UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material under Rule14a-12 | |
BRIGHTHOUSE FINANCIAL, INC.
(Name of Registrant as Specified In Its Charter)
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| Brighthouse Financial, Inc. | Notice of Annual Meeting of Stockholders |
Notice of Annual
Meeting of Stockholders
On behalf of the Board of Directors, I am honored to
invite you to attend the 2018
2019 Annual Meeting of
Stockholders (the “Annual Meeting”) of Brighthouse
of Brighthouse Financial, Inc. (“Brighthouse”)
Date and Time
Wednesday, May 23, 2018Thursday, June 13, 2019 at 8:3000 a.m., Eastern Daylight Time
Location
The Ballantyne Hotel, 10000 Ballantyne Hotel Commons Parkway, Charlotte, North Carolina 28277
Agenda
At the meeting,Annual Meeting, stockholders will consider and vote on the following matters:
| 1. | Proposal 1: Election of |
| 2. | Proposal 2: Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year |
| 3. | Proposal 3: Advisory vote to approve the compensation paid to Brighthouse’s Named Executive Officers; and |
| 4. |
Any such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
Our Board of Directors recommends that you vote ““FOR”the election of each of the nominees named in Proposal 1 of this Proxy Statement, ““FOR” Proposal 2 and “each of Proposals 2, 3, 5, 6 and 7, and for a frequency of“ONE YEARFOR”for future advisory votes to approve compensation paid to Brighthouse’s Named Executive Officers in Proposal 4.3. Information about the matters to be acted upon at the Annual Meeting is contained in the accompanying Proxy Statement.
2018 Proxy Statement | i
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Voting Your Shares
Stockholders of record holding shares of Brighthouse common stock, par value $0.01 per share (“Shares”), as of the close of business on March 26, 2018 will beApril 15, 2019 are entitled to vote at the Annual Meeting.
 | Internet | |
| Please log on to www.ProxyVote.com and submit a proxy to vote your Shares by 11:59 p.m., Eastern | ||
  | Telephone | |
Please call1-800-690-6903 until 11:59 p.m., Eastern | ||
 | ||
| If you received printed copies of the proxy materials, please complete, sign, date and return your proxy card by mail so that it is received by Brighthouse, c/o Broadridge Financial Solutions, Inc. | ||
  | In Person | |
You may attend the Annual Meeting in person and cast your vote. | ||
Beneficial owners whose Shares are held at a brokerage firm or by a bank or other nominee should follow the voting instructions that they received from the nominee. Participants in retirement and savings plans should refer to the voting instructions in the Proxy Statement under “Voting by Participants in Retirement Plans.”
2019 Proxy Statement | i
| Notice of Annual Meeting of Stockholders | Brighthouse Financial, Inc. |
This notice is being delivered to the holders of Shares as of the close of business on March 26, 2018,April 15, 2019, the record date fixed by the Board of Directors for the purposes of determining the stockholders of Brighthouse entitled to receive notice of and to vote at the Annual Meeting, and constitutes notice of the Annual Meeting under Delaware law.
By Order of the Board of Directors,
D. Burt Arrington
Corporate Secretary
Charlotte, North Carolina
April 10, 201829, 2019
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 23, 2018June 13, 2019
The accompanying Proxy Statement, our 20172018 Annual Report to Stockholders and directions to the location of the 20182019 Annual Meeting of Stockholders are available at http://investor.brighthousefinancial.com by selecting the appropriate link under “Financial Information.”
ii | 20182019 Proxy Statement
| Brighthouse Financial, Inc. |
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Dear Fellow Stockholders:
We are excited to be writing to you after the completion of Brighthouse Financial’ s first full year as an independent public company. We are proud of the progress Brighthouse has made in the further development and execution of its business strategy, guided by the Company’s mission to help people achieve financial security and its goal of creating long-term value for our stockholders. We would like to take this opportunity to share our priorities and provide an overview of the work we performed on your behalf in 2018.
The Board of Directors (the “Board”). We are a majority independent, highly-qualified and diverse Board dedicated to overseeing Brighthouse. Collectively, we have strong experience in areas relevant to Brighthouse’s business and strategy, including insurance, financial services, investments, governance, operations and cybersecurity. The value we place on diversity is evidenced by the Board’s composition, which includes four women and two individuals of ethnically diverse backgrounds, resulting in a Board that is 56% diverse by gender or race. We regularly review our board refreshment and director succession plans and annually assess our performance, both individually and collectively, to help ensure we are well-positioned to effectively carry out our duties.
Overseeing Strategy and Risk. One of our Board’s most important and vital functions is to provide oversight, guidance and direction regarding Brighthouse’s strategy. The Board is actively engaged in shaping – and challenging, as appropriate – Brighthouse’s short- and long-term strategy to grow the company and create stockholder value. We review and discuss strategy topics in our meetings throughout the year. Annually, we devote an entire Board meeting to strategy, including deep dives into Brighthouse’s product and sales strategy, the competitive landscape, Brighthouse’s operational model and financial and capital plans. As the Board of one of the largest annuities and life insurance companies in the United States, we take seriously our role in risk oversight to ensure an effective enterprise risk management program is in place, including an appropriate enterprise risk management framework and governance structure. Throughout the year, the Board and its committees monitor Brighthouse’s performance and management of key risks, including risks relating to finance, markets, operations, cybersecurity and human capital.
Engagement and Responsiveness. We want to know what Brighthouse’s stockholders think about our company. Soon after Brighthouse’s establishment as an independent company in 2017, we launched a robust engagement program that we have enhanced and expanded in 2018. Our Chairman is available to meet with our stockholders so that we can directly engage in meaningful conversations about our strategy, governance and executive compensation program. We are grateful for our stockholders’ candid feedback and are pleased that they generally support our governance and executive compensation practices. We pledge to continue to build upon our relationships with our stockholders and to be responsive to your feedback. We will continue to assess our governance and executive compensation programs to ensure that they remain appropriate as Brighthouse matures.
Culture and Values. Brighthouse’s corporate culture and values of collaboration, focus and accountability are aligned with its strategy and integral to its success. Brighthouse’s culture is, and will continue to be, a focus of our oversight of management and discussions in the boardroom. We also recognize the benefit of observing and experiencing how Brighthouse operates firsthand and believe that by interacting with Brighthouse’s employees outside of the boardroom we are able to gain meaningful insights into Brighthouse’s culture. We regularly visit Brighthouse’s headquarters and other offices to observe Brighthouse’s operations and interact with associates. During 2018, our Chairman led a Town Hall from Brighthouse’s corporate headquarters that was broadcast to all Brighthouse associates. In celebration of Women’s History Month, in early 2019 our four women directors participated in a panel to share with Brighthouse employees their views on the importance of diversity and creating a culture of inclusion.
2019 Proxy Statement | i
| Letter from the Board of Directors to Our Stockholders | Brighthouse Financial, Inc. |
Talent Management. Brighthouse’s success depends on having a skilled and engaged workforce that believes in Brighthouse’s mission and values. The Board and the Compensation Committee regularly discuss human capital management issues, including succession planning, talent development, employee engagement and diversity and inclusion. We have adopted an executive compensation program that we believe is aligned with Brighthouse’s strategy and stockholder interests and that aims to attract and retain talented associates, and to appropriately reward them for their performance.
Your vote is important. We encourage you to read these proxy materials and to vote your shares “FOR” each proposal.
Thank you for your continuing investment in and support of Brighthouse.
Sincerely,
The Board of Directors
April 29, 2019
ii | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Proxy Statement |
Proxy Statement
The Board of Directors (the “Board” or the “Board of Directors”) of Brighthouse Financial, Inc. (“Brighthouse” or the “Company”) is providing this Proxy Statement in connection with the Annual Meeting of Stockholders to be held on May 23, 2018,June 13, 2019, at 8:3000 a.m., Eastern Daylight Time (the “Annual Meeting”), at The Ballantyne Hotel, 10000 Ballantyne Hotel Commons Parkway, Charlotte, North Carolina 28277, and at any adjournment or postponement thereof. Stockholders holding shares of common stock, par value $0.01 per share, (the “Common Stock”), of the Company (“Shares”) as of the close of business on March 26, 2018April 15, 2019, (the “Record Date”) are entitled to vote at the Annual Meeting. Proxy materials or a Notice of Internet Availability were first made available, sent or given to the Company’s stockholders on or about April 10, 2018.29, 2019.
2018 Proxy Statement | 1
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2019 Proxy Statement | 1
| Contents | Brighthouse Financial, Inc. |
2 | 2018 Proxy Statement
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20182 | 2019 Proxy Statement | 3
| Brighthouse Financial, Inc. | Proxy Summary |
This section summarizes important information contained in this Proxy Statement and in our 20172018 Annual Report to Stockholders (the “Annual Report”), but does not contain all the information that you should consider when casting your vote. Please review the entire Proxy Statement and Annual Report carefully before voting.
Proposals for Your Vote
Proposal
| Board Recommendation | Page(s) | ||||||||
FOR each of the Board’s nominees |
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2019 | FOR | 34 | ||||||||
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3. Advisory vote to approve the compensation paid to Brighthouse’s Named Executive Officers (the “Say-on-Pay” vote) | ||||||||||
FOR | ||||||||||
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4 | 2018 Proxy Statement
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Business and Strategy HighlightsThe Brighthouse Story
Brighthouse became an independent company on August 4, 2017, the effective date of our separation (the “Separation”) from MetLife, Inc. (“MetLife”) through the distribution of approximately 80.8% of MetLife’s interest in Brighthouse to holders of MetLife common stock (the “DistributionSeparation”). We became a publicly-traded company when our Common Stockcommon stock began“regular-way” trading on The Nasdaq Stock Market LLC (“Nasdaq”) on August 7, 2017. In June 2018, MetLife divested all of its remaining Shares.
We are a major provider of annuities and life insurance solutions in the United States. Our mission is to help people achieve financial security. We are one of the largest providers of annuities and life insurance in the United States. We specialize in products that play an essential role in helpingare designed to help people protect what they’vethey have earned and ensure it lasts. Our goal is to build a focused andbest-in-cost culture that creates value for our customers and our stockholders. We believe that our strategy of offering a targeted set of products to serve our customers and distribution partners, each of which is intended to produce positive statutory distributable cash flows on an accelerated basis compared to our legacy products, will enhance our ability to invest in our business and distribute cash to our stockholders over time. We also believe that our product strategy of offering a more tailored set of new products and the outsourcing ofour decision to outsource a significant portion of our client administration and service processes is consistent with our focus on reducing our expense structure over time.
2018 Highlights
During 2018, our first full year as an independent company, we made significant progress toward executing our strategy that we believe will deliver long-term value for our stockholders. Below we describeare some of the key events of 20172018 and highlights of our strategy and recent performance.
Key EventsExecuting Our Strategy
Sales – our 2018 full year annuity sales (approximately $5.9 billion) were up 36% compared to 2017 (approximately $4.3 billion), and our fourth quarter 2018 annuity sales (approximately $1.7 billion) were our highest since becoming an independent company.
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Operational Performance – we exited 66 transition service agreements (“TSAs”) with MetLife in 2018, in line with our target, to position us for further expense reductions and cost control to achieve our previously communicated expense reduction target of $150 million inrun-rate savings byyear-end 2020.
20182019 Proxy Statement | 53
Proxy Summary | Brighthouse Financial, Inc. |
Business Highlights
Executing our strategy has resulted in strong financial performance, including:
Capital Return – we have set at Conditional Tail Expectation 95 (“CTE95,” defined as the amountannounced a $200 million common stock repurchase program in August 2018, two years ahead of assets requiredour original expectation to satisfy contract holder obligations across market environmentsstart returning capital in the average2020, and repurchased $105 million of the worst five percent of 1,000 capital market scenarios over the life of the contracts) (see Fig. 2)
| • | Financial Strength – VA assets remained in excess of CTE98 at December 31, 2018. (“CTE” is a statistical measure that assesses the “worst case” loss by calculating the average amount of total assets required to satisfy obligations over the life of a contract or policy in the worst x% of future market scenarios, represented by CTE(100 less x) (e.g., CTE98 represents the total assets required in the worst two percent of a set of future market scenarios)). |
Board Oversight of Our Strategy
The Board annually reviews Brighthouse’sOne of the Board’s most important duties is to oversee our strategy to help ensure that wegrow the Company and deliver long-term value to our stockholders. Throughout the year, the Board discusses with management and receives updates on key strategy topics. Additionally, the Board devotes one entire meeting each year to a review of the Company’s strategy. In February 2018,January 2019, the Board and senior management including our executive officers, engaged in constructive dialogue and feedback regarding our multi-year strategic and financial plan. The Board also reviewed with management plan, including the following key topics:
the competitive landscape in which we operate;
our product and sales growth strategy and plans;
our business pricing process, including the Company’s pricing program that evaluates the profitability of new business;
our operational model, including our business process outsourcing strategy;
our future state technology platform;
our investment strategy and investment operating model;
our financial and risk profile under various capital market scenarios. The topics discussed covered key aspects of our business, including:scenarios; and
key financial drivers of our financial plan, including capital return and other targets.
Key Elements of Our Strategy
We areremain focused on executing the key elements of our strategy, namely to:
offer a tailored set of annuity and life insurance solutions that are simpler, more transparent and provide value to our advisors and clients, andas well as our stockholders;
sell our products to clients through a broad network of independent distribution partners; and
leverage our strong expense management discipline to become a cost-competitive manufacturer over time.
64 | 20182019 Proxy Statement
| Brighthouse Financial, Inc. | Proxy Summary |
Our Board of Directors: Composition, Qualifications and Diversity
The fundamental duty of our Board is to oversee the Companymanagement of Brighthouse for the benefit of our stockholders. It is essential that the Board be composed of directors (“Directors”) who are qualified to oversee the development and execution by our management of our business strategies.strategy by management. The Board seeks Directors who possess a broad range of skills, expertise and perspectives and who contribute to the ethnic and gender diversity of our Board. The composition of our Board, as reflected in the tables and charts below, demonstrates our commitment to these principles.
Board Composition Summary
Name
| Age
| Principal Professional
| Expiration of Term1
| Independent
| Committee Memberships
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Irene Chang Britt | 55 | Senior Vice President, Campbell Soup Company (Retired) | 2019 | Yes | • •
• | Compensation Nominating and Investment | ||||||||
C. Edward (“Chuck”) Chaplin Chairman of the Board | 61 | President, Chief Financial Officer and Chief Administrative Officer, MBIA (Retired) | 2019 | Yes | • • • | Audit Executive Finance and Risk (Chair) | ||||||||
John D. McCallion2 | 44 | Executive Vice President and Treasurer, MetLife | 2018 | No | • | Finance and Risk | ||||||||
Diane E. Offereins2 | 60 | Executive Vice President and President - Payments Services, Discover Financial Services | 2018 | Yes | • • • | Compensation (Chair) Finance and Risk Nominating and | ||||||||
Patrick J. (“Pat”) Shouvlin2 | 67 | Partner, PricewaterhouseCoopers LLP (Retired) | 2018 | Yes | • • • | Audit (Chair) Executive Investment | ||||||||
Eric T. Steigerwalt | 56 | President and Chief Executive Officer, Brighthouse | 2020 | No | • | Executive | ||||||||
William F. (“Bill”) Wallace | 70 | Managing director andco-head of the Global Insurance Investor Client Practice, J.P. Morgan Chase & Co. (Retired) | 2020 | Yes | • • | Audit Investment (Chair) | ||||||||
Paul M. Wetzel | 58 | Chairman of the Global Financial Institutions Group, Deutsche Bank Securities Inc. (Retired) | 2019 | Yes | • • • | Compensation Finance and Risk Nominating and | ||||||||
Name
| Age
| Principal Professional Experience
| Expiration
| Independent
| Committee Memberships
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Irene Chang Britt(2) |
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56 |
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Senior Vice President, Campbell Soup Company and President, Pepperidge Farm Inc. (Retired) |
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2020 |
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Yes |
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Compensation Investment Nominating and Corporate Governance (Chair)
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Chuck Chaplin(2) Chairman of the Board |
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62 |
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President, Chief Financial Officer and Chief Administrative Officer, MBIA Inc. (Retired) |
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2020 |
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Yes |
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Audit Executive Finance and Risk (Chair)
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Eileen Mallesch(2) |
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63 |
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Senior Vice President and Chief Financial Officer of the property and casualty business of Nationwide Mutual Insurance Company (Retired)
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2020 |
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Yes |
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Compensation Investment Nominating and Corporate Governance
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Meg McCarthy |
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Executive Vice President of Operations and Technology, CVS Health Corporation (acquired Aetna, Inc.)
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2020 |
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Yes |
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Audit Finance and Risk | ||||||
Diane Offereins |
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61 |
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Executive Vice President and President – Payments Services, Discover Financial Services |
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2020 |
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Yes |
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Compensation (Chair) Finance and Risk Nominating and Corporate Governance
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Pat Shouvlin |
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68 |
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Partner, PricewaterhouseCoopers LLP (Retired) |
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2020 |
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Yes |
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Audit (Chair) Executive Investment
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Eric Steigerwalt |
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57 |
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President and Chief Executive Officer, Brighthouse
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2020 |
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No |
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Executive (Chair) | ||||||
Bill Wallace |
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71 |
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Managing director andco-head of the Global Insurance Investor Client Practice, J.P. Morgan Chase & Co. (Retired)
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2020 |
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Yes |
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Audit Investment (Chair) | ||||||
Paul Wetzel(2) |
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59 |
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Chairman of the Global Financial Institutions Group, Deutsche Bank Securities Inc. (Retired) |
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2020 |
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Yes |
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Compensation Finance and Risk Nominating and Corporate Governance
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The Board will be declassified by the 2020 Annual Meeting. |
These Directors are nominated for election |
2018 Proxy Statement | 7
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Board Skills and Experience
The Board seeks Directors who possess a broad range of skills, experience expertise and perspectives that position the Board to effectively oversee Brighthouse’s strategies and risks.management. Our Directors were carefully selected for their mix of skills and expertise,
2019 Proxy Statement | 5
| Proxy Summary | Brighthouse Financial, Inc. |
experience, which align with, and facilitate effective oversight of, Brighthouse’s strategy.strategy and risks. Our Directors possess substantive skills and experience in the following key areas which are relevant to the Board’s oversight of Brighthouse: the financial services and insurance industries; senior management; audit and accounting; information technology and cybersecurity; brand and marketing; public company board service; risk management; investments; and compensation and human resources.resources (see “Skills Matrix”).
Board Diversity
The Board believes that a diverse board is better able to effectively oversee our management and strategy and position Brighthouse to deliver long-term value for our stockholders. Our Board considersrecognizes that gender and ethnic diversity as addingadd to the overall mix of perspectives of our Board as a whole. In 2018, we added two new Directors, both of whom are women. The following charts present our current Board diversity profile:
Diverse 
Directors who are diverse by gender or race serve in a majority of our Board leadership positions, including as:
Chairman of the BoardBoard;
Chair of the Compensation CommitteeCommittee;
Chair of the Finance and Risk CommitteeCommittee; and
Chair of the Nominating and Corporate Governance CommitteeCommittee.
Stockholder Engagement Highlights
FollowingIn 2018-2019, we continued the Separation, management worked with the Board and the Nominating and Corporate Governance Committee to develop a robust and proactive stockholder engagement program to share our perspectives and solicit feedback onwe instituted in 2017 following the Company.Separation. As part of this program, we contacted 1916 stockholders representing approximately 33%42% of our Shares then outstanding(at that time) and met with a substantial portion of those we contacted. These discussions largelyWe also offered several stockholders the opportunity to engage with our Chairman, and one accepted. Discussion during our engagements focused on our Board, corporate governance and executive compensation practices, as well as our business profile, strategy and performance. For additional information about our program, see “Stockholder Engagement.”
86 | 20182019 Proxy Statement
| Brighthouse Financial, Inc. | Proxy Summary |
Corporate Governance Highlights
Brighthouse is committed to good governance practices that protect and promote the long-term value of the Company for our stockholders. The Board regularly reviews our governance practicesprofile to ensure they reflectit reflects the evolving governance landscape and appropriately supportsupports and serveserves the best interests of the Company and our stockholders.
| Independent Oversight |   | Independent Chairman of the Board
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| Majority of our Board is independent
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| Board Effectiveness | | Directors possess a deep and diverse set of skills and
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| Proactive assessment of
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| Robust risk oversight framework to assess and manage risks
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| Comprehensive annual self-assessment of the Board and Committees, including an action plan to implement Directors’ suggestions
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| Commitment to Board diversity of perspective, gender and ethnicity
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| Regular executive sessions of the
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Responsiveness and Accountability | |
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Majority voting for Directors, with resignation policy for Directors who do not receive a majority of the votes cast
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| Development and regular review of succession plans for the Chief Executive Officer (the “CEO”) and other members of senior management
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 | Annual assessment of Committee charters and the Board’s Corporate Governance Principles | |||||||
 | All Directors to be elected annually forone-year terms beginning with 2020 Annual Meeting
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20182019 Proxy Statement | 97
Proxy Summary | Brighthouse Financial, Inc. |
Brighthouse is on a mission to help people achieve financial security. We are committed to building a company that creates sustainable long-term value for our stockholders while delivering on that mission. When we launched the Company, management sought to build an inclusive culture that supports our strategic goals. In our first full year as an independent company, we are proud of what we have accomplished to reinforce our culture and lay the foundation for sustainable growth. Highlights include:
| Our Values We aim to build an organization where talented, passionate people from all backgrounds can make meaningful contributions to our success and grow their careers. We value collaboration, accountability and respect, and the health and safety of our employees, customers and communities. We strive to create a diverse and inclusive work environment, practice fair labor standards at every level, and recognize and respect basic human rights for all. We demonstrate our commitment to ethical practices through mandatory training on anti-harassment and on our Code of Conduct – which includes our commitment to maintaining the highest standard of ethical awareness, integrity and business conduct, and putting honesty, fairness and trustworthiness at the center of everything we do. | |||
| Diversity and Inclusion We foster a culture where diverse backgrounds and experiences are celebrated, and different ideas are heard and respected. We believe that by creating an inclusive workplace, we are better able to attract and retain talent and provide valuable solutions that meet the needs of our distribution partners, our advisors and their clients. We have established a Diversity and Inclusion Council that develops policies designed to increase inclusion in our offices and educate the Brighthouse community about the impact of diversity and inclusion on our corporate culture and business results. Brighthouse is a proud equal opportunity employer committed to attracting, retaining and maximizing the performance of a diverse and inclusive workforce. It is Brighthouse’s policy to ensure equal employment opportunity without discrimination or harassment based on race, color, religion, sex (including pregnancy, childbirth, or related medical conditions), sexual orientation, gender identity or expression, age, disability, national origin, marital or domestic/civil partnership status, genetic information, citizenship status, uniformed service member or veteran status, or any other characteristic protected by law. | |||
| Community Involvement Brighthouse is committed to making a positive impact on our communities, and we encourage employees to take advantage of three paid volunteer days per year to help support local organizations. As a company, Brighthouse directly supports charitable endeavors through corporate contributions, fundraising campaigns and engagement in community groups such as Habitat for Humanity, Operation Sandwich (food drive for the hungry), Dress for Success (support services and professional attire for women in need) and many others. | |||
| Brighthouse Foundation The Brighthouse Foundation (the “Foundation”) was founded to enhance the quality of life in communities in which we live and work. The Foundation provides grants to high-impact,non-profit organizations, with a specific focus on organizations supporting women, children, veterans and the arts. Some of these organizations include the Foundation for the Carolinas, Habitat for Humanity and the Bechtler Museum of Modern Art. |
8 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Proxy Summary |
| Sustainability Brighthouse understands and respects our impact on the environment. Our headquarters in Charlotte, North Carolina, is LEED Platinum certified and our involvement in the construction process ensured we had a say in sourcing local building materials, and implementing a recycling program and light-harvesting system. These actions have allowed us to take meaningful steps toward conserving energy and resources. |
Executive Compensation Highlights
Executive Compensation Philosophy: 2017 and OnwardPhilosophy
Our Compensation Committee and Board established a compensation program rooted in apay-for-performance philosophy that incentsincentivizes and rewards our named executive officers (each an “NEO”) for achievement of performance metrics that are aligned with key strategic goals. In particular, theOur 2018 compensation paid toprogram incentivizes our NEOs for the period from the Separation toyear-end 2017 (“Fiscal 2017”) was intended primarily to incent them to achieve key objectives relatedgoals that support Brighthouse’s long-term strategy and rewards them for their contributions to the Separation and establish Brighthouse as an independent company. The broader objectives of our 2017Brighthouse’s performance. Our 2018 compensation program included:objectives include:
Pay-for-performance by tying variable compensation to achievement of Company and individual goals;
Aligning executives’the interests of our executives with stockholders’stockholders by having a significant portion of our NEOs’ total compensation delivered in the form of stock-based incentives;
Avoiding problematic pay practices by incorporating market best practices into our compensation program; and
Reinforcing strong risk management by avoiding incentives that encourage NEOs to take excessive risks.
2018 Executive Compensation Program
In designing our executive compensation program for 2018, our first full year as an independent company, the Compensation Committee built on the guiding principles of our 2017 compensation program, including apay-for-performance philosophy, strong governance practices and aligning our executives’ interests with those of our stockholders.
The Compensation Committee also considered stockholder feedback and designedin designing a compensation program that aims to align our NEOs’ compensation opportunities with achievement of the Company’s short- and long-term business goals, as approved by the Board as part of its annual review of the Company’sBrighthouse’s strategy. For further information regarding our executive compensation program structure for 2018, please see “Compensation Discussion and Analysis – Section 3 – The Brighthouse Vision and Strategy — Establishing the 2018 Executive Compensation Program.”
Key Components of Our 2018 Executive Compensation Program
Base Salary
| • Fixed compensation for services during the year | |||
Short-Term Incentive | • • Performance metrics measure our achievement of three equally-weighted key strategic goals: • TSA Exits – measures our ability to reduce expenses and operate as a • Annuity Sales – measures our growth, • Adjusted Statutory Earnings – measures our ability to pay future distributions and is reflective of the performance of our hedging program |
10 | 2018 Proxy Statement
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Long-Term Incentive | • Variable equity awards, in a mix of three equally-weighted elements: Restricted Stock Units (“RSUs”), Performance Share Units (“PSUs”) and Nonqualified Stock Options • Performance metrics apply only to our PSUs and measure our achievement of two strategic goals over the 2018-2020 performance • Corporate Expense Reduction • Capital Return | |||
2019 Proxy Statement | 9
| Prosy Summary | Brighthouse Financial, Inc. |
Executive Compensation Governance Practices
We are committed to building a compensation program with strong governance features that reflect best practices in the market and stockholder feedback. The table below provides a summary of our executive compensation governance practices.
Key Executive Compensation Practices
| What we do | |
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| | Stock Ownership guidelines ownership, thereby aligning their interests with those of our stockholders. | ||||||
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| Minimum Vesting Periods. Equity awards that are subject to achievement of performance goals or that vest based solely on continued service generally have three-year vesting periods (the latter at a rate not greater thanone-third per year). | |||||||
| Stockholder Engagement.Since the Separation, we have actively engaged with our stockholders on various topics, including our executive compensation program. We recognize the importance of our stockholders’ perspectives in the compensation | |||||||
| Independent Compensation Consultant.Our Compensation Committee | |||||||
| Double-Trigger Vesting of Equity Awards upon a Change of Control.Outstanding awards that are substituted or assumed in a change of control only vest if the NEO is terminated or resigns with good reason.
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| What we don’t do |  |
| Gross-ups on Excise with payments upon a change | |||||
| Reprice Stock | |||||||
| Excessive | |||||||
| Hedging and | |||||||
201810 | 2019 Proxy Statement | 11
Brighthouse Financial, Inc. | Proposal 1 - Election of Directors |
Election of three (3)four (4) Class III Directors to serve
atwo-yearone-year term ending at the 2020 Annual
Meeting of Stockholders
The Board has nominated each of our Class III Directors, John D. McCallion, Diane E. OffereinsIrene Chang Britt, C. Edward Chaplin, Eileen A. Mallesch and Patrick J. Shouvlin,Paul M. Wetzel, for election at the Annual Meeting. The Board believes that each of these nominees has the necessary skills and experience to effectively oversee our business. Each of these nominees currently serves as a Class III Director, and each has consented to being named in this Proxy Statement and agreed to serve if elected.
The Board recommends that you vote “FOR” the election of each of John D. McCallion, Diane E. OffereinsIrene Chang Britt, C. Edward Chaplin, Eileen A. Mallesch and Patrick J. Shouvlin.Paul M. Wetzel.
Our Board is currently composed of eightnine Directors. A biography ofBiographical information for each Director, including the Class III Director nominees, and a description of each Director’s skills and qualifications, followfollows this proposal.
As described in our Amended and Restated Certificate of Incorporation (the ““Certificate of Incorporation”), our Board is currentlywas initially divided into three classes. The term of our Class I Directors currently in office expires at this 2018 Annual Meeting, the term of our Class II Directors expires at the 2019 Annual Meeting, and the term of our Class III Directors expires at the 2020 Annual Meeting. Our Certificate of Incorporation provides for the declassification of our Board by our 2020 Annual Meeting. Following our 2018 Annual Meeting, our Board consists of two classes: Class III Directors (which includes the former Class I Directors) whose terms expire at the 2020 Annual Meeting; and Class II Directors up for election at this 2019 Annual Meeting, for a term expiring at the 2020 Annual Meeting. Beginning with our 2020 Annual Meeting, all director nominees will stand for election forone-year terms that expire at the following annual meeting. The following table describes the schedule for the election of our Directors over the next threetwo annual meetings and the terms they will serve if elected.
Meeting
| Directors Standing for Election
| Term | ||||||
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| 2019 Annual Meeting | Class II Directors | One-year term expiring at 2020 Annual Meeting
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2020 Annual Meeting and all future | All Directors | One-year term expiring at the following | ||||||
Unless otherwise instructed, the proxyholders will vote proxies “FOR” the nominees of the Board. The Board has no reason to believe that any of its nominees will be unable or unwilling to serve if elected. However, if any of the Board’s nominees areis unable to serve as Director at any point before the Annual Meeting or any adjournment or postponement of the meeting,thereof, the Board may reduce the size of the Board or nominate another candidate for election as a Class III Director. If the Board nominates a new candidate, unless otherwise provided, the form of proxy attached to this Proxy Statement permits the proxyholders to use their discretion to vote for that candidate.
