | | | 2/11/2020 | | | 12,387 | | | 24,776 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 25,817 | | | 2,794,432 | | | | | 2/10/2015 | | | | 0 | | | | 13,475 | | | | 78.08 | | | | 2/10/2025 | | | | 36,498 | | | | 4,196,540 | | | 2/12/2019 | | | 4,681 | | | 2,341 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 11,248 | | | 1,217,484 | | | | | | 2/14/2012 | | | | 8,553 | | | | 0 | | | | 59.41 | | | | 2/14/2022 | | | | | | | 2/13/2018 | | | 3,251 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | | | | 10/2/2017 | | | 1,128 | | | 0 | | | 107.28 | | | 10/2/2027 | | | | | | | | | | | | | | | 2/14/2017 | | | 2,577 | | | 0 | | | 110.45 | | | 2/14/2027 | | | | | | | | | | | | | | | 10/13/2015 | | | 749 | | | 0 | | | 77.15 | | | 10/13/2025 | | | | | | | | | | | | | | | 5/15/2015 | | | 344 | | | 0 | | | 85.46 | | | 5/15/2025 | | | | | | | | | | | | | | | | 2/10/2015 | | | 826 | | | 0 | | | 78.08 | | | 2/10/2025 | | | | | | | | | | | |
| (1) | The options reported in theOption Awards column vest at the rate ofone-third per year on the anniversary of the date of grant. |
| (2) | TheEquity Incentive Plan Awards columns reflect the number of outstanding performance shares and performance units that would be received by each Named Executive OfficerNEO at the maximum payout level for the 2017, 20162021, 2020 and 2015 grants.2019 grants, as well as the number of restricted stock units outstanding. The dollar values reported represent the estimated value of the outstanding performance shares and performance units at the maximum payout level for the 2017, 20162021, 2020 and 20152019 grants and outstanding restricted stock units, based on the closing market price for our Common Stock on the last trading day of thelatest year December 29, 2017 ($114.98 per share).end share price. Performance shares and performance units are subject to a three-year performance period with payout determined at the end of the period based on ourmeasures of Company performance, against our ROE goals.as well as for the 2021 grants, an inclusion and diversity modifier. As discussed in the CD&A, the Committee approved a final earn-out factor of 0.937 for the awards granted on February 12, 2019. |
Grants were made for three-year performance cycles with the 2015 grant as the 2015-2017 performance cycle, the 2016 grant as the 2016-2018 performance cycle, and the 2017 grant as the 2017-2019 performance cycle.
| | | | | 74 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement57 |
| | | | | | |
Executive Compensation | | Executive Compensation
|
Option Exercises and Stock Vested The following table provides information on the value realized by each of the NEOs as a result of the exercise of stock options and the vesting of stock awards from January 1, 20172021 through December 31, 2017. 2017 Option Exercises and Stock Vested Table2021.
| | | | Option Awards | | | Stock Awards | | | Option Awards | | | | | | Stock Awards | | Name | | Number of Shares
Acquired on Exercise
(#) | | | Value Realized
On Exercise
($) | | | Number of Shares
Acquired on Vesting (#)1 | | | Value
Realized
on Vesting (#)2 | | | Number of Shares
Acquired on Exercise
(#) | | | Value Realized
on Exercise ($) | | | | | Number of Shares
Acquired on Vesting (#)(1) | | | Value
Realized
on Vesting ($)(2) | | John R. Strangfeld | | | 170,667 | | | | 7,852,410 | | | | 36,079 | | | | 3,984,926 | | | | Charles F. Lowrey | | | | 124,398 | | | | 4,293,372 | | | | | | 24,878 | | | | 2,025,816 | | | Kenneth Y. Tanji | | | | 29,285 | | | | 965,275 | | | | | | 3,800 | | | | 309,434 | | | Robert M. Falzon | | | 0 | | | | 0 | | | | 11,037 | | | | 1,219,037 | | | | — | | | | — | | | | | | 20,952 | | | | 1,706,121 | | Mark B. Grier | | | 0 | | | | 0 | | | | 29,713 | | | | 3,281,801 | | | Charles F. Lowrey | | | 256,057 | | | | 12,777,478 | | | | 19,102 | | | | 2,109,816 | | | Stephen Pelletier | | | 72,229 | | | | 2,601,876 | | | | 12,922 | | | | 1,427,235 | | | | Scott G. Sleyster | | | | 22,383 | | | | 1,194,057 | | | | | | 14,144 | | | | 1,151,746 | | | Andrew F. Sullivan | | | | — | | | | — | | | | | | 5,240 | | | | 426,693 | |
| (1) | The amounts in the Stock Awards—Number of Shares Acquired on Vesting column represent the payout of shares of our Common Stock for the vesting of the 20142018 performance shares grants and payout of the 2014 performance units as cash.grants. |
| (2) | The amounts in the Stock Awards—Value Realized on Vesting column represent the product of the number of performance shares and performance units released and the closing salemarket price of our Common Stock on February 14, 2017, $110.45.9, 2021, $81.43. |
Pension Benefits The following table provides information on the defined benefit retirement plans in which the NEOs participate, including the present value of accumulated benefits as of December 31, 2017,2021, except as noted, payable for each of the NEOs under each of these plans determined using interest rate and mortality rate assumptions consistent with those used in our consolidated financial statements; namely, the RP 2014PRI-2012 generational mortality table with white collar adjustments and an adjustment to reflect recent Prudential-specific experience and an interest discount rate of 3.65%2.85%. Cash Balance Formula accounts are assumed to grow with interest based on an assumed 30-year Treasury Rate, but not less than 4.25%, and PSI Cash Balance Formula accounts are assumed to grow with interest at 5.00% until the commencement of pension benefits. No additional earnings or service after December 31, 2017 are2021 is included in the calculation of the accumulated benefits. 2017 Pension Benefits Table
| Name | | Plan Name | | Number of Years of Credited Service (#) | | | Present Value of Accumulated Benefit ($) | | Payments During Last Fiscal Year ($) | | | Plan Name | | Number of Years of
Credited Service
(#) | | Present Value of
Accumulated Benefit
($) | | | Payments During
Last Fiscal Year
($) | | John R. Strangfeld | | Merged Retirement Plan—Traditional Benefit Formula | | | 40 | | | $ 3,564,528 | | | — | | | | Charles F. Lowrey | | | Merged Retirement Plan—Cash Balance Formula | | | 20 | | | 2,549,963 | | | | — | | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 20 | | | | 6,420,585 | | | | 23,597 | (3) | | Kenneth Y. Tanji | | | Merged Retirement Plan—Cash Balance Formula | | | 32 | (2) | | 1,434,654 | | | | — | | | | | | Merged Retirement Plan—PSI Cash Balance Formula | | | n/a | (2) | | 102,599 | | | | — | | | | | Supplemental Retirement Plan—Traditional Pension Formula | | | 40 | | | $86,685,078 | | | — | | | Supplemental Retirement Plan—Cash Balance Formula | | | 32 | (2) | | | 1,467,118 | | | | 3,812 | (3) | | | | Supplemental Retirement Plan—Cash Balance Formula | | | n/a | (1) | | $ 36,442 | | | — | | | | Robert M. Falzon | | Merged Retirement Plan—Cash Balance Formula | | | 34 | (2) | | $ 1,552,843 | | | — | | | Merged Retirement Plan—Cash Balance Formula | | | 38 | (2) | | 2,079,065 | | | | — | | | | Merged Retirement Plan—PSI Cash Balance Formula | | | n/a | (2) | | $ 86,079 | | | — | | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 34 | (2) | | $ 1,751,221 | | | $ 8,928 | (3) | | Merged Retirement Plan—PSI Cash Balance Formula | | | n/a | (2) | | 102,170 | | | | — | | Mark B. Grier | | Merged Retirement Plan—Cash Balance Formula | | | 22 | | | $ 2,726,202 | | | — | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 22 | | | $ 38,580 | | | $11,847,072 | (3) | | Charles F. Lowrey | | Merged Retirement Plan—Cash Balance Formula | | | 16 | | | $ 2,081,124 | | | — | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 16 | | | $ 3,289,009 | | | $ 17,274 | (3) | | Stephen Pelletier | | Merged Retirement Plan—Traditional Benefit Formula | | | 19 | | | $ 1,465,724 | | | — | | | | | Merged Retirement Plan—Cash Balance Formula | | | n/a | (1) | | $ 5,914 | | | — | | | | | | Merged Retirement Plan—PSI Cash Balance Formula | | | n/a | (4) | | $ 114,371 | | | — | | | Supplemental Retirement Plan—Cash Balance Formula | | | 38 | (2) | | | 3,722,755 | | | | 15,613 | (3) | | | Supplemental Retirement Plan—Traditional Pension Formula | | | 19 | | | $22,815,588 | | | — | | | | Scott G. Sleyster | | | Merged Retirement Plan—Cash Balance Formula | | | 34 | | | 3,898,368 | | | | — | | | | | PSI Supplemental Retirement Plan for Executives | | | n/a | (4) | | $ 513,105 | | | — | | | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 34 | | | | 2,780,239 | | | | 8,146 | (3) | | Andrew F. Sullivan | | | Merged Retirement Plan—Cash Balance Formula | | | 10 | | | 264,848 | | | | — | | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 10 | | | | 998,800 | | | | 3,224 | (3) |
| (1) | This benefit is a result of an allocation of demutualization compensation distributed to all participants in the Merged Retirement Plan in 2002 (“Demutualization Credit”). Ongoing service is not a consideration in determining this benefit for the NEOs. |
| (2) | Mr. Tanji transferred from Prudential to Prudential Securities Incorporated in 1994 and transferred back to Prudential from Prudential Securities Incorporated in 2002. He began accruing pension benefits under the Traditional Pension Formula and, subsequently, the Cash Balance Formula upon his election of this formula in 2001; in accordance with the Merged Retirement Plan Cash Balance Formula, credited service includes service with the Company’s subsidiaries, in particular Prudential Securities Incorporated. As a result of his transfer, ongoing service is not a consideration in determining his benefit under the PSI Cash Balance Formula. |
| Mr. Falzon transferred to Prudential from Prudential Securities Incorporated in 1998 and began accruing pension benefits under the Traditional Pension Formula and, subsequently, the Cash Balance Formula upon his election of this formula in 2001; in accordance with the Merged Retirement Plan Cash Balance Formula, credited service includes service with the Company’s subsidiaries, in particular Prudential Securities Incorporated. As a result of his transfer, ongoing service is not a consideration in determining his benefit under the PSI Cash Balance Formula. |
| (3) | For Messrs. Lowrey, Tanji, Falzon, Sleyster and Lowrey,Sullivan, this payment was a distribution from the Supplemental Retirement Plan Cash Balance Formula to pay for accrued FICA taxes due in 20162020 on this benefit, and federal, state, and local taxes on the distributed amount. The entire payment was withheld to pay these taxes. |
| For Mr. Grier, this amount is made up of two payments: (i) for FICA taxes in the amount of $25,982; (ii) the terms of the Supplemental Retirement Plan require a participant in active service on the first day of the month on or following his or her 65th birthday to receive his or her benefit on that date. In accordance with these terms, Mr. Grier received a distribution of $11,821,090. Any Supplemental Retirement Plan benefit accrued after that date will be paid to him early in the year following the year in which the benefit was accrued. |
(4) | Mr. Pelletier transferred to Prudential from Prudential Securities Incorporated in 1998 and began accruing pension benefits under the Traditional Pension Formula. As a result, ongoing service is not a consideration in determining this benefit. |
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| | | | | | |
Executive Compensation | | Executive Compensation
|
The Merged Retirement Plan Our wholly owned subsidiary, The Prudential Insurance Company of America, sponsors ourtax-qualified defined benefit retirement plan, The Prudential Merged Retirement Plan (the “Merged Retirement Plan”), which is available to our executive officers, including the NEOs, and other salaried U.S. employees. The Merged Retirement Plan has two formulas under which participants may have their retirement benefits for ongoing service determined: the “Traditional Pension Formula” or the “Cash Balance Formula.” In addition, employees who previously worked for Prudential Securities Incorporated also have retirement benefits for their service with Prudential Securities Incorporated under a third component of the Merged Retirement Plan: the “PSI Cash Balance Formula.” TRADITIONAL PENSION FORMULATraditional Pension Formula
Under the Traditional Pension Formula, employees are fully vested in their accrued benefits. These benefits (which are subject to Internal Revenue Code limits) are determined using the following formula, which is based on Average Eligible Earnings (as defined) and years of Credited Service (as defined): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1.35% x Average Eligible Earnings up to Covered Compensation + 2.00% x Average Eligible Earnings in
excess of Covered Compensation) | | × | | | | Years of Credited Service up to 25 years | | | | + | | | | (0.75% x Average Eligible Earnings
up to Covered Compensation + 1.00% x Average Eligible Earnings in
excess of Covered Compensation) | | × | | | | Years of Credited Service for the next 13 years | | | | + | | | | 1.00% x Average Eligible Earnings | | | | × | | | | Years of Credited Service in excess of
38 years | | |
For a separation from service in 2017,2021, Average Eligible Earnings are determined by taking the average of earnings (base salary plus annual incentive payment) over the period beginning January 1, 2009,2013, and ending on the date of separation after dropping the lowest two years of earnings in that period. Under the Traditional Pension Formula, the starting point for the averaging period is moved forward two years on January 1 of every even calendar year. “Covered Compensation” for a year is the average of the Social Security wage bases for the 35 years ending in the year the participant will reach Social Security normal retirement age. Benefits are payable as early as age 55 (with a reduction in benefits) as a single life annuity if not married or an actuarially equivalent 50% joint and survivor annuity if married. Generally, a participant’s benefit will be determined as the greater of: the benefit as determined above calculated at the time of separation from service;
| ● | | the benefit as determined above calculated at the time of separation from service; |
the benefit as determined above calculated as of January 1, 2002, plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2002; and
| ● | | the benefit as determined above calculated as of January 1, 2002, plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2002; and |
If the Supplemental Retirement Plan benefit is to be paid in the form of an annuity, the benefit as determined above calculated as of January 1, 2012 (including any adjustment in the benefit on January 1, 2002 as described in the previous bullet), plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2012. (Messrs. Strangfeld and Pelletier each elected to receive their Supplemental Retirement Plan benefit in the form of a lump sum; consequently, this provision does not apply to them.)
| ● | | If the Supplemental Retirement Plan benefit is to be paid in the form of an annuity, the benefit as determined above calculated as of January 1, 2012 (including any adjustment in the benefit on January 1, 2002 as described in the previous bullet), plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2012. |
Additional benefits are provided to participants who are eligible to retire upon separation from service. A participant is eligible to retire if he or she separates from service either: (a) after attainment of age 55 (with 10 years of vesting service) or age 65 or (b) due to an involuntary termination (other than for cause or exhausting short-term disability benefits) after attainment of age 50 (with 20 years of continuous service). If a participant is eligible to retire, he or she is eligible for survivor benefits (with no actuarial reduction), a lesser (or no) reduction in benefit for benefit commencement before age 65, and an additional benefit paid to age 65. The benefits reported in the Pension Benefits Tabletable above are assumed to commence in the form of a 50% joint and survivor annuity on the later of January 1, 20182021 and the date the participant is eligible for an unreduced benefit, i.e., the earlier of (i) the first of the month on or following the later of attainment of age 60 and 30 years of service and (ii) the first of the month on or following attainment of age 65 (“Normal Retirement Date”). | | | | | 76 | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |
| | |
| | Executive CompensationCash Balance Formula
|
CASH BALANCE FORMULA
The Cash Balance Formula was added to the Merged Retirement Plan in 2001 for employees hired on or after January 1, 2001, except employees of Prudential Securities Incorporated. At that time, we offered aone-time conversion election for the current Merged Retirement Plan participants with benefits under the Traditional Pension Formula to opt to have their individual retirement benefits determined under the Cash Balance Formula. Participants who made this election to use the Cash Balance Formula are fully vested in their Cash Balance Formula benefit. Otherwise, participants are generally vested in their Cash Balance Formula benefit after three years of service. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 59 |
| | | | | | | Executive Compensation | |
|
Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account that is allocated basic credits equal to 2% to 14% (depending on age and service) of base salary and annual incentive payments. Interest credits are made to the hypothetical account each month using an interest rate set each year based on the average yield on30-year U.S. Treasury securities (constant maturities) for October of the prior year, with a minimum rate of 4.25%. The rate in effect for 20172021 was 4.25%. Active participants on June 30, 2003 received an additional credit equal to his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of January 1, 2002, if any. Active participants on June 30, 2012 received an additional credit of no more than his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of April 1, 2012, if any. Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity; 50%, 75%, or 100% joint and survivor annuity; or 50% contingent annuity. Employees who made theone-time conversion election to use the Cash Balance Formula (specifically, Messrs. Tanji, Falzon, and Grier)Sleyster) have a frozen “Grandfathered Benefit” determined as the accrued benefit under the Traditional Pension Formula as of January 1, 2002. The value of the Grandfathered Benefit, and early retirement subsidies on this benefit, if applicable, are included in determining the payable benefit. As reported in the Pension Benefits Table, cash balance accounts are assumed to grow with interest until, and benefits will commence on: for Messrs. Strangfeld and Pelletier (whose Cash Balance Formula benefits are due only to the Demutualization Credit), the same date benefits are assumed to commence under the Traditional Pension Formula; and
for Messrs. Falzon, Grier, and Lowrey,on the participant’s Normal Retirement Date.
Benefits are assumed to commence in a form that is based on a value comparison betweenwith 90% of participants electing a lump sum and 10% electing a 50% joint and survivor annuity. PSI CASH BALANCE FORMULACash Balance Formula The PSI Cash Balance Formula applies only to employees who previously worked for Prudential Securities Incorporated. At this time, all participants are fully vested in their PSI Cash Balance Formula benefit. Messrs. FalzonTanji and PelletierFalzon are the only NEOs with a benefit under this formula. PSI Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account. Prior to January 1, 2004, the hypothetical accounts were allocated basic credits equal to 1.7% to 7% (depending on age and service) of eligible earnings. Since then, interest credits only have been made to the hypothetical account each month using an interest rate set each year, with a minimum rate of 5.00%. The rate in effect for 20172020 was 5.00%. Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single lifesingle-life annuity; 50%, 75%, or 100% joint and survivor annuity; 50% or 100% contingent annuity; or single lifesingle-life annuity with 5five or 10 years guaranteed. As reported in the Pension Benefits Table, PSI Cash Balance accounts are assumed to grow with interest until, and benefits will commence on: for Mr. Falzon,on the participant’s Normal Retirement Date; and
Date. for Mr. Pelletier, the same date benefits are assumed to commence under the Traditional Pension Formula.
Benefits are assumed to commence with 90% of participants electing a lump sum and 10% electing a 50% joint and survivor annuity. | | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 77 |
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| | Executive Compensation
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The Supplemental Retirement Plan and SERPs The Supplemental Retirement Plan is anon-qualified nonqualified retirement plan designed to complement the Merged Retirement Plan by providing benefits to all participants of the Merged Retirement Plan, including the NEOs, who are prohibited from receiving additional benefits under the Merged Retirement Plan because of Internal Revenue Code limits. Benefits under the Supplemental Retirement Plan are generally payable at the earlier of six months after separation from service and age 65. Under a special rule applicable to the Supplemental Retirement Plan, benefits are required to begin to be paid to a home office participant following attainment of age 65, regardless of whether he or she has separated from service. The Prudential Insurance Supplemental Executive Retirement Plan and the PFI Supplemental Executive Retirement Plan (collectively, the “Prudential SERPs”) provide “Early Retirement Benefits” to certain eligible executives, including the NEOs, subject to the approval of our Board and the Committee. Early Retirement Benefits are designed to recognize the service and contributions of eligible executives who are involuntarily terminated by exempting them from the reduction factor for early retirement between the ages of 55 and 65, a reduction of up to 50%, which would otherwise be applicable under the Traditional Pension Formula and the Grandfathered Benefit under the Cash Balance Formula of the Merged Retirement Plan and the Supplemental Retirement Plan. Benefits under the Prudential SERPs are generally payable at the earlier of six months after separation from service and age 65. No NEO is currently eligible for benefits under the Early Retirement Benefits provision. Upon an involuntary termination of employment, Messrs. Strangfeld, Grier, and Lowreyno NEO will not be eligible for benefits under the Early Retirement Benefits provision due to a variety of factors; Messrs. Falzon and Pelletier are potentially eligible for benefits under the Early Retirement Benefits provision. However, were Mr. Falzon to qualify for Early Retirement Benefits, only the Grandfathered Benefit portion of his benefits would not be subject to reduction.factors. | | | | 60 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Executive Compensation | |
|
In 2008, the NEOs (with the exception of Mr. Lowrey)Messrs. Lowrey and Sullivan) were permitted to make an irrevocable election regarding the form of payment for their pension benefits and each NEO (with the exception of Mr. Falzon)Messrs. Falzon and Sleyster) elected to receive his Supplemental Retirement Plan and Prudential SERPs benefits, if any, in a lump sum. The Prudential Securities Incorporated Supplemental Retirement Plan for Executives (“PSI SERP”) was designed to make it more attractive to certain key executives to remain employees of Prudential Securities Incorporated and its subsidiaries. Mr. Pelletier is the only NEO that is accruing benefits under the PSI SERP. Mr. Pelletier’s PSI SERP benefit will be paid as an annuity upon separation from service, irrespective of age. The PSI SERP benefit is determined as a target benefit, less the benefit payable from the PSI Cash Balance Formula and an estimated Social Security retirement benefit. The target benefit is 60% of an employee’s average salary times a ratio of service to 30 years. Mr. Pelletier stopped accruing service creditThere are no NEOs currently eligible for benefits under this plan upon his transfer to Prudential from Prudential Securities Incorporated.the PSI SERP. Notwithstanding the foregoing, benefits reported in the Pension Benefits Table are assumed to commence in the same form of payment elected for this benefit, either an annuity or a lump sum, and at the same time as under the Merged Retirement Plan benefit to be consistent with assumptions used in the Company’s financial statements. Nonqualified Deferred Compensation The following table provides information on the NEOs’ participation in the Prudential Supplemental Employee Savings Plan (the “SESP”) and the Deferred Compensation Plan: 2017 Nonqualified Deferred Compensation Table
| Name | | Plan | | | Executive
Contributions in Last
Fiscal Year ($)(1) | | | Registrant
Contributions in Last
Fiscal Year ($)(2) | | | Aggregate
Earnings in Last
Fiscal Year ($)(3) | | | Aggregate Balance
at Last Fiscal Year
End ($)(4) | | | Plan | | | Executive
Contributions in Last
Fiscal Year ($)(1) | | | Registrant
Contributions in Last
Fiscal Year ($)(2) | | | Aggregate
Earnings in Last
Fiscal Year ($)(3) | | | Aggregate
Withdrawals/
Distributions ($) | | | Aggregate Balance
at Last Fiscal
Year End ($)(4) | | John R. Strangfeld | | SESP | | | $ | 45,200 | | | $ | 45,200 | | | $ | 50,562 | | | $ | 1,548,952 | | | | Charles F. Lowrey | | | | SESP | | | | 36,400 | | | | 36,400 | | | | 27,056 | | | | | | 846,932 | | | | | | | Deferred Compensation | | | | — | | | | — | | | | 529,123 | | | | — | | | | 15,449,798 | | | Kenneth Y. Tanji | | | | SESP | | | | 14,092 | | | | 14,092 | | | | 6,220 | | | | | | 205,125 | | | | | | | Deferred Compensation | | | | — | | | | — | | | | 886,317 | | | | (407,023) | | | | 6,754,159 | | | | | | Deferred Compensation | | | $ | — | | | $ | — | | | $ | 1,182,407 | | | $ | 10,944,848 | | | Robert M. Falzon | | SESP | | | $ | 20,000 | | | $ | 20,000 | | | $ | 6,478 | | | $ | 218,523 | | | | SESP | | | | 28,400 | | | | 28,400 | | | | 15,335 | | | | | | 479,461 | | | | | | Deferred Compensation | | | $ | 418,600 | | | $ | — | | | $ | 411,650 | | | $ | 3,371,429 | | | | Deferred Compensation | | | | 249,500 | | | | — | | | | 1,118,973 | | | | — | | | | 7,408,149 | | Mark B. Grier | | SESP | | | $ | 36,800 | | | $ | 36,800 | | | $ | 35,568 | | | $ | 1,096,814 | | | | | | | Deferred Compensation | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | Charles F. Lowrey | | SESP | | | $ | 20,000 | | | $ | 20,000 | | | $ | 15,770 | | | $ | 493,293 | | | Scott G. Sleyster | | | | SESP | | | | 16,400 | | | | 16,400 | | | | 18,342 | | | | | | 566,326 | | | | | | Deferred Compensation | | | $ | — | | | $ | — | | | $ | 753,326 | | | $ | 13,246,168 | | | | Deferred Compensation | | | | 127,927 | | | | — | | | | 4,712,454 | | | | — | | | | 20,990,956 | | Stephen Pelletier | | SESP | | | $ | 20,000 | | | $ | 20,000 | | | $ | 12,440 | | | $ | 394,800 | | | | | | | Deferred Compensation | | | $ | — | | | $ | — | | | $ | 560,567 | | | $ | 6,921,401 | | | Andrew F. Sullivan | | | | SESP | | | | 16,400 | | | | 16,400 | | | | 4,100 | | | | | | 145,188 | | | | | | | Deferred Compensation | | | | 94,500 | | | | — | | | | 126,784 | | | | — | | | | 448,123 | |
| (1) | The amounts reported in the Executive Contributions in Last Fiscal Year column represent elective contributions of a portion of their base salary to the SESP (which amounts are also included in the Salary Column of the Summary Compensation Table) and elective contributions to the Deferred Compensation Plan from the annual incentive payments.award (which amounts are included in the Salary and Non-Equity Incentive Plan Columns of the Summary Compensation Table, respectively). |
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| | |
| | Executive Compensation
|
(2) | The amounts reported in the Registrant Contributions in Last Fiscal Year column represent the Company’s contributions to each NEO’s SESP account (which amounts are also included in the All Other Compensation column of the Summary Compensation Table). |
| (3) | The amounts reported in the Aggregate Earnings in the Last Fiscal Year column include amounts reported for above-market interest on the SESP in the Change in Pension Value column of the Summary Compensation Table. Specifically, $4,281$10,452 for Mr. Strangfeld, $562Lowrey, $2,405 for Mr. Tanji, $5,766 for Mr. Falzon, $3,016$7,099 for Mr. Grier, $1,341Sleyster, and $1,582 for Mr. Lowrey and $1,062 for Mr. Pelletier.Sullivan. |
| (4) | The amounts reported in the Aggregate Balance at Last Fiscal Year-EndYear End column represent balances from the SESP and the Deferred Compensation Plan and include various amounts previously reported in the Summary Compensation Table as Salary, Non-Equity Incentive Plan Compensation or All Other Compensation. |
SESP The SESP is anon-qualified profit-sharing nonqualified profit sharing plan designed to provide benefits in excess of amounts permitted to be contributed under the PESP. It allows employees, including the NEOs, to elect to defer from 1% to 4% of their eligible earnings paid after the Code limit is exceeded in the year ($270,000290,000 in 2017)2021) to a hypothetical recordkeepingrecord-keeping account on apre-tax basis through payroll deduction. We match 100% of an employee’s deferrals. Eligible earnings for the NEOs under the SESP are limited to base salary only. Interest is earned on a participant’s account at the same rate as the Fixed Rate Fund under the PESP. This rate is generally set quarterly within a calendar year, and the rate in effect for each quarter of 20172021 was 3.50%. A participant’s account is distributed to the employee six months after the participant’s separation from service. Deferred Compensation Plan The Deferred Compensation Plan is anon-qualified, nonqualified, unfunded plan that provides certain designated executives in the United States, including the NEOs, with the ability to defer taxation on up to 85% of their annual cash incentive awards. Deferrals may be invested in notional funds that generally mirror the PESP fund offerings, including shares of our Common Stock. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 61 |
| | | | | | | Executive Compensation | |
|
Post-Employment Compensation Arrangements While we have not entered into employment agreements with our NEOs, they are eligible to receive certain payments and benefits in the event of a termination of employment, including following a change in control of the Company, under the Severance Plan and Change in Control Program. Mr. StrangfeldOur CEO does not participate in the Severance Plan. In the case of the NEOs, and in many cases, subject to the approval of our Board, the various payments and benefits are provided under the Severance Plan, the Change in Control Program, the Omnibus Plan and other Company plans and programs, as applicable, are as follows:applicable. | | | | | | | | | | | | | | | | | | | Severance | | Annual
Incentives
| | Stock Options | | Performance
Shares/
Performance
Units
| | Book Value
Units
| | SERP | | Additional
Retirement
Accruals
| | Health/Life | Voluntary Termination; Early or Normal Retirement
| | —
| | Annual Incentive Program
| | Omnibus Plan*
| | Omnibus
Plan*
| | Omnibus Plan*
| | —
| | Merged Retirement Plan and Supplemental Retirement
Plan
| | —
| Involuntary Termination Without Cause
| | Severance Plan
| | Annual Incentive Program
| | Omnibus Plan**
| | Omnibus Plan**
| | Omnibus Plan**
| | Prudential SERP
| | Merged Retirement Plan and Supplemental Retirement Plan
| | —
| Separation in Connection With Change in Control1
| | Change in Control Program
| | Change in Control Program
and Annual Incentive Program
| | Change in Control Program and Omnibus Plan
| | Change in Control Program
and Omnibus Plan
| | Change in Control Program and Omnibus Plan
| | Prudential SERP
| | Merged Retirement Plan and Supplemental Retirement Plan
| | Change in Control Program
| Separation Due to
Disability
| | —
| | Annual Incentive Program
| | Omnibus Plan
| | Omnibus Plan
| | Omnibus
Plan
| | —
| | Merged Retirement Plan and Supplemental Retirement Plan
| | Prudential Welfare Benefits Plan
| Separation Due to Death
| | —
| | Annual Incentive Program
| | Omnibus Plan
| | Omnibus
Plan
| | Omnibus
Plan
| | —
| | Merged Retirement Plan and Supplemental Retirement Plan
| | —
|
See footnotes below.
| | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 79 |
| | |
| | Executive Compensation
|
Voluntary Termination;Termination(1) — Early or Normal Retirement Normal RetirementAnnual Incentives.
SEVERANCE
ANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on the current year’s businessCompany and individual performance, payable following the completion of the performance year. STOCK OPTIONS
Stock Options.Omnibus Plan*Plan(1): Vested stock options remain exercisable for a period of up to five years after termination; and unvested stock options continue to vest according to the original vesting schedule. PERFORMANCE SHARES/PERFORMANCE UNITS
Performance Shares/Performance Units.Omnibus Plan*Plan(1): each grant of performance shares and performance units will be paid out at the end of its respective performance period based on the actual number of shares and performance units earned as determined by the Committee. Performance shares areRestricted Stock Units. Omnibus Plan(1): generally, each grant of restricted stock units vest one-third each year and is paid out annually in shares of Common Stock and performance units are paid in cash.shares.