122019 Proxy Statement | 2018 Proxy Statement11
Class I -II – Nominees for Election as Directors for Terms Expiring in 2020
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2018 Proxy Statement | 13
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14 | 2018 Proxy Statement
Class II - Continuing Directors Whose Terms Expire in 2019
  | Irene Chang Britt
Independent Director
Age: Director since: 2017 Other public company directorships: Dunkin’ Brands Group, Inc.; Tailored Brands, Inc. Past public company directorships:TerraVia Holdings, Inc. Professional Experience:Ms. Chang Britt retired from Campbell Soup Company Skills and Qualifications:Ms. Chang Britt is qualified to serve on our Board on the | |
201812 | 2019 Proxy Statement | 15
| Brighthouse Financial, Inc. | The Board of Directors |
  | C. Edward (“Chuck”) Chaplin
Independent Director Chairman of the Board
Age: Director since: 2017 Other public company directorships: MGIC Investment Corp. Professional Experience:Mr. Chaplin retired from MBIA, Inc. (“MBIA”), a provider of Skills and Qualifications:Mr. Chaplin is qualified to serve on our Board on the basis of | |
2019 Proxy Statement | 13
| The Board of Directors | Brighthouse Financial, Inc. |
  | Eileen A. Mallesch Independent Director Committee memberships:Compensation; Investment; Nominating and Age: 63 Director since: 2018 Other public company directorships: State Auto Financial Corporation; Libbey Inc.; Fifth Third Bancorp Past public company directorships: Bob Evans Farms, Inc. Professional Experience: Ms. Mallesch served as Senior Vice President and Chief Financial Officer Skills and Qualifications: Ms. Mallesch is qualified to serve on our Board on the basis of her financial | |
14 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | The Board of Directors |
 | Paul M. Wetzel
Independent Director
Age: Director since: 2017 Professional Experience:Mr. Wetzel has served as a Senior Advisor to Rockefeller Capital Skills and Qualifications:Mr. Wetzel is qualified to serve on our Board on the basis of | |
162019 Proxy Statement | 2018 Proxy Statement15
Class III -(includes former Class I Directors) – Continuing Directors Whose Terms Expire in 2020
  | Margaret M. (“Meg”) McCarthy Independent Director Committee memberships:Audit; Finance and Risk Age: 65 Director since: 2018 Other public company directorships:First American Financial Corporation; Marriott International, Inc. Professional Experience:Ms. McCarthy is currently Executive Vice President of Operations and Skills and Qualifications: Ms. McCarthy is qualified to serve on our Board on the basis of her deep | |
16 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | The Board of Directors |
 | Diane E. Offereins Independent Director Committee memberships:Compensation (Chair); Finance and Risk; Nominating and Corporate Governance Age: 61 Director since: 2017 Past public company directorships: West Corporation Professional Experience: Ms. Offereins has served as Executive Vice President and President – Skills and Qualifications: Ms. Offereins is qualified to serve on our Board on the basis of her | |
 | Patrick J. (“Pat”) Shouvlin Independent Director Committee memberships:Audit (Chair); Executive; Investment Age: 68 Director since: 2017 Professional Experience:Mr. Shouvlin retired from PricewaterhouseCoopers LLP (“PwC”), an Skills and Qualifications:Mr. Shouvlin is qualified to serve on our Board on the basis of his | |
2019 Proxy Statement | 17
| The Board of Directors | Brighthouse Financial, Inc. |
 | Eric T. Steigerwalt
Age: Director since: 2016 Professional Experience:Mr. Steigerwalt has served as President and CEO of Skills and Qualifications:Mr. Steigerwalt is qualified to serve on our Board on the | |
  | William F. (“Bill”) Wallace
Independent Director
Age: Director since: 2017 Professional Experience:Mr. Wallace retired from J.P. Morgan Chase & Co. Skills and Qualifications: Mr. Wallace is qualified to serve on our Board on the basis of | |
201818 | 2019 Proxy Statement | 17
The Board seeks Directors who possess a broad range of skills, experience expertise and perspectives that position the Board to effectively oversee Brighthouse’s strategiesstrategy and risks. The following table presentsIn its oversight of Board succession planning and refreshment, the Nominating and Corporate Governance Committee utilizes a skills matrix to track our current Directors’ skills and expertise. To create the skills matrix, presented below, each Director periodicallyself-evaluates those areas in which each Directorhe or she has meaningful and substantive experience, skills or expertise.experience.
Irene Chang Britt
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Chaplin
| Eileen
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| Pat
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| Bill Wallace | Paul Wetzel
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Senior Management Experience
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Financial Services
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Insurance
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Risk Management
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Accounting
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Brand and Marketing
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Compensation/Human Resources
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Information Technology/ Cybersecurity
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Investments
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Legal/Regulatory
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Public Company Board Experience
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182019 Proxy Statement | 2018 Proxy Statement19
| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Board and Corporate Governance Practices
We believe that effective corporate governance policies and practices will help Brighthouse deliver sustainable, long-term value to our stockholders.
These policies and practices are contained in our governance documents, including our Certificate of Incorporation, Amended and Restated Bylaws (the “Bylaws”), Corporate Governance Principles, and Committee charters. This section describes the key features of our Board practices and corporate governance program. The Board believes a balanced governance profile will help the Company deliver long-term value to our stockholders. The Board continually assesses our governance profile to ensure it remains appropriate as we continue to evolve as a public company.
Building Our Board of Directors
Our stockholders rely on our Board to oversee Brighthouse on their behalf. The Board has adopted the following key policies and practices to guide it in building an effective, high-functioningwell-functioning board that we believe is well- equipped to fulfill its duties and responsibilities to our stockholders.
Director Criteria and Nomination Process
Board Membership Criteria – The Nominating and Corporate Governance Committee leads the search for, and recommends, candidates to serve on the Board based on their business and professional experience, judgment, diversity, age, skills and background. All candidates must possess high integrity and be able to meet the demands of serving on our Board.
Director Qualifications – In seeking qualified director candidates, the Nominating and Corporate Governance Committee, in consultation with the Board, the Chairman of the Board and the CEO, seeks individuals who possess the skills, experience and background appropriate for overseeing the development and execution of Brighthouse’s business strategies. The Board has identified the following qualifications, among others, in considering director candidates:
Leadership experience
Experience in insurance or financial services
Financial expertiseliteracy
Risk management expertise, including in the areas of market, liquidity and cybersecurity risk
Investments expertise, including oversight of strategic asset allocation and portfolio construction
Gender and ethnic diversity
Information technology expertise
Experience serving on a public company board
Commitment to Brighthouse values
Director Independence – At least a majority of the Board consistsis required to consist of “independent” Directors who satisfy the independence standards prescribed by various laws and regulations applicable to the Company, including the Nasdaq listing rules, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder. To determine independence, the Nominating and Corporate Governance Committee and the Board consider the independence requirements under the applicable Nasdaq listing rules, Exchange Act requirements and other factors that contribute to effective oversight and decision-making by the Board. In determining Ms. McCarthy’s independence, the Board considered Brighthouse’s relationship with her current employer, CVS Health Corporation (which acquired Aetna in November 2018). Aetna provides and administers insurance and other employee benefits services to Brighthouse and our employees. The Board
201820 | 2019 Proxy Statement | 19
Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
determined that this relationship does not exceed thresholds in applicable independence |
Other Directorships – Directors must confirm the absence of, or disclose, any material actual or potential conflict of interest and receive the consent of the Chair of the Nominating and Corporate Governance Committee before accepting an invitation to serve on the board or committee of another organization. To ensure that Directors have requisite time to devote sufficient attention to their duties and responsibilities, the Board believes that: (1) Directors should not serve on more than three other public company boards; (2) Independent Directors who serve as chief executive officer of another public company and also serve on that company’s board of directors should not serve on any additional public company board other than our Board; and (3) members of the Audit Committee should notDirectors who serve on more than three public company audit committees should not serve on our Audit Committees in total without obtainingCommittee if their ability to effectively serve on our Audit Committee is impaired, as determined by the Nominating and Corporate Governance Committee Chair and Board’s approval.the Board.
Director Nomination Process – Nominations for election as a Director at our annual meetings may be made by our Board or any Committee in the Company’s notice of meeting or any supplement thereto, or by a stockholder or stockholders in compliance with the stockholder nomination requirements set forth in theour Bylaws. Our Board nominates Director-nominees upon the recommendation of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee and the Board may identify potential nominees through a variety of means, including referrals from current Directors, executive officers and stockholders or recommendations from professional search firms. We did not retainretained a professional search firm to identify orand recruit any of our current Directors.candidates for the two directorships we filled in 2018. In recommending candidates for nomination by the Board, the Nominating and Corporate Governance Committee takes into consideration the candidate’s skills and qualifications, the Nasdaq listing requirements, the ability of candidates to enhance the diversity of our Board as a whole and any other criteria the Board may establish from time to time. The Nominating and Governance Committee will consider candidates recommended by stockholders. Our stockholders may bring nominations for Director before an annual meeting of our stockholders by following the procedures described in our Bylaws. For more information on how and when to submit a nomination for future annual meetings, see “Other stockholder proposals and director nominations.”
Board Composition, Refreshment and Ongoing Education
Board Diversity – The Board believes that a diverse board is better able to effectively oversee Brighthouse and deliver long-term value for our stockholders. The Board seeks Directors who possess a broad range of skills, experiences, expertiseexperience and perspectives, and who contribute to the ethnic and gender diversity of our Board.
Board Refreshment – As Brighthouse grows and evolves overtime, theThe Board recognizes that it must refresh itself to address Brighthouse’s strategiesoversight needs as it evolves over time. The Nominating and oversight needs.Corporate Governance Committee and Board annually review the skills and experience that allow the Board to best oversee Brighthouse’s strategy. We previously disclosed our intent for the Board to consist of nine directors as soon as reasonably practicable following the Separation. In September 2018, following MetLife’s divestiture of its remaining Shares, John McCallion resigned from the Board. In November 2018 (and as discussed in greater detail below), we added two new Directors, resulting in a Board consisting of nine Directors. During 2018, the Nominating and Corporate Governance Committee led a Director self-evaluation process where each Director ranked his or her expertise and experience in a number of key skill areas that are relevant to service on our Board. The Nominating and Corporate Governance Committee considered the Directors’ self-evaluations in analyzing the aggregate representation of skills on the Board, will regularly assess its compositionand identified an opportunity to identifyimprove the qualificationsBoard’s effectiveness by adding one or more Directors with skills and experience in the areas of (i) information technology and cybersecurity and (ii) investments and overall finance expertise. The Nominating and Corporate Governance Committee, with the assistance of management and a third-party director search firm, led the director search and recruitment, and, in November 2018, the Board appointed two new Independent Directors who possessed the desired skills that Directors and candidates should possess.fit, and who also added to the diversity of our Board. Ms. Mallesch brings more than 25 years of finance and strategy experience in a variety of industries, including insurance, telecommunications, consumer products and manufacturing. Ms. McCarthy brings over 30 years of experience as a senior leader in the insurance and healthcare industries with expertise in information technology, cybersecurity and operations.
2019 Proxy Statement | 21
| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Assessing the Board’s Performance – The Board views self-assessment as an important tool for candid evaluation of its composition, performance and proper functioning, as well as an important component of our board refreshment strategy. The Nominating and Corporate Governance Committee will develop and propose tooversees the Board aoverall process for annual self-evaluationthe assessment, as well as the substantive matters to be addressed during the assessment. In 2018, each Director completed assessments of the Board’s and each Committee’s effectiveness, including with respect to: Board and Committee composition; the Committeesquality of meeting materials and will presentdiscussions during Board and Committee meetings; appropriateness of meeting agenda topics; and interactions with management. Each Director also provided feedback on the other Directors. The Nominating and Corporate Governance Committee reviewed and reported the results of the evaluation for discussion byassessments to the Board.full Board and to management. The chair of the Nominating and Corporate Governance Committee discussed with each Director the results of the individual feedback. The Board addressed issues raised in the self-assessments with concrete steps, including discussions with management to enhance meeting materials, refining the focus on key areas and other actions to maximize the Board’s and Committees’ effectiveness.
20 | 2018 Proxy Statement
Director Orientation and Continuing Education–Education – The Board views orientation and continuing education as vital tools for building an effective Board. We provide all new Directors with an orientation program as soon as practicable around the timewhen they join the Board. The orientation consists of presentations by our senior management to familiarize the Directors with our business, operations, financial condition, risk management and governance, as well as Directors’ legal duties and requirements. We also encourage and will provide funding for both new and longer-serving Directors to attend continuing education programs delivered by third parties to develop and enhance their skills and knowledge. In 2018, the entire Board participated in continuing education programs. We also intend to incorporate continuing education into our regular Board and Committee meetings from time to time.
Attendance at Meetings–Meetings – Directors are expected to regularly attend meetings of the Board and the Committees of which they are members, and to spend the time needed outside of meetings to keep themselves informed about Brighthouse’s business and operations.
The Board has determined that having an independent chairman leading the Board is the best board leadership structure for Brighthouse at this time is separate chief executive officer and chairman roles, with an independent chairman leading the Board.time. This structure enhances the Board’s ability to exercise independent oversight of Brighthouse’s management of Brighthouse on behalf of its stockholders. Furthermore, as a newly independent company, Brighthouse is engaged in establishing and stabilizing itself for the future. During this crucial and transformative period, the duties of the chairman of the Board (the “Chairman”) and the CEO are particularly demanding.demanding for a new public company. Separating these roles allows each to focus on theirhis respective duties.
Our Chairman’s duties and responsibilities focus on promoting sound corporate governance practices, building the Board and fostering a culture of effective oversight on behalf of our stockholders and overseeing management’s development and execution of its business strategies. These duties include the following:include:
promoting the highest standards of corporate governance;
providing thought leadership for the Board, through understanding the views of our Directors, stockholders and management;
setting the agenda for Board meetings with input from the CEO;
presiding over Board meetings and executive sessions of the Independent Directors (as defined below);Directors;
promoting effective communication and serve as the primary conduit between the Board and the CEO and other members of management;
setting the tone of Board discussions to promote a Board culture of the highest level of integrity, active engagement, open communication, constructive debate, and effective decision-making;
22 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
establishing a close relationship of trust with the CEO, providing support and advice while respecting the executive responsibility of the CEO;
with the Chair of the Nominating and Corporate Governance Committee, overseeoverseeing CEO and management succession planning; and
with the Chair of the Nominating and Corporate Governance Committee, reviewing Committee and Committee chair assignments, lead the Board’s recruitment of Director candidates oversee development of Director orientation and continuing education programs, review Committee and Committee Chair assignments, and oversee annual evaluations for the Board and its Committees.
2018 Proxy Statement | 21
The Board elected Mr. Chaplin to serve as Chairman on the basis of his independence from management, his experience as president, chief financial officer and chief administrative officer of a major financial services company, experience as a director of a public company, leadership skills and ability to devote the time and effort to effectively oversee Brighthouse.
Mr. Steigerwalt, Brighthouse’s President and CEO, also serves as a Director. Mr. Steigerwalt works closely with the Chairman to help focus the Board on matters of strategic importance for Brighthouse.
The Board believes it is important to retain its flexibility to allocate the responsibilities of the Chairman of the Board in the best interests of the Company and will continue to evaluate the best leadership structure for Brighthouse as it evolves.
Our Board annually considers whether our Directors are independent in accordance with applicable Nasdaq and Exchange Act rules. An “Independent Director” is a Director who the Board has affirmatively determined (i) is independent of management and free from any material relationship with the Company and its subsidiaries (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company or its subsidiaries) that would interfere with the exercise of the Director’s independent judgment as a member of the Board and (ii) meets the independence standards for directors set forth in the Nasdaq listing standards. Our Board has determined that the following sixall our Directors, out ofexcept for Mr. Steigerwalt, our eight total Directors,President and CEO, are Independent Directors: Ms. Chang Britt; Mr. Chaplin; Ms. Offereins; Mr. Shouvlin; Mr. Wallace; and Mr. Wetzel.Directors. In making this determination, the Board considered information provided by the Directors about their and their family members’ business and professional relationships with Brighthouse and with entities that have business interactions with Brighthouse, including MetLife.Brighthouse.
As part of each regular meeting of the Board, Brighthouse’s Independent Directors meet in an executive session without management present. The Chairman presides over these executive sessions. In addition, each Board Committee typically holds an executive session as part of its regular meeting, which is presided over by the Committee Chair.
2019 Proxy Statement | 23
| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Building relationships with our stockholders is important and beneficial to Brighthouse and our stockholders. Following the Separation, management worked with our Board, and our Nominating and Corporate Governance Committee in particular, to develop a robust and proactive stockholder engagement program. In our engagements, we aim to create constructive dialogue in which we communicate the perspectives of management and the Board on the issues that are important to our stockholders and solicit our stockholders’ insights and feedback, which the Board considers in developing our governance and compensation practices. Our stockholder engagement program will comprisecomprises a year-round cycle of communication, feedback and action, which is described in the diagram on the following page.diagram.
22 | 2018 Proxy Statement
|
2017-20182018-2019 Engagement– Our Board believes it is important to engage directly with our stockholders. During the fourth quarter of 2017, only months after2018 and the first quarter of 2019, we became an independent company, we launched our stockholder engagement program. We invited 1916 of our largest stockholders owning approximately 33%42% of our common stock outstanding at such timeShares (at that time) to engage with us, and met with a substantial numbernine of those 19 stockholders.stockholders representing 26% of our Shares. We also met with two major proxy advisory firms, Institutional Stockholder Services (ISS) and Glass Lewis. We also offered several stockholders the opportunity to engage with our Chairman, and one accepted. Both the Chairman and the stockholder reported that the engagement provided a valuable opportunity to deeply discuss the Board’s oversight of Brighthouse.
During these meetings, we:our stockholder engagements, we discussed:
our first full year as an overview of Brighthouse, our industry, andindependent company, including our publicly disclosed strategic objectives and performance.performance;
the Board’s oversight of our Company’s strategy and business plan;
Board composition including: theand refreshment, including our recent addition of two new Directors; our Board’s diverse mix of skills, experience and perspectives; the Board’s gender and ethnic diversity; and our commitment to building a high- functioning,well-functioning, effective Board through meaningful assessments and refreshment.refreshment;
the Separation, particularly with respectBoard’s annual evaluation of our governance profile and its commitment to corporate governancecontinual assessment of our policies and practices;
24 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
our 2018 executive compensation as disclosed publicly.programs, including our use of objective, quantitative metrics that are aligned with our long-term strategy; and
our corporate culture and the Board’s oversight of human capital management.
During each engagement, we solicited feedback on our Board, governance practices and executive compensation program.
programs. Our Corporate Secretary discussed with the Nominating and Corporate Governance Committee our engagement activities and the feedback that we received from our stockholders. In particular, the Corporate Secretary reported that our stockholders generally expressed support for our governance program,and our executive compensation programs; commended the composition of our Board, including their qualifications and our disclosed compensation practices. He further reported that our stockholdersdiversity; encouraged the Board and management to regularly evaluate our governance and compensation practices to ensure that they areremain appropriate foras we evolve over time; and shared their views on specific policies and practices that the Company.Board may consider adopting in the future. Our Corporate Secretary discussed our engagement activities with the Nominating and Corporate Governance Committee and shared the feedback we received from our stockholders.
2018 Proxy Statement | 23
Succession Planning and Talent Management
Succession planning and oversight of our talent management practices are central to the Board’s responsibilities. The Board, in coordination with the Compensation Committee, oversees the Company’s succession plans for the CEO and other senior members of senior management. The Board will discuss,discusses, at least annually, the Company’s succession plans, including identifying potential candidates to succeed the CEO, both in cases of orderly succession and in the event of an emergency. In addition, the Board willand the Compensation Committee regularly discuss with management succession plans for other senior managermanagement positions, including identifying potential candidates and plans to develop their skills in anticipation of a potential succession. To support talent development and allow the Board to meet and assess potential successors,non-executive officers andmid-level management regularly participate and make presentations in Board and Committee meetings. The Board also meets in executive session to discuss whether the Company has the managerial talent available to replace current executives should the need arise.
EffectiveWe believe effective risk oversight is fundamental to delivering long-term value for our stockholders. Our Board, with the assistance of the Committees, oversees the development and execution of our business strategies to help ensure that risks are appropriately assessed and mitigated and that our business plans align to our overall risk appetite. The Board and its Committees review and approve our risk appetite statement, review our most significant risk policies and regularly discuss with management our performance against our risk targets.
In connection with each regular meeting of the Board and Committees, the Chief Risk Officer prepares an enterprise risk dashboard that assesses our risk profile and our performance against our risk targets in key risk areas, including credit, risk, market, risk, liquidity, risk, operational, riskmodel, cyber and modelIT, and third-party risk. In addition, the Chief Risk Officer presents a report on enterprise risk at regular meetings of the Finance and Risk Committee. The Chief Risk Officer, or his designee, also periodically presents reports to the Board on key risks and to the other Committees on risk topics within the scope of the Committees’ respective responsibilities.
The Board exercises direct oversight over certain key risks, including the following:
Strategic Risk – In connection with its annual review of our strategy and ongoing oversight of our performance against the strategy, the Board oversees the management of strategic risks. SeniorIn its discussions with the Board, senior management, including the CEO, the Chief Product and StrategyOperating Officer (“COO”) and the Chief Financial Officer (“CFO”), and discuss with the Boardreviews the key risks relating to the execution of our strategy and describedescribes management’s activities to identify, assess and mitigate risk.such risks.
Cybersecurity – The Board periodically meets with our Chief Technology Officer and Chief Information Security Officer to review our information technology and cybersecurity risk profile and to discuss our activities to manage those risks. The Chief Information Security Officer is responsible for the Company’s cybersecurity program which is designed to protect and preserve the integrity, confidentiality, and continued availability of the information owned by, or in the care of, the Company. The Company’s cybersecurity program also establishes operational standards
2019 Proxy Statement | 25
| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
that are designed to enable the Company to effectively identify, evaluate and respond to events that have the potential to negatively impact the Company’s operations. In addition, our Chief Compliance Officer reports to the Board on our compliance with regulations and guidance regarding information technology and cybersecurity. The Audit Committee will provide ongoing oversight of information technology and cybersecurity risk. |
Human Capital Management – The Board recognizes the importance of maintaining a highly skilled and engaged workforce and a strong corporate culture that reinforces our values of collaboration, focus and accountability. The Board periodically meets with our Human Resources organization to discuss key human capital metrics. The Board and the Committees also assess employee engagement, turnover and workloads to help ensure that the Company has adequate resources to execute on its strategy.
The roles of the Board Committees in overseeing risk are discussed in greater detail in “Information about Our Board Committees.”
Information about Our Board Committees
The Board has designatedestablished six standing Board Committees to assist the Board in carrying out its duties: Audit; Compensation; Executive; Finance and Risk; Nominating and Corporate Governance; and Investment. Each Committee has a Board-approved, written charter whichthat describes thatthe Committee’s role and
24 | 2018 Proxy Statement
responsibilities. Current, printable copiesCopies of the charters of the Audit, Compensation and Nominating and Corporate Governance Committees are posted on our website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview. The Audit, Compensation and Nominating and Corporate Governance Committees all comply with applicable requirements of the U.S. Securities and Exchange Commission (“SEC”) and Nasdaq, and are chaired by and consist solely of Independent Directors. The Committee Chairs approve the meeting agendas for their respective Committees.
Each Committee regularly reports on the matters discussed during its meetings to the full Board and presents recommendations on actions requiring Board approval. On an annual basis, each Committee will conductconducts an evaluation of its performance and will reviewreviews the adequacy of, and proposeproposes changes to, its charter for Board approval. Each Committee has full authority to retain, at Brighthouse’s expense, independent advisors or consultants.
The table below provides additionalAdditional information about our Committees:Committees follows, including their composition;composition, the number of meetings they held in 2017 (from August 4, 2017, when we became an independent company);2018 and their primary roles and responsibilities, including their roles in the oversight of risk management.
Audit Committee
Members:
Patrick J. (“Pat”)Pat Shouvlin (Chair)
C. Edward (“Chuck”)Chuck Chaplin
William F. (“Bill”)Meg McCarthy
Bill Wallace
All Audit Committee members are independent under applicable SEC and Nasdaq rules and are “financially literate.” The Board has determined that Pat Shouvlin, the Committee’s Chair, is an “audit committee financial expert” under theapplicable SEC rules.
Number of Meetings in 2017:42018: 10
Key Roles and Responsibilities
Oversee our accounting and financial reporting processes, internal control over financial reporting and disclosure controls and procedures, to help preserve the integrity of our financial statements.
Oversee the auditsaudit of the Company’s financial statements of the Company and recommend to the Board whether the audited financial statements should be included in our Annual Report on Form10-K (“Form10-K”).
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| Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
Review and discuss with management and the independent auditor our unaudited quarterly financial statements.statements and the Company’s statutory financial results.
Review earnings press releases prior to their release to the public.
Oversee our compliance with legal and regulatory requirements.
Oversee the internal audit functions. function.
Oversee procedures for the receipt, analysis and resolution of complaints concerning accounting, internal control over financial reporting, or auditing matters, as well as for confidential, anonymous submissions by Company employees of concerns regarding accounting or auditing matters.
Oversee our operational risks.
Review reports on our compliance processes and programs.
Appoint, engage, evaluate, compensateapprove the compensation of, and oversee the work and the continued independence of our independent auditor (the Audit Committee’s role in oversight of Brighthouse’s independent auditor is discussed further inProposal 2)2).
2018 Proxy Statement | 25
Role in Risk Oversight
Discuss with management our risk assessment and risk management practices and the guidelines, policies and processes for risk assessment and risk management.practices.
Oversee the management of our risk policies and processesrisks relating to financial statements, financial systems, financial reporting processes, internal control over financial reporting, compliance and auditing, as well as the guidelines, policies and processes for monitoring and mitigating such risks.
Oversee the disclosure of material risks in our public filings.
Provide ongoing oversight of operational risk, including information technology and cybersecurity risk, as well as the policies for monitoring and mitigating such risks.
Discuss with management the state of regulatory compliance risk.
Compensation Committee
Members:
Diane E. Offereins (Chair)
Irene Chang Britt
Eileen Mallesch
Paul M. Wetzel
All Compensation Committee members are independent under applicable SEC and Nasdaq rules and are“non-employee directors” for purposes of Section 16 of the Exchange Act, and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
Number of Meetings in 2017:22018: 9
Key Roles and Responsibilities
Review and approve, on an annual basis, our corporate goals and objectives with respect to CEO compensation, evaluate the CEO’s performance in light of these goals and objectives and recommend to the independent members of the BoardIndependent Directors for approval the CEO’s annual compensation, including salary, bonus and equity andnon-equity incentive compensation.
Review and approve, on an annual basis, the compensation for our other executive officers, including such officers’ salary, bonus and equity andnon-equity incentive compensation, based on the CEO’s initial recommendations and evaluation of performance from the CEO.their performance.
Review and approve the Company’s equity andnon-equity incentive compensation plans and arrangements, and approve awards to employees under such plans.
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| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Review and discuss with management the Company’s Compensation Discussion and Analysis, (“CD&A”) for inclusionand recommend to the Board that it be included in the Company’s annual reportForm10-K or proxy statement.
Consider the results of the most recent stockholder advisory vote on executive compensation, as required by Section 14A of the Exchange Act.
Review and approve the Company’s severance arrangements and related plans.
Approve and oversee compensation-related policies, including stock ownership guidelines, and hedging, pledging and clawback policies.
26 | 2018 Proxy StatementOversee the Company’s succession planning for its CEO and other executive officers.
Role in Risk Oversight
Review, with the assistance of the Chief Risk Officer and the Compensation Committee’s independent compensation consultant and Brighthouse’s Chief Risk Officer, incentive compensation arrangements to confirm that incentive paycompensation does not encourage unnecessary risk-taking.risk taking.
Review and discuss the relationship between risk management policies and practices, corporate strategy and compensation of senior executive compensation.executives.
Executive Committee
Members:
Eric T. Steigerwalt (Chair)
C. Edward (“Chuck”)Chuck Chaplin
Patrick J. (“Pat”)Pat Shouvlin
Number of Meetings in 2017:2018:None
Key Roles and Responsibilities
Act on behalf of the entire Board with respect to certain exigent matters between meetings of the Board.
Finance and Risk Committee
Members:
C. Edward (“Chuck”)Chuck Chaplin (Chair)
John D. McCallionMeg McCarthy
Diane E. Offereins
Paul M. Wetzel
All Finance and Risk Committee members other than Mr. McCallion, are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2017:22018: 5
Key Roles and Responsibilities
Oversee the Company’s financial plans, policies and strategies.
Review keybusiness and financial metrics to measure Brighthouse’s performance against its business and financial plans, in alignment with our multi-year strategy.
Approve, or recommend for Board approval, equity and debt issuances, share repurchase programs, dividend payments,dividends and mergers and acquisitions.
Oversee the Company’s capital management strategy,and liquidity management strategies, including the review and approval of capital and liquidity policies and plans.plans, the availability and use of liquidity management tools and the review of liquidity benchmarks and metrics.
Oversee the capitalization of Brighthouse and its subsidiaries.
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Oversee the Company’s hedging strategy, including the use of derivative instruments.
Oversee the management, budget and business plan of Brighthouse’s finance and risk management organizations.
Role in Risk Oversight
Broad oversight of risk management, including approval of our risk appetite statement, and review of mostour significant risk policies and review of our performance against risk metrics and targets.
2018 Proxy Statement | 27
Regularly review with the Chief Risk Officer an assessment of our risk profile, including credit risk, market risk, liquidity risk, operational risk and model risk.
Review the finance and risk management functions, including their management, budget and business plan.
Oversee management’s use of risk metrics and targets and monitor performance against such benchmarks and targets.
Coordinate, through the Finance and Risk Committee’s chair, with the Chief Risk Officer and other members of management, and with the chairs of the other committees,Committees, to help ensure that all committeesCommittees receive necessary information to oversee our risks.
Coordinate, through the Finance and Risk Committee’s chair, with the Chief Risk Officermanagement and the chair of the Compensation Committee chair, the Compensation Committee’s oversight of compensation-related risk matters.
Review themanagement’s Own Risk and Solvency Assessment report, a required regulatory filing which summarizesassesses our risk exposures and solvency, and describes our risk management organization, structure and processes and analysis of our risk exposures and capital adequacy.processes.
InvestmentAudit Committee
Members:
William F. (“Bill”) WallacePat Shouvlin (Chair)
Irene Chang BrittChuck Chaplin
Patrick J. (“Pat”) ShouvlinMeg McCarthy
Bill Wallace
All InvestmentAudit Committee members are independent under applicable SEC and Nasdaq rules and are “financially literate.” The Board has determined that Pat Shouvlin, the Committee’s Chair, is an “audit committee financial expert” under applicable SEC rules.