BOOK VALUE UNITS
Book Value Units.Omnibus Plan*Plan(1): each grant of book value units vestsone-third each year and is paid out annually in cash based on the Company’s adjusted book value per share at the end of the fiscal quarter prior to payment. * | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment (i) unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination and (ii) all outstanding restricted stock units, performance shares, performance units and book value units are generally forfeited. |
SERP
ADDITIONAL RETIREMENT ACCRUALS
Additional Retirement Accruals.Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive. Involuntary Termination Without Cause SEVERANCE
Severance.Severance Plan: assuming all eligibility conditions are satisfied, severance payments of up to 18 months of base salary and annual incentive. ANNUAL INCENTIVES
Annual Incentives.Annual Incentive Program: an annual incentive payment based on the current year’s businessCompany and individual performance, payable following the completion of the performance year. STOCK OPTIONS
Stock Options.Omnibus Plan**Plan(2): (i) Vested stock options remain exercisable for a period of up to five years after termination date and unvested stock options continue to vest according to the original vesting schedule. Restricted Stock Units. Omnibus Plan(2): generally, each grant of restricted stock units vest one-third each year and is paid out annually in shares. PERFORMANCE SHARES/PERFORMANCE UNITS
Performance Shares/Performance Units.Omnibus Plan**Plan(2): each grant of performance shares and performance units will be paid out at the end of its respective performance period based on the actual number of shares and performance units earned as determined by the Committee. Performance shares are paid in shares of Common Stock and performance units are paid in cash. BOOK VALUE UNITS
Book Value Units.Omnibus Plan**Plan(2): each grant of book value units vestsone-third each year and is paid out annually in cash based on the Company’s adjusted book value per share at the end of the fiscal quarter prior to payment. ** | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment (i) unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination, (ii) generally apro-rata portion of restricted stock units, performance shares, performance units and book value units will vest. |
SERP
SERP.Prudential SERP: Messrs. Falzon and Pelletier are retirement- eligible and may receive an Early Retirement Benefit.Benefit provided to eligible participants. ADDITIONAL RETIREMENT ACCRUALS
Additional Retirement Accruals.Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive. Merged Retirement Plan (Traditional Pension Formula)incentive and Supplemental Retirement Plan (Traditional Pension Formula): additional benefit to Mr. PelletierMessrs. Tanji, Falzon, Sleyster and Sullivan based on the amount of severance paid and the period of time over which the severance is based (e.g., 78 weeks).severance.
Merged Retirement Plan (Cash Balance Formula) and Supplemental Retirement Plan (Cash Balance Formula): additional benefit to Messrs. Falzon, Grier, and Lowrey based on the amount of severance.
Separation in Connection with Change in Control(3) Control1Severance.
SEVERANCE
Change in Control Program: (i) alump-sum payment equal to the sum of two times annual base salary and bonusannual incentive (based on the average of the annual incentive payments for the previous three calendar years); and (ii) a payment equal to the present value of the retirement benefits that would have accrued during the period of time on which thelump-sum payment in (i) is based. Annual Incentives. Change in Control Program and Annual Incentive Program: an annual incentive payment based on the target annual incentive award opportunity in the year termination occurs. Stock Options. Change in Control Program and Omnibus Plan: accelerated vesting of stock options, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. Performance Shares/Performance Units. Change in Control Program and Omnibus Plan: payment of outstanding performance shares and performance units at target in shares within 30 days of a change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. For performance shares and performance units granted in 2017 and subsequent years, at the change in control (i) outstanding, | | | | 62 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
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unconverted performance shares and performance units will become vested at target and settled in shares, and (ii) outstanding performance shares and performance units that were converted to restricted stock units will become vested and settled in shares, only if such outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. Restricted Stock Units. Change in Control Program and Omnibus Plan: payment of restricted stock units in shares, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. Book Value Units. Change in Control Program and Omnibus Plan: payment of outstanding book value units in cash based on the Company’s adjusted book value per share at the end of the fiscal quarter ended on or immediately prior to the change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. SERP. Prudential SERP: Early Retirement Benefit provided to eligible participants. Additional Retirement Accruals. Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive. Health/Life. Change in Control Program: continued health benefits at active employee contribution levels for a period of 18 months, plus a “gross-up” for any expected tax consequences associated with providing these health benefits. Separation Due to Disability or Death Annual Incentives. Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards. Restricted Stock Units. Omnibus Plan: all outstanding restricted stock units are paid out in shares. Stock Options. Omnibus Plan: stock option vesting accelerates with up to three years to exercise. Performance Shares/Performance Units. Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock. Book Value Units. Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company’s adjusted book value per share at the end of the fiscal quarter prior to payment. Additional Retirement Accruals. Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive (paid to spouse in the event of death). In the event of disability, additional credits until pension commencement (assumed to be Normal Retirement Date). Health/Life. Prudential Welfare Benefits Plan: monthly disability payment based on salary plus the greater of the most recently paid annual incentive award or the average of the last three most recently paid annual incentive awards. | (1) | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment, all outstanding restricted stock units are generally forfeited. |
| (2) | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment, generally a pro-rata portion of restricted stock units will vest. |
| (3) | Pursuant to the Change in Control Program, before payments may be made, a change in control must have occurred and the designated executive officer’s employment must, within two years following the change in control, either have terminated involuntarily without “cause” or by the eligible executive officer for “good reason”.reason.” An eligible executive officer would have good reason to terminate his or her employment in the event of a material reduction in his or her compensation or the terms and conditions of his or her employment were to adversely change (for example, a reduction in job responsibilities, title, or forced relocation). |
ANNUAL INCENTIVES
Change in Control Program and Annual Incentive Program: an annual incentive payment based on the target annual incentive award opportunity in the year termination occurs.
STOCK OPTIONS
Change in Control Program and Omnibus Plan: accelerated vesting of stock options, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.
PERFORMANCE SHARES/PERFORMANCE UNITS
Change in Control Program and Omnibus Plan: payment of outstanding performance shares and performance units at target in cash or shares within 30 days of a change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. For performance shares and
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performance units granted in 2017 and subsequent years, at the change in control (i) outstanding, unconverted performance shares and performance units will become vested at target and settled in cash or shares, as applicable, and (ii) outstanding performance shares and performance units that were converted to restricted stock units will become vested and settled in shares, only if such outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.
BOOK VALUE UNITS
Change in Control Program and Omnibus Plan: payment of outstanding book value units in cash based on the Company book value per share at the end of the fiscal quarter ended on or immediately prior to the change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.
SERP
Prudential SERP: Messrs. Falzon and Pelletier are retirement-eligible and may receive an Early Retirement Benefit.
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.
HEALTH/LIFE
Change in Control Program: continued health benefits at active employee contribution levels for a period of 18 months, plus a “gross up” for any expected tax consequences associated with providing these health benefits.
Separation Due to Disability
SEVERANCE
ANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards.
STOCK OPTIONS
Omnibus Plan: stock option vesting accelerates with up to three years to exercise.
PERFORMANCE SHARES/PERFORMANCE UNITS
Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock and cash, respectively.
BOOK VALUE UNITS
Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company book value per share at the end of the fiscal quarter prior to payment.
SERP
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.
Merged Retirement Plan (Cash Balance Formula) and Supplemental Retirement Plan (Cash Balance Formula): Messrs. Falzon, Grier, and Lowrey would receive additional credits until pension commencement (assumed to be Normal Retirement Date).
HEALTH/LIFE
Prudential Welfare Benefits Plan: monthly disability payment based on salary plus the greater of the most recently paid annual incentive award or the average of the last three most recently paid annual incentive awards.
Separation Due to Death
SEVERANCE
ANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards.
STOCK OPTIONS
Omnibus Plan: stock option vesting accelerates with a minimum of one and up to three years to exercise outstanding options.
PERFORMANCE SHARES/PERFORMANCE UNITS
Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock and cash, respectively.
BOOK VALUE UNITS
Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company book value per share at the end of the fiscal quarter prior to payment.
SERP
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit payable to the spouse based on the annual incentive.
Potential Payments Upon upon Termination or Change in Control The following table presents, for each of the NEOs, the estimated payments and benefits that would have been payable as of the end of 20172021 in the event of: voluntary termination of employment;
involuntarya termination of employment (voluntary or involuntary without cause;
cause) or a separation due to a changefor another reason (change in control, of the Company; disability, or death). separation due to disability; and
separation due to death.
Consistent with SEC requirements, these estimated amounts have been calculated as if the NEO’s employment had been terminated as of December 29, 2017,31, 2021, the last business day of 2017, and using the closing market price of our Common Stock on December 29, 2017 ($114.98 per share).2021. Retirement eligibility differs according to the employment separation event. The following table assumes that benefits are paid in an annuity form and commence on January 1, 2018,2022, unless stated otherwise. The table also assumes Board approval of various payments and Prudential SERP Early Retirement Benefits, as applicable, for all NEOs. | | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 81 |
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The following items have been excluded from the table:
The benefits the NEOs would be entitled to receive under the SESP and the Deferred Compensation Plan (these benefits are disclosed in the Nonqualified Deferred Compensation Table contained in this Proxy Statement).
Additional payments to the NEOs under the PESP, The Prudential Welfare Benefits Plan and The Prudential Retiree Welfare Benefits Plan (plans providing, among other things, life insurance, disability insurance, medical insurance and/or dental insurance), which do not discriminate in scope, terms, or operation in favor of the NEOs, and are generally available to all salaried employees.
The effects of an involuntary termination of employment for cause, which will result in a forfeiture of all outstanding vested and unvested performance shares, performance units, book value units, restricted stock units, and stock options, and for Mr. Pelletier potential forfeiture of the benefit under the PSI SERP. The NEOs will receive no additional payments in the event of a termination of employment for cause.
The amounts reported in the following table aredisplays hypothetical amounts based on the disclosure of compensation information about the NEOs. Actual payments and benefits will depend on the circumstances and timing of any termination of employment or other triggering event.
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Estimated Post-Employment Payments and Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Type of Payment or Benefit | | | | Voluntary
Termination/Early or
Normal Retirement
($) | | | Involuntary
Termination
Without Cause
($) | | | Separation Due to
Change in Control
($) | | | Separation
Due to Disability
($) | | | Separation
Due to Death
($) | | | John R. Strangfeld | | Severance Payment | | | | | | | | | | | | | 27,667,065 | (1) | | | | | | | | | | | Annual Incentive | | | | | 6,660,000 | (2) | | | 6,660,000 | (2) | | | 6,000,000 | | | | 6,563,700 | | | | 6,563,700 | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 11,616,429 | (4) | | | 11,616,429 | (4) | | | 11,616,429 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 11,616,429 | (5) | | | 11,616,429 | (5) | | | 11,616,429 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 8,813,699 | (6) | | | 8,813,699 | (6) | | | 8,813,699 | (6) | | | Benefits: | | SERP | | | | | | | | | | | | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 26,057 | (7) | | | | | | | | | | | | | Addtl. Retire Accurals | | | 1,543,392 | | | | 1,543,392 | | | | 450,756 | | | | 706,128 | | | | 675,252 | | | | | Total | | | | | 8,203,392 | | | | 8,203,392 | | | | 66,190,437 | | | | 39,316,386 | | | | 39,285,510 | | | Robert M. Falzon | | Severance Payment | | | | | | | | | 5,600,100 | | | | 8,844,159 | (1) | | | | | | | | | | | Annual Incentive | | | | | 3,330,000 | (2) | | | 3,330,000 | (2) | | | 3,000,000 | | | | 2,963,400 | | | | 2,963,400 | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 4,478,701 | (4) | | | 4,478,701 | (4) | | | 4,478,701 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 4,478,701 | (5) | | | 4,478,701 | (5) | | | 4,478,701 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 3,763,418 | (6) | | | 3,763,418 | (6) | | | 3,763,418 | (6) | | | Benefits: | | SERP | | | | | | | 70,272 | | | | 70,284 | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 26,057 | (7) | | | | | | | | | | | | | Addtl. Retire Accurals | | | 344,808 | | | | 924,660 | | | | 310,632 | | | | 2,580,802 | | | | 331,901 | | | | | Total | | | | | 3,674,808 | | | | 9,925,032 | | | | 24,971,951 | | | | 18,265,022 | | | | 16,016,121 | | | Mark B. Grier | | Severance Payment | | | | | | | | | 10,125,000 | | | | 15,691,344 | (1) | | | | | | | | | | | Annual Incentive | | | | | 5,660,000 | (2) | | | 5,660,000 | (2) | | | 5,100,000 | | | | 5,560,000 | | | | 5,560,000 | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 9,377,079 | (4) | | | 9,377,079 | (4) | | | 9,377,079 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 9,377,079 | (4) | | | 9,377,079 | (4) | | | 9,377,079 | (4) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 7,285,784 | (4) | | | 7,285,784 | (4) | | | 7,285,784 | (4) | | | Benefits: | | SERP | | | | | | | | | | | | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 34,982 | (7) | | | 256,987 | | | | | | | | | | Addtl. Retire Accurals | | | 792,400 | | | | 2,209,900 | | | | 714,000 | | | | 710,975 | | | | 778,400 | | | | | Total | | | | | 6,452,400 | | | | 17,994,900 | | | | 47,580,268 | | | | 32,567,904 | | | | 32,378,342 | | | Charles F. Lowrey | | Severance Payment | | | | | | | | | 7,972,500 | | | | 12,775,912 | (1) | | | | | | | | | | | Annual Incentive | | | | | 4,440,000 | (2) | | | 4,440,000 | (2) | | | 4,000,000 | | | | 4,545,000 | | | | 4,545,000 | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 5,793,727 | (4) | | | 5,793,727 | (4) | | | 5,793,727 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 5,793,727 | (5) | | | 5,793,727 | (5) | | | 5,793,727 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 5,212,979 | (6) | | | 5,212,979 | (6) | | | 5,212,979 | (6) | | | Benefits: | | SERP | | | | | | | | | | | | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 31,345 | (7) | | | | | | | | | | | | | Addtl. Retire Accurals | | | 492,840 | | | | 1,377,787 | | | | 444,000 | | | | 3,815,101 | | | | 504,495 | | | | | Total | | | | | 4,932,840 | | | | 13,790,287 | | | | 34,051,690 | | | | 25,160,534 | | | | 21,849,928 | | | Stephen Pelletier | | Severance Payment | | | | | | | | | 6,747,600 | | | | 15,311,943 | (1) | | | | | | | | | | | Annual Incentive | | | | | 4,700,000 | (2) | | | 4,700,000 | (2) | | | 4,000,000 | | | | 3,728,400 | | | | 3,728,400 | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 5,300,923 | (4) | | | 5,300,923 | (4) | | | 5,300,923 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 5,300,923 | (5) | | | 5,300,923 | (5) | | | 5,300,923 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 4,592,814 | (6) | | | 4,592,814 | (6) | | | 4,592,814 | (6) | | | Benefits: | | SERP | | | | | | | | | | | 632,964 | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 33,830 | (7) | | | | | | | | | | | | | Addtl. Retire Accurals | | | 2,765,832 | | | | 6,144,288 | | | | 2,079,276 | | | | 1,528,272 | | | | 1,008,060 | | | | | Total | | | | | 7,465,832 | | | | 17,591,888 | | | | 37,252,672 | | | | 20,451,332 | | | | 19,931,120 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Type of Payment or Benefit | | | | | Voluntary
Termination/Early
or Normal
Retirement ($) | | | Involuntary
Termination
Without Cause
($) | | | Separation Due to
Change in
Control
($) | | | Separation Due to
Disability
($) | | | Separation
Due to Death
($) | | | | | | | | | | Charles F. Lowrey | | Severance Payment* | | | | | | | | | | | | | | | 12,822,009 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 4,253,000 | (2) | | | 4,253,000 | (2) | | | 3,500,000 | | | | 3,914,700 | | | | 3,914,700 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 22,661,776 | | | | 22,661,776 | | | | 22,661,776 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 3,755,170 | | | | 3,755,170 | | | | 3,755,170 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 5,427,737 | | | | 5,427,737 | | | | 5,427,737 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 41,887 | (6) | | | | | | | | | | | | | | Addtl. Retire Accruals | | | | 561,396 | | | | 561,396 | | | | 462,000 | | | | 1,596,731 | | | | 516,740 | | | | | | | | | | | | | Total | | | | | | | 4,814,396 | | | | 4,814,396 | | | | 48,670,579 | | | | 37,356,114 | | | | 36,276,123 | | | | | | | | | | Kenneth Y. Tanji | | Severance Payment* | | | | | | | | | | | 2,921,600 | | | | 4,594,304 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 1,883,000 | (2) | | | 1,883,000 | (2) | | | 1,550,000 | | | | 1,297,700 | | | | 1,297,700 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 7,159,102 | | | | 7,159,102 | | | | 7,159,102 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 1,196,377 | | | | 1,196,377 | | | | 1,196,377 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 1,574,266 | | | | 1,574,266 | | | | 1,574,266 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 51,194 | (6) | | | 1,533,901 | | | | | | | | | | | Addtl. Retire Accruals | | | | 190,183 | | | | 485,265 | | | | 156,550 | | | | 3,485,645 | | | | 131,068 | | | | | | | | | | | | | Total | | | | | | | 2,073,183 | | | | 5,289,865 | | | | 16,281,792 | | | | 16,246,990 | | | | 11,358,512 | | | | | | | | | | Robert M. Falzon | | Severance Payment* | | | | | | | | | | | 6,132,600 | | | | 9,941,399 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 3,402,000 | (2) | | | 3,402,000 | (2) | | | 2,800,000 | | | | 3,088,400 | | | | 3,088,400 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 17,805,264 | | | | 17,805,264 | | | | 17,805,264 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 2,990,888 | | | | 2,990,888 | | | | 2,990,888 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 4,305,856 | | | | 4,305,856 | | | | 4,305,856 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 35,260 | (6) | | | | | | | | | | | | | | Addtl. Retire Accruals | | | | 413,511 | | | | 1,158,924 | | | | 340,338 | | | | 663,612 | | | | 401,492 | | | | | | | | | | | | | Total | | | | | | | 3,815,511 | | | | 10,693,524 | | | | 38,219,004 | | | | 28,854,019 | | | | 28,591,899 | | | | | | | | | | Scott G. Sleyster | | Severance Payment* | | | | | | | | | | | 3,998,600 | | | | 6,562,763 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 2,430,000 | (2) | | | 2,430,000(2) | | | | 2,000,000 | | | | 1,965,700 | | | | 1,965,700 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 9,604,243 | | | | 9,604,243 | | | | 9,604,243 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 1,462,214 | | | | 1,462,214 | | | | 1,462,214 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 2,274,531 | | | | 2,274,531 | | | | 2,274,531 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 45,025 | (6) | | | | | | | | | | | | | | Addtl. Retire Accruals | | | | 278,739 | | | | 737,408 | | | | 229,415 | | | | 584,521 | | | | 241,781 | | | | | | | | | | | | | Total | | | | | | | 2,708,739 | | | | 7,166,008 | | | | 22,178,192 | | | | 15,891,210 | | | | 15,548,470 | | | | | | | | | | Andrew F. Sullivan | | Severance Payment* | | | | | | | | | | | 3,550,100 | | | | 5,170,451 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | | | | | 2,430,000 | (2) | | | 2,000,000 | | | | 1,666,700 | | | | 1,666,700 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 7,595,958 | | | | 7,595,958 | | | | 7,595,958 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 1,462,214 | | | | 1,462,214 | | | | 1,462,214 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 1,320,296 | | | | 1,320,296 | | | | 1,320,296 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 52,515 | (6) | | | 1,953,060 | | | | | | | | | | | Addtl. Retire Accruals | | | | | | | | 466,448 | | | | 156,000 | | | | 5,645,122 | | | | 130,003 | | | | | | | | | | | | | Total | | | | | | | | | | | 6,446,548 | | | | 17,757,434 | | | | 19,643,350 | | | | 12,175,171 | |
| 1 | Includes severance payments equal to two times annual cash compensation (subject to execution of a non-competition agreement), and a cash payment for the pension impact of additional two years of credited service. |
| 2 | Includes annual incentive award amount for 20172021 performance. |
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| 3 | For disability and death, accelerated vesting of all stock options with up to three years to exercise. |
4 | Includes the value of 2015, 2016, and 20172019, 2020, 2021 target performance shares paid based on the closing market price of our Common Stock on December 31, 2017 ($114.98 per share). |
5 | Includes the value of 2015, 2016, and 2017 target performance units paid based on the closing market price of our Common Stock on December 31, 2017 ($114.98 per share).latest year end share price. |
64 | Includes the value of 2015, 2016,2021 restricted stock units paid based on the latest year end share price. |
| 5 | Includes the value of 2019 and 20172020 book value units paid based on the Company’s latest year end book value per share as of December 31, 2016 ($85.54 per share).share. |
76 | Reflects the expected contribution subsidy for 18 months and the associated tax gross-up. For this purpose, we have assumed the 20182022 premium and contribution rates continue for the full 18 months. |
| * | Subject to receipt from the executive of a general release of claims and confidentiality and nondisparagement agreements. |
| ** | Subject to receipt from the executive of a general release of claims and agreements relating to confidentiality, nondisparagement, nonsolicitation and, in the case of retirees, noncompetition. |
The following items are excluded from the table above: | ● | | The benefits the NEOs would be entitled to receive under the SESP and the Deferred Compensation Plan (these benefits are disclosed in the Nonqualified Deferred Compensation table contained in this Proxy Statement). |
| ● | | Additional payments to the NEOs under the PESP, The Prudential Welfare Benefits Plan and The Prudential Retiree Welfare Benefits Plan (plans providing, among other things, life insurance, disability insurance, medical insurance and/or dental insurance), which do not discriminate in scope, terms, or operation in favor of the NEOs and are generally available to all salaried employees. |
| ● | | The effects of an involuntary termination of employment for cause, which will result in a forfeiture of all outstanding vested and unvested performance shares, performance units, book value units, restricted stock units, and stock options. The NEOs will receive no additional payments in the event of a termination of employment for cause. |
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General Information About The Meeting
Voting Instructions and Information Who Can Vote You are entitled to vote your Common Stock if our records show that you held your shares as of the record date of March 9, 2018.11, 2022. At the close of business on that date, a total of 421,881,122376,425,525 shares of Common Stock were outstanding and entitled to vote. Each share of Common Stock is entitled to one vote at this Annual Meeting. Your voting instructions are confidential and will not be disclosed to persons other than those recording the vote, except if a shareholder makesyou make a written comment on the proxy card, otherwise communicates his or hercommunicate your vote to management, as may be required in accordance with the appropriate legal process, or as authorized by you. Voting Your Proxy If your Common Stock is held through a broker, bank or other nominee (held in street name), you will receive instructions from such entity that you must follow in order to have your shares voted. If you want to vote in person, you must obtain a legal proxy from your broker, bank or other nominee, and bring it to the meeting, and submit it with your vote. If you hold your shares in your own name as a holder of record with our transfer agent, Computershare, you may instruct the proxies how to vote by following the instructions listed on the Notice of Internet Availability or the proxy card to vote online, or by signing, dating and mailing the proxy card in the postage-paid envelope. Of course, you can always come to the meeting and vote your shares in person.person, if you satisfy the procedures for attendance outlined in “Attending the Annual Meeting” below. Whichever method you select to transmit your instructions, the proxies will vote your shares in accordance with those instructions. Except as discussed below with respect to shares held in certain companyCompany plans, if you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board of Directors: FOR each director nominee, FOR ratification of the appointment of the independent registered public accounting firm,auditor, FOR the advisory vote to approve named executive officer compensation and AGAINST the shareholder proposal regarding an independent Board Chairman.to adopt the right to act by written consent. Special Voting Instructions for Plan Shares If you are a participant in The Prudential Employee Savings Plan (“PESP”) and your account is invested in the PFI Common Stock Fund, you may instruct the PESP Trustee on how to vote the shares of Common Stock credited to your PESP account and held in the Fund on March 7, 2018.9, 2022. The PESP Trustee, the shareholder of record, will vote these shares in accordance with your instructions or, if you do not provide voting instructions, in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions subject to the terms of the PESP plan document, its trust agreement and applicable law. If you hold shares of Common Stock through your participation in the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (covering vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan (collectively, the “Plan”), on March 9, 201811, 2022, those shares will be voted by the Plan administrator in accordance with your instructions or, if you do not provide voting instructions, in accordance with the Board of Directors’ recommendation subject to the terms of the Plan and applicable law. Matters to Be Presented We are not aware of any matters tothat will be presentedacted on at the Annual Meeting other than those described in this Proxy Statement. If any matters not described in this Proxy Statement are properly presented at the meeting, the proxies will use their own judgment to determine how to vote your shares. If the meeting is adjourned or postponed, the proxies can vote your shares at the adjournment or postponement as well. Revoking Your Proxy If you hold your shares in street name, you must follow the instructions of your broker, bank or other nominee to revoke your voting instructions. If you are a holder of record and wish to revoke your proxy instructions, you must deliver later-dated proxy instructions, advise the Chief Governance Officer and Corporate Secretary in writing before the proxies vote your shares at the meeting,Annual Meeting, or attend the meetingAnnual Meeting and vote your shares in person. | | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement |66 | | 83 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
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Quorum A quorum is required to transact business at our Annual Meeting. Shareholders of record holding shares of stock constituting 50%a majority of the shares entitled to be cast shall constitute a quorum. If you have returned valid proxy instructions or attend the meeting in person, your shares will be counted for the purpose of determining whether there is a quorum, even if you abstain from voting on some or all matters introduced at the meeting. In addition, brokernon-votes will be treated as present for purposes of determining whether a quorum is present. Voting Requirements You may either vote for, against or abstain on each of the proposals. The affirmative vote of a majority of the votes cast is required to approve each proposal. Brokernon-votes and abstentions will have no impact, as they are not counted as votes cast. Although the advisory vote in Item 3 isnon-binding, non binding, as provided by law, our Board will review the results of the vote and, consistent with our commitment to shareholder engagement, will take the results into account in making a determination concerning our named executive officer compensation. If you hold your shares in street name, and you do not submit voting instructions to your broker, bank or other nominee, your broker, bank or other nominee will not be permitted to vote your shares in their discretion, which would result in “broker non-votes”on proposals relating to the election of directors, the advisory vote to approve named executive officer compensation, orand the shareholder proposal regarding an independent Board Chairman,the right to act by written consent, but may still be permitted to vote your shares in their discretion on the ratification of the independent registered public accounting firm.auditor. Any shares represented by “broker non-votes” are not considered votes cast or entitled to vote and therefore will not impact the outcome of such proposals (other than for the ratification of the independent auditor). Election of Directors At the meeting, each nominee must receive the affirmative vote of a majority of the votes cast with respect to his or her election in order to be elected. If an incumbent nominee is not elected by the requisite vote, he or she must tender his or her resignation, and the Board, through a process managed by the Corporate Governance and Business Ethics Committee, will decide whether to accept the resignation. BOARD RECOMMENDATIONS | | | | | The Board of Directors recommends that you vote “FOR” each of the Director Nominees, “FOR” the ratification of the appointment of the Independent Auditor, “FOR” the advisory vote to approve named executive officer compensation and “AGAINST” the shareholder proposal to adopt the right to act by written consent. |
The Board of Directors recommends that you vote“FOR” each of the Director Nominees,“FOR” the
ratification of the appointment of the Independent Registered Public Accounting Firm,
“FOR” the advisory vote to approve named executive officer compensation and“AGAINST” the shareholder proposal regarding an independent Board Chairman.
Cost of Proxy Solicitation We are providing these proxy materials in connection with the solicitation by the Company’s Board of Directors of proxies to be voted at our Annual Meeting. We will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, we expect that a number of our employees will solicit shareholders personally, electronically and by telephone. None of these employees will receive any additional compensation for doing this. We have retained Georgeson, Inc. to assist in the solicitation of proxies for a fee of $25,000 plus reimbursement of expenses. We will, on request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. Attending the Annual Meeting If you attend the Annual Meeting, you will be asked to present valid, government-issued photo identification, such as a driver’s license. If you are a holder of record, the top half of your proxy card or your Notice of Internet Availability is your admission ticket. If you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or a letter from your bank or broker are examples of proof of ownership. If you want to vote your shares held in street name in person, you must get a legal proxy in your name from the broker, bank or other nominee that holds your shares, and submit it with your vote. | | | | | 84 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement67 |
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Attendance at the Annual Meeting is limited to shareholders of Prudential as of the record date. Each shareholder may appoint only one proxy holder or representative to attend the Annual Meeting on his or her behalf. Special Precautions Due to COVID-19: In order to protect the health and safety of our employees and shareholders, we are taking special precautions in connection with the Annual Meeting due to the health impact of COVID-19. These include limiting the Annual Meeting to the items of business on the Notice of Annual Meeting of Shareholders of Prudential Financial, Inc., maintaining appropriate social distance of six feet apart, requiring masks that fully cover mouths and noses to be worn at all times, and providing proof of vaccination. We also encourage shareholders who intend to attend the Annual Meeting to review the relevant guidance from public health authorities. Submission of Shareholder Proposals and Director Nominations Rule 14a-8Proposals and Director Nominations for Inclusion in the Proxy Statement for the 20192023 Annual Meeting In order to submit shareholder proposals for the 20192023 Annual Meeting of Shareholders for inclusion in our Proxy Statement pursuant to SEC Rule14a-8, materials must be received by the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark, New Jersey,(see below), no later than the close of business on November 23, 2018.24, 2022. Proposals submitted for inclusion in our Proxy Statement must comply with all of the requirements of SEC Rule 14a-8. As the rules of the SEC make clear, simply submitting a proposal or nomination does not guarantee its inclusion. Proxy Access Director Nominations for Inclusion in the Proxy Statement for the 2023 Annual Meeting We have adopted proxy access, which permits a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding capital stock for at least three years, to submit director nominees for up to 20% of the Board for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in ourBy-laws. Notice of director nominations submitted under these proxy accessBy-law provisions must be received no earlier than December 9, 201811, 2022 and no later than January 8, 2019.10, 2023. However, if the 20192023 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 20192023 Annual Meeting was mailedgiven or public disclosure of the meeting date was made. Proposals submitted for inclusion in our Proxy Statement must comply with all of the requirements of SEC Rule14a-8, and directorDirector nominations submitted pursuant to the proxy access provisions of ourBy-laws must comply with all of the requirements of ourBy-laws, a copy of which may be obtained at no cost from the Chief Governance Officer and Corporate Secretary. As the rules of the SEC and ourBy-laws make clear, simply submitting a proposal or nomination does not guarantee its inclusion.