Number of Meetings in 2017:22018: 10
Key Roles and Responsibilities
Oversee our engagement of investment advisers to manage the separate accounts’ investments.
Role in Risk Oversight
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Nominating and Corporate Governance Committee
Members:
Irene Chang Britt (Chair)
Diane E. Offereins
Paul M. Wetzel
All Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2017:2
Key Roles and Responsibilities
Role in Risk Oversight
2018 Proxy Statement | 29
Board Meetings and Director Attendance
In 2017, the Board held five meetings and the Committees held a total of 12 meetings. Every current Director attended more than 75% of the aggregate number of meetings of the Board and the Committees on which the Director served.
In August 2017, shortly after the completion of the Separation, the Board, on the recommendation of the Nominating and Governance Committee, established a compensation program for the independent members of the Board. In establishing this compensation program, the Board considered benchmarking data fornon-management director compensation at companies in our Comparator Group (as defined below) provided by the Company’s compensation consultant, Willis Towers Watson, prior to the Separation.
Our director compensation program is intended to compensate our Independent Directors fairly for their work as members of the Board and to align their interests with those of our stockholders by delivering half of the annual retainer in the form of equity-based awards. Annual equity-based awards are expected to be granted at the Board meeting held around the time of the annual meeting of stockholders and will be eligible to vest on the earlier of the first anniversary of the grant date and the date of the next annual meeting of stockholders.
The table below sets forth the details of the compensation program for independent members of the Board. Each element of the program is described in greater detail in the narrative following the table.
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Annual Equity Awards
In connection with the approval of our independent director compensation program, the Board approved annual Restricted Stock Unit (“RSU”) awards for the independent members of our Board. Beginning in 2018, each independent member of the Board continuing in service at the annual meeting of stockholders will receive an award of RSUs. Annual awards to independent members of the Board generally vest on the earlier of the first anniversary of the grant date and the date of the next annual meeting of stockholders. The number of RSUs to be granted to each independent member of the Board will be determined by
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dividing the value of the equity portion of the annual retainer ($120,000) by the closing price of the Company’s common stock on the date of grant. The annual RSU grants will be made pursuant to the Brighthouse Financial, Inc. 2017Non-Management Director Stock Compensation Plan (the “Director Plan”), subject to stockholder approval of the Director Plan (seeProposal 6 – Approval of the Brighthouse Financial, Inc. 2017Non-Management Director Stock Compensation Plan).
Director Founders’ Grants
To further align the interests of our Independent Directors with our stockholders, the Board, on the recommendation of the Nominating and Corporate Governance Committee, authorized an equity award in the form of RSUs to each of the six independent members of the Board (the “Director Founders’ Grants”) on August 9, 2017. The number of RSUs subject to each Director Founders’ Grant was determined by dividing $120,000 by the closing price of Brighthouse common stock on September 8, 2017 ($54.54), resulting in each independent member of the Board receiving 2,200 RSUs. The Director Founders’ Grants were made pursuant to the Director Plan and are subject to stockholder approval of the Director Plan (seeProposal 6 – Approval of the Brighthouse Financial, Inc. 2017Non-Management Director Stock Compensation Plan). If stockholders approve the Director Plan, the RSUs granted pursuant to the Director Founders’ Grants will vest on September 30, 2018. If stockholders do not approve the Director Plan, the Director Founders’ Grants will be void.
Fiscal 2017 Director Compensation Table
Name
| Fees Earned or Paid in Cash
| Stock Awards1
| All Other Compensation Financial Services
| Total
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Irene Chang Britt
| $68,750
| -
| $0
| $68,750
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C. Edward (“Chuck”) Chaplin
| $118,750
| -
| $0
| $118,750
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Diane E. Offereins
| $68,750
| -
| $0
| $68,750
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Patrick J. Shouvlin
| $71,250
| -
| $0
| $71,250
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William F. Wallace
| $68,750
| -
| $0
| $68,750
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Paul M. Wetzel
| $60,000
| -
| $0
| $60,000
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Fees Earned or Paid in Cash
Each of the six independent members of the Board is entitled to receive an annual cash retainer of $120,000. We provide additional retainers to the Chairman of the Board and to each Director who serves as the Chair of a standing Committee, the amounts of which are set forth above under the heading “Director Compensation.” All cash retainers are paid in quarterly installments in arrears. For Fiscal 2017, each independent member of the Board received two installments of the annual cash retainer, and if applicable, the additional retainer.
Director Stock Ownership Guidelines
In February 2018, the Board, on the recommendation of the Nominating and Corporate Governance Committee, established stock ownership and retention guidelines for the independent members of the Board. Pursuant to the guidelines, each Independent Director is expected to acquire ownership of a number of Shares equal to at least four times the equity portion of the Director’s annual retainer, including for Mr. Chaplin the portion of his annual Chairman of the Board retainer paid in the form of RSUs. Directors are expected to achieve the applicable ownership level within five years from the later of the date the guidelines became effective (January 1, 2018) and the date the Director commences service. Directors are expected to retain at least 50% of the net shares acquired upon vesting of equity awards until the ownership guideline is satisfied.
We understand that our strength depends on the trust of our associates, customers and stockholders. We strive to adhere to the highest standards of business conduct at all times, and put honesty, fairness and trustworthiness at the center of all that we do. We have adopted codes of conduct that reflect these values and enshrine them in our corporate culture.
The Code of Conduct for Financial Management is a “code of ethics” (as defined under the rules of the SEC) that applies to Brighthouse’s CEO, CFO, Chief Accounting Officer (“CAO”), Corporate Controller, and all Brighthouse associates who perform similar functions or who may obtain access to any financial records.
The Code of Conduct for Employees applies to all Brighthouse officers and employees.
The Code of Conduct for Directors applies to members of the Board.
Current, printable versions of these codes of conduct are available on Brighthouse’s website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview.
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2018 Proxy Statement | 33
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Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2018
The Audit Committee is responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm (“independent auditor”). To execute on this responsibility, the Audit Committee annually evaluates the independent auditor’s qualifications, performance and independence. The Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent auditor for the fiscal year ending December 31, 2018. Deloitte’s background knowledge of Brighthouse and its subsidiaries, combined with its industry expertise, has enabled it to carry out its audits of the Company’s financial statements with effectiveness and efficiency. The members of the Audit Committee believe that the continued retention of Deloitte as the Company’s independent auditor is in the best interest of the Company and its stockholders.
In addition, the Audit Committee is involved in the selection of Deloitte’s lead engagement partner and ensures that the lead partner’s engagement is limited to no more than five consecutive years of service (in accordance with SEC rules). The current lead Deloitte engagement partner was designated commencing with the 2017 audit and is eligible to serve in that capacity through the end of the 2021 audit.
We request that our stockholders ratify the appointment of Deloitte as the independent auditor for fiscal year 2018. If the stockholders do not ratify such appointment, the Audit Committee will take note and may reconsider its retention of Deloitte. If such appointment is ratified, the Audit Committee will still have the discretion to replace Deloitte at any time during the year. Representatives of Deloitte are expected to be present at the Annual Meeting and will have the opportunity to make a statement. They will also be available to respond to questions from stockholders regarding their audit of our consolidated financial statements for fiscal year 2017.
The Board of Directors recommends that stockholders voteFORthe ratification of the appointment of Deloitte as our independent registered accounting firm for fiscal year 2018.
Fees Paid to Deloitte & Touche LLP
The following table shows the fees paid by the Company to Deloitte for professional services rendered for the fiscal year ending December 31, 2017. Prior to the Separation, and until the end of the first quarter of 2017, MetLife, as our then-parent, paid all audit, audit-related, tax and other fees of Deloitte. As a result, (i) no fees are reflected for the Company for the fiscal year ending December 31, 2016 and (ii) the 2017 fees listed below exclude the fees paid by MetLife for the first quarter of 2017 (ending March 31, 2017). All services (and related fees) paid by the Company were approved by the Audit Committee.
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Audit CommitteePre-Approval Policy
The Audit Committee established a policy requiring itspre-approval of all audit andnon-audit services provided by the independent auditor, and the policy is designed to ensure that the independent auditor’s independence is not impaired. The policy provides for the Committee’s generalpre-approval, on an annual basis, of audit, audit-related, tax and permissiblenon-audit services up to amounts reasonably determined by the Audit Committee to be appropriate. Any proposed services exceeding such generalpre-approval limits will require the specificpre-approval by the Audit Committee. Specific approval of the Audit Committee is also required for any other services that have not been generallypre-approved by the Audit Committee. The independent auditor is required to periodically report to the Audit Committee regarding (i) the extent of the services it has provided in accordance with the Audit Committee’spre-approval and (ii) the fees for the services performed to date. The Audit Committee annually reviews the policy to ensure its continued appropriateness and compliance with applicable laws and listing standards.
The policy delegates to the Audit Committee Chair the authority topre-approve audit, audit-related or non-audit services up to a maximum of $750,000 between Audit Committee meetings if management deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee. The Chair must report anypre-approval decisions to the Audit Committee at its next scheduled meeting.
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The Audit Committee currently consists of three Independent Directors, and it operates under a written charter adopted by the Board. The Board of Directors has determined that Patrick J. Shouvlin has the requisite experience to be designated an audit committee financial expert as such term is defined under Item 407(d)(5) of RegulationS-K under the Securities Act of 1933, as amended (the“Securities Act”) and the applicable standards of Nasdaq.
Management is responsible for the preparation and presentation of the Company’s financial statements and the reporting process, for its accounting policies and procedures, and for the establishment of effective internal controls and procedures.
The primary duties of the Audit Committee are to assist the Board in its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s systems of internal controls regarding finance, accounting, legal compliance and ethics, (iv) the independence and qualifications of the Company’s independent auditor and (v) the performance of the Company’s internal audit function and independent auditor. The Audit Committee also discusses with management, including the CFO, the CAO, the Chief Auditor, and the Head of Investor Relations, and with the Company’s independent auditor, each quarterly report on Form10-Q and annual report on Form10-K prior to their filing, as well as earnings releases prior to their release to the public. As part of its meetings, the Audit Committee regularly meets in executive session without management present.
The Chief Auditor regularly attends meetings of the Audit Committee and reports directly to the Chair of the Audit Committee, which supports her independence from management and the objectivity of her work. The Audit Committee regularly discusses with the Chief Auditor, both in general session and executive session, the adequacy and effectiveness of the Company’s financial reporting processes, internal control over financial reporting and disclosure controls and procedures, as well asto help preserve the performance of the internal audit function.
The independent auditor is responsible for performing an independent auditintegrity of our financial statements and, as required, of our internal controls over financial reporting, in each case, in accordance with standards established bystatements.
Oversee the Public Company Accounting Oversight Board (“PCAOB”), and the independent auditor issues a report with respect to each of the foregoing items. The independent auditor must also express an opinion as to the conformityaudit of the Company’s financial statements with generally accepted accounting principles and recommend to the effectiveness ofBoard whether the audited financial statements should be included in our internal controls over financial reporting (beginning with the Company’s Annual Report on Form10-K for the year ending December 31, 2018)(“Form10-K”). The independent auditor regularly affirms to the Audit Committee that it remains independent from the Company. The Audit Committee regularly meets with the independent auditor, both in general session and in executive session, to discuss the Company’s financial reporting processes, internal control over financial reporting, disclosure controls and procedures, required communications to the Audit Committee, fraud risks and any other matters that the Committee or the independent auditor deem appropriate.
More information on the Audit Committee and its responsibilities is included in the Audit Committee Charter available on our website at http://investor.brighthousefinancial.com/corporate-governance/ governance-overview.
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In the performance of its oversight function, the Audit Committee has reviewedReview and discussed the audited consolidated financial statements for fiscal year 2017discuss with each of management and the independent auditor. The Audit Committeeauditor our unaudited quarterly financial statements and the Company’s statutory financial results.
Review earnings press releases prior to their release to the public.
Oversee our compliance with legal and regulatory requirements.
Oversee the internal audit function.
Oversee procedures for the receipt, analysis and resolution of complaints concerning accounting, internal control over financial reporting, or auditing matters, as well as for confidential, anonymous submissions by Company employees of concerns regarding accounting or auditing matters.
Oversee our operational risks.
Review reports on our compliance processes and programs.
Appoint, engage, evaluate, approve the compensation of, and oversee the work and the continued independence of our independent auditor have also(the Audit Committee’s role in oversight of Brighthouse’s independent auditor is discussed further inProposal 2).
Coordinate with the matters requiredNominating and Corporate Governance Committee regarding the review of transactions between the Company and Related Persons (see “Certain Relationships and Related Party Transactions”), where appropriate.
Role in Risk Oversight
Discuss with management our risk assessment and risk management policies and practices.
Oversee the management of our risks relating to be discussed by themfinancial statements, financial systems, financial reporting processes, internal control over financial reporting, compliance and auditing, as well as the policies for monitoring and mitigating such risks.
Oversee the disclosure of material risks in our public filings.
Provide ongoing oversight of operational risk, including information technology and cybersecurity risk, as well as the policies for monitoring and mitigating such risks.
Discuss with management the state of regulatory compliance risk.
Compensation Committee
Members:
Diane Offereins (Chair)
Irene Chang Britt
Eileen Mallesch
Paul Wetzel
All Compensation Committee members are independent under the applicable SEC and Nasdaq rules and are“non-employee directors” for purposes of Section 16 of the PCAOB.Exchange Act, and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
The Audit Committee has received from its independent auditorNumber of Meetings in 2018: 9
Key Roles and Responsibilities
Review and approve, on an annual basis, our corporate goals and objectives with respect to CEO compensation, evaluate the written disclosuresCEO’s performance in light of these goals and objectives and recommend to the lettersIndependent Directors for approval the CEO’s annual compensation, including salary, bonus and equity andnon-equity incentive compensation.
Review and approve, on an annual basis, the compensation for our other executive officers, including such officers’ salary, bonus and equity andnon-equity incentive compensation, based on the CEO’s initial recommendations and evaluation of their performance.
Review and approve the Company’s equity andnon-equity incentive compensation plans and arrangements, and approve awards to employees under such plans.
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| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Review and discuss with management the Company’s Compensation Discussion and Analysis, and recommend to the Board that it be included in the Company’s Form10-K or proxy statement.
Consider the results of the most recent stockholder advisory vote on executive compensation, as required by the applicable rulesSection 14A of the PCAOB, as currentlyExchange Act.
Review and approve the Company’s severance arrangements and related plans.
Approve and oversee compensation-related policies, including stock ownership guidelines, and hedging, pledging and clawback policies.
Oversee the Company’s succession planning for its CEO and other executive officers.
Role in effect, regarding the firm’s communicationsRisk Oversight
Review, with the Audit Committee relatingassistance of the Compensation Committee’s independent compensation consultant and Brighthouse’s Chief Risk Officer, incentive compensation arrangements to independence,confirm that incentive compensation does not encourage unnecessary risk taking.
Review and it has discusseddiscuss the independent auditor’s independence with the independent auditor.relationship between risk management policies and practices, corporate strategy and compensation of senior executives.
BasedExecutive Committee
Members:
Eric Steigerwalt (Chair)
Chuck Chaplin
Pat Shouvlin
Number of Meetings in 2018: None
Key Roles and Responsibilities
Act on behalf of the entire Board with respect to certain exigent matters between meetings of the Board.
Finance and Risk Committee
Members:
Chuck Chaplin (Chair)
Meg McCarthy
Diane Offereins
Paul Wetzel
All Finance and Risk Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018: 5
Key Roles and Responsibilities
Oversee the Company’s financial plans, policies and strategies.
Review business and financial metrics to measure Brighthouse’s performance against its business and financial plans, in alignment with our multi-year strategy.
Approve, or recommend for Board approval, equity and debt issuances, share repurchase programs, dividends and mergers and acquisitions.
Oversee the Company’s capital management and liquidity management strategies, including the review and discussions describedapproval of capital and liquidity policies and plans, the availability and use of liquidity management tools and the review of liquidity benchmarks and metrics.
Oversee the capitalization of Brighthouse and its subsidiaries.
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| Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
Oversee the Company’s hedging strategy, including the use of derivative instruments.
Oversee the management, budget and business plan of Brighthouse’s finance and risk management organizations.
Role in this Audit Committee Report,Risk Oversight
Broad oversight of risk management, including approval of our risk appetite statement, and review of our significant risk policies and our performance against risk metrics and targets.
Discuss with management our risk management practices, including how we measure, monitor and manage risk exposures in the Audit Committee recommended to the Board of Directors that the audited financial statements for fiscal year 2017 be included in our Annual Report on Form10-K for the year ended December 31, 2017 for filingenterprise.
Regularly review with the SEC.Chief Risk Officer an assessment of our risk profile, including credit risk, market risk, liquidity risk, operational risk and model risk.
Review the finance and risk management functions, including their management, budget and business plan.
Oversee management’s use of risk metrics and targets and monitor performance against such benchmarks and targets.
Coordinate, through the Finance and Risk Committee’s chair, with management, and with the chairs of the other Committees, to help ensure that all Committees receive necessary information to oversee our risks.
Coordinate, through the Finance and Risk Committee’s chair, with management and the Compensation Committee chair, the Compensation Committee’s oversight of compensation-related risk matters.
Review management’s Own Risk and Solvency Assessment report, a required regulatory filing which assesses our risk exposures and solvency, and describes our risk management organization, structure and processes.
Audit Committee
Patrick J.Members:
Pat Shouvlin (Chair)
C. EdwardChuck Chaplin
William F.Meg McCarthy
Bill Wallace
All Audit Committee members are independent under applicable SEC and Nasdaq rules and are “financially literate.” The Board has determined that Pat Shouvlin, the Committee’s Chair, is an “audit committee financial expert” under applicable SEC rules.
Number of Meetings in 2018: 10
Key Roles and Responsibilities
Oversee our accounting and financial reporting processes, internal control over financial reporting and disclosure controls and procedures, to help preserve the integrity of our financial statements.
Oversee the audit of the Company’s financial statements and recommend to the Board whether the audited financial statements should be included in our Annual Report on Form10-K (“Form10-K”).
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| Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
Review and discuss with management and the independent auditor our unaudited quarterly financial statements and the Company’s statutory financial results.
Review earnings press releases prior to their release to the public.
Oversee our compliance with legal and regulatory requirements.
Oversee the internal audit function.
Oversee procedures for the receipt, analysis and resolution of complaints concerning accounting, internal control over financial reporting, or auditing matters, as well as for confidential, anonymous submissions by Company employees of concerns regarding accounting or auditing matters.
Oversee our operational risks.
Review reports on our compliance processes and programs.
Appoint, engage, evaluate, approve the compensation of, and oversee the work and the continued independence of our independent auditor (the Audit Committee’s role in oversight of Brighthouse’s independent auditor is discussed further inProposal 2).
Coordinate with the Nominating and Corporate Governance Committee regarding the review of transactions between the Company and Related Persons (see “Certain Relationships and Related Party Transactions”), where appropriate.
Role in Risk Oversight
Discuss with management our risk assessment and risk management policies and practices.
Oversee the management of our risks relating to financial statements, financial systems, financial reporting processes, internal control over financial reporting, compliance and auditing, as well as the policies for monitoring and mitigating such risks.
Oversee the disclosure of material risks in our public filings.
Provide ongoing oversight of operational risk, including information technology and cybersecurity risk, as well as the policies for monitoring and mitigating such risks.
Discuss with management the state of regulatory compliance risk.
Compensation Committee
Members:
Diane Offereins (Chair)
Irene Chang Britt
Eileen Mallesch
Paul Wetzel
All Compensation Committee members are independent under applicable SEC and Nasdaq rules and are“non-employee directors” for purposes of Section 16 of the Exchange Act, and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
Number of Meetings in 2018: 9
Key Roles and Responsibilities
Review and approve, on an annual basis, our corporate goals and objectives with respect to CEO compensation, evaluate the CEO’s performance in light of these goals and objectives and recommend to the Independent Directors for approval the CEO’s annual compensation, including salary, bonus and equity andnon-equity incentive compensation.
Review and approve, on an annual basis, the compensation for our other executive officers, including such officers’ salary, bonus and equity andnon-equity incentive compensation, based on the CEO’s initial recommendations and evaluation of their performance.
Review and approve the Company’s equity andnon-equity incentive compensation plans and arrangements, and approve awards to employees under such plans.
2019 Proxy Statement | 27
| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Review and discuss with management the Company’s Compensation Discussion and Analysis, and recommend to the Board that it be included in the Company’s Form10-K or proxy statement.
Consider the results of the most recent stockholder advisory vote on executive compensation, as required by Section 14A of the Exchange Act.
Review and approve the Company’s severance arrangements and related plans.
Approve and oversee compensation-related policies, including stock ownership guidelines, and hedging, pledging and clawback policies.
Oversee the Company’s succession planning for its CEO and other executive officers.
Role in Risk Oversight
Review, with the assistance of the Compensation Committee’s independent compensation consultant and Brighthouse’s Chief Risk Officer, incentive compensation arrangements to confirm that incentive compensation does not encourage unnecessary risk taking.
Review and discuss the relationship between risk management policies and practices, corporate strategy and compensation of senior executives.
Executive Committee
Members:
Eric Steigerwalt (Chair)
Chuck Chaplin
Pat Shouvlin
Number of Meetings in 2018: None
Key Roles and Responsibilities
Act on behalf of the entire Board with respect to certain exigent matters between meetings of the Board.
Finance and Risk Committee
Members:
Chuck Chaplin (Chair)
Meg McCarthy
Diane Offereins
Paul Wetzel
All Finance and Risk Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018: 5
Key Roles and Responsibilities
Oversee the Company’s financial plans, policies and strategies.
Review business and financial metrics to measure Brighthouse’s performance against its business and financial plans, in alignment with our multi-year strategy.
Approve, or recommend for Board approval, equity and debt issuances, share repurchase programs, dividends and mergers and acquisitions.
Oversee the Company’s capital management and liquidity management strategies, including the review and approval of capital and liquidity policies and plans, the availability and use of liquidity management tools and the review of liquidity benchmarks and metrics.
Oversee the capitalization of Brighthouse and its subsidiaries.
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Oversee the Company’s hedging strategy, including the use of derivative instruments.
Oversee the management, budget and business plan of Brighthouse’s finance and risk management organizations.
Role in Risk Oversight
Broad oversight of risk management, including approval of our risk appetite statement, and review of our significant risk policies and our performance against risk metrics and targets.
Discuss with management our risk management practices, including how we measure, monitor and manage risk exposures in the enterprise.
Regularly review with the Chief Risk Officer an assessment of our risk profile, including credit risk, market risk, liquidity risk, operational risk and model risk.
Review the finance and risk management functions, including their management, budget and business plan.
Oversee management’s use of risk metrics and targets and monitor performance against such benchmarks and targets.
Coordinate, through the Finance and Risk Committee’s chair, with management, and with the chairs of the other Committees, to help ensure that all Committees receive necessary information to oversee our risks.
Coordinate, through the Finance and Risk Committee’s chair, with management and the Compensation Committee chair, the Compensation Committee’s oversight of compensation-related risk matters.
Review management’s Own Risk and Solvency Assessment report, a required regulatory filing which assesses our risk exposures and solvency, and describes our risk management organization, structure and processes.
Investment Committee
Members:
Bill Wallace (Chair)
Irene Chang Britt
Eileen Mallesch
Pat Shouvlin
All Investment Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018: 7
Key Roles and Responsibilities
Oversee, on a consolidated basis, the investment activities of Brighthouse and its subsidiaries’ general accounts and consolidated separate accounts.
Oversee the enterprise investment strategy, including strategic and tactical asset allocation decisions.
Review the performance of the investments in our general and consolidated separate accounts, including our derivatives activity.
Review and approve Enterprise Investment Authorities (“EIAs”) relating to our general accounts and consolidated separate accounts.
Review the compliance of our investments with our EIAs.
Authorize or approve investments and the retention and termination of investment advisers, as required by the EIAs.
Oversee the implementation and execution of our investments operating model.
Oversee our engagement of investment advisers to manage general account and the separate account investments.
Review the investment activities and performance of the separate accounts.
Discuss with management the economic and market outlook, and the Company’s invested asset sectors and asset allocation.
Review Brighthouse’s annual investment plan and monitor performance against it.
2019 Proxy Statement | 29
| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Role in Risk Oversight
Oversee the management and mitigation of risks associated with our investment portfolios, including credit risk, portfolio allocation and diversification risk, and counterparty risk.
Oversee the management and mitigation of the risks associated with our investments operating model.
Nominating and Corporate Governance Committee
Members:
Irene Chang Britt (Chair)
Eileen Mallesch
Diane Offereins
Paul Wetzel
All Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018:5
Key Roles and Responsibilities
Review our corporate governance policies and practices, and recommend appropriate changes to the Board.
Recommend qualifications for director candidates to the Board, and periodically review such qualifications with the Board.
Lead the search for qualified director candidates, including the development of search criteria and specifications, and consider director candidates recommended by our stockholders pursuant to the procedures set forth in our Corporate Governance Principles.
Oversee the Director orientation process and continuing education programs.
Recommend to the Board policies and procedures to enhance the Board’s effectiveness, the size and composition of the Board, and the frequency and structure of Board meetings.
Review the Board’s committee structure and composition and recommend committee appointments to the Board.
Review the Company’s Code of Conduct for Directors, Code of Conduct for Financial Management and Code of Conduct for Employees.
Review transactions between the Company and related persons, and coordinate with the Audit Committee where appropriate.
Review and evaluate any conflicts of interest of prospective and current Directors and executive officers. If it is determined that such review involves an investigation or complaint within the purview of the Audit Committee, the Nominating and Corporate Governance Committee may seek guidance from and coordinate the review with the Audit Committee.
Develop standards for determining director independence and make recommendations regarding such determinations to the Board.
Develop and oversee the annual self-evaluations for the Board and Committees.
Review Director compensation on an annual basis.
Oversee the Company’s government relations and political activities in accordance with its political strategy and public policy objectives.
Role in Risk Oversight
Oversee risks related to the Company’s governance.
Oversee our related person transaction policy.
Oversee our regulatory and compliance programs, including the development and implementation of our codes of conduct.
30 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
Board Meetings and Director Attendance
In 2018, the Board held ten meetings and the Committees held a total of 36 meetings. Every Director attended at least 75% of the aggregate number of meetings of the Board and the Committees on which he or she served.
Our director compensation program is designed to fairly compensate our Independent Directors for their work as members of the Board and to align their interests with those of our stockholders by delivering half of the annual retainer in the form of equity-based awards. To benchmark Director compensation, the Independent Directors targeted compensation at the median of the same Comparator Group we used for our NEOs (see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Role of the Compensation Committee and Others in Determining Compensation – Establishing a Compensation Comparator Group”). The table below sets forth the details of the compensation program for independent members of the Board.
Description
|
Amount
|
Form
| ||||
Pay for Board Service | ||||||
Annual retainer | $ | 240,000 | 50% cash and 50% equity | |||
Pay for Service as Chair of the Board or a Board Committee | ||||||
Chairman of the Board retainer | $ | 200,000 | 50% cash and 50% equity | |||
Audit Committee | $ | 22,500 | 100% cash | |||
Other Committees (Compensation Committee; Nominating and Corporate Governance Committee; Finance and Risk Committee; Investment Committee) | $ | 17,500 | 100% cash | |||
In November 2018, on the recommendation of the Nominating and Corporate Governance Committee, the Board approved the award of prorated compensation in consideration of interim service on the Board until the next quarterly or annual payment for two new Directors (Ms. Mallesch and Ms. McCarthy) who were appointed in November 2018.
Annual Equity Awards
The Board approved annual RSU awards as part of our independent director compensation program. Annual awards to Independent Directors generally vest on the earlier of theone-year anniversary of the grant date or the date of the next annual meeting of stockholders. The number of RSUs to be granted to each Independent Director is determined by dividing the value of the equity portion of the annual retainer ($120,000), or a prorated amount of the retainer for service of less than a year, by the closing price of the Company’s common stock on the grant date, rounded down to the nearest whole number. The number of RSUs to be granted to the Chairman for the additional Chairman retainer is determined by dividing the equity portion of the Chairman retainer ($100,000) by the closing price of the Company’s common stock on the grant date, rounded down to the nearest whole number. The RSU grants are made pursuant to the Brighthouse Financial, Inc. 2017Non-Management Director Stock Compensation Plan (the “Director Plan”), which was approved by stockholders at the 2018 Annual Meeting.
Director Founders’ Grants
To further align the interests of our Independent Directors with our stockholders, on August 9, 2017, the Board, on the recommendation of the Nominating and Corporate Governance Committee, authorized an equity award in the form of RSUs to each of the six Independent Directors then in office (the “Director Founders’ Grant”). The Director Founders’ Grants were made under the Director Plan, effective September 8, 2017, and were subject to stockholder approval of the Director Plan. The number of RSUs was determined by dividing 50% of the annual retainer for independent
2019 Proxy Statement | 31
| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
members of the Board ($120,000) by $54.54, the closing price of Brighthouse common stock on the effective award date, rounded down to the nearest whole number.
Compensation paid to our Independent Directors in 2018 is presented in the following table and the accompanying narrative.
2018 Director Compensation Table
Name
| Fees Earned or
| Stock Awards(2, 3)
| Total
| |||||||||
Irene Chang Britt |
| $137,500 |
|
| $225,781 |
|
| $363,281 |
| |||
Chuck Chaplin(4) |
| $237,500 |
|
| $325,781 |
|
| $563,281 |
| |||
Eileen Mallesch(5) |
| $30,000 |
|
| $59,962 |
|
| $89,962 |
| |||
Meg McCarthy(6) |
| $30,000 |
|
| $59,962 |
|
| $89,962 |
| |||
Diane Offereins |
| $137,500 |
|
| $225,781 |
|
| $363,281 |
| |||
Pat Shouvlin |
| $142,500 |
|
| $225,781 |
|
| $368,281 |
| |||
Bill Wallace |
| $137,500 |
|
| $225,781 |
|
| $363,281 |
| |||
Paul Wetzel |
| $120,000 |
|
| $225,781 |
|
| $345,781 |
| |||
| (1) | Fees Earned or Paid in Cash. Each Independent Director is entitled to receive an annual cash retainer of $120,000, or a prorated amount for a lesser period of service. We provide additional retainers to the Chairman of the Board and to each Director who serves as the Chair of a standing Committee, the amounts of which are set forth above under the heading “Director Compensation.” All cash retainers are paid in quarterly installments in arrears. For their service in 2018, Ms. Mallesch and Ms. McCarthy each received one installment of the annual cash retainer. |
| (2) | Stock Awards. Amounts in this column represent the aggregate grant date fair value of each applicable award of RSUs, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. |
| (3) | Annual and Prorated Awards.As part of their annual retainers, each of Ms. Britt, Ms. Offereins, Mr. Shouvlin, Mr. Wallace and Mr. Wetzel was granted an equity award of 2,494 RSUs on May 23, 2018, each with an aggregate grant date fair value equal to $119,961. Mr. Chaplin was granted an equity award of 4,573 RSUs on May 23, 2018 for his service as Director (2,494 RSUs) and Chairman of the Board (2,079 RSUs), with an aggregate grant date fair value equal to $219,961. The Directors’ awards will vest on May 23, 2019, theone-year anniversary of the grant. Ms. Mallesch and Ms. McCarthy were each granted a prorated annual equity award of 1,482 RSUs on November 15, 2018, each with a grant date fair value equal to $59,962, which will vest on the date of the 2019 Annual Meeting. |
Director Founders’ Grants.Each of the Independent Directors serving as of August 9, 2017 (excludes Ms. Mallesch and Ms. McCarthy) also received a grant of 2,200 RSUs under the Director Plan effective September 8, 2017, subject to stockholder approval of the Director Plan, which was received at the 2018 Annual Meeting on May 23, 2018. Since the Director Founders’ Grants were subject to stockholder approval as of their effective date, no grant date fair value was determinable in 2017 under ASC Topic 718 and no value was included in the Fiscal 2017 Director Compensation Table. The value is instead recorded in this column along with the grant date fair value of the annual award of RSUs made in respect of the 2018 fiscal year. Upon stockholder approval of the Director Plan at the 2018 Annual Meeting, the grant date fair value of the Director Founders’ Grants was determined to be $105,820, based on the closing price of the Company’s common stock of $48.10. The fair value of the Director Founders’ Grant RSUs on September 8, 2017 was $119,988. The Director Founders’ Grant RSUs vested and were paid out on September 30, 2018.
32 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
| (4) | The amount includes cash and equity payments for service as Chairman of the Board. |
| (5) | Ms. Mallesch joined the Board on November 15, 2018 and was assigned to the Compensation, Investment, and Nominating and Corporate Governance Committees. |
| (6) | Ms. McCarthy joined the Board on November 15, 2018 and was assigned to the Audit and Finance and Risk Committees. |
Director Stock Ownership Guidelines
In February 2018, the Board, on the recommendation of the Nominating and Corporate Governance Committee, established stock ownership and retention guidelines for Independent Directors. Pursuant to these guidelines, each Independent Director is expected to acquire a number of Shares equal to at least four times the equity portion of the Director’s annual retainer, including for Mr. Chaplin the portion of his annual Chairman of the Board retainer paid in the form of RSUs. Directors are expected to achieve the applicable ownership level within five years from the later of the date the guidelines became effective (January 1, 2018) or the date the Director commences service. Directors are required to retain at least 50% of the net shares acquired upon vesting of equity awards until the ownership guidelines are satisfied. No Directors have sold any vested equity awarded to them.
Compensation Committee Interlocks and Insider Participation
There are no interlocking relationships between any member of our Compensation Committee and any of our executive officers that require disclosure under applicable rules.
Brighthouse’s strength depends on the trust of our associates, distribution partners, customers and stockholders. We strive to adhere to the highest standards of business conduct at all times, and put honesty, fairness and trustworthiness at the center of all that we do. We have adopted codes of conduct that reflect these values and enshrine them in our corporate culture. The Code of Conduct for Employees applies to all Brighthouse officers and employees.
The Code of Conduct for Financial Management is a “code of ethics” (as defined under SEC rules) that applies to Brighthouse’s CEO, CFO, COO, Chief Accounting Officer (“CAO”), Chief Auditor, Corporate Controller, and all other Brighthouse employees who perform similar functions or who may obtain access to any financial records covered by the Code of Conduct for Financial Management.
The Code of Conduct for Employees applies to all Brighthouse officers and employees.
The Code of Conduct for Directors applies to members of the Board.
Current versions of these codes of conduct are available on Brighthouse’s website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview.
2019 Proxy Statement | 33
Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019 | Brighthouse Financial, Inc. |
Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019
The Audit Committee is responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm (“independent auditor”). To execute on this responsibility, the Audit Committee annually evaluates the independent auditor’s qualifications, performance and independence. The Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent auditor for the fiscal year ending December 31, 2019. Deloitte’s background knowledge of Brighthouse and its subsidiaries, combined with its industry expertise, has enabled it to carry out its audits of the Company’s financial statements and the effectiveness of the Company’s internal controls over financial reporting with effectiveness and efficiency. The members of the Audit Committee believe that the continued retention of Deloitte as the Company’s independent auditor is in the best interest of the Company and its stockholders.
In addition, the Audit Committee is involved in the selection of Deloitte’s lead engagement partner and ensures that the lead partner’s engagement is limited to no more than five consecutive years of service (in accordance with SEC rules). The current lead Deloitte engagement partner was designated commencing with the 2017 audit and is eligible to serve in that capacity through the end of the 2021 audit.
We request that our stockholders ratify the appointment of Deloitte as the Company’s independent auditor for fiscal year 2019. If the stockholders do not ratify such appointment, the Audit Committee will take note and may reconsider its retention of Deloitte. If such appointment is ratified, the Audit Committee will still have the discretion to replace Deloitte at any time during the year. Representatives of Deloitte are expected to be present at the Annual Meeting and will have the opportunity to make a statement. They will also be available to respond to questions from stockholders regarding their audit of our consolidated financial statements for fiscal year 2018.
The Board of Directors recommends that stockholders vote “FOR”the ratification of the appointment of Deloitte as our independent registered public accounting firm for fiscal year 2019.
Fees Paid to Deloitte & Touche LLP
The following table shows the fees incurred by the Company for professional services rendered by Deloitte for the fiscal year ending December 31, 2018. Prior to the Separation, and until the end of the first quarter of 2017, MetLife, as our then-parent company, paid all audit, audit-related, tax and other fees of Deloitte. As a result, the 2017 fees listed below exclude the fees paid by MetLife for the first quarter of 2017 (ending March 31, 2017). All services provided to the Company were approved by the Audit Committee.
| Fees (in Thousands) | 2018 | 2017 | ||||||
Audit Fees(1) | $14,505 | $15,250 | ||||||
Audit-Related Fees(2) | $390 | $1,140 | ||||||
Tax Fees(3) | $790 | $980 | ||||||
All Other Fees(4) | $2 | $8 | ||||||
Total | $15,687 | $17,378 | ||||||
| (1) | Audit Fees.Fees billed for professional services for the integrated audit of the consolidated financial statements of the Company and its subsidiaries (as required), including the annual financial statement audit, the reviews of |
34 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019 |
| the interim financial statements included in quarterly reports on Form10-Q for the Company and its subsidiaries (as required), statutory audits or other financial statement audits of subsidiaries, the audit of the effectiveness of our internal controls over financial reporting, assistance with and review of documents filed with the SEC and other services that enable the independent auditor to form an opinion of the consolidated financial statements of the Company and its subsidiaries (as required). |
| (2) | Audit-Related Fees. Fees billed for assurance and related services that are reasonably related to the audit or review of the financial statements of the Company and its subsidiaries (as required) and for other services that are traditionally performed by the independent auditor. Such services consist of fees for employee benefit plan audits, assessments and testing of internal controls, and accounting consultations not directly associated with the annual audit or quarterly reviews. |
| (3) | Tax Fees. Fees billed for permitted tax services, including tax compliance, tax advice and tax planning. |
| (4) | All Other Fees. Fees billed for this category primarily represent accounting research subscription fees. |
Audit CommitteePre-Approval Policy
The Audit Committee has established a policy requiring itspre-approval of all audit andnon-audit services provided by the independent auditor, and this policy is designed to ensure that the independent auditor’s independence is not impaired. The policy provides for the Audit Committee’s generalpre-approval, on an annual basis, of audit, audit-related and permissiblenon-audit services up to amounts reasonably determined by the Audit Committee to be appropriate. The Audit Committee must specificallypre-approve (i) any proposed services that exceed such generalpre-approval limits, (ii) tax services and (iii) any additional services that have not been generallypre-approved by the Audit Committee. The independent auditor is required to periodically report to the Audit Committee the extent of the services that it has provided to the Company and the fees for the services performed to date. The Audit Committee annually reviews the policy to ensure its continued appropriateness and compliance with applicable laws and listing standards.
The policy delegates to the Audit Committee Chair the authority topre-approve audit, audit-related ornon-audit services between meetings for individual projects up to $250,000 (up to a total annual maximum of $750,000) if management deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee. The Audit Committee Chair must report anypre-approval decisions to the Audit Committee at its next scheduled meeting.
The Audit Committee currently consists of four Independent Directors, and operates under a written charter adopted by the Board. The Board has determined that Patrick J. Shouvlin has the requisite experience to be designated an audit committee financial expert as such term is defined under Item 407(d)(5) of RegulationS-K under the Securities Act of 1933, as amended (the “Securities Act”), and the applicable Nasdaq standards.
Management is responsible for the preparation and presentation of the Company’s financial statements, the reporting process, the accounting policies and procedures, and the establishment of effective internal controls and procedures.
The primary duties of the Audit Committee are to assist the Board in its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s systems of internal controls regarding finance, accounting, legal compliance and ethics, (iv) the independence and qualifications of the Company’s independent auditor, (v) the Company’s operational risks and (vi) the performance of the Company’s internal audit function and independent auditor. As part of its meetings, the Audit Committee regularly meets in executive session without management present. Prior to the filing of each quarterly report on Form10-Q and annual report on Form10-K and prior to each earnings release to the public, the Audit Committee discusses such reports with management, the Company’s Chief Auditor and the Company’s independent auditor. As part of these
2019 Proxy Statement | 35
Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019 | Brighthouse Financial, Inc. |
discussions, the Audit Committee also reviews the Company’s statutory financial results and the Company’s internal controls over financial reporting.
The Chief Auditor regularly attends meetings of the Audit Committee and reports directly to the Audit Committee Chair, which supports her independence from management and the objectivity of her work. The Audit Committee regularly discusses with the Chief Auditor, both in general session and executive session, the adequacy and effectiveness of the Company’s financial reporting processes, internal control over financial reporting and disclosure controls and procedures, as well as the performance of the internal audit function.
The independent auditor is responsible for performing an independent audit of our financial statements and, as required, of our internal controls over financial reporting, in each case, in accordance with standards established by the Public Company Accounting Oversight Board (“PCAOB”), and the independent auditor issues a report with respect to each of the foregoing items. The independent auditor must also express an opinion as to the conformity of the Company’s financial statements with generally accepted accounting principles and the effectiveness of its internal controls over financial reporting. The independent auditor regularly affirms to the Audit Committee that it remains independent from the Company. The Audit Committee regularly meets with the independent auditor, both in general session and in executive session, to discuss the Company’s financial reporting processes, internal control over financial reporting, disclosure controls and procedures, required communications to the Audit Committee, fraud risks and any other matters that the Audit Committee or the independent auditor deem appropriate.
More information on the Audit Committee and its responsibilities is included in the Audit Committee Charter available on our website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview. In accordance with the requirements set forth in the Audit Committee Charter, the Audit Committee (i) reviewed and amended the Audit Committee Charter, (ii) approved the charter governing the internal audit function, and (iii) approved the procedures for the confidential submission of complaints to the Audit Committee regarding accounting, internal accounting controls or auditing matters (the “Audit Committee Complaint Procedures”). A copy of the Audit Committee Complaint Procedures is also available on our website.
In the performance of its oversight function, the Audit Committee has reviewed and discussed the audited consolidated financial statements for fiscal year 2018 with each of management and the independent auditor. The Audit Committee and the independent auditor have also discussed the matters required to be discussed by them under the applicable rules of the PCAOB.
The Audit Committee has received from its independent auditor the written disclosures and the letters required by the applicable rules of the PCAOB, as currently in effect, regarding the firm’s communications with the Audit Committee relating to independence, and has discussed the independent auditor’s independence with the independent auditor.
Based on the review and discussions described in this Audit Committee Report, the Audit Committee recommended to the Board of Directors that the audited financial statements for fiscal year 2018 be included in our Annual Report on Form10-K for the year ended December 31, 2018, for filing with the SEC.
Audit Committee
Pat Shouvlin (Chair)
Chuck Chaplin
Meg McCarthy
Bill Wallace
36 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Proposal 3 - to Brighthouse’s Named Executive Officers |
Advisory vote to approve the compensation paid to
Brighthouse’s Named Executive Officers
In accordance with Section 14A of the Exchange Act, we are providing our stockholders with an advisory(non-binding) vote on the compensation paid to our named executive officers. Details on ourofficers (the “NEOs”). Our compensation approach areis described in the Compensation Discussion and Analysis ((““CD&A”) and the accompanying, compensation tables and theaccompanying narrative discussion in accordance with the compensation and disclosure rules of the SEC.discussion.
The CD&A summarizes our executive compensation program. FollowingSince the Separation and our establishment as an independent company, our Board of Directors and Compensation Committee have implemented an executive compensation program that is intended to align the interests of our executive officers with those of our stockholders. A substantial portion of our named executive officers’NEOs’ compensation is in the form of variable,at-risk compensation that requires us to achieve performance objectives that are aligned with our strategy and intended to create long-term stockholder value. Furthermore, we intend to continue to align our executives’ interests with those of our stockholders by utilizing metrics in our short- and long-term incentive programs that are tied to performance outcomes that willare intended to enhance stockholder value.
As a newly public company with a diversified stockholder base, we believe it is critical to understand the views of our stockholders with respect to how we compensate our named executive officers.NEOs. To that end, shortly after the Separation, we have engaged our stockholders in discussions about our executive compensation program, philosophy and objectives. We solicited feedback from stockholders on the decisions we made in connection with the Separation regarding our publicly-disclosed executive compensation program.program for fiscal 2017 and on our 2018 executive compensation program that we previewed in our 2018 Proxy Statement. The feedback we received was generally supportive.
We are asking stockholders to approve the following resolution:
RESOLVED, that the compensation paid to Brighthouse’s Named Executive Officers,NEOs, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative disclosure, is hereby APPROVED.
Although this vote is advisory, the Board of Directors and the Compensation Committee intend to consider the results of the vote, as well as other relevant factors, as we continue to develop our executive compensation program.
The Board of Directors recommends that stockholders vote “FOR” the approval of the compensation of our Named Executive Officers, as disclosed in this Proxy Statement.
382019 Proxy Statement | 2018 Proxy Statement37
Compensation Discussion and Analysis Section 1 – Executive Summary | Brighthouse Financial, Inc. |
Compensation Discussion and Analysis
The Compensation Discussion and Analysis (“This CD&A”) describes our executive compensation philosophy, policies, practices and objectives in the context of our compensation decisions for our named executive officers (the“NEOs”) for the period from August 5, 2017, the2018, our first day following the Separation, through December 31, 2017. We refer to this periodfull year as“Fiscal 2017” throughout the CD&A. Prior to August 5, 2017, compensation to our NEOs and all other employees was paid by one of MetLife’s subsidiaries. Following the completion of the Separation, our NEOs and other employees were compensated by Brighthouse Services, LLC (“Brighthouse Services”) as a subsidiary of Brighthouse and not a subsidiary of MetLife. Brighthouse Services is a payroll and services company and is the employer of all our NEOs and other employees. Please note that, except to the extent an amount is specified as relating to calendar year 2017, all compensation figures and amounts reported in this CD&A, and in the tabular disclosures following, reflect compensation paid and/or granted during Fiscal 2017 only and does not include compensation paid prior to the Separation.independent company.
For Fiscal 2017, our NEOs are comprised of our CEO, CFO and the next three most highly compensated executive officers whose names appear below:
| ||
| ||
| ||
| ||
| ||
The CD&A is organized into four sections:
Section 1 – Executive Summary
Section 2 – Features of our Fiscal 2017 Executive Compensation Program
Section 43 – Additional Compensation Practices and Policies
2018 Proxy Statement | 39Section 4 – 2019 Compensation Program Preview
Brighthouse became an independent publicly-traded company following the completion of the Separation on August 4, 2017, culminatingthe effective date of our Separation from MetLife. We are one of the largest providers of annuities and life insurance in the United States. We specialize in products that are designed to help people protect what they have earned and ensure it lasts. Our goal is to build a focused andbest-in-cost culture that creates value for our customers and our stockholders. We believe that our strategy of offering a targeted set of products to serve our customers and distribution partners, each of which is intended to produce positive statutory distributable cash flows on an accelerated basis compared to our legacy products, will enhance our ability to invest in our business and distribute cash to our stockholders over time. We also believe that our product strategy of offering a more tailored set of new products and our decision to outsource a significant portion of our client administration and service processes is consistent with the listing of Brighthouse’s stockour focus on the Nasdaq Stock Market on August 7, 2017. Sincereducing our expense structure over time.
During 2018, our first dayfull year as an independent company, we have been a major providermade significant progress toward executing our strategy that we believe will deliver long-term value for our stockholders.
For 2018, our NEOs are our CEO, former CFO, the next three most highly compensated executive officers as of life insurancethe end of 2018, and annuity solutions in the United States. Our mission is to assist our customers to achieve financial security by offering annuity and life insurance solutions.one former executive officer who was not serving as of end of 2018.
| Name | Title | |
Eric Steigerwalt | President and Chief Executive Officer | |
Anant Bhalla | Former Executive Vice President and Chief Financial Officer(1) | |
John Rosenthal | Executive Vice President and Chief Investment Officer | |
Christine DeBiase | Executive Vice President, Chief Administrative Officer and General Counsel(2) | |
Conor Murphy | Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer(3) | |
Peter Carlson | Former Executive Vice President and Chief Operating Officer(4) |
| (1) | Mr. Bhalla ceased serving as Chief Financial Officer effective February 27, 2019, and departed Brighthouse effective March 14, 2019. |
| (2) | Ms. DeBiase’s title was changed from Executive Vice President, General Counsel and Corporate Secretary, effective February 2, 2018. |
| (3) | Mr. Murphy was appointed Executive Vice President and Chief Operating Officer, effective June 5, 2018. Until that date, Mr. Murphy served as Executive Vice President and Chief Product and Strategy Officer. Mr. Murphy was also appointed Interim Chief Financial Officer, effective February 27, 2019. |
| (4) | Mr. Carlson stepped down from the position of Executive Vice President and Chief Operating Officer effective June 4, 2018, and remained employed with Brighthouse through December 31, 2018. |
38 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Discussion and Analysis Section 1 – Executive Summary |
Compensation ApproachPhilosophy
Prior to the Separation, our executive officers were officers or employees of MetLife and its subsidiaries, although some or all of the work they performed prior to the Separation related to us or our subsidiaries.
On August 9, 2017, at its first meeting after the Separation, the Compensation Committee of our Board of Directors met and determined the compensation arrangements for our NEOs. The Compensation Committee approvedhas established a compensation arrangements for our NEOs that areprogram rooted in apay-for-performance philosophy.
Our executive compensation program has been designed to:
Ourpay-for-performancephilosophy, which is intended to align the interests and incentives of our NEOs with those of our stockholders by tying a substantial portion of our NEO’sNEOs’ compensation to the achievement of performance metrics that are aligned with the core elements of our strategy.
Fiscal 2017 Compensation Highlights
Calendar year 2017 was a year of transformation for Brighthouse. Throughout 2017, our employees were focused on completing the Separation and establishing Brighthouse as an independent public company. Accordingly, the Fiscal 2017 compensation program was established to support these objectives.
Highlights of our Fiscal 2017 compensation program are described below.
40 | 2018 Proxy Statement
|
Compensation Highlights
Base Salary and Target Total Compensation
Synopsis:Post-Separation base salaries and Target Total Compensation opportunities were established.
Rationale:Base salaries and Target Total Compensation opportunities were determined by reference to the market median of the Comparator Group (as defined below) and established to reflect the NEO’s responsibilities as top executives of a standalone public company.
Annual Variable Incentive Plan (“AVIP”)
Synopsis:AVIP pool for calendar year 2017 was funded at 105% of target level, with NEO payout percentages determined based on individual performance.
Rationale:AVIP is our annual cash incentive plan. The AVIP award pool was approved at slightly above target levels to reflect the Compensation Committee’s quantitative and qualitative assessment of management’s success in accomplishing the Separation.
Separation Bonus
Synopsis:Aone-time 25% bonus enhancement for all Brighthouse employees eligible for AVIP awards.
Rationale:Based on the successful Separation, our NEOs and other employees received an additional cash incentive bonus equal to 25% of his or her respective calendar year 2017 bonus payout under AVIP (“Separation Bonus”). The Separation Bonus was based upon the Company’s achievement of critical post-Separation transition milestones and reflects the extraordinary efforts by all employees to effectuate the Separation.
Founders’ Grants
Synopsis:Shortly following the Separation, these Brighthouse equity awards were issued to all employees of the Company who participate in the Employee Plan. Awards were issued as Restricted Stock Units (“RSUs”) that 100% cliff vest a short time after the anniversary of the grant date, subject to the achievement of one or more performance goals. Founders’ Grants are subject to stockholder approval of the Employee Plan.
Rationale:Founders’ Grants were used to accelerate Brighthouse equity ownership by our officers and to immediately align our NEOs’ interests with those of our stockholders.
Temporary Incentive Deferred Compensation
Synopsis:Deferred compensation credits under the Temporary Incentive Deferred Compensation Plan, as restated (the “Temporary Plan”) to our NEOs as a “make-whole” for equity-based compensation that was forfeited or otherwise forgone as a result of the Separation. Credits under the Temporary Plan are subject to achievement of one or more performance goals. We are seeking stockholder approval of the material terms of the performance goals for certain credits under the Temporary Plan.
Rationale:Our NEOs and other employees received deferred compensation credits under the Temporary Plan to retain and motivate the participating employees through the Separation. These credits were equal to the sum of: (i) outstanding MetLife equity awards that were forfeited upon the Separation, if any, and (ii) 2017 MetLife equity grants that were forgone in light of the planned Separation.
2018 Proxy Statement | 41
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See “Section 3 – The Brighthouse Vision and Strategy – Establishing the 2018 Executive Compensation Program,” for an overview of the key elements of our strategy and the ways in which our compensation program for 2018 is designed to promote and reward achievement of goals that are central to our strategy.
Section 2 – Features of Our Fiscal 2017 Executive Compensation Program
Since the Separation, the Compensation Committee has been responsible for overseeing the development and implementation of our executive compensation program. The Compensation Committee is guided by the following general principles and practices:
paying for performance:variable compensation should be based on Company and individual performance and results that drive increases in stockholder value;
providing competitiveTarget Total Direct Compensation (“Target TDC”) opportunities (defined as base salary plus short-term incentive(“STI”) and long-term incentive(“LTI”) compensation opportunities): we aim to offer compensation that enables Brighthouse to attract, motivate and retain high-performing employees;
aligning executives’ interests with stockholders’: interests:a significant portion of our NEOs’ Target Total CompensationTDC will be delivered in the form of stock-based incentives;
encouraging long-term decision-making:our long-term incentive compensation programs should include awards with multi-year, overlapping incentive performance or restriction periods;
avoiding problematic pay practices:we do not provide excessive perquisites, excessivechange-in-control severance pay or excise taxgross-ups, and we will not reprisereprice stock options without stockholder approval; and
reinforcing strong risk management:our compensation programs are intendedprogram is designed to avoid providing our employees with incentives to take excessive risks.
What’s New in Our 2018 Compensation Program
We regularly review our compensation program to help ensure that it motivates and rewards our associates for performance that supports our strategic goals. In 2018, our first full year as an independent company, we made the following changes to our compensation program:
Element of Our | Changes in 2018 | |
STI Awards | • Established quantitative metrics focusing on areas critical to the work of establishing us as an independent company and that drive long-term value creation. • For 2018, three equally-weighted metrics were used: • TSA Exits; • Annuity Sales; and • Adjusted Statutory Earnings. | |
LTI Awards | • Established an equity mix for 2018 LTI awards with three equally-weighted components: PSUs, RSUs and NQSOs. • Selected the following PSU performance metrics, which measure the Company’s success in executing its long-term strategy over the 2018-2020 performance period: corporate expense reduction (weighted 60%); and capital return (weighted 40%). | |
Clawback Policy | • Adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct. For additional information about our clawback policy, see “Compensation Discussion and Analysis – Section 3 – Additional Compensation Practices and Policies – Clawback Policy.” | |
For more information about our 2018 Compensation Program, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program.”
2019 Proxy Statement | 39
Compensation Discussion and Analysis Section 1 – Executive Summary | Brighthouse Financial, Inc. |
2018Say-on-Pay Vote and Stockholder Engagement
Our stockholders expressed strong support for our compensation program during our engagement meetings and through their overwhelming approval of our 2018Say-on-Pay vote (97% of votes in favor of ourSay-on-Pay proposal). The Compensation Committee considered stockholder feedback and theSay-on-Pay vote results in reviewing our 2018 executive compensation program and making compensation decisions for our NEOs. In particular, the Compensation Committee has adopted quantitative compensation metrics for both STI and LTI awards that are aligned with our near- and long-term strategy.
2018 Performance. As a newly independent company, Brighthouse’s strategic focus is on establishing the foundation for future growth. Consistent with ourpay-for-performance philosophy, the Compensation Committee established metrics for STI and LTI awardsthat directly align with Brighthouse’s strategy. Although 2018 was a challenging year for our stock performance, the Board believes that management has developed a strategy that will lead to long-term growth and that the Company has successfully executed on that strategy in 2018. To align the interests of our NEOs with those of our stockholders, their compensation is weighted heavily toward equity-based compensation whose realized value depends both on the performance of our stock and select performance metrics which we believe will be drivers of long-term value creation.
2018 STI Awards. The table below presents our 2018 metrics for STI Awards (“STI Metrics”), which measure our performance in the areas that are critical to meeting our strategic goals over time. Brighthouse met or exceeded all 2018 STI Metrics targets, resulting in an aggregate Company Performance Factor of 118%. For additional information about our STI Awards, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Elements of 2018 Compensation” and “–2018 STI Awards for Our NEOs.” STI Awards are made under the Amended and Restated Brighthouse Services, LLC Short-Term Incentive Plan (the “STI Plan”).
STI Metric | Performance Link | Performance (Payout | ||||||
| TSA Exits | Exiting our TSAs with MetLife is critical to achieving our strategic goal of controlling corporate expenses and establishing a cost-competitive company. | Target Achieved (100%) | ||||||
| Annuity Sales | Key indicator of our growth prospects and franchise stability. | Maximum Achieved (150%) | ||||||
| Adjusted Statutory Earnings | Important indicator of our financial health that measures our insurance companies’ ability to pay future distributions and the effectiveness of our hedging program. | Target Exceeded (105%) | ||||||
| 2018 Company Performance Factor | 118% | |||||||
2018 STI Award. The Independent Directors, on the Compensation Committee’s recommendation, approved CEO compensation that reflects ourpay-for-performance philosophy. Mr. Steigerwalt’s 2018 goals were a mix of strategic and operational objectives that measured his performance in leading Brighthouse and laying the foundation for achieving our strategic goals. In setting the STI payout percentage at the Company’s aggregate performance factor, the Independent Directors considered Brighthouse’s performance against the 2018 STI Metrics and Mr. Steigerwalt’s accomplishments of his 2018 goals. The following table highlights Mr. Steigerwalt’s 2018 STI Award for performance in 2018, as approved by the Independent Directors in January 2019.
| Name | Base Salary | 2018 STI Target | 2018 STI Payout Percentage | 2018 STI Award | ||||
Eric Steigerwalt | $900,000 | $1,800,000 | 118% | $2,124,000 |
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| Brighthouse Financial, Inc. | Compensation Discussion and Analysis Section 1 – Executive Summary |
2018 LTI Award. In February 2018, the Independent Directors granted Mr. Steigerwalt a 2018 LTI Award at his LTI target of $4,500,000, consisting of 1/3rd RSUs, 1/3rd PSUs and 1/3rd NQSOs. The actual number of PSUs issued will depend on Brighthouse’s actual performance at the end of the 2018-2020 performance period.
Additional information about Mr. Steigerwalt’s 2018 STI and LTI Awards is presented in “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program” and “2018 Compensation Tables.”
2019 LTI Award. In January 2019, the Independent Directors also granted Mr. Steigerwalt a 2019 LTI Award at his LTI target of $4,500,000, consisting of 70% PSUs and 30% RSUs. The actual number of PSUs issued will depend on Brighthouse’s actual performance at the end of the 2019-2021 performance period. For more information about 2019 LTI Awards, see “Compensation Discussion and Analysis – Section 4 – 2019 Compensation Program Preview – 2019 LTI Awards.” Pursuant to SEC disclosure rules, 2019 LTI Awards are not included in the “2018 Compensation Tables.”
Key Executive Compensation Practices
| What we do |
 | Direct Compensation is in the form of variable,at-risk elements that executives only if we achieve performance goals that create stockholder value. | ||||
|
Stock Ownership | |||||
| Clawback Policy.We adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct. | |||||
| Minimum Vesting achievement of performance goals | |||||
| Stockholder Engagement.Since the Separation, we have actively engaged with our stockholders on various topics, including our executive compensation program. We recognize the importance of our stockholders’ perspectives in the compensation programs. | |||||
| Independent Compensation Consultant.Our Compensation Committee retained consultant to advise on all aspects of our executive compensation program. | |||||
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| Double-Trigger Vesting of Equity Awards upon a Change of Control. | |||||
| What we don’t do |
 | Gross-ups on Excise | ||||
|
Reprice Stock Options.Our equity incentive plans prohibit us from repricing stock options or stock appreciation rights without stockholder approval. | |||||
| Excessive | |||||
| Hedging and Pledging.Our insider trading policy prohibits all employees and Directors from engaging in hedging or pledging transactions. | |||||
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Compensation Discussion and Analysis Section 2 – Our 2018 Executive Compensation Program | Brighthouse Financial, Inc. |
Fiscal 2017Planned Changes for 2019
We have committed to a regular review of our compensation program to help ensure that it evolves with our maturing organization and continues to motivate and reward our associates for performance that supports our strategic goals. To this end, the Compensation Committee has approved several changes to our compensation program, which are described in “Section 4 – 2019 Compensation Program Preview.”