Other Proposals or Director Nominations for Presentation at the 20192023 Annual Meeting OurBy-laws also establish an advance notice procedure with regard to director nominations and shareholder proposals that are not submitted for inclusion in the Proxy Statement, but that a shareholder instead wishes to present directly at an Annual Meeting. To be properly brought before the 20192023 Annual Meeting, a notice of the nomination or the matter the shareholder wishes to present at the meeting must be delivered to the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark (see below) not less than 120 or more than 150 days prior to the first anniversary of the date of this year’s Annual Meeting. As a result, any notice given by or on behalf of a shareholder pursuant to these provisions of the Company’sBy-laws (and not pursuant to SEC Rule14a-8) must be received no earlier than December 9, 201811, 2022 and no later than January 8, 2019.10, 2023. However, if the 20192023 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 20192023 Annual Meeting was mailedgiven or public disclosure of the meeting date was made. All director nominations and shareholder proposals must comply with the requirements of the Company’sBy-laws. The Chairman may refuse to acknowledge or introduce any such matter at the 2023 Annual Meeting if notice of the matter is not received within the applicable deadlines or does not comply with the Company’sBy-laws. If a shareholder does not meet these deadlines, or does not satisfy the requirements of Rule14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the 2023 Annual Meeting. All proposals and director nominations should be addressed to: Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, Prudential Financial, Inc., 751 Broad Street, Newark, NJ 07102. | | | | 68 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
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Eliminating Duplicative Proxy Materials A single Proxy Statement and Annual Report, along with individual proxy cards, or individual Notices of Internet Availability, will be delivered in one envelope to multiple shareholders having the same last name and address and to individuals with more than one account registered at Computershare with the same address unless contrary instructions have been received from an affected shareholder. If you would like to enroll in this service or receive individual copies of all documents, now or in the future, please contact Computershare by calling1-800-305-9404 or writing to Computershare at P.O. Box 43033, Providence, RI 02940-3033.50500, Louisville, KY 40233-5000. We will | | | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | | | 85 |
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deliver a separate copy of all documents to a shareholder at a shared address to which a single copy of the documents was delivered promptly upon request to the address or telephone number provided above. Delivery of Proxy Materials We want to communicate with you in the way that is most convenient for you. You may choose to receive either a full set of printed materials—which will include an Annual Report, Proxy Statement, and proxy card—or an email with instructions for how to view the materials and vote online. To select a method of delivery during the voting season, registered shareholders may follow the instructions when voting online at www.investorvote.com/prudential. Following the 20182022 Annual Meeting, you may continue to choose your method of delivery of future documents by visiting www.computershare.com/investor. If you own shares indirectly through a broker, bank, or other nominee, please contact your financial institution for additional information regarding delivery options. If you do not choose a method of delivery as outlined above, you may receive aone-page Notice of Internet Availability instructing you how to access the materials and vote online in lieu of printed or electronic materials. As a publicly traded company, Prudential is legally required to make these materials available to all shareholders, and it is not possible to opt out of the mailing. Important Notice Regarding the Availability of Proxy Materials for the 20182022 Annual Meeting of Shareholders to Be Held on May 8, 2018:10, 2022: Our 20182022 Proxy Statement and Annual Report for the year ended December 31, 2017,2021 are available free of charge on our website at www.prudential.com/governance. Annual Report on Form10-K The Company will provide by mail, without charge, a copy of its Annual Report on Form10-K, at your request. Please direct all inquiries to the Company’s Corporate Information Service at1-877-998-ROCK (7625)investor.relations@prudential.com or 751 Broad Street, Newark, NJ 07102. Incorporation Byby Reference To the extent that this Proxy Statement has been or will be specifically incorporated by reference into any other filing of Prudential Financial under the Securities Act of 1933 or the Exchange Act, the sections of this Proxy Statement entitled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC) and “Compensation Committee Report” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing. Shareholder List A list of shareholders entitled to vote at the Annual Meeting will be available for examination by shareholders at the Annual Meeting. Forward-Looking Statements and Website References Certain of the statements included in this Proxy Statement constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on our current expectations and beliefs concerning future developments and their potential effects upon the Company. Our actual results may differ, possibly materially, from expectations or estimates reflected in such forward-looking statements. Certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements can be found in the “Risk Factors” and “Forward-Looking Statements” sections included in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. We do not undertake to update any particular forward-looking statement included in this Proxy Statement. Website references and their hyperlinks have been provided for convenience only. The content on any referenced websites is not incorporated by reference into this Proxy Statement, nor does it constitute a part of this Proxy Statement. | | | | | 86 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement69 |
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| | | Appendix A Non-GAAP Measures |
APPENDIX A - Non-GAAP Measures
Adjusted operating income (“AOI”) and operating return on average equity are non-GAAP measures of financial performance. Adjusted book value is a non-GAAP measure of financial position. We use earnings per share based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. Also, we believe that our use of these non-GAAP measures helps investors understand and evaluate the Company’s results of operations and financial position by providing measures that are primarily attributable to our business operations separate from the portion attributable to external and potentially volatile capital and currency market conditions. Adjusted Operating Income Adjusted operating income is a non-GAAP measure used by the Company to evaluate segment performance and to allocate resources. Adjusted operating income excludes “Realized investment gains (losses), net,” as adjusted, and related charges and adjustments. A significant element of realized investment gains and losses are impairments and credit-related and interest rate-related gains and losses. Impairments and losses from sales of credit-impaired securities, the timing of which depends largely on market credit cycles, can vary considerably across periods. The timing of other sales that would result in gains or losses, such as interest rate-related gains or losses, is largely subject to our discretion and influenced by market opportunities as well as our tax and capital profile. Realized investment gains (losses) within certain of our businesses for which such gains (losses) are a principal source of earnings, and those associated with terminating hedges of foreign currency earnings and current period yield adjustments are included in adjusted operating income. Adjusted operating income generally excludes realized investment gains and losses from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset-liability management program related to the risk of those products. However, the effectiveness of our hedging program will ultimately be reflected in adjusted operating income over time. Adjusted operating income also excludes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that have been economically hedged or considered part of our capital funding strategies for our international subsidiaries, as well as gains and losses on certain investments that are classifieddesignated as other trading account assets. trading. Adjusted operating income also excludes investment gains and losses on trading account assets supporting insuranceexperience-rated contractholder liabilities and changes in experience-rated contractholder liabilities due to asset value changes, because these recorded changes in asset and liability values are expected to ultimately accrue to contractholders. In addition,Additionally, adjusted operating income excludes the changes in fair value of equity securities that are recorded in net income. Adjusted operating income excludes market experience updates, reflecting the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which we believe enhances the understanding of underlying performance trends. Adjusted operating income also excludes the results of divested businesses,Divested and Run-off Businesses, which are not relevant to our ongoing operations. Earningsoperations and discontinued operations and earnings attributable to noncontrolling interests, each of which is presented as a separate component of net income under GAAP. Additionally, adjusted operating income excludes other items, such as certain components of the consideration for acquisitions, which are recognized as compensation expense over the requisite service periods, changes in the fair value of contingent consideration, and goodwill impairments. Earnings attributable to noncontrolling interests is presented as a separate component of net income under GAAP are alsoand excluded from adjusted operating income. The tax effect associated with pre-tax adjusted operating income is based on applicable Internal Revenue ServiceIRS and foreign tax regulations inclusive of pertinent adjustments. Reconciliation of GAAP Net Income toAfter-Tax Adjusted Operating Income
(in billions)
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December 31 | | | | | 2017 | | | 2016 | | | Net income attributable to Prudential Financial, Inc. | | $ | 7.86 | | | $ | 4.37 | | | Income attributable to noncontrolling interests | | | 0.11 | | | | 0.05 | | | Net income | | | 7.97 | | | | 4.42 | | | Less: Earnings attributable to noncontrolling interests | | | 0.11 | | | | 0.05 | | | Income attributable to Prudential Financial, Inc. | | | 7.86 | | | | 4.37 | | | Less: Equity in earnings of operating joint ventures, net of taxes and earnings attributable to noncontrolling interests | | | (0.06 | ) | | | (0.00 | ) | | Income (after-tax) before equity in earnings of operating joint ventures | | | 7.92 | | | | 4.37 | | Less: Reconciling Items: | | | | | | | | | Realized investment gains (losses), net, and related charges and adjustments | | | (0.06 | ) | | | 0.52 | | Investment gains (losses) on trading account assets supporting insurance liabilities, net | | | 0.34 | | | | (0.02 | ) | Change in experience-rated contractholder liabilities due to asset value changes | | | (0.15 | ) | | | 0.02 | | Divested businesses: | | | | | | | | | Closed Block division | | | 0.04 | | | | (0.13 | ) | Other divested businesses | | | 0.04 | | | | (0.08 | ) | Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests | | | 0.03 | | | | (0.01 | ) | Total reconciling items, before income taxes | | | 0.24 | | | | 0.31 | | Less: Income taxes, not applicable to adjusted operating income | | | (3.03 | ) | | | 0.04 | | Total reconciling items, after income taxes | | | 3.27 | | | | 0.26 | | | After-tax adjusted operating income | | $ | 4.65 | | | $ | 4.11 | |
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Appendix A | | Appendix A
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Reconciliation of GAAP Net Income to After-Tax Adjusted Operating Income (in millions) | | | | | | | | | | | | Year Ended
December 31, | | | | | | | | 2021 | | | 2020 | | | | | Net income attributable to Prudential Financial, Inc. | | $ | 7,724 | | | $ | (374 | ) | | | | Income attributable to noncontrolling interests | | | 70 | | | | 228 | | | | | Net income | | | 7,794 | | | | (146 | ) | | | | Less: Earnings attributable to noncontrolling interests | | | 70 | | | | 228 | | | | | Income attributable to Prudential Financial, Inc. | | | 7,724 | | | | (374 | ) | | | | Less: Equity in earnings of operating joint ventures, net of taxes and earnings attributable to noncontrolling interests | | | 17 | | | | (132 | ) | | | | Income (after-tax) before equity in earnings of operating joint ventures | | | 7,707 | | | | (242 | ) | | | | Less: Reconciling Items: | | | | | | | | | | | | Realized investment gains (losses), net, and related charges and adjustments(1) | | | 1,627 | | | | (4,300) | | | | | Market experience updates | | | 750 | | | | (640) | | | | | Divested and Run-off Businesses: | | | | | | | | | | | | Closed Block Division | | | 140 | | | | (24) | | | | | Other Divested and Run-off Businesses(1) | | | 716 | | | | (450) | | | | | Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests | | | (41) | | | | 90 | | | | | Other adjustments(2) | | | (1,112) | | | | 51 | | | | | Total reconciling items, before income taxes | | | 2,080 | | | | (5,273) | | | | | Less: Income taxes, not applicable to adjusted operating income(1) | | | 145 | | | | (1,118) | | | | | Total reconciling items, after income taxes | | | 1,935 | | | | (4,155) | | | | | After-tax adjusted operating income(1) | | $ | 5,772 | | | $ | 3,913 | |
| (1) | Prior period amounts have been updated to conform to current period presentation. |
| (2) | Represents adjustments not included in the above reconciling items, including a goodwill impairment that resulted in a charge of $837 million after-tax, $1,060 million pre-tax, in fourth quarter of 2021 related to Assurance IQ. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration. |
Reconciliation of GAAP Earnings per Share toAfter-Tax Adjusted Operating Income Earnings per Share (shares in millions) | | | | | Year Ended
December 31, | | | | | | Year Ended
December 31 | | | 2021 | | 2020 | | | | | 2017 | | 2016 | | | | Net income attributable to Prudential Financial, Inc. | | $ | 17.86 | | | $ | 9.71 | | | $ | 19.51 | | | | ($ 1.00) | | | Less: Reconciling Items: | | | | | | | | | Realized investment gains (losses), net, and related charges and adjustments | | | (0.13 | ) | | 1.17 | | | Investment gains (losses) on trading account assets supporting insurance liabilities, net | | | 0.77 | | | (0.04 | ) | | Change in experience-rated contractholder liabilities due to asset value changes | | | (0.35 | ) | | 0.05 | | | Divested businesses: | | | | | | Closed Block division | | | 0.10 | | | (0.30 | ) | | Other divested businesses | | | 0.09 | | | (0.19 | ) | | | Realized investment gains (losses), net, and related charges and adjustments(1) | | | | 4.17 | | | | (10.81) | | | Market experience updates | | | | 1.92 | | | | (1.61) | | | Divested and Run-off Businesses: | | | | | | | Closed Block Division | | | | 0.36 | | | | (0.06) | | | Other Divested and Run-off Businesses(1) | | | | 1.84 | | | | (1.13) | | | Difference in earnings allocated to participating unvested share-based payment awards | | | (0.09 | ) | | | — | | | | (0.07 | ) | | | 0.07 | | | Other adjustments(2) | | | | (2.85 | ) | | | 0.13 | | | Total reconciling items, before income taxes | | | 0.39 | | | 0.69 | | | | 5.37 | | | | (13.41) | | | Less: Income taxes, not applicable to adjusted operating income | | | (6.89 | ) | | 0.11 | | | | 0.44 | | | | (2.69) | | | Total reconciling items, after income taxes | | | 7.28 | | | 0.58 | | | | 4.93 | | | | (10.72) | | | After-tax adjusted operating income | | $ | 10.58 | | | $ | 9.13 | | | | After-tax adjusted operating income(1) | | | $ | 14.58 | | | | $ 9.72 | | | Weighted average number of outstanding Common shares (diluted) | | | 436.0 | | | 446.6 | | | | 390.1 | | | | 397.8 | |
| (1) | Prior period amounts have been updated to conform to current period presentation. |
| (2) | Represents adjustments not included in the above reconciling items, including a goodwill impairment that resulted in a charge of $837 million after-tax, $1,060 million pre-tax, in fourth quarter of 2021 related to Assurance IQ. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration. |
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 71 |
| | | | | | | Appendix A | |
|
Adjusted Book Value Reconciliation of GAAP Book Value to Adjusted Book Value (in millions, except for per share data) | | | | | Year Ended
December 31, | | | | | | As of December 31 | | | 2021 | | | 2020 | | | | | 2017 | | 2016 | | | | GAAP book value (total Prudential Financial, Inc. equity) at end of period | | $ | 54,069 | | | $ | 45,863 | | | $ | 61,876 | | | $ | 67,425 | | | | Less: Accumulated other comprehensive income (AOCI) | | $ | 17,074 | | | $ | 14,621 | | | | 21,324 | | | | 30,738 | | | | GAAP book value excluding AOCI | | $ | 36,995 | | | $ | 31,242 | | | | 40,552 | | | | 36,687 | | | Less: Cumulative effect of foreign exchange rate remeasurement and changes in certain deferred taxes | | $ | (969 | ) | | $ | (3,199 | ) | | | Less: Cumulative effect of foreign currency exchange rate remeasurement | | | | (1,164) | | | | (1,399) | | | | Adjusted book value | | $ | 37,964 | | | $ | 34,441 | | | $ | 41,716 | | | $ | 38,086 | | | Number of diluted shares at end of period(1) | | | 435.7 | | | 436.2 | | | | GAAP book value per common share - diluted(1) | | | 125.24 | | | 104.91 | | | | Adjusted book value per common share - diluted(1)(2) | | | 88.28 | | | 78.95 | | | | Number of diluted shares at end of period | | | | 383.7 | | | | 401.8 | | | GAAP book value per Common share—diluted | | | $ | 161.26 | | | $ | 167.81 | | | Adjusted book value per Common share—diluted(1) | | | $ | 108.72 | | | $ | 94.79 | |
| (1) | As of December 31, 2017, exchangeable surplus notes are dilutive when book value per share is greater than $85.00 (equivalent to an additional 5.88 million in diluted shares and an increase of $500 million in equity). As of December 31, 2016, exchangeable surplus notes are dilutive when book value per share is greater than $86.92 (equivalent to an additional 5.75 million in diluted shares and an increase of $500 million in equity). |
(2) | Includes the cumulative impact of net gains and losses resulting from foreign currency exchange rate remeasurement and associated realized investment gains and losses included in net income (loss) and currency translation adjustments corresponding to realized investment gains and losses. Includes $1,678 million impact reported in net income for 2017 from the remeasurement of deferred tax assets and liabilities originally established through accumulated other comprehensive income, related to enactment of the Tax Cuts and Jobs Act on December 22, 2017. |
Operating Return on Average Equity Operating return on average equity (based on adjusted operating income) is a non-GAAP measure and represents adjusted operating income after-tax divided by average Prudential Financial, Inc. equity excluding accumulated other comprehensive income and adjusted to remove amounts included for foreign currency exchange rate remeasurement and certain deferred taxes.remeasurement. The comparable GAAP measure to operating return on average equity (based on adjusted operating income) is return on average equity (based on net income). Return on average equity (based on net income) represents income after-tax, attributable to consolidated Prudential Financial, Inc., as determined in accordance with U.S. GAAP, divided by average total Prudential Financial, Inc. equity. Return on average equity (based on net income) was 16.0%12.4% and 8.8%(0.6)% for the years ended December 31, 20172021 and December 31, 2016,2020, respectively. | | | | 72 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
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| 88 | | | Notice of Annual Meeting of Shareholders and 2018 ProxyPay Equity Statement |
GENDER PAY EQUITY STATEMENT
Prudential’s Total Rewards is integral to our employee value proposition. This package includes compensation, as well as benefits and talent programs and resources available to our employees. All roles in our U.S. organization are reviewed against market and benchmarking data. Our compensation structure and benefits package enables Prudential to recruit and promote talent within the context of an individual’s background, experience and performance.