Section 2 – Our 2018 Executive Compensation Program
2018 Compensation Setting Process
Prior to the Separation, we were a subsidiary of MetLife and our NEOs and all other employees were compensated by a subsidiary of MetLife based on MetLife’s compensation program for similarly-situated employees of MetLife and its subsidiaries. In addition, because we were not yet an independent public company, we did not have a compensation committee comprised of Independent Directors prior to the Separation. We and MetLife believed it would be appropriate for our post-Separation Compensation Committee and Board to make determinations and decisions about how our NEOs should be compensated.
Because the Separation occurred more thanhalf-way through calendar year 2017, we believed it was appropriate for ourOur Human Resources department in consultation with Willis Towers Watsonorganization (“WTWHR”), to be was primarily responsible for preparingperforming market benchmarking and setting context for 2018 compensation recommendations for Fiscal 2017 for our NEOs and other members of our senior management, which we collectively refer to as the Senior Leadership Management Group (the “SLMG”). As described below, shortly after the Separation, our newly formed Compensation Committee considered theIn developing its recommendations, HR consulted with Willis Towers Watson (“WTW”), which serves as management’s compensation recommendations prepared in the period leading up to the Separation and ultimately determined to adopt such recommendations for the NEOs and other members of the SLMG. Going forward, our Compensation Committee, with input from SBCG, will be primarily responsible for reviewing and determining all elements of Total Compensation for our NEOs and other members of the SLMG.consultant.
Our executive compensation program and accompanying pay positioning strategy have been designedaims to provide our executives with Target Total CompensationTDC that uses market median as an important reference point, but recognizerecognizes that the positioning of individual executives may vary from that strategy with considerationdue to a variety of factors, including criticality of role, skills, experience and strategic priorities. To determine pay positioning, we used WTW’s proprietary database of executive compensation at large diversified insurers (“DIS”) as our primary data point.
Role of the Compensation Committee and Others in Determining Compensation
Compensation Committee’s Role. The Compensation Committee is responsible for establishing and implementing our executive compensation philosophy and structure. Pursuant to its written charter, the responsibilities of the Compensation Committee include, among other things:
Assisting the Board in fulfilling its responsibility to oversee the development and administration of compensation programs for our executives and other employees;
Approving the goals and objectives relevant to our CEO’s compensation, evaluating at least annually our CEO’s performance in light of such goals and objectives, and recommending, for approval by the Independent Directors, the CEO’s annual compensation based on such evaluation;
Reviewing and approving on an annual basis the compensation of the other executive officers of the Company (as determined by the Compensation Committee);
Reviewing and approving our equity andnon-equity incentive compensation plans and arrangements, and where appropriate or required, recommending such plans and arrangements for approval by the Board and/or our stockholders; and
Reviewing incentive compensation arrangements to confirm that incentive pay does not encourage our executive officers to take unnecessary risks, and reviewing and discussing the relationship between risk management policies and practices, corporate strategy and senior executive compensation.
Management’s Role. As discussed above, HR, in consultation with WTW, is primarily responsible for preparing Target TDC recommendations for our SLMG, which includes the NEOs. As part of ouryear-end compensation process, our CEO oversaw the review of each SLMG member’s performance during 2018. Based on the CEO’s assessment of each SLMG member’s performance, HR prepared and presented compensation recommendations for each SLMG member to the Compensation Committee.
HR consulted with WTW to gather compensation data that was used to prepare Target TDC recommendations for the SLMG, which includes the NEOs. The CEO developed recommendations for all elements of pay for the members of the SLMG, other than himself, and discussed these recommendations with the Compensation Committee. The Compensation Committee, in consultation with SBCG, reviewed and approved management’s compensation recommendations for all other members of the SLMG, including our NEOs, as described below. The Independent
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| Brighthouse Financial, Inc. | Compensation Discussion and Analysis Section 2 – Our 2018 Executive Compensation Program |
Directors approved the Target TDC and final compensation for our CEO, Mr. Steigerwalt, on the recommendation of the Compensation Committee.
Compensation Consultants’ Role. Under its written charter, the Compensation Committee has the authority to retain advisers to assist it in the discharge of its duties. In November 2017, the Compensation Committee retained SBCG as its independent compensation consultant. The Compensation Committee assessed SBCG’s independence in light of SEC standards and determined that no conflicts of interest or independence concerns exist. SBCG reports directly to the Compensation Committee, and the Compensation Committee has the sole authority to approve the fees and other terms of the retention of SBCG as its independent compensation consultant. SBCG is expected to attend all Compensation Committee meetings and to provide advice to the Compensation Committee on all aspects of the Company’s executive compensation program, including the form, mix and amount of Target TDC. SBCG has assisted the Compensation Committee in its implementation of our compensation principles and practices. SBCG has advised the Compensation Committee on the development of the Company’s 2018 STI and LTI compensation arrangements, including the STI and LTI metrics for 2018 and the forms of equity-based incentives awarded to members of the SLMG in 2018.
HR has retained WTW to provide assistance related to our executive compensation program. It is expected that WTW will continue to advise HR on matters related to our executive compensation program. Additional information about WTW’s role is provided above under the heading “Management’s Role.”
Establishing a Compensation Comparator Group.For compensation benchmarking purposes, we Members: Diane Offereins (Chair) Irene Chang Britt Eileen Mallesch Paul Wetzel All Compensation Committee members are independent under applicable SEC and Nasdaq rules and are“non-employee directors” for purposes of Section 16 of the Exchange Act, and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Key Roles and Responsibilities Review and approve, on an annual basis, our corporate goals and objectives with respect to CEO compensation, evaluate the Review and approve, on an annual basis, the Review and approve the usealso used a group of peer companies within our industry that are similar to us in terms of assets and revenues and with which we compete for executive talent (the “Comparator GroupCompensation CommitteeIn anticipationNumber of Meetings in 2018: 9Separation, our Human Resources departmentCEO’s performance in light of these goals and WTW constructedobjectives and recommend to the Comparator GroupIndependent Directors for approval the CEO’s annual compensation, including salary, bonus and usedequity andnon-equity incentive compensation.companies in the Comparator Group as the market reference for developing pay recommendationscompensation for our NEOsother executive officers, including such officers’ salary, bonus and other membersequity andnon-equity incentive compensation, based on the CEO’s initial recommendations and evaluation of their performance.SLMG. The Comparator Group consists of fourteen publicly-traded companies in the insurance industry with assets between 0. 25Company’s equity andnon-equity incentive compensation plans and arrangements, and approve awards to 2.0 times those of Brighthouse and/or revenues between 0.4 to 2.5 times those of Brighthouse. As Brighthouse markets its products solely in the U.S.,comparably-sized insurers with significant global operations (e.g., MetLife) were excluded from the Comparator Group.employees under such plans.
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In August 2017, shortly afterReview and discuss with management the Separation,Company’s Compensation Discussion and Analysis, and recommend to the Board that it be included in the Company’s Form10-K or proxy statement.
Consider the results of the most recent stockholder advisory vote on executive compensation, as required by Section 14A of the Exchange Act.
Review and approve the Company’s severance arrangements and related plans.
Approve and oversee compensation-related policies, including stock ownership guidelines, and hedging, pledging and clawback policies.
Oversee the Company’s succession planning for its CEO and other executive officers.
Role in Risk Oversight
Review, with the assistance of the Compensation Committee’s independent compensation consultant and Brighthouse’s Chief Risk Officer, incentive compensation arrangements to confirm that incentive compensation does not encourage unnecessary risk taking.
Review and discuss the relationship between risk management policies and practices, corporate strategy and compensation of senior executives.
Executive Committee
Members:
Eric Steigerwalt (Chair)
Chuck Chaplin
Pat Shouvlin
Number of Meetings in 2018: None
Key Roles and Responsibilities
Act on behalf of the entire Board with respect to certain exigent matters between meetings of the Board.
Finance and Risk Committee
Members:
Chuck Chaplin (Chair)
Meg McCarthy
Diane Offereins
Paul Wetzel
All Finance and Risk Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018: 5
Key Roles and Responsibilities
Oversee the Company’s financial plans, policies and strategies.
Review business and financial metrics to measure Brighthouse’s performance against its business and financial plans, in alignment with our Human Resources department recommendedmulti-year strategy.
Approve, or recommend for Board approval, equity and debt issuances, share repurchase programs, dividends and mergers and acquisitions.
Oversee the Company’s capital management and liquidity management strategies, including the review and approval of capital and liquidity policies and plans, the availability and use of liquidity management tools and the Compensation Committee approvedreview of liquidity benchmarks and metrics.
Oversee the following Comparator Group:capitalization of Brighthouse and its subsidiaries.
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In connection
Oversee the Company’s hedging strategy, including the use of derivative instruments.
Oversee the management, budget and business plan of Brighthouse’s finance and risk management organizations.
Role in Risk Oversight
Broad oversight of risk management, including approval of our risk appetite statement, and review of our significant risk policies and our performance against risk metrics and targets.
Discuss with management our risk management practices, including how we measure, monitor and manage risk exposures in the enterprise.
Regularly review with the constructionChief Risk Officer an assessment of our risk profile, including credit risk, market risk, liquidity risk, operational risk and model risk.
Review the finance and risk management functions, including their management, budget and business plan.
Oversee management’s use of risk metrics and targets and monitor performance against such benchmarks and targets.
Coordinate, through the Finance and Risk Committee’s chair, with management, and with the chairs of the Comparator Group,other Committees, to help ensure that all Committees receive necessary information to oversee our Human Resources department consultedrisks.
Coordinate, through the Finance and Risk Committee’s chair, with WTW to gather compensation data that was used to prepare Target Total Compensation recommendations for the SLMG, including the NEOs. Target Total Compensation recommendations were prepared for each member of the SLMG by reference to the compensation datamanagement and presented to the Compensation Committee chair, the Compensation Committee’s oversight of compensation-related risk matters.
Review management’s Own Risk and Solvency Assessment report, a required regulatory filing which assesses our risk exposures and solvency, and describes our risk management organization, structure and processes.
Investment Committee
Members:
Bill Wallace (Chair)
Irene Chang Britt
Eileen Mallesch
Pat Shouvlin
All Investment Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018: 7
Key Roles and Responsibilities
Oversee, on a consolidated basis, the investment activities of Brighthouse and its subsidiaries’ general accounts and consolidated separate accounts.
Oversee the enterprise investment strategy, including strategic and tactical asset allocation decisions.
Review the performance of the investments in our general and consolidated separate accounts, including our derivatives activity.
Review and approve Enterprise Investment Authorities (“EIAs”) relating to our general accounts and consolidated separate accounts.
Review the compliance of our investments with our EIAs.
Authorize or approve investments and the retention and termination of investment advisers, as required by the EIAs.
Oversee the implementation and execution of our investments operating model.
Oversee our engagement of investment advisers to manage general account and the separate account investments.
Review the investment activities and performance of the separate accounts.
Discuss with management the economic and market outlook, and the Company’s invested asset sectors and asset allocation.
Review Brighthouse’s annual investment plan and monitor performance against it.
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| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Role in Risk Oversight
Oversee the management and mitigation of risks associated with our investment portfolios, including credit risk, portfolio allocation and diversification risk, and counterparty risk.
Oversee the management and mitigation of the risks associated with our investments operating model.
Nominating and Corporate Governance Committee
Members:
Irene Chang Britt (Chair)
Eileen Mallesch
Diane Offereins
Paul Wetzel
All Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018:5
Key Roles and Responsibilities
Review our corporate governance policies and practices, and recommend appropriate changes to the Board.
Recommend qualifications for director candidates to the Board, and periodically review such qualifications with the Board.
Lead the search for qualified director candidates, including the development of search criteria and specifications, and consider director candidates recommended by our stockholders pursuant to the procedures set forth in our Corporate Governance Principles.
Oversee the Director orientation process and continuing education programs.
Recommend to the Board policies and procedures to enhance the Board’s effectiveness, the size and composition of the Board, and the frequency and structure of Board meetings.
Review the Board’s committee structure and composition and recommend committee appointments to the Board.
Review the Company’s Code of Conduct for Directors, Code of Conduct for Financial Management and Code of Conduct for Employees.
Review transactions between the Company and related persons, and coordinate with the Audit Committee where appropriate.
Review and evaluate any conflicts of interest of prospective and current Directors and executive officers. If it is determined that such review involves an investigation or complaint within the purview of the Audit Committee, the Nominating and Corporate Governance Committee may seek guidance from and coordinate the review with the Audit Committee.
Develop standards for determining director independence and make recommendations regarding such determinations to the Board.
Develop and oversee the annual self-evaluations for the Board and Committees.
Review Director compensation on an annual basis.
Oversee the Company’s government relations and political activities in accordance with its political strategy and public policy objectives.
Role in Risk Oversight
Oversee risks related to the Company’s governance.
Oversee our related person transaction policy.
Oversee our regulatory and compliance programs, including the development and implementation of our codes of conduct.
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Board Meetings and Director Attendance
In 2018, the Board held ten meetings and the Committees held a total of 36 meetings. Every Director attended at its first meetingleast 75% of the aggregate number of meetings of the Board and the Committees on August 9, 2017. Thewhich he or she served.
Director Compensation Committee reviewed the recommendation
Our director compensation program is designed to fairly compensate our Independent Directors for our Chief Executive Officer and recommended that the independenttheir work as members of the Board approveand to align their interests with those of our stockholders by delivering half of the Target Total Compensationannual retainer in the form of equity-based awards. To benchmark Director compensation, the Independent Directors targeted compensation at the median of the same Comparator Group we used for our ChiefNEOs (see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Officer, Mr. Steigerwalt. The independent members of the Board, on the recommendation of the Compensation Committee, approved Mr. Steigerwalt’s Target Total Compensation at their meeting on August 9, 2017. The Compensation Committee reviewed and approved the compensation recommendations for all other members of the SLMG, including our NEOs. Our Chief Executive Officer was involved in discussions with our Human Resources department and our Compensation Committee regarding Target Total Compensation recommendations for members of the SLMG other than himself.
In November 2017, the Compensation Committee retained SBCG as its independent compensation consultant. From such date, SBCG has advised, and will continue to advise, the Compensation Committee on the Company’s overall executive compensation program, including executive pay levels and mix, design of our short- and long-term incentive programs, and competitiveness of the Company’s executive compensation. See “Program – Role of the Compensation Committee and Others in Determining Compensation – Establishing a Compensation Consultant’s RoleComparator Group,” below, for additional information regarding SBCG’s role in our executive compensation program.
Fiscal 2017 Target Total Compensation Opportunities
). The table below showssets forth the post-Separation base salary, target annual incentive opportunity (as a percentagedetails of base salary) and target long-term equity incentive opportunity (as a percentage of base salary)the compensation program for each NEO that the independent members of the Board.
Description
|
Amount
|
Form
| ||||
Pay for Board Service | ||||||
Annual retainer | $ | 240,000 | 50% cash and 50% equity | |||
Pay for Service as Chair of the Board or a Board Committee | ||||||
Chairman of the Board retainer | $ | 200,000 | 50% cash and 50% equity | |||
Audit Committee | $ | 22,500 | 100% cash | |||
Other Committees (Compensation Committee; Nominating and Corporate Governance Committee; Finance and Risk Committee; Investment Committee) | $ | 17,500 | 100% cash | |||
In November 2018, on the recommendation of the Nominating and Corporate Governance Committee, the Board (for Mr. Steigerwalt)approved the award of prorated compensation in consideration of interim service on the Board until the next quarterly or annual payment for two new Directors (Ms. Mallesch and Ms. McCarthy) who were appointed in November 2018.
Annual Equity Awards
The Board approved annual RSU awards as part of our independent director compensation program. Annual awards to Independent Directors generally vest on the earlier of theone-year anniversary of the grant date or the date of the next annual meeting of stockholders. The number of RSUs to be granted to each Independent Director is determined by dividing the value of the equity portion of the annual retainer ($120,000), or a prorated amount of the retainer for service of less than a year, by the closing price of the Company’s common stock on the grant date, rounded down to the nearest whole number. The number of RSUs to be granted to the Chairman for the additional Chairman retainer is determined by dividing the equity portion of the Chairman retainer ($100,000) by the closing price of the Company’s common stock on the grant date, rounded down to the nearest whole number. The RSU grants are made pursuant to the Brighthouse Financial, Inc. 2017Non-Management Director Stock Compensation Committee (for all other NEOs)Plan (the “Director Plan”), which was approved in August 2017. The base salary amounts became effectiveby stockholders at the 2018 Annual Meeting.
Director Founders’ Grants
To further align the interests of our Independent Directors with our stockholders, on August 15, 2017.9, 2017, the Board, on the recommendation of the Nominating and Corporate Governance Committee, authorized an equity award in the form of RSUs to each of the six Independent Directors then in office (the “Director Founders’ Grant”). The AVIP payouts, Separation Bonuses andDirector Founders’ Grants valueswere made under the Director Plan, effective September 8, 2017, and were subject to stockholder approval of the Director Plan. The number of RSUs was determined by dividing 50% of the annual retainer for our NEOs were based on the amounts in the below on the following page.independent
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| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
members of the Board ($120,000) by $54.54, the closing price of Brighthouse common stock on the effective award date, rounded down to the nearest whole number.
Compensation paid to our Independent Directors in 2018 is presented in the following table and the accompanying narrative.
2018 Director Compensation Table
Name
| Fees Earned or
| Stock Awards(2, 3)
| Total
| |||||||||
Irene Chang Britt |
| $137,500 |
|
| $225,781 |
|
| $363,281 |
| |||
Chuck Chaplin(4) |
| $237,500 |
|
| $325,781 |
|
| $563,281 |
| |||
Eileen Mallesch(5) |
| $30,000 |
|
| $59,962 |
|
| $89,962 |
| |||
Meg McCarthy(6) |
| $30,000 |
|
| $59,962 |
|
| $89,962 |
| |||
Diane Offereins |
| $137,500 |
|
| $225,781 |
|
| $363,281 |
| |||
Pat Shouvlin |
| $142,500 |
|
| $225,781 |
|
| $368,281 |
| |||
Bill Wallace |
| $137,500 |
|
| $225,781 |
|
| $363,281 |
| |||
Paul Wetzel |
| $120,000 |
|
| $225,781 |
|
| $345,781 |
| |||
| (1) | Fees Earned or Paid in Cash. Each Independent Director is entitled to receive an annual cash retainer of $120,000, or a prorated amount for a lesser period of service. We provide additional retainers to the Chairman of the Board and to each Director who serves as the Chair of a standing Committee, the amounts of which are set forth above under the heading “Director Compensation.” All cash retainers are paid in quarterly installments in arrears. For their service in 2018, Ms. Mallesch and Ms. McCarthy each received one installment of the annual cash retainer. |
| (2) | Stock Awards. Amounts in this column represent the aggregate grant date fair value of each applicable award of RSUs, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. |
| (3) | Annual and Prorated Awards.As part of their annual retainers, each of Ms. Britt, Ms. Offereins, Mr. Shouvlin, Mr. Wallace and Mr. Wetzel was granted an equity award of 2,494 RSUs on May 23, 2018, each with an aggregate grant date fair value equal to $119,961. Mr. Chaplin was granted an equity award of 4,573 RSUs on May 23, 2018 for his service as Director (2,494 RSUs) and Chairman of the Board (2,079 RSUs), with an aggregate grant date fair value equal to $219,961. The Directors’ awards will vest on May 23, 2019, theone-year anniversary of the grant. Ms. Mallesch and Ms. McCarthy were each granted a prorated annual equity award of 1,482 RSUs on November 15, 2018, each with a grant date fair value equal to $59,962, which will vest on the date of the 2019 Annual Meeting. |
Director Founders’ Grants.Each of the Independent Directors serving as of August 9, 2017 (excludes Ms. Mallesch and Ms. McCarthy) also received a grant of 2,200 RSUs under the Director Plan effective September 8, 2017, subject to stockholder approval of the Director Plan, which was received at the 2018 Annual Meeting on May 23, 2018. Since the Director Founders’ Grants were subject to stockholder approval as of their effective date, no grant date fair value was determinable in 2017 under ASC Topic 718 and no value was included in the Fiscal 2017 Director Compensation Table. The value is instead recorded in this column along with the grant date fair value of the annual award of RSUs made in respect of the 2018 fiscal year. Upon stockholder approval of the Director Plan at the 2018 Annual Meeting, the grant date fair value of the Director Founders’ Grants was determined to be $105,820, based on the closing price of the Company’s common stock of $48.10. The fair value of the Director Founders’ Grant RSUs on September 8, 2017 was $119,988. The Director Founders’ Grant RSUs vested and were paid out on September 30, 2018.
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| Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
| (4) | The amount includes cash and equity payments for service as Chairman of the Board. |
| (5) | Ms. Mallesch joined the Board on November 15, 2018 and was assigned to the Compensation, Investment, and Nominating and Corporate Governance Committees. |
| (6) | Ms. McCarthy joined the Board on November 15, 2018 and was assigned to the Audit and Finance and Risk Committees. |
Director Stock Ownership Guidelines
In February 2018, the Board, on the recommendation of the Nominating and Corporate Governance Committee, established stock ownership and retention guidelines for Independent Directors. Pursuant to these guidelines, each Independent Director is expected to acquire a number of Shares equal to at least four times the equity portion of the Director’s annual retainer, including for Mr. Chaplin the portion of his annual Chairman of the Board retainer paid in the form of RSUs. Directors are expected to achieve the applicable ownership level within five years from the later of the date the guidelines became effective (January 1, 2018) or the date the Director commences service. Directors are required to retain at least 50% of the net shares acquired upon vesting of equity awards until the ownership guidelines are satisfied. No Directors have sold any vested equity awarded to them.
Compensation Committee Interlocks and Insider Participation
There are no interlocking relationships between any member of our Compensation Committee and any of our executive officers that require disclosure under applicable rules.
Brighthouse’s strength depends on the trust of our associates, distribution partners, customers and stockholders. We strive to adhere to the highest standards of business conduct at all times, and put honesty, fairness and trustworthiness at the center of all that we do. We have adopted codes of conduct that reflect these values and enshrine them in our corporate culture. The Code of Conduct for Employees applies to all Brighthouse officers and employees.
The Code of Conduct for Financial Management is a “code of ethics” (as defined under SEC rules) that applies to Brighthouse’s CEO, CFO, COO, Chief Accounting Officer (“CAO”), Chief Auditor, Corporate Controller, and all other Brighthouse employees who perform similar functions or who may obtain access to any financial records covered by the Code of Conduct for Financial Management.
The Code of Conduct for Employees applies to all Brighthouse officers and employees.
The Code of Conduct for Directors applies to members of the Board.
Current versions of these codes of conduct are available on Brighthouse’s website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview.
2019 Proxy Statement | 33
Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s
|
Name
| Base Salary
|
Target Annual (as % of Base Salary)
|
Target Long-Term (as % of Base Salary)
| Target Total
| ||||
Eric T. Steigerwalt | $900,000 | 200% | 500% | $7,200,000 | ||||
Anant Bhalla | $600,000 | 140% | 175% | $2,490,000 | ||||
John L. Rosenthal | $550,000 | 195% | 200% | $2,722,500 | ||||
Peter M. Carlson | $600,000 | 150% | 200% | $2,700,000 | ||||
Christine M. DeBiase | $575,000 | 110% | 175% | $2,213,750 | ||||
Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019
The amountAudit Committee is responsible for the appointment, compensation, retention and oversight of each elementour independent registered public accounting firm (“independent auditor”). To execute on this responsibility, the Audit Committee annually evaluates the independent auditor’s qualifications, performance and independence. The Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent auditor for the fiscal year ending December 31, 2019. Deloitte’s background knowledge of Target Total Compensation for our NEOs was informed by market data regarding senior executive compensation at companies withinBrighthouse and its subsidiaries, combined with its industry expertise, has enabled it to carry out its audits of the Comparator Group, as well as survey data from WTW’s proprietary databaseCompany’s financial statements and the effectiveness of executive compensation at large diversified insurers. In preparing the recommendations, our Human Resources department sought to provide Target Total Compensation toCompany’s internal controls over financial reporting with effectiveness and efficiency. The members of the SLMG, includingAudit Committee believe that the NEOs, based on Brighthouse’s median pay positioning strategycontinued retention of Deloitte as the Company’s independent auditor is in the best interest of the Company and individual factors (including criticalityits stockholders.
In addition, the Audit Committee is involved in the selection of role, skills, experience,Deloitte’s lead engagement partner and strategic priorities)ensures that the lead partner’s engagement is limited to no more than five consecutive years of service (in accordance with SEC rules). The current lead Deloitte engagement partner was designated commencing with the 2017 audit and is eligible to serve in that capacity through the end of the 2021 audit.
We request that our stockholders ratify the appointment of Deloitte as the Company’s independent auditor for fiscal year 2019. If the stockholders do not ratify such appointment, the Audit Committee will take note and may influence positioning relativereconsider its retention of Deloitte. If such appointment is ratified, the Audit Committee will still have the discretion to replace Deloitte at any time during the year. Representatives of Deloitte are expected to be present at the Annual Meeting and will have the opportunity to make a statement. They will also be available to respond to questions from stockholders regarding their audit of our consolidated financial statements for fiscal year 2018.
The Board of Directors recommends that stockholders vote “FOR”the ratification of the appointment of Deloitte as our independent registered public accounting firm for fiscal year 2019.
Fees Paid to Deloitte & Touche LLP
The following table shows the fees incurred by the Company for professional services rendered by Deloitte for the fiscal year ending December 31, 2018. Prior to the median. The Human Resources department did not specifically target individual elements or overall levels of compensation at a specific percentageSeparation, and until the end of the median. Instead,first quarter of 2017, MetLife, as our then-parent company, paid all audit, audit-related, tax and other fees of Deloitte. As a result, the Human Resources department considered ranges for each element of compensation because it viewed market data as an approximation2017 fees listed below exclude the fees paid by MetLife for the overall marketfirst quarter of 2017 (ending March 31, 2017). All services provided to the Company were approved by the Audit Committee.
| Fees (in Thousands) | 2018 | 2017 | ||||||
Audit Fees(1) | $14,505 | $15,250 | ||||||
Audit-Related Fees(2) | $390 | $1,140 | ||||||
Tax Fees(3) | $790 | $980 | ||||||
All Other Fees(4) | $2 | $8 | ||||||
Total | $15,687 | $17,378 | ||||||
| (1) | Audit Fees.Fees billed for professional services for the integrated audit of the consolidated financial statements of the Company and its subsidiaries (as required), including the annual financial statement audit, the reviews of |
34 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019 |
| the interim financial statements included in quarterly reports on Form10-Q for the Company and its subsidiaries (as required), statutory audits or other financial statement audits of subsidiaries, the audit of the effectiveness of our internal controls over financial reporting, assistance with and review of documents filed with the SEC and other services that enable the independent auditor to form an opinion of the consolidated financial statements of the Company and its subsidiaries (as required). |
| (2) | Audit-Related Fees. Fees billed for assurance and related services that are reasonably related to the audit or review of the financial statements of the Company and its subsidiaries (as required) and for other services that are traditionally performed by the independent auditor. Such services consist of fees for employee benefit plan audits, assessments and testing of internal controls, and accounting consultations not directly associated with the annual audit or quarterly reviews. |
| (3) | Tax Fees. Fees billed for permitted tax services, including tax compliance, tax advice and tax planning. |
| (4) | All Other Fees. Fees billed for this category primarily represent accounting research subscription fees. |
Audit CommitteePre-Approval Policy
The Audit Committee has established a policy requiring itspre-approval of all audit andnon-audit services provided by the independent auditor, and this policy is designed to ensure that the independent auditor’s independence is not impaired. The policy provides for a particular position, with ultimate recommendations basedthe Audit Committee’s generalpre-approval, on an annual basis, of audit, audit-related and permissiblenon-audit services up to amounts reasonably determined by the factors referenced above.
Audit Committee to be appropriate. The CompensationAudit Committee expectsmust specificallypre-approve (i) any proposed services that exceed such generalpre-approval limits, (ii) tax services and (iii) any additional services that have not been generallypre-approved by the Audit Committee. The independent auditor is required to periodically assessreport to the competitiveness of our NEOs’ Target Total Compensation againstAudit Committee the Comparator Group and periodically review the compositionextent of the Comparator Groupservices that it has provided to assess whether it remains an appropriate source of comparison.
As shown in the graphs below, our CEO’s Target Total CompensationCompany and the average Target Total Compensationfees for our other NEOsthe services performed to date. The Audit Committee annually reviews the policy to ensure its continued appropriateness and compliance with applicable laws and listing standards.
The policy delegates to the Audit Committee Chair the authority topre-approve audit, audit-related ornon-audit services between meetings for individual projects up to $250,000 (up to a total annual maximum of $750,000) if management deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee. The Audit Committee Chair must report anypre-approval decisions to the Audit Committee at its next scheduled meeting.
The Audit Committee currently consists of four Independent Directors, and operates under a written charter adopted by the Board. The Board has determined that Patrick J. Shouvlin has the requisite experience to be designated an audit committee financial expert as setsuch term is defined under Item 407(d)(5) of RegulationS-K under the Securities Act of 1933, as amended (the “Securities Act”), and the applicable Nasdaq standards.
Management is responsible for the preparation and presentation of the Company’s financial statements, the reporting process, the accounting policies and procedures, and the establishment of effective internal controls and procedures.
The primary duties of the Audit Committee are to assist the Board in August 2017 is heavily weighted towards variable,its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s systems of internal controls regarding finance, accounting, legal compliance and ethics, (iv) the independence and qualifications of the Company’s independent auditor, (v) the Company’s operational risks and (vi) the performance of the Company’s internal audit function and independent auditor. As part of its meetings, the Audit Committee regularly meets in executive session without management present. Prior to the filing of each quarterly report on Format-risk10-Q elements.and annual report on Form10-K
20182019 Proxy Statement | 4535
Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019 | Brighthouse Financial, Inc. |
discussions, the Audit Committee also reviews the Company’s statutory financial results and the Company’s internal controls over financial reporting.
The Chief Auditor regularly attends meetings of the Audit Committee and reports directly to the Audit Committee Chair, which supports her independence from management and the objectivity of her work. The Audit Committee regularly discusses with the Chief Auditor, both in general session and executive session, the adequacy and effectiveness of the Company’s financial reporting processes, internal control over financial reporting and disclosure controls and procedures, as well as the performance of the internal audit function.
The independent auditor is responsible for performing an independent audit of our financial statements and, as required, of our internal controls over financial reporting, in each case, in accordance with standards established by the Public Company Accounting Oversight Board (“PCAOB”), and the independent auditor issues a report with respect to each of the foregoing items. The independent auditor must also express an opinion as to the conformity of the Company’s financial statements with generally accepted accounting principles and the effectiveness of its internal controls over financial reporting. The independent auditor regularly affirms to the Audit Committee that it remains independent from the Company. The Audit Committee regularly meets with the independent auditor, both in general session and in executive session, to discuss the Company’s financial reporting processes, internal control over financial reporting, disclosure controls and procedures, required communications to the Audit Committee, fraud risks and any other matters that the Audit Committee or the independent auditor deem appropriate.
More information on the Audit Committee and its responsibilities is included in the Audit Committee Charter available on our website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview. In accordance with the requirements set forth in the Audit Committee Charter, the Audit Committee (i) reviewed and amended the Audit Committee Charter, (ii) approved the charter governing the internal audit function, and (iii) approved the procedures for the confidential submission of complaints to the Audit Committee regarding accounting, internal accounting controls or auditing matters (the “Audit Committee Complaint Procedures”). A copy of the Audit Committee Complaint Procedures is also available on our website.
In the performance of its oversight function, the Audit Committee has reviewed and discussed the audited consolidated financial statements for fiscal year 2018 with each of management and the independent auditor. The Audit Committee and the independent auditor have also discussed the matters required to be discussed by them under the applicable rules of the PCAOB.
The Audit Committee has received from its independent auditor the written disclosures and the letters required by the applicable rules of the PCAOB, as currently in effect, regarding the firm’s communications with the Audit Committee relating to independence, and has discussed the independent auditor’s independence with the independent auditor.
Based on the review and discussions described in this Audit Committee Report, the Audit Committee recommended to the Board of Directors that the audited financial statements for fiscal year 2018 be included in our Annual Report on Form10-K for the year ended December 31, 2018, for filing with the SEC.
Audit Committee
Pat Shouvlin (Chair)
Chuck Chaplin
Meg McCarthy
Bill Wallace
36 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Proposal 3 - Advisory vote to approve the compensation paid to Brighthouse’s Named Executive Officers |
Advisory vote to approve the compensation paid to Brighthouse’s Named Executive Officers
In accordance with Section 14A of the Exchange Act, we are providing our stockholders with an advisory(non-binding) vote on the compensation paid to our named executive officers (the “NEOs”). Our compensation approach is described in the Compensation Discussion and Analysis (“CD&A”), compensation tables and accompanying narrative discussion.
The CD&A summarizes our executive compensation program. Since the Separation and our establishment as an independent company, our Board of Directors and Compensation Committee have implemented an executive compensation program that is intended to align the interests of our executive officers with those of our stockholders. A substantial portion of our NEOs’ compensation is in the form of variable,at-risk compensation that requires us to achieve performance objectives that are aligned with our strategy and intended to create long-term stockholder value. Furthermore, we intend to continue to align our executives’ interests with those of our stockholders by utilizing metrics in our short- and long-term incentive programs that are tied to performance outcomes that are intended to enhance stockholder value.
As a newly public company with a diversified stockholder base, we believe it is critical to understand the views of our stockholders with respect to how we compensate our NEOs. To that end, we have engaged our stockholders in discussions about our executive compensation program, philosophy and objectives. We solicited feedback from stockholders on our executive compensation program for fiscal 2017 and on our 2018 executive compensation program that we previewed in our 2018 Proxy Statement. The feedback we received was generally supportive.
We are asking stockholders to approve the following resolution:
RESOLVED, that the compensation paid to Brighthouse’s NEOs, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative disclosure, is hereby APPROVED.
Although this vote is advisory, the Board of Directors and the Compensation Committee intend to consider the results of the vote, as well as other relevant factors, as we continue to develop our executive compensation program.
The Board of Directors recommends that stockholders vote “FOR” the approval of the compensation of our Named Executive Officers, as disclosed in this Proxy Statement.
2019 Proxy Statement | 37
Compensation Discussion and Analysis Section 1 – Executive Summary | Brighthouse Financial, Inc. |
Compensation Discussion and Analysis
This CD&A describes our executive compensation philosophy, policies, practices and objectives in the context of our compensation decisions for our NEOs for 2018, our first full year as an independent company.
The CD&A is organized into four sections:
Section 1 – Executive Summary
Section 2 – Our 2018 Executive Compensation Program
Section 3 – Additional Compensation Practices and Policies
Section 4 – 2019 Compensation Program Preview
Brighthouse became an independent company on August 4, 2017, the effective date of our Separation from MetLife. We are one of the largest providers of annuities and life insurance in the United States. We specialize in products that are designed to help people protect what they have earned and ensure it lasts. Our goal is to build a focused andbest-in-cost culture that creates value for our customers and our stockholders. We believe that our strategy of offering a targeted set of products to serve our customers and distribution partners, each of which is intended to produce positive statutory distributable cash flows on an accelerated basis compared to our legacy products, will enhance our ability to invest in our business and distribute cash to our stockholders over time. We also believe that our product strategy of offering a more tailored set of new products and our decision to outsource a significant portion of our client administration and service processes is consistent with our focus on reducing our expense structure over time.
During 2018, our first full year as an independent company, we made significant progress toward executing our strategy that we believe will deliver long-term value for our stockholders.
For 2018, our NEOs are our CEO, former CFO, the next three most highly compensated executive officers as of the end of 2018, and one former executive officer who was not serving as of end of 2018.
| Name | Title | |
Eric Steigerwalt | President and Chief Executive Officer | |
Anant Bhalla | Former Executive Vice President and Chief Financial Officer(1) | |
John Rosenthal | Executive Vice President and Chief Investment Officer | |
Christine DeBiase | Executive Vice President, Chief Administrative Officer and General Counsel(2) | |
Conor Murphy | Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer(3) | |
Peter Carlson | Former Executive Vice President and Chief Operating Officer(4) |
| (1) | Mr. Bhalla ceased serving as Chief Financial Officer effective February 27, 2019, and departed Brighthouse effective March 14, 2019. |
| (2) | Ms. DeBiase’s title was changed from Executive Vice President, General Counsel and Corporate Secretary, effective February 2, 2018. |
| (3) | Mr. Murphy was appointed Executive Vice President and Chief Operating Officer, effective June 5, 2018. Until that date, Mr. Murphy served as Executive Vice President and Chief Product and Strategy Officer. Mr. Murphy was also appointed Interim Chief Financial Officer, effective February 27, 2019. |
| (4) | Mr. Carlson stepped down from the position of Executive Vice President and Chief Operating Officer effective June 4, 2018, and remained employed with Brighthouse through December 31, 2018. |
38 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Discussion and Analysis Section 1 – Executive Summary |
The Compensation Committee has established a compensation program rooted in apay-for-performance philosophy, which is intended to align the interests and incentives of our NEOs with those of our stockholders by tying a substantial portion of our NEOs’ compensation to the achievement of performance metrics that are aligned with our strategy. The Compensation Committee is guided by the following general principles and practices:
paying for performance:variable compensation should be based on Company and individual performance and results that drive increases in stockholder value;
providing competitiveTarget Total Direct Compensation (“Target TDC”) opportunities (defined as base salary plus short-term incentive(“STI”) and long-term incentive(“LTI”) compensation opportunities): we aim to offer compensation that enables Brighthouse to attract, motivate and retain high-performing employees;
aligning executives’ interests with stockholders’ interests:a significant portion of our NEOs’ Target TDC will be delivered in the form of stock-based incentives;
encouraging long-term decision-making:our long-term incentive compensation programs include awards with multi-year, overlapping incentive performance or restriction periods;
avoiding problematic pay practices: we do not provide excessive perquisites, excessivechange-in-control severance pay or excise taxgross-ups, and we will not reprice stock options without stockholder approval; and
reinforcing strong risk management:our compensation program is designed to avoid providing our employees with incentives to take excessive risks.
What’s New in Our 2018 Compensation Program
We regularly review our compensation program to help ensure that it motivates and rewards our associates for performance that supports our strategic goals. In 2018, our first full year as an independent company, we made the following changes to our compensation program:
Element of Our | Changes in 2018 | |
STI Awards | • Established quantitative metrics focusing on areas critical to the work of establishing us as an independent company and that drive long-term value creation. • For 2018, three equally-weighted metrics were used: • TSA Exits; • Annuity Sales; and • Adjusted Statutory Earnings. | |
LTI Awards | • Established an equity mix for 2018 LTI awards with three equally-weighted components: PSUs, RSUs and NQSOs. • Selected the following PSU performance metrics, which measure the Company’s success in executing its long-term strategy over the 2018-2020 performance period: corporate expense reduction (weighted 60%); and capital return (weighted 40%). | |
Clawback Policy | • Adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct. For additional information about our clawback policy, see “Compensation Discussion and Analysis – Section 3 – Additional Compensation Practices and Policies – Clawback Policy.” | |
For more information about our 2018 Compensation Program, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program.”
2019 Proxy Statement | 39
Compensation Discussion and Analysis Section 1 – Executive Summary | Brighthouse Financial, Inc. |
2018Say-on-Pay Vote and Stockholder Engagement
Our stockholders expressed strong support for our compensation program during our engagement meetings and through their overwhelming approval of our 2018Say-on-Pay vote (97% of votes in favor of ourSay-on-Pay proposal). The Compensation Committee considered stockholder feedback and theSay-on-Pay vote results in reviewing our 2018 executive compensation program and making compensation decisions for our NEOs. In particular, the Compensation Committee has adopted quantitative compensation metrics for both STI and LTI awards that are aligned with our near- and long-term strategy.
2018 Performance. As a newly independent company, Brighthouse’s strategic focus is on establishing the foundation for future growth. Consistent with ourpay-for-performance philosophy, the Compensation Committee established metrics for STI and LTI awardsthat directly align with Brighthouse’s strategy. Although 2018 was a challenging year for our stock performance, the Board believes that management has developed a strategy that will lead to long-term growth and that the Company has successfully executed on that strategy in 2018. To align the interests of our NEOs with those of our stockholders, their compensation is weighted heavily toward equity-based compensation whose realized value depends both on the performance of our stock and select performance metrics which we believe will be drivers of long-term value creation.
2018 STI Awards. The table below presents our 2018 metrics for STI Awards (“STI Metrics”), which measure our performance in the areas that are critical to meeting our strategic goals over time. Brighthouse met or exceeded all 2018 STI Metrics targets, resulting in an aggregate Company Performance Factor of 118%. For additional information about our STI Awards, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Elements of Fiscal 20172018 Compensation” and “–2018 STI Awards for Our NEOs.” STI Awards are made under the Amended and Restated Brighthouse Services, LLC Short-Term Incentive Plan (the “STI Plan
The elements of Fiscal 2017 compensation are as follows, each as discussed in greater detail below:”).
|
|
| ||||||||||
| ||||||||||||
| Target Achieved (100%) | ||||||||||||
| ||||||||||||
| Maximum Achieved (150%) | ||||||||||||
| Important indicator of our financial health that measures our insurance companies’ ability to pay future distributions and the effectiveness of our hedging program. | Target Exceeded (105%) | |||||||||||
| 2018 Company Performance Factor |
|
| ||||||||||
|
| |||||||||||
| ||||||||||||
2018 STI Award. The Independent Directors, on the Compensation Committee’s recommendation, approved CEO compensation that reflects ourpay-for-performance philosophy. Mr. Steigerwalt’s 2018 goals were a mix of strategic and operational objectives that measured his performance in leading Brighthouse and laying the foundation for achieving our strategic goals. In setting the STI payout percentage at the Company’s aggregate performance factor, the Independent Directors considered Brighthouse’s performance against the 2018 STI Metrics and Mr. Steigerwalt’s accomplishments of his 2018 goals. The following table highlights Mr. Steigerwalt’s 2018 STI Award for performance in 2018, as approved by the Independent Directors in January 2019.
| Name | Base Salary | 2018 STI Target | 2018 STI Payout Percentage | 2018 STI Award | ||||
Eric Steigerwalt | $900,000 | $1,800,000 | 118% | $2,124,000 |
4640 | 20182019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Discussion and Analysis Section 1 – Executive Summary |
Base Salary
Base salary is intended to provide our NEOs2018 LTI Award. In February 2018, the Independent Directors granted Mr. Steigerwalt a fixed level2018 LTI Award at his LTI target of compensation for their services during$4,500,000, consisting of 1/3rd RSUs, 1/3rd PSUs and 1/3rd NQSOs. The actual number of PSUs issued will depend on Brighthouse’s actual performance at the year. Our Target Total Compensation has been structured so that base salary is the smallest component.
Annual Incentives
Annual incentive awards are the primary compensation arrangement for differentiating and rewarding individual performance during the year. For 2017, annual incentive awards were paid pursuant to the Brighthouse Services, LLC Amended and Restated Annual Variable Incentive Plan. The purpose of AVIP is to align total annual pay with business results, provide competitive levels of pay for performance and make a substantial portion of Target Total Compensation variable based on both Company and individual performance. The amountend of the payouts2018-2020 performance period.
Additional information about Mr. Steigerwalt’s 2018 STI and LTI Awards is tied to the Company’spresented in “Compensation Discussion and the employee’s achievement of annual performance goals that contribute to our long-term success without creating an incentive to take excessive risk.
Because 2017 was a year of transformation for the Company, the pre-Separation Board of Directors recognized it would be difficult to establish performance goals for AVIP for the 2017 calendar year that related to traditional performance metrics. In establishing performance goals for 2017, it was necessary to set qualitative goals that could be objectively measured but also not expected to be unduly affected by the Separation. In addition, as further discussed under “Tax ConsiderationsAnalysis – Section 2 – Our 2018 Executive Compensation Program” below, we intended to structure our 2017 AVIP awards to qualify forand “2018 Compensation Tables.”
2019 LTI Award. In January 2019, the then-available performance-based compensation deduction under Section 162(m)Independent Directors also granted Mr. Steigerwalt a 2019 LTI Award at his LTI target of $4,500,000, consisting of 70% PSUs and 30% RSUs. The actual number of PSUs issued will depend on Brighthouse’s actual performance at the end of the Code, which limited our ability2019-2021 performance period. For more information about 2019 LTI Awards, see “Compensation Discussion and Analysis – Section 4 – 2019 Compensation Program Preview – 2019 LTI Awards.” Pursuant to make adjustments or reflect changing circumstances. Therefore,SEC disclosure rules, 2019 LTI Awards are not included in the performance goals established for AVIP awards focused on measuring the Company’s overall performance during the pre- and post-Separation portions of calendar year 2017, with a particular emphasis on successfully separating from MetLife and establishing Brighthouse as a standalone public company.“2018 Compensation Tables.”
At its first post-Separation meeting in August 2017, theKey Executive Compensation Committee ratified the performance goals adopted by the pre-Separation Board of Directors.Practices
In order for AVIP funding to occur for 2017, the Company needed to achieve one or more of the pre established performance goals outlined below:
In January 2018, the Compensation Committee certified that the Company achieved an insurer financial strength rating of A- from one or more credit rating agencies, allowing the AVIP to be funded.
In determining the actual AVIP funding level, the Compensation Committee considered the Company’s performance against the pre-established performance goals above, the Company’s performance overall and the efforts made by our NEOs and employees to effectuate the Separation. Although the Separation ultimately occurred in August 2017, multiple potential Separation dates were considered beginning in 2016. As a consequence of the uncertain timing, there were many internal processes and engagements that were established, periodically paused, and then restarted throughout the period leading up to the Separation.
| What we do | | Pay-for-Performance.A substantial portion of our NEOs’ Target Total Direct Compensation is in the form of variable,at-risk elements that reward our executives only if we achieve performance goals that create stockholder value. | ||||
| Stock Ownership Guidelines. We have established stock ownership and retention guidelines that call for our NEOs to maintain significant stock ownership, thereby aligning their interests with those of our stockholders. | |||||
| Clawback Policy.We adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct. | |||||
| Minimum Vesting Periods. Equity awards that are subject to achievement of performance goals generally have a vesting period of three years, and equity awards that vest based solely on continued service have a three-year vesting period (at a rate not greater thanone-third per year). | |||||
| Stockholder Engagement.Since the Separation, we have actively engaged with our stockholders on various topics, including our executive compensation program. We recognize the importance of our stockholders’ perspectives in the compensation-setting process and consider their feedback in the design of our compensation programs. | |||||
| Independent Compensation Consultant.Our Compensation Committee retained SBCG as its independent compensation consultant to advise on all aspects of our executive compensation program. | |||||
| Double-Trigger Vesting of Equity Awards upon a Change of Control.Outstanding awards that are substituted or assumed in a change of control only vest if the NEO is terminated or resigns with good reason. | |||||
| What we don’t do | | Gross-ups on Excise Taxes. We do not provide taxgross-up benefits in connection with payments upon a change of control. | ||||
| Reprice Stock Options.Our equity incentive plans prohibit us from repricing stock options or stock appreciation rights without stockholder approval. | |||||
| Excessive Perquisites. We provide limited perquisites to our executive officers. | |||||
| Hedging and Pledging.Our insider trading policy prohibits all employees and Directors from engaging in hedging or pledging transactions. | |||||
20182019 Proxy Statement | 4741
Compensation Discussion and Analysis Section 2 – Our 2018 Executive Compensation Program | Brighthouse Financial, Inc. |
In addition,Planned Changes for 2019
We have committed to a regular review of our compensation program to help ensure that it evolves with our maturing organization and continues to motivate and reward our associates for performance that supports our strategic goals. To this end, the Compensation Committee consideredhas approved several other factors that it viewed as integral to the Company’s future success, including developing relationships with key distributors of our products, implementing an overall risk management framework for our business, and establishing and implementing the Brighthouse culture.
With consideration to these factors, our Human Resources department recommended, and the Compensation Committee ultimately approved, funding of the AVIP at 105% of target to reflect both the work required to complete the Separation, but also the financial, operational, and strategic results achieved despite the additional workstreams associated with the transition to a standalone public company.
Separation Bonus
In addition to awards under AVIP, our NEOs and all other administrative (non-wholesaler) employees were eligible to receive a Separation Bonus equal to 25% of each employee’s calendar year 2017 AVIP award based upon the Company’s achievement of performance goals and milestones in connection with the Separation and the establishment of Brighthouse as a standalone public company. The Separation Bonus was awarded to all NEOs based upon the determination by the Head of Compensation and Benefits that Brighthouse achieved each of the following pre-established objectives during the period from the Separation through December 31, 2017:
Fiscal 2017 AVIP and Separation Bonus Decisions for Our NEOs
Prior to the Separation, Mr. Steigerwalt and members of our Human Resources department established general performance goals that would be used to assess Mr. Steigerwalt’s performance during calendar year 2017, and in particular, Fiscal 2017. These goals were reviewed and ratified by our Compensation Committee in November 2017 following the Separation. For Fiscal 2017, Mr. Steigerwalt’s goals were a mix of strategic and operational objectives that were intended to assess Mr. Steigerwalt’s performance in leading the Company through the Separation and establishing Brighthouse as an independent public company.
In November, the Compensation Committee ratified the following 2017 calendar year goals for Mr. Steigerwalt:
In February 2018, the Compensation Committee and the independent members of our Board considered the Company’s performance overall, Mr. Steigerwalt’s performance against the performance goals listed above, as well as a self-assessment of accomplishments provided by Mr. Steigerwalt. In completing the recruitment of his SLMG, Mr. Steigerwalt was able to drive the Company toward the following accomplishments:
48 | 2018 Proxy Statement
|
Based on the foregoing achievements, the Compensation Committee recommended, and the independent members of the Board approved, the following AVIP and Separation Bonus payments to Mr. Steigerwalt:
| Name |
AVIP Payout Percentage |
Calendar Year 2017 |
Fiscal 2017 AVIP |
Separation Bonus | ||||
Eric T. Steigerwalt | 105% | $1,890,000 | $771,534 | $472,500 | ||||
Beginning in 2018, the Compensation Committee with SBCG’s input and assistance expects to establish qualitative and quantitative goals against which Mr. Steigerwalt’s performance will be assessed.
Also in February 2018, the Compensation Committee considered the overall performance of each of the other NEOs, including against their 2017 performance goals referenced below. Mr. Steigerwalt also provided the Compensation Committee with his assessment of the NEOs’ 2017 performance, including the material performance highlights summarized below.
Anant Bhalla, Executive Vice President and Chief Financial Officer:
|
|
2018 Proxy Statement | 49
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John L. Rosenthal, Executive Vice President and Chief Investment Officer:
2017 Goals
2017 Performance Highlights
Peter M. Carlson, Executive Vice President and Chief Operating Officer:
2017 Goals
2017 Performance Highlights
Christine M. DeBiase, Executive Vice President, General Counsel and Corporate Secretary(during 2017):
2017 Goals
2017 Performance Highlights
50 | 2018 Proxy Statement
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The Compensation Committee considered the foregoing accomplishments and, based on Mr. Steigerwalt’s recommendations, approved the following AVIP and Separation Bonus paymentschanges to our other NEOs:
Name
|
AVIP Payout
| Calendar Year 2017 AVIP Payment
| Fiscal 2017 AVIP
| Separation Bonus
| ||||||||||||||||
Anant Bhalla
|
100%
|
$840,000
|
$342,904
|
$210,000
| ||||||||||||||||
John L. Rosenthal
|
105%
|
$1,126,000
|
$459,655
|
$281,500
| ||||||||||||||||
Peter M. Carlson
|
99%
|
$891,000
|
$363,723
|
$222,750
| ||||||||||||||||
Christine M. DeBiase
|
112%
|
$709,000
|
$289,427
|
$177,250
| ||||||||||||||||
The AVIP and Separation Bonus amounts paid to all of our NEOscompensation program, which are described in respect of Fiscal 2017 are reported in the “Non-Equity Incentive“Section 4 – 2019 Compensation Plan” column of the “Summary Compensation TableProgram Preview.”
Founders’ GrantsSection 2 – Our 2018 Executive Compensation Program
In Fiscal 2017, each NEO received a Founders’ Grant in the form of RSUs under the Employee Plan. The Founders’ Grants were authorized on August 9, 2017. The number of RSUs awarded was based on the amount of value being delivered, divided by the closing price of the Company’s common stock on September 8, 2017 (the first Friday after one month of public trading), which was $54.54. The September 8, 2017 award date was established at the August 9, 2017 meeting and was determined to be the appropriate award date for the Founders’ Grants given the uncertainty of our stock performance immediately following the Separation. Founders’ Grants are subject to and conditioned upon stockholder approval of the Employee Plan (see “2018 Compensation Setting Process
Our Human Resources organization (“Proposal 5 - Approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation PlanHR”).
The Compensation Committee determined that it was appropriate to award Founders’ Grants in order to both align the interests ofprimarily responsible for performing market benchmarking and setting context for 2018 compensation recommendations for our NEOs with those of our stockholders, and to reward NEOs and other employees for their contributions towardmembers of our senior management, which we collectively refer to as the successful Separation and establishment of BrighthouseSenior Leadership Management Group (the “SLMG”). In developing its recommendations, HR consulted with Willis Towers Watson (“WTW”), which serves as an independent public company. The Founders’ Grant awarded to each NEO is equal to two times the NEO’s target long-term equity incentive opportunity approved for each NEO in August 2017. Awarding Founders’ Grants with a value equal to two-times each NEO’s target annual long-term incentive opportunity was intendedmanagement’s compensation consultant.
Our executive compensation pay positioning strategy aims to provide our NEOsexecutives with Target TDC that uses market median as an important reference point, but recognizes that the abilitypositioning of individual executives may vary due to acquire a substantial ownership interest in Brighthouse, while also delivering a substantial amountvariety of Fiscal 2017 Total Compensation in the formfactors, including criticality of stock-based incentives.
The table below shows the valuerole, skills, experience and strategic priorities. To determine pay positioning, we used WTW’s proprietary database of each NEO’s Founders’ Grant approved in August 2017 as well as the number of the RSUs into which the value was converted based on the closing price of the Company’s common stock on September 8, 2017.
executive compensation at large diversified insurers (“2018 Proxy Statement | 51DIS
Name
|
Founders’ Grant Value
|
Number of RSUs
| ||
Eric T. Steigerwalt
| $9,000,000
| 165,016
| ||
Anant Bhalla
| $2,100,000
| 38,503
| ||
John L. Rosenthal
| $2,200,000
| 40,337
| ||
Peter M. Carlson
| $2,400,000
| 44,004
| ||
Christine M. DeBiase
| $2,012,500
| 36,899
| ||
Founders’ Grants awarded to our NEOs are subject to the Company’s achievement of one or more performance criteria during the performance period that began on September 8, 2017 and ends on September 30, 2018 (the “Performance Period”). The performance criteria, which are listed below, were established in order to qualify the Founders’ Grants as performance-based compensation under Section 162(m) of the Code.
In the event we achieve one or more of the foregoing performance goals, and subject further to stockholder approval of the Employee Plan, the RSUs subject to the Founders’ Grants will vest on September 30, 2018.
Founders’ Grants are not reported in the Summary Compensation Table, Grants of Plan-Based Awards Table or Outstanding Equity Awards at Fiscal Year End Table because Founders’ Grants are subject to stockholder approval of the Employee Plan. If stockholders approve the Employee Plan, the Founders’ Grants will be reported under Securities and Exchange Commission rules as compensation to our NEOs for the fiscal year ending December 31, 2018. However, Founders’ Grants were intended to be a one-time award and were a central element of the Total Compensation delivered to our NEOs in Fiscal 2017.
Temporary Incentive Deferred Compensation Plan
Prior to the Separation, many of our employees, including all of our NEOs, were employees of an affiliate of MetLife and participated in benefit and compensation programs sponsored by MetLife or an affiliate. Certain employees, including our NEOs, received equity awards from MetLife during their employment.
In anticipation of the Separation, certain employees, including all of our NEOs, who had been eligible to receive equity awards from MetLife, ceased participating in MetLife’s equity compensation plan as of December 31, 2016 and, therefore, did not receive long-term equity awards from MetLife during 2017. In addition, certain employees, including some of our NEOs, forfeited their outstanding and unvested MetLife equity awards upon the Separation because these employees did not satisfy certain age and service requirements under MetLife’s equity compensation plan that would have allowed such employees’ outstanding equity awards to continue to vest.
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As a result of the foregoing, and in order to attract, retain and motivate our employees who forfeited MetLife equity awards and/or did not receive such awards in 2017, the Temporary Plan was established prior to the Separation. The Temporary Plan allows us to provide affected employees, including our NEOs, cash-based deferred compensation credits in respect of forgone 2017 MetLife equity awards and forfeited MetLife equity awards. Credits for forgone awards under the Temporary Plan were established at the level consistent with the equity award the recipient would have been eligible to receive from MetLife. Deferred compensation credited in respect of forgone 2017 MetLife equity awards vests over three years from the grant date at a rate of one-third per year. Deferred compensation credited in respect of forfeited MetLife equity is subject to the same vesting schedule as the forfeited award. Credits in respect of forfeited RSUs vest one-third per year from the date of grant by MetLife, while credits in respect of forfeited stock options and forfeited performance shares cliff vest on the third anniversary of the date of grant by MetLife. Amounts credited under the Temporary Plan earn interest based upon the 120%AFR/Long Term/Monthly rate, which is reset effective December 1. For calendar year 2017, including Fiscal 2017, amounts under the Temporary Plan were credited with interest at a rate of 3.2%. In the event of a change of control, no amendments can be made to the Temporary Plan after a change of control that would decrease the amount of deferred compensation credited to participants under the Temporary Plan as of the date of the change of control or modify the time or form of distributions under the Temporary Plan.
The table below shows the amount of each type of deferred compensation credited to each NEO under the Temporary Plan:
Name
| Credit in Lieu of 2017
|
Credit for Forfeited MetLife Equity Awards –
| Credit for
| Credit for Awards – Stock Options
| Total Temporary
| ||||||||||||||||||||
Eric T. Steigerwalt
|
| $1,200,000
|
|
| $-
|
|
| $-
|
|
| $-
|
|
| $1,200,000
|
| ||||||||||
Anant Bhalla
|
| $368,000
|
|
| $300,000
|
|
| $150,000
|
|
| $-
|
|
| $818,000
|
| ||||||||||
John L. Rosenthal
|
| $700,200
|
|
| $-
|
|
| $-
|
|
| $-
|
|
| $700,200
|
| ||||||||||
Peter M. Carlson
|
| $-
|
|
| $1,187,500
|
|
| $398,000
|
|
| $507,373
|
|
| $2,092,873
|
| ||||||||||
Christine M. DeBiase
|
| $307,100
|
|
| $-
|
|
| $-
|
|
| $-
|
|
| $307,100
|
| ||||||||||
Awards to our NEOs under the Temporary Plan are further subject to the achievement of one or more performance goals, which were established in order to qualify such awards as performance-based compensation under Section 162(m) of the Code. For the performance period ended December 31, 2017, the performance goals were:
2018 Proxy Statement | 53
In January 2018, the Compensation Committee certified that the Company maintained an insurer financial strength rating of at least A- from one or more credit rating agencies for the 2017 performance period. As a result, we made payments to our NEOs under the Temporary Plan in respect of Fiscal 2017. The payments in respect of Fiscal 2017 made to our NEOs under the Temporary Plan are reported in the “Non-Equity Incentive Compensation Plan” column of the “Summary Compensation Table.” In addition, payments under the Temporary Plan may be made to our NEOs in connection with certain terminations of employment. See the Potential Payments Upon Termination or Change in Control table and accompanying narrative disclosure below for additional information.
We are seeking stockholder approval of the material terms of the performance goals under the Temporary Plan for credits to our NEOs under the Temporary Plan paid after our annual meeting of stockholders in 2019 (seeProposal 7 - Approval of the Material Terms of the Performance Goals under the Brighthouse Services, LLC Temporary Incentive Deferred Compensation Plan).primary data point.
Role of the Compensation Committee and Others in Determining Compensation
Compensation Committee’s Role
Role.The Compensation Committee is responsible for establishing and implementing our executive compensation philosophy.philosophy and structure. Pursuant to its written charter, the responsibilities of the Compensation Committee include, among other things:
Assisting the Board in fulfilling its responsibility to oversee the development and administration of compensation programs for our executives and other employees;
Approving the goals and objectives relevant to our CEO’s compensation, evaluating at least annually our CEO’s performance in light of such goals and objectives, and endorsing,recommending, for approval by the Independent Directors, the CEO’s annual compensation based on such evaluation;
Reviewing and approving on an annual basis the compensation of the other executive officers of the Company (as determined by the Compensation Committee);
Reviewing and approving our equity andnon-equity incentive compensation plans and arrangements, and where appropriate or required, recommending such plans and arrangements tofor approval by the Board for approval, including by stockholders of the Company;and/or our stockholders; and
Reviewing incentive compensation arrangements to confirm that incentive pay does not encourage our executive officers to take unnecessary risk-takingrisks, and reviewing and discussing the relationship between risk management policies and practices, corporate strategy and senior executive compensation.