PRUDENTIAL IS COMMITTED TO PAY EQUITY. THE COMPANY’S POLICIES AND PRACTICES ADDRESS
PAY DISCRIMINATION THROUGHOUT THE EMPLOYEE’S CAREER
Recruiting
Reduce likelihood that U.S. compensation decisions are perpetuating discriminatory pay practices of former employers.
Nationally, Prudential removed compensation inquiries from its employment applications and;
Stopped considering compensation history when establishing starting pay for new employees, except as required by law.
These practices go beyond simple compliance with the laws of a limited number of states and cities.
Existing Employees
Guided by independent legal counsel, Prudential conducts a review of its U.S. compensation practices to protect against systemic race/ethnicity and gender biased patterns, and takes action as warranted.
Employees can raise issues regarding pay equity with the Ethics Office, Human Resources or their manager.
Pay discrimination concerns are promptly and thoroughly investigated by trained professionals dedicated to reviewing unlawful discrimination claims.
This integrated approach ensures that we proactively review pay equity on an ongoing basis, and that we satisfy our heightened obligations as a federal contractor.
As part of our annual human resources strategy update, our Board reviews the status of our pay practices and the broad range of our diversity and inclusion efforts.
All roles in our U.S. organization are reviewed against relevant market data. Our Total Rewards and talent programs enable Prudential to recruit and promote talent within the context of an individual’s background, experience and performance. AN OPEN LETTER TO PRUDENTIAL SHAREHOLDERS
LET’S BUILD NEW PATHWAYS TO PROSPERITY
The promise of our society has always been this: Hard work can create a better life.
How do we keep that promise within reach, when people are living longer, the pace of change is quickening, and our policies and safety nets strain to keep up?
The challenges are daunting: Our 2017 Financial Wellness Study found nearly six out of 10 workers said their financial situation is a cause of stress.
Prudential was founded to help working families achieve financial well-being by providing affordable insurance. More than 140 years later, we remain committed to creating opportunities for families to achieve financial security.
We are addressing today’s financial wellness challenges in multiple ways:
Nearly
workers said their financial situation is a cause of stress.
6 OUT OF 10
Through our clients
Prudential’s Financial Wellness platform gives employers tools and resources to help understand and improve the financial health of their workforce, including managing day-to-day finances, achieving important financial goals, and protecting themselves against financial risks. Prominent among these is Prudential PathwaysTM, a worksite seminar series led by Prudential Advisors addressing issues including budgeting, retirement savings, asset protection and savings.
Through our partners
Recently, Prudential announced a three-year, $5 million grant to the Aspen Institute, a nonpartisan forum for public policy leadership, to advance solutions helping increase economic opportunity for workers. Through this partnership, and many others, we aim to foster equal opportunity by removing barriers to social and financial mobility.
Through our employees
Promoting the financial wellness of our own employees is a corporate priority. Included in the many benefits we offer are: the options to participate in Prudential PathwaysTM; auto enrollment in the company’s 401(k) plan with a company match up to 4%; and lower healthcare costs for lower-salaried employees.
By identifying solutions that build income security, Prudential is helping bridge the gap between work and wealth. So that millions can move from financial fragility to financial resilience, stability, mobility and prosperity.
Because at Prudential, we believe financial opportunity is within reach of all.
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| | | | | | | Prudential’s policies and practices address pay equity throughout the employee’s career. | 
| | | | 
|  | | Recruiting Took steps to reduce the likelihood that U.S. compensation decisions are perpetuating discriminatory pay practices; Nationally, Prudential removed compensation inquiries from its employment applications; and Stopped considering compensation history when establishing starting pay for new employees, except as required by law. | | | | Dear Shareholder:Existing Employees
Guided by independent legal counsel, Prudential conducts a review of its U.S. compensation practices to help protect against systemic race/ethnicity and gender-biased patterns, and takes action as warranted. Employees can raise issues regarding pay equity with the Ethics Office, Human Resources or their manager. | |
| | | |
| These Practices go beyond simple compliance with the laws of a limited number of states and cities. | | | | Pay equity is a critical component of our commitment to paying employees fairly, regardless of race or gender. Pay discrimination concerns are promptly and thoroughly investigated by trained professionals dedicated to reviewing unlawful discrimination claims. |
In addition to this integrated approach that encourages a proactive review of pay equity on an ongoing basis, and to satisfy our heightened obligations as a federal contractor, we periodically retain independent external experts to conduct pay equity analyses for our U.S. population. In 2020, salary was evaluated and the results showed, when accounting for relevant factors including job and location, that, on average, women and Asian employees were paid at least 100% of the pay of male and White employees, respectively. Additionally, on average, Black employees were paid at 99.0% and Hispanic employees were paid at 98.3% of the pay of non-Hispanic White employees. In 2022, salary, bonus and equity were evaluated. With respect to salary, the results showed, when accounting for relevant factors including job and location, that, on average, women and Asian employees were paid, at least 100% of the pay of male and White employees, respectively. Additionally, on average, Black employees were paid at 99.3% and Hispanic employees were paid at 99.0% of the pay of non-Hispanic White employees. In 2022, with respect to Total Compensation, accounting for relevant factors including job and location, on average, women were paid, at 99.8% of male employees, Asian employees were paid at least 100%, Black employees were paid at 99.4% and Hispanic employees were paid at 98.9% of non-Hispanic White employees.
MMMMMMMMMMMM Admission Ticket MMMMMMMMMMMMMMMC0123456789 000004 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext Your vote matters – here’s how to vote! MR A SAMPLE You may vote online or by phone instead of mailing DESIGNATION (IF ANY) this card. ADD 1 Votes submitted electronically must be received by ADD 2 11:59 p.m., May 9, 2022, for Registered Shares and by ADD 3 11:59 p.m., May 4, 2022, for PESP Shares and ADD 4 PSPP Shares. ADD 5 ADD 6 Online MMMMMMMMM Go to www.investorvote.com/prudential — login details are located in the shaded bar below. Vote by telephone ● Call toll-free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE for the call. ● Follow the instructions provided by the recorded message. Save paper, time and money! Registered shareholders Using a black ink pen, mark your votes with an X as shown in this example. (Holders of Record) can sign up for electronic Please do not write outside the designated areas. X delivery of future proxy materials at www.investorvote.com/prudential Proxy/Voting Instruction Form 1234 5678 9012 345 q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals – The Board of Directors recommends a vote FOR the election of each director nominee listed in Proposal 1. 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain + 01—Thomas J. Baltimore, Jr. 05—Wendy Jones 09—George Paz 02—Gilbert F. Casellas 06—Karl J. Krapek 10—Sandra Pianalto 03—Robert M. Falzon 07—Peter R. Lighte 11—Christine A. Poon 04—Martina Hund-Mejean 08—Charles F. Lowrey 12—Douglas A. Scovanner The Board of Directors recommends a vote FOR Proposals 2 – 3. 13—Michael A. Todman For Against Abstain The Board of Directors recommends a vote AGAINST Proposal 4. 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022. For Against Abstain 4. Shareholder proposal to adopt the right to act by 3. Advisory vote to approve named executive officer compensation. written consent. B Non-Voting Proposal – Please select one option or leave blank if you do not want to participate. I would like a free tote bag from Prudential. I prefer Prudential contribute to a tree planting campaign. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears herein. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMMM1 UPX 533507 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE +
ANNUAL MEETING OF SHAREHOLDERS May 10, 2022, 2:00 p.m. 751 Broad Street, Newark, New Jersey 07102 If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification, such as a driver’s license, and comply with the special precautions we are taking due to the impact of COVID-19. These include limiting the Annual Meeting to the items of business on the Notice of Annual Meeting of Shareholders of Prudential Financial, Inc., maintaining appropriate social distance of six feet apart, and requiring masks that fully cover mouths and noses to be worn at all times, and providing proof of vaccination. We also encourage shareholders who intend to attend the Annual Meeting to review the relevant guidance from public health authorities. For your safety, all personal belonging or effects including purses are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. This card covers the total number of shares of Prudential Financial, Inc. Common Stock (“Common Stock”) registered in your name (“Registered Shares”) at Prudential’s transfer agent, Computershare, as of March 11, 2022, and may also cover the total number of shares of Prudential Financial, Inc. Common Stock held in The Prudential Employee Savings Plan (“PESP”) on March 9, 2022. Or, this card may cover the total number of shares of Prudential Financial, Inc. Common Stock for the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants covering vested shares of Prudential Financial, Inc. Common Stock registered in your name with Computershare as of the close of business on the record date of March 11, 2022. You only need to vote once. This card enables you to submit your vote on your Registered Shares; to provide voting instructions to the PESP Trustee for your PESP shares; or to submit voting instructions for your international portion of the Prudential Stock Purchase Plan shares. Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 10, 2022. The Proxy Statement and Annual Report to Shareholders are available at www.investorvote.com/prudential. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy/Voting Instruction Form Prudential Financial, Inc. + This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. on May 10, 2022. The undersigned, having received the Notice of Meeting and Proxy Statement dated March 24, 2022, appoints Margaret M. Foran, Ann Kappler and Charles F. Lowrey, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc., at the Annual Meeting of Shareholders to be held at 2:00 p.m., May 10, 2022, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card. If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting. Special Voting Instructions for Plan Shares: If you are a participant in The Prudential Employee Savings Plan (“PESP”), or the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants covering vested shares of Prudential Financial, Inc. Common Stock under the Prudential Financial, Inc. Omnibus Incentive Plan, your shares will be voted by the applicable trustee or administrator in accordance with the instructions indicated on the reverse side or received by internet or telephone. If no instructions are specified, your PESP shares will be voted in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions, and all other shares will be voted by the plan administrator in accordance with the Board of Directors’ recommendations, in each case, subject to the terms of the applicable plan documents and applicable law. Comments — We value your feedback. Please provide any comments you have in the space below. +
MMMMMMMMMMMM MMMMMMMMM Using a black ink pen, mark your votes with an X as shown in this example. X Please do not write outside the designated areas. Proxy/Voting Instruction Form q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals – The Board of Directors recommends a vote FOR the election of each director nominee listed in Proposal 1. 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain + 01—Thomas J. Baltimore, Jr. 05—Wendy Jones 09—George Paz 02—Gilbert F. Casellas 06—Karl J. Krapek 10—Sandra Pianalto 03—Robert M. Falzon 07—Peter R. Lighte 11—Christine A. Poon 04—Martina Hund-Mejean 08—Charles F. Lowrey 12—Douglas A. Scovanner The Board of Directors recommends a vote FOR Proposals 2 – 3. 13—Michael A. Todman For Against Abstain The Board of Directors recommends a vote AGAINST Proposal 4. 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022. For Against Abstain 4. Shareholder proposal to adopt the right to act by 3. Advisory vote to approve named executive officer compensation. written consent. B Non-Voting Proposal – Please select one option or leave blank if you do not want to participate. I would like a free tote bag from Prudential. I prefer Prudential contribute to a tree planting campaign. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears herein. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMMM1 UPX 533507 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE + 03KAED
ANNUAL MEETING OF SHAREHOLDERS May 10, 2022, 2:00 p.m. 751 Broad Street, Newark, New Jersey 07102 If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification, such as a driver’s license, and comply with the special precautions we are taking due to the impact of COVID-19. These include limiting the Annual Meeting to the items of business on the Notice of Annual Meeting of Shareholders of Prudential Financial, Inc., maintaining appropriate social distance of six feet apart, and requiring masks that fully cover mouths and noses to be worn at all times, and providing proof of vaccination. We also encourage shareholders who intend to attend the Annual Meeting to review the relevant guidance from public health authorities. For your safety, all personal belonging or effects including purses are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy/Voting Instruction Form Prudential Financial, Inc. This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. on May 10, 2022. The undersigned, having received the Notice of Meeting and Proxy Statement dated March 24, 2022, appoints Margaret M. Foran, Ann Kappler and Charles F. Lowrey, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc., at the Annual Meeting of Shareholders to be held at 2:00 p.m., May 10, 2022, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card. If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting. Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 10, 2022. The Proxy Statement and Annual Report to Shareholders are available at www.prudential.com/governance.
Important Notice Regarding the Availability of Proxy Materials for the Prudential Financial, Inc. Shareholder Meeting to be Held on May 10, 2022 Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual shareholders’ meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important! This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting. The proxy statement and annual report to shareholders are available at: www.investorvote.com/prudential Easy Online Access — View your proxy materials and vote. Step 1: Go to www.investorvote.com/prudential. Step 2: Click on the icon on the right to view meeting materials. Step 3: Return to the investorvote.com window and follow the instructions on the screen to log in. Step 4: Make your selections as instructed on each screen for your delivery preferences. Step 5: Vote your shares. When you go online, you can also help the environment by consenting to receive electronic delivery of future materials. 2 NOTCOY+03KAFD
Shareholder Meeting Notice & Admission Ticket Prudential Financial, Inc.’s Annual Meeting of Shareholders will be held on May 10, 2022, at 751 Broad Street, Newark, New Jersey 07102, at 2:00 p.m. Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations. The Board of Directors recommends that you vote FOR Proposals 1 – 3: 1. Election of Directors: Thomas J. Baltimore, Jr., Gilbert F. Casellas, Robert M. Falzon, Martina Hund-Mejean, Wendy Jones, Karl J. Krapek, Peter R. Lighte, Charles F. Lowrey, George Paz, Sandra Pianalto, Christine A. Poon, Douglas A. Scovanner and Michael A. Todman. 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022. 3. Advisory vote to approve named executive officer compensation. The Board of Directors recommends that you vote AGAINST Proposal 4: 4. Shareholder proposal to adopt the right to act by written consent. PLEASE NOTE – YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must go online or request a paper copy of the proxy materials to receive a proxy card. We encourage you to vote your shares before the Annual Meeting. If you are attending the meeting, you will be asked to present your admission ticket and valid government-issued photo identification, such as a driver’s license, and comply with the special precautions we are taking due to the impact of COVID-19. These include limiting the Annual Meeting to the items of business on the Notice of Annual Meeting of Shareholders of Prudential Financial, Inc., maintaining appropriate social distance of six feet apart, and requiring masks that fully cover mouths and noses to be worn at all times, and providing proof of vaccination. We also encourage shareholders who intend to attend the Annual Meeting to review the relevant guidance from public health authorities. For your safety, all personal belonging or effects including purses are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. Obtaining a Copy of the Proxy Materials – If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed below on or before April 29, 2022, to facilitate timely delivery. Here’s how to order a copy of the proxy materials and select future delivery preference: Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or e-mail options below. E-mail copies: Current and future e-mail delivery requests must be submitted via the Internet or e-mail following the instructions below. If you request an e-mail copy of the materials, you will receive an e-mail with a link to view the materials on the Internet. PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials. g Internet – Go to www.investorvote.com/prudential and follow the instructions to log in and order a paper or e-mail copy of the current meeting materials and submit your preference for e-mail or paper delivery of future meeting materials. g Telephone – Call us free of charge at 1-866-641-4276 using a touch-tone phone and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings. g E mail – Send an e-mail to investorvote@computershare.com with “Proxy Materials Prudential” in the subject line. In the e-mail, include your full name and address, plus the number located in the shaded bar on the reverse side of this document. State in the e-mail whether you want a paper or e-mail copy of the current meeting materials. You can also state your preference for an e-mail or paper copy for future meetings.