Management’s Role.As discussed above, HR, in consultation with WTW, is primarily responsible for preparing Target TDC recommendations for our SLMG, which includes the NEOs. As part of ouryear-end compensation process, our CEO oversaw the review of each SLMG member’s performance during 2018. Based on the CEO’s assessment of each SLMG member’s performance, HR prepared and presented compensation recommendations for each SLMG member to the Compensation Committee.
HR consulted with WTW to gather compensation data that was used to prepare Target TDC recommendations for the SLMG, which includes the NEOs. The CEO developed recommendations for all elements of pay for the members of the SLMG, other than himself, and discussed these recommendations with the Compensation Committee. The Compensation Committee, in consultation with SBCG, reviewed and approved management’s compensation recommendations for all other members of the SLMG, including our NEOs, as described below. The Independent
42 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Discussion and Analysis Section 2 – Our 2018 Executive Compensation Program |
Directors approved the Target TDC and final compensation for our CEO, Mr. Steigerwalt, on the recommendation of the Compensation Committee.
Compensation Consultants’ Role. Under its written charter, the Compensation Committee has the authority to retain advisers to assist it in the discharge of its duties. In November 2017, the Compensation Committee retained SBCG as its independent compensation consultant. The Compensation Committee assessed SBCG’s independence in light of SEC standards and determined that no conflicts of interest or independence concerns exist. SBCG reports directly to the Compensation Committee, and the Compensation Committee has the sole authority to approve the fees and other terms of the retention of SBCG as its independent compensation consultant. SBCG is expected to attend all Compensation Committee meetings and to provide advice to the Compensation Committee on all aspects of the Company’s executive compensation program, including the form, mix and amount of Target Total Compensation.
Management’s Role
As discussed above, prior to the Separation, members of our Human Resources department worked
54 | 2018 Proxy Statement
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with the Company’s compensation consultant, WTW, to gather and review compensation information from companies within the Comparator Group, as well as data from WTW’s proprietary diversified insurance survey database. Based on information from WTW, the Human Resources department prepared compensation recommendations for each member of the SLMG, including each NEO. Given that the Separation occurred more than half way through 2017, and also due to the fact that we did not have a Compensation Committee comprised of Independent Directors until the Separation, our Human Resources department, with assistance from WTW, was primarily responsible for preparing Fiscal 2017 compensation recommendations for all members of the SLMG, including each NEO. The compensation recommendations were provided to the members of our Compensation Committee in advance of its first post-Separation meeting in August 2017, and the Compensation Committee ultimately adopted the recommendations at its first post-Separation meeting in August 2017.
As part of our year-end compensation process that began in December 2017, our Chief Executive Officer met with each of our other NEOs and members of the SLMG to review performance during calendar year 2017. Based on the CEO’s assessment of each of our other NEO’s performance, he provided recommendations to the Compensation Committee as to the amount and form of the compensation of our NEOs other than himself.
Compensation Consultant’s Role
Under its written charter, the Compensation Committee has the authority to retain advisers to assist it in the discharge of its duties. Since its retention in November 2017 shortly after the Separation,TDC. SBCG has attended Compensation Committee meetings and assisted the Compensation Committee in its implementation of our compensation principles and practices. SBCG has advised the Compensation Committee on the development of the Company’s 2018 short-STI and long-term incentiveLTI compensation arrangements, including the short-STI and long-term incentive planLTI metrics for 2018 and the forms of equity-based incentives awarded to members of the SLMG in 2018. See “2018 Compensation-Setting Process – 2018 Compensation Decisions,” below, for additional information.
In 2017, our Human Resources departmentHR has retained WTW to provide assistance related to our executive compensation program that was implemented in August 2017 in connection with the Separation.program. It is expected that WTW will continue to advise our Human Resources departmentHR on matters related to our executive compensation program. Details ofAdditional information about WTW’s role are set forthis provided above under the heading “Management’s Role.”
Section 3 – The Brighthouse Vision and Strategy – Establishing the 2018 Executivea Compensation Program
Brighthouse isComparator Group. For compensation benchmarking purposes, we also used a focused providergroup of annuities and life insurance products. Our mission is to help people achieve financial security. The products that we offer, particularly annuities, have historically been considered complex and costly. We intend to achievepeer companies within our mission by offering simpler, more transparent, and valuable protection solutions. Our business goal is to build a focused, best-in-cost culture that creates value. We believe that by embedding best-in-cost into our culture at the outset of our existence as an independent public company, we will drive value for all our stakeholders, including our stockholders, community, employees, insurance customers, and our distribution partners.
On February 2, 2018, the Board and senior management, including our NEOs, engaged in constructive dialogue and feedback regarding our strategic and financial plan. The topics discussed covered all aspects of our business, including our mission and vision, our best-in-cost culture, the competitive
2018 Proxy Statement | 55
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landscape, our sales strategy and growth projections, our annuity and life insurance product strategy, our business process outsourcing strategy, our path to expense optimization, our capital return goals, and our financial plan through 2020 in a variety of economic scenarios.
As a result of these strategic sessions, on February 2, 2018, the Compensation Committee focused on establishing performance metrics that aligned all aspects of the Company’s strategy: sales, expense management, and cashflow. Adjusted Statutory Earnings was deemed an appropriate 2018 short-term incentive (“STI”) award metric that aligns to our ability as an independent company to return cash to stockholders. These conversations became the basis for establishing our 2018 compensation program. On February 16, 2018, the Compensation Committee approved the 2018 compensation program that applies to the NEOs and the SLMG. The 2018 compensation program will be discussed in detail in the proxy statement related to the 2019 annual meeting of stockholders. Due to the mid-year timing of the Separation, the 2018 compensation program is the first compensation program for Brighthouse that relates to a full annual performance period(s) as an independent public company. Accordingly, we believe it is appropriate to preview the 2018 compensation program and articulate the alignment to the Company’s strategic and financial plan.
2018 Short-Term Incentive Metrics
The Compensation Committee approved metrics for the 2018 STI award that directly align with Brighthouse’s strategic plans. This is consistent with our pay-for-performance philosophy and will ensure that the NEOs are compensated relative to the achievement of the business goals set forth in the strategic plan. A brief summary of each of the three equally-weighted metrics and the rationale for selecting each follow.
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|
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| ||||||||
|
|
| ||||||
|
|
| ||||||
Each 2018 STI metric has a threshold (50%), target (100%) and maximum (150%) level of performance. Short-term incentive plan payouts, if any, will be based upon the Company’s achievement of the metrics specified above, as well as qualitative factors the Compensation Committee deems appropriate, including each SLMG member’s accomplishments during 2018. We believe the underlying goals for each STI metric are appropriately rigorous. If earned, STI awards for 2018 will be paid in calendar year 2019.
2018 Long-Term Incentive Awards
In February 2018, the independent members of the Board, on the recommendation of the Compensation
56 | 2018 Proxy Statement
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Committee, approved a long-term equity incentive (“LTI”) award for Mr. Steigerwalt, and the Compensation Committee approved LTI awards for our other NEOs. The table below shows the breakdown of award vehicles chosen for 2018 long-term equity incentive awards.
|
|
| ||||||
|
| |||||||
|
| |||||||
| ||||||||
The decision to use PSUs, and the mix of PSUs relative to the other long-term equity elements, was carefully considered by the Compensation Committee in light of the challenges of setting long-term performance goals as a new public company. The Compensation Committee will consider a heavier weighting of PSUs in future awards as the Company matures and gains historical data that makes long-term goal setting more precise. The 2018 long-term equity incentive awards are subject to stockholder approval of the Employee Plan, which will be presented at the Annual Meeting.
The 2018 PSUs measure Brighthouse’s performance over the 2018-2020 performance period. The actual number of shares issued, if any, at the end of the performance period will depend on the Company’s actual performance. We believe the underlying goals for each PSU metric are appropriately rigorous. A brief summary of the PSU metrics, the weighting and the rationale for each follow.
|
|
| ||||||
|
| |||||||
| ||||||||
2018 Proxy Statement | 57
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2018 Target Total Compensation Opportunities
With the exception of the changes described below to Ms. DeBiase’s Target Total Compensation opportunity, no adjustments were made to the Target Total Compensation opportunities of the CEO or any of the other NEOs. In February 2018, Ms. DeBiase was named the Company’s Chief Administrative Officer, in addition to her position as the Company’s General Counsel. In connection with Ms. DeBiase’s expanded role as the Chief Administrative Officer, the Compensation Committee adjusted Ms. DeBiase’s base salary to $600,000 from $575,000 and also increased Ms. DeBiase’s target annual incentive opportunity to 120% of her base salary from 110%. Her long-term incentive opportunity was unchanged.
Section 4 – Additional Compensation Practices and Policies
Stock Ownership and Retention Guidelines
We have implemented stock ownership and retention guidelines for members of the SLMG, including our NEOs, effective January 1, 2018. The guidelines are intended to align the interests of the SLMG members with those of our stockholders by requiring the executives subject to the guidelines to obtain and maintain significant ownership in our stock. The ownership guidelines are set as a multiple of the executive’s base salary as in effect on January 1, 2018, which is then converted into a number of shares of common stock based upon the closing price of our common stock on January 2, 2018, which was $57.67. The ownership levels applicable to our NEOs are as follows.
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| ||
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| ||
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| ||
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| ||
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| ||
Executives subject to the guidelines must retain at least 50% of the net after-tax shares acquired from settlement or exercise of stock-based awards until the applicable ownership level is achieved. Executives are expected to meet the applicable stock ownership guideline within five years of becoming subject to the guidelines. Sharesindustry that are includedsimilar to us in determining an executive’s stock ownership level include shares owned outright (or jointlyterms of assets and revenues and with a spouse or in a trust over which anwe compete for executive has investment control), net shares received from exercise and/or settlement of stock-based awards under the Employee Plan, and shares acquired pursuant to the Company’s Employee Stock Purchase Plan. Shares underlying unvested equity awards are not included in determining an executive’s ownership level.
Benefit Plans
Brighthouse Savings Plan and Auxiliary Savings Plan
Our employees, including our NEOs, are eligible to participate in the Brighthouse Services, LLC Savings Plan and Trusttalent (the “Brighthouse Savings Plan”), which is a tax-qualified 401(k) plan. In addition, certain of our employees, including our NEOs, are eligible to participate in the Brighthouse Services,
58 | 2018 Proxy Statement
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LLC Auxiliary Savings Plan (the “Auxiliary Plan”). Participants in the Auxiliary Plan receive company matching and profit sharing contributions that would have been made to the Brighthouse Savings Plan except that the participant’s compensation exceeds certain tax qualified plan limits imposed under the Code. Employees who elect to participate in the Brighthouse Savings Plan and who also elect to participate in the Brighthouse Services, LLC Voluntary Deferred Compensation Plan (“VDCP”) will be eligible to receive matching contributions in the Auxiliary Plan on amounts deferred into the VDCP equal to the amount of matching contributions that would have been made to the Brighthouse Savings Plan. As explained below, the VDCP was not in effect during Fiscal 2017. For the Company matching and profit sharing contributions made under the Brighthouse Savings Plan and Auxiliary Plan in respect of Fiscal 2017, see the “All Other Compensation” column in the Summary Compensation Table, below. Company matching and profit sharing contributions in the Brighthouse Savings Plan and the Auxiliary Plan become 100% vested after the participant completes two years of service. Under the Auxiliary Plan, in the event of a change of control, all participants will be fully vested in all contributions, including earnings, under the Auxiliary Plan. In addition, no amendments can be made to the Auxiliary Plan after a change of control that would decrease the value of benefits accrued to any participant under the Auxiliary Plan as of the date of the change of control or change the time or form of distribution under the Auxiliary Plan to eliminate lump sum distributions or further defer the time of payment.
Voluntary Deferred Compensation Plan
In December 2017, Brighthouse Services adopted the VDCP, which is a non-qualified deferred compensation plan. Effective January 1, 2018, the VDCP allows a select group of management the opportunity to defer between 10% and 50% of eligible base salary and from 10% to 80% of STI awards. Amounts deferred are notionally invested in investment tracking funds selected by the participant. Participants can elect to have deferred compensation accounts paid, or begin to be paid, in a specific year, which cannot be earlier than May of the third calendar year following the year the compensation was earned, and may elect to receive distributions in either a single lump sum or up to 15 annual installments. In the event of a participant’s death before distributions commence or are completed, the participant’s account balance will be paid in a single lump sum to the participant’s beneficiary. In the event of a change of control, no amendments can be made to the VDCP after a change of control that would decrease the amount in a participant’s deferred compensation account accrued under the VDCP as of the date of the change of control or modify the time or form of distributions under the VDCP.
Termination and Change in Control Benefits
As of December 31, 2017, we had no employment agreements or offer letters with any of our NEOs that provide for severance or change in control benefits. As we previously disclosed, we intend to provide severance pay and related benefits to employees discontinued due to job elimination in order to encourage a focus on transition to other opportunities and allow us to obtain a release of employment-related claims and to adopt change-in-control arrangements in order to retain senior executive officers while a transaction is pending and encourage them to act in the best interests of stockholders, promoting maximum stockholder value without impinging on flexibility to engage in a transaction.
2018 Proxy Statement | 59
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During Fiscal 2017, we did not have any outstanding equity awards because we did not have a stockholder-approved equity compensation plan. We are seeking stockholder approval of the Employee Plan (see “Proposal 5 – Approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan”). Awards under the Employee Plan may become payable in the event of an NEO’s termination, retirement, or death, or upon the occurrence of a change in control of Brighthouse. Under the Auxiliary Plan, in the event of a change of control, all participants will be fully vested in all contributions, including earnings, under the Auxiliary Plan. As of December 31, 2017, all of our NEOs were fully vested in their account balances under the Auxiliary Plan. See the Fiscal 2017 Nonqualified Deferred Compensation table on page 67 for each NEO’s aggregate account balance as of December 31, 2017.
Certain amounts credited to our NEOs under the Temporary Plan may vest and become payable in the event of the NEO’s death or termination on or following the date the NEO satisfies the “rule of 65” (generally, an age and service requirement). See the “Potential Payments Upon Termination or Change in Control” table, below, for additional information about amounts that would be payable to our NEOs under the Temporary Plan.
Stock-Based Award Timing Practices
Stock-based long-term incentive awards are expected to be granted on an annual basis to our executive officers, including the NEOs, in connection with Board and Compensation Committee meetings occurring in the first quarter of each year, although stock-based awards may be granted from time-to-time in connection with the hiring or change in responsibilities of an executive officer.
Tax Deductibility of Executive Compensation
For 2017, Section 162(m) of the Code placed a $1 million limit on the compensation that could be deducted for our chief executive officer and next three most highly compensated NEOs, except for compensation that qualified as performance-based compensation under Section 162(m). Certain elements of the compensation we provided in 2017 were intended to qualify for the performance-based compensation exception to Section 162(m), although the Compensation Committee retained discretion to pay non-deductible compensation if it determined doing so was in our best interest. The Tax Cuts and Jobs Act (“TCJA”), which was signed into law on December 22, 2017, eliminated the exception for performance based compensation under Section 162(m), although the TCJA does include a provision that grandfathers certain binding contracts in effect on November 2, 2017 that are not materially modified after that date. In light of the change in law, beginning in 2018 any compensation paid to our NEOs in excess of $1 million will not be deductible, except with respect to such grandfathered contracts.
Hedging and Pledging Prohibition
Our insider trading policy prohibits all Directors and employees, including our NEOs, from engaging in short sales, hedging, and trading in put and call options, with respect to the Company’s securities. The insider trading policy also prohibits Directors and employees, including our NEOs, from pledging Company securities.
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Clawback Policy
We expect to adopt a performance-based compensation recoupment policy that would allow us to seek recoupment of performance-based compensation if an employee engages in or contributes to fraudulent or other wrongful conduct that causes financial or reputational harm to Brighthouse or its affiliates. All awards granted under our Employee Plan are subject to any performance-based compensation recoupment policy in effect from time to time.
Risk Assessment
At its March 2018 meeting, the Compensation Committee reviewed the results of a 2017 annual compensation risk assessment prepared by SBCG and developed in consultation with management. Such assessment highlighted the inherently risk-balancing and risk-mitigating nature of the Company’s largely discretionary compensation program in 2017, other risk-mitigating features of the compensation program (such as caps on incentive payouts and balance in pay mix), and the associated compensation governance policies and Board-level controls in place to manage compensation-related risk. Following a discussion of such assessment and findings, the Compensation Committee concluded that the risks arising from the Company’s compensation programs are not reasonably likely to have a material adverse impact on the Company.
The Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed the CD&A with management. Based on the Compensation Committee’s review and discussion with management, the Compensation Committee recommended to the Board that the CD&A be included in the Company’s annual report on Form 10-K and in the Company’s Proxy Statement.
This report is provided by the following independent members of the Board, who comprise the Compensation Committee:
Compensation Committee
Members:
Diane E. Offereins (Chair)
Irene Chang Britt
Eileen Mallesch
Paul M. Wetzel
All Compensation Committee members are independent under applicable SEC and Nasdaq rules and are“non-employee directors” for purposes of Section 16 of the Exchange Act, and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
Number of Meetings in 2018: 9
Key Roles and Responsibilities
Review and approve, on an annual basis, our corporate goals and objectives with respect to CEO compensation, evaluate the CEO’s performance in light of these goals and objectives and recommend to the Independent Directors for approval the CEO’s annual compensation, including salary, bonus and equity andnon-equity incentive compensation.
Review and approve, on an annual basis, the compensation for our other executive officers, including such officers’ salary, bonus and equity andnon-equity incentive compensation, based on the CEO’s initial recommendations and evaluation of their performance.
Review and approve the Company’s equity andnon-equity incentive compensation plans and arrangements, and approve awards to employees under such plans.
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| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Review and discuss with management the Company’s Compensation Discussion and Analysis, and recommend to the Board that it be included in the Company’s Form10-K or proxy statement.
Consider the results of the most recent stockholder advisory vote on executive compensation, as required by Section 14A of the Exchange Act.
Review and approve the Company’s severance arrangements and related plans.
Approve and oversee compensation-related policies, including stock ownership guidelines, and hedging, pledging and clawback policies.
Oversee the Company’s succession planning for its CEO and other executive officers.
Role in Risk Oversight
Review, with the assistance of the Compensation Committee’s independent compensation consultant and Brighthouse’s Chief Risk Officer, incentive compensation arrangements to confirm that incentive compensation does not encourage unnecessary risk taking.
Review and discuss the relationship between risk management policies and practices, corporate strategy and compensation of senior executives.
Executive Committee
Members:
Eric Steigerwalt (Chair)
Chuck Chaplin
Pat Shouvlin
Number of Meetings in 2018: None
Key Roles and Responsibilities
Act on behalf of the entire Board with respect to certain exigent matters between meetings of the Board.
Finance and Risk Committee
Members:
Chuck Chaplin (Chair)
Meg McCarthy
Diane Offereins
Paul Wetzel
All Finance and Risk Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018: 5
Key Roles and Responsibilities
Oversee the Company’s financial plans, policies and strategies.
Review business and financial metrics to measure Brighthouse’s performance against its business and financial plans, in alignment with our multi-year strategy.
Approve, or recommend for Board approval, equity and debt issuances, share repurchase programs, dividends and mergers and acquisitions.
Oversee the Company’s capital management and liquidity management strategies, including the review and approval of capital and liquidity policies and plans, the availability and use of liquidity management tools and the review of liquidity benchmarks and metrics.
Oversee the capitalization of Brighthouse and its subsidiaries.
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| Brighthouse Financial, Inc. | Board and Corporate Governance Practices |
Oversee the Company’s hedging strategy, including the use of derivative instruments.
Oversee the management, budget and business plan of Brighthouse’s finance and risk management organizations.
Role in Risk Oversight
Broad oversight of risk management, including approval of our risk appetite statement, and review of our significant risk policies and our performance against risk metrics and targets.
Discuss with management our risk management practices, including how we measure, monitor and manage risk exposures in the enterprise.
Regularly review with the Chief Risk Officer an assessment of our risk profile, including credit risk, market risk, liquidity risk, operational risk and model risk.
Review the finance and risk management functions, including their management, budget and business plan.
Oversee management’s use of risk metrics and targets and monitor performance against such benchmarks and targets.
Coordinate, through the Finance and Risk Committee’s chair, with management, and with the chairs of the other Committees, to help ensure that all Committees receive necessary information to oversee our risks.
Coordinate, through the Finance and Risk Committee’s chair, with management and the Compensation Committee chair, the Compensation Committee’s oversight of compensation-related risk matters.
Review management’s Own Risk and Solvency Assessment report, a required regulatory filing which assesses our risk exposures and solvency, and describes our risk management organization, structure and processes.
Investment Committee
Members:
Bill Wallace (Chair)
Irene Chang Britt
Eileen Mallesch
Pat Shouvlin
All Investment Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018: 7
Key Roles and Responsibilities
Oversee, on a consolidated basis, the investment activities of Brighthouse and its subsidiaries’ general accounts and consolidated separate accounts.
Oversee the enterprise investment strategy, including strategic and tactical asset allocation decisions.
Review the performance of the investments in our general and consolidated separate accounts, including our derivatives activity.
Review and approve Enterprise Investment Authorities (“EIAs”) relating to our general accounts and consolidated separate accounts.
Review the compliance of our investments with our EIAs.
Authorize or approve investments and the retention and termination of investment advisers, as required by the EIAs.
Oversee the implementation and execution of our investments operating model.
Oversee our engagement of investment advisers to manage general account and the separate account investments.
Review the investment activities and performance of the separate accounts.
Discuss with management the economic and market outlook, and the Company’s invested asset sectors and asset allocation.
Review Brighthouse’s annual investment plan and monitor performance against it.
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| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
Role in Risk Oversight
Oversee the management and mitigation of risks associated with our investment portfolios, including credit risk, portfolio allocation and diversification risk, and counterparty risk.
Oversee the management and mitigation of the risks associated with our investments operating model.
Nominating and Corporate Governance Committee
Members:
Irene Chang Britt (Chair)
Eileen Mallesch
Diane Offereins
Paul Wetzel
All Committee members are independent under applicable SEC and Nasdaq rules.
Number of Meetings in 2018:5
Key Roles and Responsibilities
Review our corporate governance policies and practices, and recommend appropriate changes to the Board.
Recommend qualifications for director candidates to the Board, and periodically review such qualifications with the Board.
Lead the search for qualified director candidates, including the development of search criteria and specifications, and consider director candidates recommended by our stockholders pursuant to the procedures set forth in our Corporate Governance Principles.
Oversee the Director orientation process and continuing education programs.
Recommend to the Board policies and procedures to enhance the Board’s effectiveness, the size and composition of the Board, and the frequency and structure of Board meetings.
Review the Board’s committee structure and composition and recommend committee appointments to the Board.
Review the Company’s Code of Conduct for Directors, Code of Conduct for Financial Management and Code of Conduct for Employees.
Review transactions between the Company and related persons, and coordinate with the Audit Committee where appropriate.
Review and evaluate any conflicts of interest of prospective and current Directors and executive officers. If it is determined that such review involves an investigation or complaint within the purview of the Audit Committee, the Nominating and Corporate Governance Committee may seek guidance from and coordinate the review with the Audit Committee.
Develop standards for determining director independence and make recommendations regarding such determinations to the Board.
Develop and oversee the annual self-evaluations for the Board and Committees.
Review Director compensation on an annual basis.
Oversee the Company’s government relations and political activities in accordance with its political strategy and public policy objectives.
Role in Risk Oversight
Oversee risks related to the Company’s governance.
Oversee our related person transaction policy.
Oversee our regulatory and compliance programs, including the development and implementation of our codes of conduct.
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Board Meetings and Director Attendance
In 2018, the Board held ten meetings and the Committees held a total of 36 meetings. Every Director attended at least 75% of the aggregate number of meetings of the Board and the Committees on which he or she served.
Our director compensation program is designed to fairly compensate our Independent Directors for their work as members of the Board and to align their interests with those of our stockholders by delivering half of the annual retainer in the form of equity-based awards. To benchmark Director compensation, the Independent Directors targeted compensation at the median of the same Comparator Group we used for our NEOs (see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Role of the Compensation Committee and Others in Determining Compensation – Establishing a Compensation Comparator Group”). The table below sets forth the details of the compensation program for independent members of the Board.
Description
|
Amount
|
Form
| ||||
Pay for Board Service | ||||||
Annual retainer | $ | 240,000 | 50% cash and 50% equity | |||
Pay for Service as Chair of the Board or a Board Committee | ||||||
Chairman of the Board retainer | $ | 200,000 | 50% cash and 50% equity | |||
Audit Committee | $ | 22,500 | 100% cash | |||
Other Committees (Compensation Committee; Nominating and Corporate Governance Committee; Finance and Risk Committee; Investment Committee) | $ | 17,500 | 100% cash | |||
In November 2018, on the recommendation of the Nominating and Corporate Governance Committee, the Board approved the award of prorated compensation in consideration of interim service on the Board until the next quarterly or annual payment for two new Directors (Ms. Mallesch and Ms. McCarthy) who were appointed in November 2018.
Annual Equity Awards
The Board approved annual RSU awards as part of our independent director compensation program. Annual awards to Independent Directors generally vest on the earlier of theone-year anniversary of the grant date or the date of the next annual meeting of stockholders. The number of RSUs to be granted to each Independent Director is determined by dividing the value of the equity portion of the annual retainer ($120,000), or a prorated amount of the retainer for service of less than a year, by the closing price of the Company’s common stock on the grant date, rounded down to the nearest whole number. The number of RSUs to be granted to the Chairman for the additional Chairman retainer is determined by dividing the equity portion of the Chairman retainer ($100,000) by the closing price of the Company’s common stock on the grant date, rounded down to the nearest whole number. The RSU grants are made pursuant to the Brighthouse Financial, Inc. 2017Non-Management Director Stock Compensation Plan (the “Director Plan”), which was approved by stockholders at the 2018 Annual Meeting.
Director Founders’ Grants
To further align the interests of our Independent Directors with our stockholders, on August 9, 2017, the Board, on the recommendation of the Nominating and Corporate Governance Committee, authorized an equity award in the form of RSUs to each of the six Independent Directors then in office (the “Director Founders’ Grant”). The Director Founders’ Grants were made under the Director Plan, effective September 8, 2017, and were subject to stockholder approval of the Director Plan. The number of RSUs was determined by dividing 50% of the annual retainer for independent
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| Board and Corporate Governance Practices | Brighthouse Financial, Inc. |
members of the Board ($120,000) by $54.54, the closing price of Brighthouse common stock on the effective award date, rounded down to the nearest whole number.
Compensation paid to our Independent Directors in 2018 is presented in the following table and the accompanying narrative.
2018 Director Compensation Table
Name
| Fees Earned or
| Stock Awards(2, 3)
| Total
| |||||||||
Irene Chang Britt |
| $137,500 |
|
| $225,781 |
|
| $363,281 |
| |||
Chuck Chaplin(4) |
| $237,500 |
|
| $325,781 |
|
| $563,281 |
| |||
Eileen Mallesch(5) |
| $30,000 |
|
| $59,962 |
|
| $89,962 |
| |||
Meg McCarthy(6) |
| $30,000 |
|
| $59,962 |
|
| $89,962 |
| |||
Diane Offereins |
| $137,500 |
|
| $225,781 |
|
| $363,281 |
| |||
Pat Shouvlin |
| $142,500 |
|
| $225,781 |
|
| $368,281 |
| |||
Bill Wallace |
| $137,500 |
|
| $225,781 |
|
| $363,281 |
| |||
Paul Wetzel |
| $120,000 |
|
| $225,781 |
|
| $345,781 |
| |||
| (1) | Fees Earned or Paid in Cash. Each Independent Director is entitled to receive an annual cash retainer of $120,000, or a prorated amount for a lesser period of service. We provide additional retainers to the Chairman of the Board and to each Director who serves as the Chair of a standing Committee, the amounts of which are set forth above under the heading “Director Compensation.” All cash retainers are paid in quarterly installments in arrears. For their service in 2018, Ms. Mallesch and Ms. McCarthy each received one installment of the annual cash retainer. |
| (2) | Stock Awards. Amounts in this column represent the aggregate grant date fair value of each applicable award of RSUs, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. |
| (3) | Annual and Prorated Awards.As part of their annual retainers, each of Ms. Britt, Ms. Offereins, Mr. Shouvlin, Mr. Wallace and Mr. Wetzel was granted an equity award of 2,494 RSUs on May 23, 2018, each with an aggregate grant date fair value equal to $119,961. Mr. Chaplin was granted an equity award of 4,573 RSUs on May 23, 2018 for his service as Director (2,494 RSUs) and Chairman of the Board (2,079 RSUs), with an aggregate grant date fair value equal to $219,961. The Directors’ awards will vest on May 23, 2019, theone-year anniversary of the grant. Ms. Mallesch and Ms. McCarthy were each granted a prorated annual equity award of 1,482 RSUs on November 15, 2018, each with a grant date fair value equal to $59,962, which will vest on the date of the 2019 Annual Meeting. |
Director Founders’ Grants.Each of the Independent Directors serving as of August 9, 2017 (excludes Ms. Mallesch and Ms. McCarthy) also received a grant of 2,200 RSUs under the Director Plan effective September 8, 2017, subject to stockholder approval of the Director Plan, which was received at the 2018 Annual Meeting on May 23, 2018. Since the Director Founders’ Grants were subject to stockholder approval as of their effective date, no grant date fair value was determinable in 2017 under ASC Topic 718 and no value was included in the Fiscal 2017 Director Compensation Table. The value is instead recorded in this column along with the grant date fair value of the annual award of RSUs made in respect of the 2018 fiscal year. Upon stockholder approval of the Director Plan at the 2018 Annual Meeting, the grant date fair value of the Director Founders’ Grants was determined to be $105,820, based on the closing price of the Company’s common stock of $48.10. The fair value of the Director Founders’ Grant RSUs on September 8, 2017 was $119,988. The Director Founders’ Grant RSUs vested and were paid out on September 30, 2018.