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Dear Shareholder: This package includes your proxy and voting materials. We care about what you think and voting is an important way for you to let us know how we’re doing. | | | | | | To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or contributing to a tree-planting campaign. Since its inception, we have provided nearly 570,000770,000 tote bags to our shareholders. Because of your active participation, we continue to support the work of American Forests to protect and restore America’s forest ecosystems. This year’s tree-planting initiative will continue our work with American Forests. | | | | | | Whether you vote via the internet, phone, or mail, you can indicate your choice of either the bag or a tree-planting contribution. If you elect to receive a bag, you can expect to receive your free gift aroundby the end of June.the summer. | | | | | | Thank you, | | | | | |  
| | | | | | Margaret M. Foran Chief Governance Officer, Senior Vice President and Corporate Secretary Prudential Financial, Inc. |
| | | | |  | | | | Margaret M. Foran | | | | | Chief Governance Officer | | | | | | | Senior Vice President and Corporate Secretary | | | | | | Prudential Financial, Inc. |
002CSN8CDA
| | |  | | Margaret M. Foran | | | Chief Governance Officer | | Senior Vice President and Corporate Secretary | | Prudential Financial, Inc.
| | | 751 Broad Street, Newark NJ 07102-3777 | | | | | | | | March 22, 201824, 2022 |
Dear Shareholder: As a shareholder, you have the right to vote on important matters that affect Prudential Financial. We take the opinions of Prudential’s shareholders very seriously and we hope you will provide your input by casting your vote on the items in the 20182022 Proxy Statement. Enclosed you will find a Notice of Internet Availability (Notice), which provides information on how to view the materials and cast your vote online. If you would prefer to vote by mail, you may request a paper copy of the proxy materials by visiting www.investorvote.com/prudential, calling1-866-641-4276, or by sending an email to investorvote@computershare.com. Additional information regarding the Notice is located on the reverse side of this letter. The SEC has also created an educational website where you can learn more about proxy voting —voting—www.sec.gov/spotlight/proxymatters.shtml.proxymatters.shtml. To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or contributing to a tree-planting initiative. Since its inception, we have provided nearly 570,000770,000 tote bags to our shareholders. Because of your active participation, we continue to support the work of American Forests to protect and restore America’s forest ecosystems. This year’s tree-planting initiative will continue our work with American Forests. As always, we thank you for your investment in Prudential. Sincerely, |  | Margaret M. Foran | Chief Governance Officer, | Senior Vice President and Corporate Secretary | Prudential Financial, Inc. |
Margaret M. Foran Chief Governance Officer, Senior Vice President and Corporate Secretary Prudential Financial, Inc. © 2018 2022 Prudential Financial, Inc., and its related entities. All rights reserved.
FAQ —– Internet Availability of Proxy Materials The Securities and Exchange Commission (SEC) has issued rules requiring public companies to: Make proxy materials (such as the Annual Report and Proxy Statement) available on the internet Notify shareholders how and where to access those materials online These rules allow companies to give shareholders more options for reviewing important proxy materials. Information can be made available to shareholders more quickly and conveniently—online documents are easily searchable, enabling shareholders to quickly find the information they need to make informed voting decisions. The SEC also allows companies to send aone-page Notice to holders with instructions on how to access the materials online, rather than sending a full set of materials. Our reasons for choosing the notice-only option are to: Adopt more sustainable practices and be more environmentally responsible—by shrinking our carbon footprint through reductions in ink and paper used in printing and fuel used in shipping Increase shareholder value—by reducing print and mail costs Please refer to the information below to learn more and to find out what your options are as a shareholder to view materials and vote. What is on the one-page Notice? The Notice contains simple instructions on how to: Access and view the proxy materials online Request a free set of printed materials Change delivery preferences for future proxy mailings DO retain the Notice for future reference DO NOT mark your vote on the Notice and return it; the Notice is not a proxy card or ballot If I received only a one-page Notice, how do I vote my shares? To vote your shares, follow the instructions on the Notice to vote online. If you request a paper copy of the proxy materials, you’ll receive a proxy card with voting instructions. You may also vote your shares in person by bringing the Notice with you and attending the meeting. If I received only a one-page Notice, how do I request a full set of printed materials for this meeting or future proxy mailings? To request a free set of printed materials for this meeting or for future mailings, refer to the Notice for detailed instructions on how to request a copy via Internet,internet, telephone or email. If I received a full set of materials, may I request only a one-page Notice for future proxy mailings? Our company will make a decision for each meeting whether or not to use the notice-only option, and send notice-only mailings at our discretion. Can I elect to receive my proxy materials electronically? You may elect to receive materials via email for future mailings. You will receive the materials electronically if our company chooses to offer email delivery in the future. To change your delivery preferences, follow the instructions on the Notice. | One of your key privileges as an investor is the right to vote on important matters that affect the company you own shares in.
Please vote. Your vote is important to us and our business.
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| | | 002CSN8CDB | | © Copyright 2017 Computershare Limited. All rights reserved. |
| | | IMPORTANT ANNUAL MEETING INFORMATION | | |
| | | Admission Ticket | | | | | | | | | | | | | | | | Electronic Voting Instructions | | You can vote by Internet or telephone | | Instead of mailing your proxy, you may choose to vote online or by
telephone.
| | Proxies submitted by the Internet or telephone must be received by
11:59 p.m., May 7, 2018, for Registered Shares and by 11:59 p.m.,
May 2, 2018, for PESP Shares and PSPP Shares.
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| | Vote by Internet
| | • Go towww.investorvote.com/prudential
| | • Follow the steps outlined on the secured website.
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| | Vote by telephone
| | • Call toll free1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There isNO CHARGEto you for the call.
| | • Follow the instructions provided by the recorded message.
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| | | Proxy/Voting Instruction Form | | 
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q IF YOU HAVE NOT VOTED VIA THE INTERNETORTELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
| | | | | A | | Proposals — The Board of Directors recommends a voteFOR the election of each director nominee listed in Proposal 1. | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 1. Election of Directors:
| | For | | Against | | Abstain | | | | For | | Against | | Abstain | | | | For | | Against | | Abstain | | + | | | 01 - Thomas J. Baltimore, Jr. | | ☐ | | ☐ | | ☐ | | 05 - Karl J. Krapek | | ☐ | | ☐ | | ☐ | | 09 - Christine A. Poon | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | 02 - Gilbert F. Casellas | | ☐ | | ☐ | | ☐ | | 06 - Peter R. Lighte | | ☐ | | ☐ | | ☐ | | 10 - Douglas A. Scovanner | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | 03 - Mark B. Grier | | ☐ | | ☐ | | ☐ | | 07 - George Paz | | ☐ | | ☐ | | ☐ | | 11 - John R. Strangfeld | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | 04 - Martina Hund-Mejean | | ☐ | | ☐ | | ☐ | | 08 - Sandra Pianalto | | ☐ | | ☐ | | ☐ | | 12 - Michael A. Todman | | ☐ | | ☐ | | ☐ | | | | |
| | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends a voteFOR Proposals 2 and 3. | | The Board of Directors recommends a voteAGAINST Proposal 4. | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | For | | Against | | Abstain | | | 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018.
| | | | ☐ | | ☐ | | ☐ | | | | 4. Shareholder proposal regarding an independent Board Chairman.
| | ☐ | | ☐ | | ☐ | | | 3. Advisory vote to approve named executive officer compensation.
| | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | |
| | | | | B | | Non-Voting Proposal — Please select one option or leave blank if you do not want to participate. | | |
| | I would like a free tote bag from Prudential. ☐ I prefer Prudential contribute to a tree planting campaign. ☐ |
| | | | | C | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | | |
| | | | | | | | | | | | | | | | | | | Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | | |
| | | | | | | Date (mm/dd/yyyy) — Please print date below.
| | Signature 1 — Please keep signature within the box.
| | Signature 2 — Please keep signature within the box.
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| | ANNUAL MEETING OF SHAREHOLDERS | |  | | May 8, 2018, 2:00 p.m. | | | 751 Broad Street, Newark, New Jersey 07102 | | | | | | | | | |
If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification. For your safety, all personal belongings or effects including purses are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification.
This card covers the total number of shares of Prudential Financial, Inc. Common Stock (“Common Stock”) registered in your name (“Registered Shares”) at Prudential’s transfer agent, Computershare, as of March 9, 2018, and may also cover the total number of shares of Prudential Financial, Inc. Common Stock held in The Prudential Employee Savings Plan (“PESP”) on March 7, 2018. Or, this card may cover the total number of shares of Prudential Financial, Inc. Common Stock for the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants covering vested shares of Prudential Financial, Inc. Common Stock registered in your name with Computershare as of the close of business on the record date of March 9, 2018.
You only need to vote once. This card enableson
important matters that affect the company you own shares in. Please vote. Your vote is important to submit your vote on your Registered Shares; to provide voting instructions to the PESP Trustee for your PESP shares; or to submit voting instructions for your international portion of the Prudential Stock Purchase Plan shares.us and our business. Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 8, 2018. The Proxy Statement and Annual Report to Shareholders are available atwww.investorvote.com/prudential.© Copyright 2017 Computershare Limited. All rights reserved.
qIF YOU HAVE NOT VOTED VIA THE INTERNETORTELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
| | | | | Proxy/Voting Instruction Form
| | Prudential Financial, Inc. | | +
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This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. on May 8, 2018.
The undersigned, having received the Notice of Meeting and Proxy Statement dated March 22, 2018, appoints Margaret M. Foran, Timothy P. Harris and John R. Strangfeld, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc., at the Annual Meeting of Shareholders to be held at 2:00 p.m., May 8, 2018, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.
If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.
Special Voting Instructions for Plan Shares:If you are a participant in The Prudential Employee Savings Plan (“PESP”), or the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants covering vested shares of Prudential Financial, Inc. Common Stock under the Prudential Financial, Inc. Omnibus Incentive Plan, your shares will be voted by the applicable trustee or administrator in accordance with the instructions indicated on the reverse side or received by internet or telephone. If no instructions are specified, your PESP shares will be voted in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions, and all other shares will be voted by the plan administrator in accordance with the Board of Directors’ recommendations, in each case, subject to the terms of the applicable plan documents and applicable law.
Comments — We value your feedback. Please provide any comments you have in the space below.
| | | IMPORTANT ANNUAL MEETING INFORMATION | | |
| | | | | Proxy/Voting Instruction Form
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q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
| | | | | A | | Proposals — The Board of Directors recommends a voteFOR the election of each director nominee listed in Proposal 1. | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 1. Election of Directors:
| | For | | Against | | Abstain | | | | For | | Against | | Abstain | | | | For | | Against | | Abstain | | + | | | 01 - Thomas J. Baltimore, Jr. | | ☐ | | ☐ | | ☐ | | 05 - Karl J. Krapek | | ☐ | | ☐ | | ☐ | | 09 - Christine A. Poon | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | 02 - Gilbert F. Casellas | | ☐ | | ☐ | | ☐ | | 06 - Peter R. Lighte | | ☐ | | ☐ | | ☐ | | 10 - Douglas A. Scovanner | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | 03 - Mark B. Grier | | ☐ | | ☐ | | ☐ | | 07 - George Paz | | ☐ | | ☐ | | ☐ | | 11 - John R. Strangfeld | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | 04 - Martina Hund-Mejean | | ☐ | | ☐ | | ☐ | | 08 - Sandra Pianalto | | �� | | ☐ | | ☐ | | 12 - Michael A. Todman | | ☐ | | ☐ | | ☐ | | | | |
| | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends a voteFOR Proposals 2 and 3. | | The Board of Directors recommends a voteAGAINST Proposal 4. | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | For | | Against | | Abstain | | | 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018.
| | | | ☐ | | ☐ | | ☐ | | | | 4. Shareholder proposal regarding an independent Board Chairman.
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | 3. Advisory vote to approve named executive officer compensation.
| | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | |
| | | | | B | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | | |
| | | | | | | | | | | | | | | | | | | Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | | |
| | | | | | | Date (mm/dd/yyyy) — Please print date below.
| | Signature 1 — Please keep signature within the box.
| | Signature 2 — Please keep signature within the box.
| | |
| | | | | | | | | | | | ANNUAL MEETING OF SHAREHOLDERS | | | | May 8, 2018, 2:00 p.m. | | | 751 Broad Street, Newark, New Jersey 07102 | | | | | | | | | |
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If you plan to attend the annual meeting, please bring proof of ownership with you.Your proof of ownership, such as a recent brokerage statement or letter from your bank or broker, admits the shareholder. All meeting attendees must present valid government-issued photo identification. If you want to vote your shares held in street name in person, you must get a legal proxy in your name from the broker, bank or other nominee that holds your shares. For your safety, all personal belongings or effects including purses are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification.
q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
| | | | | Proxy – Prudential Financial, Inc.
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This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. on May 8, 2018.
The undersigned, having received the Notice of Meeting and Proxy Statement dated March 22, 2018, appoints Margaret M. Foran, Timothy P. Harris and John R. Strangfeld, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc., held of record on March 9, 2018 at the Annual Meeting of Shareholders to be held at 2:00 p.m., May 8, 2018, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.
If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 8, 2018.
The Proxy Statement and Annual Report to Shareholders are available atwww.prudential.com/governance.
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IMPORTANT SHAREHOLDER INFORMATION
YOUR VOTE COUNTS!
| | | | | | | | | ANNUAL MEETING OF SHAREHOLDERS
| | | | | | | | May 8, 2018, 2:00 p.m. | | | | | 751 Broad Street, Newark, New Jersey 07102 | | | | | | | | You can vote and obtain proxy materials online. | | | | | | | | VOTING INSTRUCTIONS ARE LOCATED BELOW
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| | | | | Shareholder Meeting Notice & Admission Ticket | | | |  |
Important Notice Regarding the Availability of Proxy Materials for theVideo Transcript Delivered For:
Prudential Financial, Inc. Shareholder Meeting2022 Proxy Statement Robert Falzon, Prudential Financial, Inc. Vice Chair A Message from Prudential’s Board of Directors Prudential’s Transformation Prudential knows what it means to be Helda “rock” in people’s lives…and our Board believes that at Prudential, our rock is our talent. The quality and the speed at which we progressed our Transformation would not have been possible without our incredible talent. Yet, we are not immune to the talent disruptions occurring across economies, and we will need to continually focus on May 8, 2018talent and culture in order to differentiate Prudential as a destination for top talent. We are committed to providing employees with opportunities to learn and grow through re-skilling, up-skilling and talent mobility; to delivering flexible work arrangements that take the best of what we did in 2019 with the best of what we learned from the pandemic - the new ways of working, learning and living that can’t, and shouldn’t, be undone; and to continuing work to drive progress on our aspiration of being a diverse and fully inclusive company. The proxy materialsentire Prudential community, including our Board, have a role in helping to achieve that outcome by embracing our differences and recognizing the strength that comes from our company’s diversity. This important work will continue this year and beyond, as we strive for lasting change at work, at home, and in our communities. Measuring Progress in our Transformation In 2021, we made significant progress with our transformation. We consistently delivered solid earnings. We’ve made customer interactions more holistic and customer transactions faster and easier, while also becoming more efficient by reengineering processes and investing in new technology. We exceeded our run-rate savings target for 2021 and are well on track to achieve our targeted $750 million of total cost savings that are part of our transformation efforts. We took significant steps to adjust our business mix to be higher growth and less market sensitive. Through our recent dispositions of our businesses in Korea and Taiwan, and the announced dispositions of our Full Service Retirement and a significant block of our legacy variable annuities, we have over $6 billion of proceeds to thoughtfully redeploy, including to higher growth opportunities. While challenges remain, we headed into 2022 with strong momentum and excitement for the annual meetingopportunities ahead, and are available online. The itemswell positioned to deliver differentiated outcomes for all our stakeholders.
Prudential’s Vision and Strategic Priorities Our vision for Prudential is to be voteda global leader in expanding access to investing, insurance, and retirement security. We are investing in growth businesses and markets around the world by redeploying our critical resources—talent, technology, capital and operating expenses—to focus on higher growth and less market sensitive businesses, such as investment management and emerging markets. We are listed below. Followcommitted to finding ways to reach and serve more people and deliver industry-leading customer and client experiences that blend human touch with advanced technology. This is especially important in the instructionsmoment we’re living in, as societies around the world grapple with financial insecurity, changing demographics and aging populations. We will leverage our strengths and expertise in investing, insurance and retirement to viewcreate the materialsnext generation of financial solutions that serve the diverse needs of a broader range of customers and vote online.Your vote is important.To obtain a paper ore-mail copyclients. Our unique combination of the proxy materials follow the instructions on the reverse side. Proposalsscale and expertise positions us well to be voted on at the meeting are listed below along with the Board of Directors’ recommendations.
The Board of Directors recommends that you voteFORProposals 1 – 3.
| 1. | Election of Directors: Thomas J. Baltimore, Jr., Gilbert F. Casellas, Mark B. Grier, Martina Hund-Mejean, Karl J. Krapek, Peter R. Lighte, George Paz, Sandra Pianalto, Christine A. Poon, Douglas A. Scovanner, John R. Strangfeld and Michael A. Todman. |
| 2. | Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018. |
| 3. | Advisory vote to approve named executive officer compensation. |
The Board of Directors recommends that you voteAGAINSTProposal 4:
| 4. | Shareholder proposal regarding an independent Board Chairman. |
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet.
We encourage you to access and review all of the important information containeda leader in the proxy materials before voting.
The proxy statementconvergence between asset management and annual report to shareholdersinsurance. At the same time, we are available atwww.investorvote.com/prudential.
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| | Easy Online Access — A Convenient Way to Vote! | | If you have access to the Internet, you can complete the process in a few easy steps:
| | Step 1: Go towww.investorvote.com/prudential
| | Step 2: Click theView buttons to see the proxy statement, which contains details of the proposals to be voted on, and the annual report.
| | Step 3: Follow the instructions on the screen to log in.
| | Step 4: Make your selection as instructed on each screen to select delivery preferences.
| | Step 5: Make your voting selections as instructed on the screen and click the vote button to submit your vote. |
PLEASE NOTE — YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares, you must vote online or request a paper copy of the proxy materials to receive a proxy card.
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Shareholder Meeting Notice & Admission Ticket
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| | Obtaining a Copy of the Proxy Materials — If you want to receive a paper ore-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed below on or before April 27, 2018, to facilitate timely delivery. | | You may still request paper copies of the materials after this date; however, your vote will not count if received after 11:59 p.m. on May 7, 2018, via the Internet or telephone or after 10:00 a.m. on May 8, 2018, via a proxy card.
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Here’s how to order a copy of the proxy materials and select future delivery preference:
Paper copies:Current and future paper delivery requests can be submitted via the telephone, Internet ore-mail options below.
E-mail copies:Current and futuree-mail delivery requests must be submitted via the Internet ore-mail following the instructions below. If you request ane-mail copy of the materials, you will receive ane-mail with a link to view the materials on the Internet.
PLEASE NOTE:You must use the numberinvesting in the shaded bar onfuture through acquisitions, and investments in technology innovation and transformational start-ups. And, we will continue investing in our talent, because it is Prudential’s people that will ultimately fuel the reverse side when requesting a setsuccess of proxy materials.our growth strategy and enable us to achieve our Vision.
| g | Internet– Go towww.investorvote.com/prudential and follow the instructions to log in and order a paper or e-mail copy of the current meeting materials and submit your preference for e-mail or paper delivery of future meeting materials. |
| g | Telephone– Call us free of charge at 1-866-641-4276 using a touch-tone phone and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings. |
| g | E-mail– Send an e-mail to investorvote@computershare.com with “Proxy Materials Prudential” in the subject line. In the e-mail, include your full name and address, plus the number located in the shaded bar on the reverse side of this document. State in the e-mail whether you want a paper or e-mail copy of the current meeting materials. You can also state your preference for an e-mail or paper copy for future meetings. |
If you wish to attend and vote at the meeting, please bring this notice and identification with you.
Video Transcript Delivered For: Prudential Financial, Inc.’s Annual Meeting of Shareholders will be held on May 8, 2018, at 751 Broad Street, Newark, New Jersey 07102, at 2:00 p.m. 2022 Proxy Statement If you plan to attend the annual meeting, please bring this admission ticket with you.This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification. For your safety, all personal belongings or effects including purses are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification.
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Gilbert Casellas, Prudential Financial, Inc. Director Video ScriptCorporate Governance and Business Ethics Committee Chairman
Interview: Christine A. Poon by Lata Reddy
Introduction Lata ReddyGilbert Casellas
Hello. My name is Lata Reddy, senior vice president of Diversity, Inclusion & Impact at Prudential. Today, I will be talking to Christine Poon, aI’m Gilbert Casellas, Prudential directorboard member and chair of the Board’s Finance Committee. Question 1
Lata Reddy
Hello Chris. Tell me about yourself.
Chris Poon
Well, my parents immigrated to the U.S. and eventually settled in Ohio where I was raised with my six brothers and sisters.
I always had an interest in both sciencecorporate governance and business so after graduate school it was naturalethics committee. Thank you for metuning in to seek a job in the life sciences. One of my first jobs was at Bristol-Myers Squibb, where I stayed for 15 years. From there, I joined Johnson & Johnson, where I served as the Worldwide Chairman of the company’s Pharmaceuticals Group. In 2009, I returned to my home state of Ohio where I served as the Dean of the Max M. Fisher College of Business at The Ohio State University. Today, I am “executive in residence” at the University, which gives me the opportunity to stay connected to learning from my peers and students.
I have been on the Prudential Board since 2006 and serve on a number of our committees. Currently, I chair the Finance Committee.
Question 2
Lata Reddy
What is the role of the Finance Committee?
Chris Poonwatch this short video.
The primary purpose of the Finance CommitteePrudential’s corporate governance and business ethics committee is to oversee the Company’s capitalcompany’s corporate governance practices, to recommend individuals for election to the board of directors, to oversee the ethics and liquidity management, the incurrence and repaymentconflict of borrowings, the capital structure, and the funding of benefit plans of Prudential and its subsidiaries. Our oversightinterest policies of the Company’s capital structure starts with a detailed Capital Policy. The Policy contains core principles for capital managementcompany, and provides a framework for making capital allocation decisions. Those decisions are then grounded in a multi-year capital plan, which we use to track the company’s progress in executing its strategy.
Question 3
Lata Reddy
Can you describe how the Finance Committee oversees Prudential’s capital structure and the risk protections in place.
Chris Poon
The oversight of liquidity risk is key to our work. As an example, we have engaged with management recently on a liquidity stress testing program. Stress testing gives us another tool to better understand and monitor the company’s financial resources under a variety of scenarios.
Question 4
Lata Reddy
How would you describe Prudential’s Board?
Chris Poon
We are collaborative and yet direct with each other. We work along with our senior management team to define Prudential’s mission and actively oversee Prudential’s long-term strategy.
If you look at our directors’ profiles, you will see that our skills and experiences are extremely diverse. This is a result of a deliberate strategy and our belief that incorporating diverse views equips the Board to better factor in various risks, consequences,reputation regarding environmental stewardship, sustainability, and implications of our actions.
Question 5
Lata Reddy
How has this Board evolved and changed during your tenure?
Chris Poon
Due to our commitment to succession planning and board refreshment, our average director tenure is about seven years. Over the last five years, we have added directors with finance and capital allocation expertise, Asian market experience, and individuals with broad and deep histories overseeing global corporate operations.
Appreciating the value of risk oversight, we created a separate Risk Committee in 2016, of which I am a member, where we oversee the governance of risk throughout the enterprise.
I am very proud of my participation on the Board’s Corporate Social Responsibility Oversight Committee, which oversees all of Prudential’s corporate social responsibility effortsthroughout our global businesses.
In this video, I am going to talk about Prudential’s environmental sustainability initiatives. The Corporate Governance and TheBusiness Ethics Committee oversees the Company’s environmental sustainability initiatives in various ways: Prudential’s Chief Governance Officer and director of Environment and Sustainability meet with the Corporate Governance Committee quarterly to discuss the Company’s sustainability objectives, including climate change. This regular engagement gives the Board insight into the Company’s climate change strategy and environmental stewardship initiatives. I also engage directly with our investors. Hearing their feedback about how Prudential Foundation whose mission is tackling business risks and opportunities addressing environmental issues is important to build prosperity for underserved populations by eliminating barriersme and my fellow directors. I share our investors’ feedback with the Board. Many of these views are ultimately reflected in our environmental sustainability practices. To stay informed of industry trends, all directors receive training addressing climate science, climate change policy, reporting frameworks including the Task Force on Climate-related Financial Disclosures, and Prudential’s General Account’s ESG framework. Our Global Environmental Commitments In November 2021, Prudential announced updates to financialits Global Environmental Commitment’s operational and social mobility. Oneinvestment goals, which we initially disclosed in 2019. My fellow Board member and Prudential’s Vice Chairman, Rob Falzon, created a senior-level Climate Change Steering Council and supporting Task Force to evaluate our climate change strategy and oversee the development of the initiatives that I find most exciting is our impact investing program. Since its launch in 1976, we have invested over $2 billion in organizations that advance our mission. We now hold more than $500 million in active investments, with anew goals. The policy recommendations from these internal groups are reviewed by the Corporate Governance and Business Ethics Committee.
To accelerate the company’s longstanding commitment to build a $1 billion impactmitigate the impacts of climate change, in November 2021, the Task Force announced three significant initiatives: we committed to reach net zero carbon emissions by 2050; We also set an interim goal to become carbon neutral by 2040. From the investment portfolio by 2020.side, we enhanced our Responsible Investing Policy, which now includes the restriction of new direct investments in companies that derive 25% or more of their revenues from thermal coal. Prudential’s climate initiatives in 2022 As an example, locally, we have investedIn 2022, Prudential will assess its Scope 3 emissions, including those related to the company’s owned assets within its General Account portfolio.
To follow our progress on our GHG reduction goals, look for the release of our ESG Report in June 2022. These carbon reduction targets reflect our longstanding commitment to provide transparency on our environmental actions. We pride ourselves in our sustainability leadership and will continue to enhance our polices to meet the recapitalizationadvances of Newark-based City National Bank of New Jersey, one of the ten largest African-American led banks in the country, because we believe that banks with roots in local communities are a critical part of the necessary financial services landscape.climate science. Closing Chris Poon
Lata, I hope this gives our investors some insights aboutmore insight into Prudential’s strategy and reputation regarding environmental stewardship and sustainability throughout our Board.global businesses. I know I speak for the entire Boardboard when I say that we arewe’re committed to working on behalf of our shareholders to achieve long-termlong term performance and value for our company.company
Lata ReddyVideo Transcript Delivered For:
Prudential Financial, Inc. 2022 Proxy Statement Wendy E. Jones, Prudential Financial, Inc. Board Member Wendy E. Jones, Prudential Board Member and Audit Committee Member Hello. I’m Wendy Jones, Prudential’s newest board member. Thank you again for yourtuning in to watch this short video. After retiring from eBay Inc. in 2020, I joined the Prudential Board of Directors in January 2021 and I currently sit on the Board’s Audit Committee. At eBay, I was the Senior Vice President of Global Operations. I was responsible for the company’s customer service, risk, trust and payment operations and the workforce resources function worldwide. It has been a very important time Chris.to join the Board, particularly during a pandemic and at a time of transformation. Although the Board was unable to hold in person Board meetings, we maintained the rigor of our pre-pandemic schedule by meeting via videoconference. And then, in our first in-person meeting, we dove right into the alignment of our transformation and other strategic priorities as well as risk management. Prudential Financial
Director Video Script
Interview: Thomas J. Baltimore by Peggy Foran
Introduction Peggy Foran
Hello. My name is Peggy Foran, chief governance officer at Prudential. Today, I will be talking to Thomas Baltimore, Prudential’s Lead Independent Director.
Question 1
Peggy Foran
Hello Tom. Tell me about your background.
Tom Baltimore
In the year that I have been a Prudential Board member since 2008. I was raised in Silver Spring, Maryland and am the oldest of five children. My late parents were high school sweethearts and attended segregated schools near Warrenton, Virginia. They dreamed of a better life for their children and stressed prayer, preparation, and perseverance. My mother’s greatest joy was seeing all five of her children graduate from college. I had no better mentors than my parents.
I attended the University of Virginia for undergraduate and graduate school.
Professionally,served on Prudential’s board, I have spent nearlyfound my entire career infellow directors are bound by the hospitality industry. Prior to my current role as chairman and CEO of Park Hotels & Resorts, I was president and CEO of RLJ Lodging Trust, which Ico-founded with Robert L. Johnson. Prior to RLJ, I was with Hilton Hotels. I started my hospitality career at Marriott.
Question 2
Peggy Foran
Talk about your role as Lead Independent Director.
Tom Baltimore
I was nominated by my independent peers at last year’s annual meeting. 12 directors sit on Prudential’s Board, of which 10 are independent.
Our Lead Independent Director Charter calls for me to serve for a term of one year and prohibits a director from serving more than three years.
Our Board gave careful thought to structuring the Lead Independent Director role. Important features include:
The Lead Independent Director presides over all executive sessions where the chairman and CEO is not present;
Approval of all Board agendas, meeting schedules, and information sent to the Board; and
Availability to meet with investors.
Question 3
Peggy Foran
What are the qualities that make Prudential’s Board special?
Tom Baltimore
I would describe Prudential’s Board as a combination of three attributes: respect, trust, and collaboration.
Our directors have developed mutual respect due to our common commitment to the companyCompany and its stakeholders. Because we respect each another, we have developed trust.
We all have access to the same information, and we feelAll directors are comfortable exchanging ourtheir candid views, and challenging our Board colleagues and management when necessary.
Our annual Board evaluationPrudential’s Audit Committee
The purpose of the Audit Committee is to provide oversight of the Company’s accounting and financial reporting and disclosure processes, the adequacy of the systems of disclosure and internal control established by management, and the audit of the Company’s financial statements. The Audit Committee also presents an opportunityoversees insurance risk, operational risks, risks related to financial controls, and legal, regulatory and compliance matters, and oversees the overall risk management governance structure and risk management function. I enjoy this Committee very much because so much of my professional experience has prepared me for directorsthe work of this Committee.
Prudential’s Risk Oversight and Function I have been asked how I would describe Prudential’s risk oversight. I think it is a great question, particularly because I sit on the Audit Committee. Managing and monitoring risks are important to share their opinions about the Board’s performance,oversight of Prudential. The Board regularly reviews the Company’s risk profile, including its approach to sustainability, including climate, and areas for improvement. Question 4
Peggy Foran
What ishuman capital management, its operational footprint and investment risk and strategies. The governance structure that we have in place – where the chairs of each Board committee sits on the Board’s view on diversity?Risk Committee – allows the Board to more closely coordinate our overall risk function. This type of good governance can offer a number of important benefits to the organization.
Tom BaltimoreE-Commerce Arena
Prudential’s commitmentMy e-commerce experience has been especially timely due to diversity is evidentthe ongoing pandemic, which requires the Company to adopt digital technologies and transactions to continue our business operations seamlessly. My experience at eBay, has enabled me to guide and inform management and offer my expertise in the Board’s composition. Overtwo-thirdsvarious functions of e-commerce, particularly our Board is diverse. Beyond genderAssurance IQ business which matches buyers with products such as life, health and race, our directors represent a diversity of ideas, backgrounds, skills, and experience.auto insurance, enabling them to make purchases online or through an Agent.
The culture of diversity permeates throughout the organization where 50% of our U.S. employees are women and nearly 30% of our U.S. employees are people of color.
We believe that our Board’s diversity enhances our ability to better understand and address the needs of our customers who are both diverse and global.
Question 5
Peggy Foran
What is the Board’s view on talent management?
Tom Baltimore
Our Board agrees that talent is the driver that distinguishes Prudential from our competitors. For this reason, talent is discussed at every board meeting.
As a business leader and board member, I appreciate that without the right people to execute and deliver a company’s strategy and objectives atall levels, we are at risk to reach our full potential. Another aspect of why I believe Prudential’s Board is unique is that talent development is an essential part of this company’s culture.
Closing Tom Baltimore
Peggy, I hope this video gives our investors perspectivemore insight about our Board. I know I speakme and Prudential’s risk function. Thank you for the entire Board when I say that we are committedopportunity to working on behalf ofshare my background and experience with you. And to all our shareholders, to achieve long-term performance and value for our company.
Peggy Foran
Thankthank you again for your time Tom.investment in Prudential.
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