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| (4) | The amount includes cash and equity payments for service as Chairman of the Board. |
| (5) | Ms. Mallesch joined the Board on November 15, 2018 and was assigned to the Compensation, Investment, and Nominating and Corporate Governance Committees. |
| (6) | Ms. McCarthy joined the Board on November 15, 2018 and was assigned to the Audit and Finance and Risk Committees. |
Director Stock Ownership Guidelines
In February 2018, the Board, on the recommendation of the Nominating and Corporate Governance Committee, established stock ownership and retention guidelines for Independent Directors. Pursuant to these guidelines, each Independent Director is expected to acquire a number of Shares equal to at least four times the equity portion of the Director’s annual retainer, including for Mr. Chaplin the portion of his annual Chairman of the Board retainer paid in the form of RSUs. Directors are expected to achieve the applicable ownership level within five years from the later of the date the guidelines became effective (January 1, 2018) or the date the Director commences service. Directors are required to retain at least 50% of the net shares acquired upon vesting of equity awards until the ownership guidelines are satisfied. No Directors have sold any vested equity awarded to them.
Compensation Committee Interlocks and Insider Participation
There are no interlocking relationships between any member of our Compensation Committee and any of our executive officers that require disclosure under applicable rules.
Brighthouse’s strength depends on the trust of our associates, distribution partners, customers and stockholders. We strive to adhere to the highest standards of business conduct at all times, and put honesty, fairness and trustworthiness at the center of all that we do. We have adopted codes of conduct that reflect these values and enshrine them in our corporate culture. The Code of Conduct for Employees applies to all Brighthouse officers and employees.
The Code of Conduct for Financial Management is a “code of ethics” (as defined under SEC rules) that applies to Brighthouse’s CEO, CFO, COO, Chief Accounting Officer (“CAO”), Chief Auditor, Corporate Controller, and all other Brighthouse employees who perform similar functions or who may obtain access to any financial records covered by the Code of Conduct for Financial Management.
The Code of Conduct for Employees applies to all Brighthouse officers and employees.
The Code of Conduct for Directors applies to members of the Board.
Current versions of these codes of conduct are available on Brighthouse’s website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview.
2019 Proxy Statement | 33
Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s
| Brighthouse Financial, Inc. |
Compensation TablesRatification of the appointment of Deloitte & Touche LLP as Brighthouse’s independent registered public accounting firm for fiscal year 2019
The information reportedAudit Committee is responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm (“independent auditor”). To execute on this responsibility, the Audit Committee annually evaluates the independent auditor’s qualifications, performance and independence. The Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent auditor for the fiscal year ending December 31, 2019. Deloitte’s background knowledge of Brighthouse and its subsidiaries, combined with its industry expertise, has enabled it to carry out its audits of the Company’s financial statements and the effectiveness of the Company’s internal controls over financial reporting with effectiveness and efficiency. The members of the Audit Committee believe that the continued retention of Deloitte as the Company’s independent auditor is in the Summary Compensation Tablebest interest of the Company and its stockholders.
In addition, the Audit Committee is involved in the selection of Deloitte’s lead engagement partner and ensures that the lead partner’s engagement is limited to no more than five consecutive years of service (in accordance with SEC rules). The current lead Deloitte engagement partner was designated commencing with the 2017 audit and is eligible to serve in that capacity through the end of the 2021 audit.
We request that our stockholders ratify the appointment of Deloitte as the Company’s independent auditor for fiscal year 2019. If the stockholders do not ratify such appointment, the Audit Committee will take note and may reconsider its retention of Deloitte. If such appointment is ratified, the Audit Committee will still have the discretion to replace Deloitte at any time during the year. Representatives of Deloitte are expected to be present at the Annual Meeting and will have the opportunity to make a statement. They will also be available to respond to questions from stockholders regarding their audit of our consolidated financial statements for fiscal year 2018.
The Board of Directors recommends that stockholders vote “FOR”the ratification of the appointment of Deloitte as our independent registered public accounting firm for fiscal year 2019.
Fees Paid to Deloitte & Touche LLP
The following table shows the fees incurred by the Company for professional services rendered by Deloitte for the period from August 5, 2017, which isfiscal year ending December 31, 2018. Prior to the Separation, and until the end of the first day followingquarter of 2017, MetLife, as our then-parent company, paid all audit, audit-related, tax and other fees of Deloitte. As a result, the Separation, to December2017 fees listed below exclude the fees paid by MetLife for the first quarter of 2017 (ending March 31, 2017. We refer to this period as “Fiscal 20172017).” The footnotes All services provided to the Summary Compensation Table andCompany were approved by the accompanying narrative disclosure discuss the manner in which the Fiscal 2017 compensation for our NEOs was calculated.
Fiscal 2017 Summary Compensation TableAudit Committee.
Name and Title
| Year
| Salary (1)
| Non-Equity (2), (3)
| All Other
| Total
| |||||
Eric T. Steigerwalt President and Chief Executive Officer
| 2017 | $349,049 | $1,507,192 | $115,853 | $1,972,094 | |||||
Anant Bhalla Executive Vice President and Chief Financial Officer
| 2017 | $233,641 | $688,444 | $63,753 | $985,838 | |||||
John L. Rosenthal Executive Vice President and Chief Investment Officer
| 2017 | $218,109 | $894,708 | $75,297 | $1,188,114 | |||||
Peter M. Carlson Executive Vice President and Chief Operating Officer
| 2017 | $237,862 | $771,139 | $55,044 | $1,064,045 | |||||
Christine M. DeBiase Executive Vice President, General Counsel and Corporate Secretary*
| 2017 | $224,232 | $534,024 | $50,041 | $808,297 | |||||
| Fees (in Thousands) | 2018 | 2017 | ||||||
Audit Fees(1) | $14,505 | $15,250 | ||||||
Audit-Related Fees(2) | $390 | $1,140 | ||||||
Tax Fees(3) | $790 | $980 | ||||||
All Other Fees(4) | $2 | $8 | ||||||
Total | $15,687 | $17,378 | ||||||
Audit Fees.Fees billed for professional services for the integrated audit of the consolidated financial statements of the Company and |
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|
| the interim financial statements included in quarterly reports on Form10-Q for the Company and its subsidiaries (as required), statutory audits or other financial statement audits of subsidiaries, the audit of the effectiveness of our internal controls over financial reporting, assistance with and review of documents filed with the SEC and other services that enable the independent auditor to form an opinion of the consolidated financial statements of the Company and its subsidiaries (as required). |
| (2) | Audit-Related Fees. Fees billed for assurance and related services that are reasonably related to the audit or review of the financial statements of the Company and its subsidiaries (as required) and for other services that are traditionally performed by the independent auditor. Such services consist of fees for employee benefit plan audits, assessments and testing of internal controls, and accounting consultations not directly associated with the annual audit or quarterly reviews. |
Tax Fees. Fees billed for permitted tax services, including tax compliance, tax advice and |
| (4) | All Other Fees. Fees billed for this category primarily represent accounting research subscription fees. |
Audit CommitteePre-Approval Policy
The table below showsAudit Committee has established a policy requiring itspre-approval of all audit andnon-audit services provided by the amount earnedindependent auditor, and this policy is designed to ensure that the independent auditor’s independence is not impaired. The policy provides for the Audit Committee’s generalpre-approval, on an annual basis, of audit, audit-related and permissiblenon-audit services up to amounts reasonably determined by each NEO in Fiscal 2017the Audit Committee to be appropriate. The Audit Committee must specificallypre-approve (i) any proposed services that exceed such generalpre-approval limits, (ii) tax services and (iii) any additional services that have not been generallypre-approved by the Audit Committee. The independent auditor is required to periodically report to the Audit Committee the extent of the services that it has provided to the Company and the fees for the services performed to date. The Audit Committee annually reviews the policy to ensure its continued appropriateness and compliance with applicable laws and listing standards.
The policy delegates to the Audit Committee Chair the authority topre-approve audit, audit-related ornon-audit services between meetings for individual projects up to $250,000 (up to a total annual maximum of $750,000) if management deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee. The Audit Committee Chair must report anypre-approval decisions to the Audit Committee at its next scheduled meeting.
The Audit Committee currently consists of four Independent Directors, and operates under a written charter adopted by the Board. The Board has determined that Patrick J. Shouvlin has the requisite experience to be designated an audit committee financial expert as such term is defined under Item 407(d)(5) of RegulationS-K under the AVIP, the Separation BonusSecurities Act of 1933, as amended (the “Securities Act”), and the Temporary Plan.applicable Nasdaq standards.
Management is responsible for the preparation and presentation of the Company’s financial statements, the reporting process, the accounting policies and procedures, and the establishment of effective internal controls and procedures.
Name
| Annual Variable Incentive Plan
| Separation Bonus
|
Temporary Incentive Deferred Compensation Plan
| ||||||||||||
Eric T. Steigerwalt
| $771,534
| $472,500
| $263,158
| ||||||||||||
Anant Bhalla
| $342,904
| $210,000
| $135,540
| ||||||||||||
John L. Rosenthal
| $459,655
| $281,500
| $153,553
| ||||||||||||
Peter M. Carlson
| $363,723
| $222,750 | $184,666
| ||||||||||||
Christine M. DeBiase
| $289,427
| $177,250
| $67,347
| ||||||||||||
The table below showsprimary duties of the amount, including interest, paidAudit Committee are to assist the Board in its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s systems of internal controls regarding finance, accounting, legal compliance and ethics, (iv) the independence and qualifications of the Company’s independent auditor, (v) the Company’s operational risks and (vi) the performance of the Company’s internal audit function and independent auditor. As part of its meetings, the Audit Committee regularly meets in executive session without management present. Prior to the filing of each quarterly report on Form10-Q and annual report on Form10-K and prior to each NEO for Fiscal 2017 in respectearnings release to the public, the Audit Committee discusses such reports with management, the Company’s Chief Auditor and the Company’s independent auditor. As part of the different types of credits under the Temporary Plan.these
Name
| Fiscal 2017 Payment for Credit in Lieu of 2017 MetLife Equity Award
|
Fiscal 2017 Payment for Credit for Forfeited MetLife Equity Awards – Performance Shares
| Fiscal 2017 Payment for Credit for Forfeited MetLife Equity Awards – RSUs
|
Fiscal 2017 Payment for Credit for Forfeited MetLife Equity Awards – Stock Options
| ||||||||||||||||
Eric T. Steigerwalt
|
| $263,158
|
|
| $-
|
|
| $-
|
|
| $-
|
| ||||||||
Anant Bhalla
|
| $80,702
|
|
| $29,796
|
|
| $24,726
|
|
| $-
|
| ||||||||
John L. Rosenthal
|
| $153,553
|
|
| $-
|
|
| $-
|
|
| $-
|
| ||||||||
Peter M. Carlson
|
| $-
|
|
| $76,973
|
|
| $71,378
|
|
| $36,315
|
| ||||||||
Christine M. DeBiase
|
| $67,347
|
|
| $-
|
|
| $-
|
|
| $-
|
| ||||||||
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Ratification of the appointment of Deloitte & Touche LLP as Brighthouse’s
| Brighthouse Financial, Inc. |
(4) All Other Compensationdiscussions, the Audit Committee also reviews the Company’s statutory financial results and the Company’s internal controls over financial reporting.
The amounts reported in this column include for each NEO Company contributions in respectChief Auditor regularly attends meetings of Fiscal 2017the Audit Committee and reports directly to the Brighthouse Savings PlanAudit Committee Chair, which supports her independence from management and the Auxiliary Plan,objectivity of her work. The Audit Committee regularly discusses with the Chief Auditor, both in general session and executive session, the following amounts:
Name
|
Brighthouse Savings Plan
|
Auxiliary Plan
| ||
Eric T. Steigerwalt
| $7,221
| $108,632
| ||
Anant Bhalla
| $12,214
| $51,539
| ||
John L. Rosenthal
| $9,061
| $66,236
| ||
Peter M. Carlson
| $12,384
| $42,660
| ||
Christine M. DeBiase
| $8,895
| $41,146
| ||
Fiscal 2017 Grants of Plan-Based Awards
Prior to the Separation, many of our employees, including all of our NEOs, were employees of MetLife. In anticipationadequacy and effectiveness of the Separation, we establishedCompany’s financial reporting processes, internal control over financial reporting and disclosure controls and procedures, as well as the Temporary Plan to provide a meansperformance of compensating such employees in respect of forgone 2017 equity awards from MetLife and/or MetLife equity awards that were forfeited due to the Separation. The amounts credited to our NEOs under the Temporary Plan for Fiscal 2017 are reported in the table below.internal audit function.
The dollar value reportedindependent auditor is responsible for performing an independent audit of our financial statements and, as required, of our internal controls over financial reporting, in each case, in accordance with standards established by the Public Company Accounting Oversight Board (“PCAOB”), and the independent auditor issues a report with respect to each of the foregoing items. The independent auditor must also express an opinion as to the conformity of the Company’s financial statements with generally accepted accounting principles and the effectiveness of its internal controls over financial reporting. The independent auditor regularly affirms to the Audit Committee that it remains independent from the Company. The Audit Committee regularly meets with the independent auditor, both in general session and in executive session, to discuss the Company’s financial reporting processes, internal control over financial reporting, disclosure controls and procedures, required communications to the Audit Committee, fraud risks and any other matters that the Audit Committee or the independent auditor deem appropriate.
More information on the Audit Committee and its responsibilities is included in the Non-Equity Incentive Plan columnAudit Committee Charter available on our website at http://investor.brighthousefinancial.com/corporate-governance/governance-overview. In accordance with the requirements set forth in the Audit Committee Charter, the Audit Committee (i) reviewed and amended the Audit Committee Charter, (ii) approved the charter governing the internal audit function, and (iii) approved the procedures for the confidential submission of complaints to the Audit Committee regarding accounting, internal accounting controls or auditing matters (the “Audit Committee Complaint Procedures”). A copy of the Summary Compensation TableAudit Committee Complaint Procedures is also available on our website.
In the performance of its oversight function, the Audit Committee has reviewed and discussed the audited consolidated financial statements for paymentsfiscal year 2018 with each of management and the independent auditor. The Audit Committee and the independent auditor have also discussed the matters required to be discussed by them under the Temporary Plan has been pro-rated to showapplicable rules of the portion of such payments that were made in respect of our NEOs service during Fiscal 2017. Prior to August 5, 2017, Brighthouse Services, which is the entity that employs our employees, was a wholly-owned subsidiary of MetLife, and as a result, compensation received prior to August 5, 2017 is not reportable under Securities and Exchange Commission rules as compensation paid by Brighthouse. The total Temporary Plan credits awarded to our NEOs is disclosed above under the heading “Compensation Discussion and Analysis - Features of our Fiscal 2017 Executive Compensation Program - Elements of Fiscal 2017 Compensation - Temporary Incentive Deferred Compensation Plan.”PCAOB.
The amounts reportedAudit Committee has received from its independent auditor the written disclosures and the letters required by the applicable rules of the PCAOB, as currently in effect, regarding the table below awarded underfirm’s communications with the Temporary Plan are not subjectAudit Committee relating to stockholder approval dueindependence, and has discussed the independent auditor’s independence with the independent auditor.
Based on the review and discussions described in this Audit Committee Report, the Audit Committee recommended to the spin-off transition rules under Section 162(m)Board of Directors that the Code. We are seeking stockholder approval ofaudited financial statements for fiscal year 2018 be included in our Annual Report on Form10-K for the material terms ofyear ended December 31, 2018, for filing with the performance goals for certain future tranches payable under the Temporary Plan.SEC.
Audit Committee
Pat Shouvlin (Chair)
Chuck Chaplin
Meg McCarthy
Bill Wallace
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| Brighthouse Financial, Inc. |
|
Grant Date
|
Estimated future payouts under non-equity incentive plan awards
| |||||||||||||
Name
| Grant Type
|
Threshold
| Target
| Maximum
| ||||||||||
Eric T. Steigerwalt
| AVIP
| $-
|
| $1,800,000
|
|
| $7,000,000
|
| ||||||
Separation Bonus
| $-
|
| $450,000
|
|
| $-
|
| |||||||
Temporary Plan – Credit in Lieu of 2017 MetLife Award
| 8/9/17
| $-
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| $263,158
| (1)
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| $
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Anant Bhalla
| AVIP
| $-
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| $840,000
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Separation Bonus
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Temporary Plan – Credit in Lieu of 2017 MetLife Award
| 3/28/17
| $-
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| $80,702
| (1)
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| $-
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Temporary Plan – Credit for Forfeited 2015 MetLife RSUs
| 8/7/17
| $-
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| $9,932
| (2)
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| $-
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Temporary Plan – Credit for Forfeited 2016 MetLife RSUs
| 8/7/17
| $-
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| $14,794
| (3)
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| $-
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| ||||||
Temporary Plan – Credit for Forfeited 2015 MetLife Performance Shares
| 8/7/17
| $-
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| $29,796
| (4)
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| $-
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John L. Rosenthal
| AVIP
| $-
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| $1,072,500
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| $7,000,000
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Separation Bonus
| $-
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| $268,125
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| $-
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Temporary Plan – Credit in Lieu of 2017 MetLife Award | 3/28/17 | $- | $153,553 | (1) | $- | |||||||||
2018 Proxy Statement | 65
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Estimated future payouts under
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Name
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Grant Type
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Grant Date
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Threshold
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Target
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Maximum
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Peter M. Carlson
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AVIP
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$-
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$900,000
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$7,000,000
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Separation Bonus
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$-
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$225,000
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$-
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Temporary Plan – Credit for Forfeited 2015 MetLife RSUs
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8/7/17
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$-
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$12,832
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(2)
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$-
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Temporary Plan – Credit for Forfeited 2016 MetLife RSUs
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8/7/17
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$-
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$19,735
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(3)
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$-
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Temporary Plan – Credit for Forfeited 2017 MetLife RSUs
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8/7/17
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$-
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$38,811
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(5)
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$-
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Temporary Plan – Credit for Forfeited 2015 MetLife Performance Shares
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8/7/17
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$-
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$76,973
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(4)
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$-
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Temporary Plan – Credit for Forfeited 2015 MetLife Stock Options
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8/7/17
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$-
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$36,315
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(6)
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$-
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Christine M. DeBiase | AVIP | $- | $632,500 | $7,000,000 | ||||||||||||
Separation Bonus
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$-
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$177,250
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$-
| |||||||||||
Temporary Plan – Credit in Lieu of 2017 MetLife Award
| 3/28/17 | $- | $67,347 | (1) | $- | |||||||||||
66 | 2018 Proxy Statement
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Fiscal 2017 Nonqualified Deferred Compensation
Name
|
Plan Name
|
Executive
|
Registrant
|
Aggregate last Fiscal Year
|
Aggregate withdrawals/ distributions
|
Aggregate last Fiscal Year end
| ||||||||||||||||||
Eric T. Steigerwalt
|
Auxiliary Plan
| $0
| $108,632
| $2,110
| $0
| $257,469
| ||||||||||||||||||
Anant Bhalla |
Auxiliary Plan
| $0 | $51,539 | $1,536 | $0 | $100,018 | ||||||||||||||||||
John L. Rosenthal
|
Auxiliary Plan
| $0 | $66,236 | $1,367 | $0 | $177,677 | ||||||||||||||||||
Peter M. Carlson
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Auxiliary Plan
| $0 | $42,660 | $209 | $0 | $74,775 | ||||||||||||||||||
Christine M. DeBiase
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Auxiliary Plan
| $0 | $41,146 | $610 | $0 | $80,164 |
Auxiliary Plan
NEOs and other eligible employees who elected to contribute a portion of their eligible compensation under the tax-qualified Brighthouse Savings Plan in 2017 received a Company matching contribution which is equal to 100% of the first 6% of their eligible compensation in that plan in 2017. In addition, a non-elective Company contribution equal to 3% of the compensation is allocated to eligible employees in that plan in 2017. Amounts reported in the Nonqualified Deferred Compensation table have been prorated to reflect the portion of the employer contributions to the Auxiliary Plan that relate to each NEO’s service during Fiscal 2017.
The Code limits compensation that is eligible for employer contributions under the Brighthouse Savings Plan. In 2017, the Company could not make contributions based on compensation over $270,000.
2018 Proxy Statement | 67
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NEOs and other eligible employees who elected to participate in the Brighthouse Savings Plan during 2017 were credited with a percentage of their eligible compensation beyond that limit. The Company contribution, both the matching and non-elective contribution, was determined using the same employee contribution rate and Company contribution rate as applied under the Brighthouse Savings Plan. This Company contribution is credited to an account established for the employee under the nonqualified Auxiliary Plan.
Auxiliary Plan balances are paid in a lump sum as soon as administratively practicable after termination of employment.
Amounts in the Auxiliary Plan are subject to the requirements of Section 409A. Payments to the top 50 highest paid officers that are due upon separation from service are delayed for six months following their separation, in compliance with Section 409A.
Employees may choose from a number of simulated investments for their Auxiliary Plan accounts. These simulated investments were identical to the core funds offered under the Brighthouse Savings Plan in 2017. Employees may change the simulated investments for new Company contributions to their Auxiliary Plan accounts at any time.
The following table shows the simulated investment return for each of the alternatives under the Auxiliary Plan for calendar year 2017.
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68 | 2018 Proxy Statement
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Potential Payments Upon Termination or Change in Control
Temporary Incentive Deferred Compensation Plan
Our NEOs may be eligible to receive payments under the Temporary Plan in the event of a termination of employment under certain circumstances, as described below.
Credits in respect of forfeited MetLife equity awards
The following provisions apply to NEOs who received credits under the Temporary Plan in respect of MetLife equity awards that were forfeited as a result of the Separation:
Termination followed by entry into a separation agreement with Brighthouse Services
If Brighthouse Services agrees to enter into a separation agreement with the NEO under a severance program of Brighthouse Services and the separation agreement is effective no later than March 15th of the year after the separation agreement is offered to the NEOs, the NEO’s outstanding Temporary Plan credits in respect of forfeited MetLife equity awards will vest when the separation agreement becomes final. Payments will be made as soon as administratively practicable following the original vesting date(s), subject to the achievement of the Section 162(m) performance metrics established for each year. There is currently no, and during Fiscal 2017 there was no, severance program in which our NEOs are eligible to participate.
Death
In the event of an NEO’s termination due to death, the NEO’s credits in respect of forfeited MetLife equity awards will vest immediately prior to such termination. Payments in respect of such credits will be made as soon as administratively practicable following the original vesting date(s), without regard to the requirement that the Section 162(m) performance metrics established for each year are achieved.
All other terminations
In the event of an NEO’s termination for any other reason, all unvested credits in respect of forfeited MetLife equity awards will be forfeited, provided that if an NEO is terminated for “Cause,” all outstanding credits, whether vested or unvested, will be forfeited.
2018 Proxy Statement | 69
Credits in respect of forgone 2017 MetLife equity awards
The following provisions apply to NEOs who received credits under the Temporary Plan in respect of forgone 2017 equity awards from MetLife:
Rule of 65
If an NEO’s employment terminates on or after the NEO’s “Rule of 65 Date” (other than a termination for “Cause”), the tranche(s) of the credits in respect of forgone 2017 MetLife equity awards that have not yet vested will become vested as of immediately after the termination, and will be paid as soon as administratively practicable after six months following the original vesting date for each such tranche, subject to the achievement of the Section 162(m) performance metrics established for such tranche. “Rule of 65 Date” means the date that the sum of a participant’s age plus years of service equals or exceed 65, provided the participant has at least five (5) years of service.
Termination followed by entry into a separation agreement with Brighthouse Services
If Brighthouse Services agrees to enter into a separation agreement with the NEO under a severance program of Brighthouse Services and the separation agreement is effective no later than March 15th of the year after the separation agreement is offered to the NEOs, the tranche(s) of the credits in respect of forgone 2017 MetLife equity awards that have not yet vested will become vested when the separation agreement becomes final, and will be paid as soon as administratively practicable after six months following the original vesting date(s) for each such tranche, subject to the achievement of the Section 162(m) performance metrics established for each year. There is currently no, and during Fiscal 2017 there was no, severance program in which our NEOs are eligible to participate.
Death
In the event of an NEO’s termination due to death, all unvested tranche(s) of the credits in respect of forgone 2017 MetLife equity awards that have not yet vested will become vested as of immediately after the termination. Payment will be made as soon as administratively practicable following the original vesting date(s), without regard to the requirement that the Section 162(m) performance metrics established for each year are achieved.
All other terminations
In the event of an NEO’s termination for any other reason, all unvested credits in respect of forgone 2017 MetLife equity awards will be forfeited provided that if an NEO is terminated for “Cause,” all outstanding credits, whether vested or unvested, will be forfeited.
Under the Temporary Plan, “Cause” generally means: (i) willful failure to substantially perform duties (other than due to physical or mental illness) after reasonable notice of such failure; (ii) engaging in serious misconduct that is injurious to Brighthouse or any affiliate in any way, including damage to reputation or standing; (iii) being convicted of, or entering a plea of nolo contendere to, a felony; or (iv) breach of any written covenant or agreement with Brighthouse or any affiliate not to disclose or misuse any information pertaining to, or misuse and property of Brighthouse or any affiliate or not to complete or interfere with Brighthouse or any affiliate.
The Temporary Plan does not provide for any payments upon or following the occurrence of a change in control of Brighthouse or any of its affiliates, including Brighthouse Services.
The following table summarizes estimated payments and benefits that would be provided to our NEOs under the Temporary Plan in connection with a termination of employment under various scenarios described above, assuming such event occurred on December 31, 2017.
70 | 2018 Proxy Statement
Credits in respect of forfeited MetLife equity awards
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2018 Proxy Statement | 71
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Advisory vote on the frequency of future
advisory votes to approve the compensation
paid to Brighthouse’s Named Executive Officers
In accordance with Section 14A of the Exchange Act, we are also providing our stockholders with an advisory(non-binding) vote to express their preference on the frequencycompensation paid to our named executive officers (the “NEOs”). Our compensation approach is described in the Compensation Discussion and Analysis (“CD&A”), compensation tables and accompanying narrative discussion.
The CD&A summarizes our executive compensation program. Since the Separation and our establishment as an independent company, our Board of votesDirectors and Compensation Committee have implemented an executive compensation program that is intended to align the interests of our executive officers with those of our stockholders. A substantial portion of our NEOs’ compensation is in the form of variable,at-risk compensation that requires us to achieve performance objectives that are aligned with our strategy and intended to create long-term stockholder value. Furthermore, we intend to continue to align our executives’ interests with those of our stockholders by utilizing metrics in our short- and long-term incentive programs that are tied to performance outcomes that are intended to enhance stockholder value.
As a newly public company with a diversified stockholder base, we believe it is critical to understand the views of our stockholders with respect to how we compensate our NEOs. To that end, we have engaged our stockholders in discussions about our executive compensation program, philosophy and objectives. We solicited feedback from stockholders on our executive compensation program for fiscal 2017 and on our 2018 executive compensation program that we previewed in our 2018 Proxy Statement. The feedback we received was generally supportive.
We are asking stockholders to approve the following resolution:
RESOLVED, that the compensation paid to Brighthouse’s NEOs, commonly referredas disclosed pursuant to asItem 402 of Regulationsay-on-pay.S-K, Stockholders may cast a vote in favor of an advisory vote on executiveincluding the Compensation Discussion and Analysis, compensation being held every one, two, or three years, or they may abstain.tables and narrative disclosure, is hereby APPROVED.
This is the first opportunity for our stockholders to express their preference regarding how frequently Brighthouse should submitsay-on-pay proposals for advisory votes by stockholders. The Board recommends an annualAlthough this vote frequency, as this will enable stockholders to provide timely feedback regarding Brighthouse’s executive compensation programs and practices, and is consistent with having regular dialogue with stockholders.
The vote on frequency of futuresay-on-pay votes is advisory, only. The result will not be binding on the Board althoughof Directors and the Board doesCompensation Committee intend to consider the outcomeresults of the vote, when determining the frequency with which futuresay-on-pay votes will be conducted.
The Board expectsas well as other relevant factors, as we continue to make its determination and disclose its decision to stockholders within 150 days of the Annual Meeting.
Unless the Board decides to hold an earliersay-on-pay frequency vote, the Company will not be required to hold another such vote until 2024.
The Compensation Committee and the Board of Directors believe that an annual advisory vote ondevelop our executive compensation is in the best interests of Brighthouse and its stockholders.program.
Accordingly, theThe Board of Directors recommends that stockholders vote “FOR” the approval of the compensation of our Named Executive Officers, as disclosed in favor of aONE YEARfrequency for future advisory votes on executive compensation.this Proxy Statement.
72 | 2018 Proxy Statement
Approval of the Brighthouse Financial, Inc.
2017 Stock and Incentive Compensation Plan
In August 2017, following our establishment as an independent company, the Board adopted the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan (“Employee Plan”), subject to stockholder approval.
The purpose of the Employee Plan is to promote the success and enhance the value of Brighthouse and its affiliates by linking the personal interests of employees to those of Brighthouse’s stockholders, and by providing participants with an incentive for strong performance. The Employee Plan is further intended to provide flexibility to Brighthouse in our ability to motivate, attract, and retain the services of employees upon whose judgment, interest, and special effort the successful conduct of our operation largely is dependent.
If stockholders decline to approve the Employee Plan, we will not be authorized to compensate employees in Shares, which will limit and impair our ability to motivate, attract, and retain qualified individuals. As a result, we would need to make significant changes to our compensation practices that would limit our flexibility to provide competitive compensation and thus our ability to motivate, attract, and retain highly qualified talent.
Section 162(m) of the Code (“Section 162(m)”) limits the deductibility of compensation paid to certain executives to $1 million, but exempts certain “performance-based” compensation from those limits. The Tax Cuts and Jobs Act (“TCJA”) eliminated the exception for performance-based compensation under Section 162(m), although the TCJA includes a provision that grandfathers certain arrangements in place on November 2, 2017 that are not materially modified after that date. Under the Employee Plan, the Compensation Committee has the flexibility to grant awards that are intended to be eligible to qualify as performance-based compensation and, as a result, are intended to be eligible to be fully deductible. In approving the Employee Plan, stockholders would approve the material terms of the performance goals set forth in that plan for purposes of qualifying awards granted in 2017 as performance-based compensation under Section 162(m). Even if stockholders approve the Employee Plan, amounts payable in respect of awards granted by the Compensation Committee that are intended to satisfy the requirements for performance-based compensation under Section 162(m) may ultimately benon-deductible. In addition, even if stockholders approve the Employee Plan, the Compensation Committee may grant awards, and is expected to grant awards as a result of TCJA, that are not intended to be eligible to be performance-based compensation under Section 162(m) and are not deductible, if it determines that it is in the Company’s best interests to do so.
Assuming stockholder approval of the Employee Plan, at the Company’s forecasted pace of granting awards that normally pay out in Shares or allow the purchase of Shares, assuming stable future rates (based on current rates) of compensation, award recipient population, award forfeitures, Shares withheld for tax purposes, and Share price, the Company currently expects the total number of Shares reserved for issuance to last for at least three years, beginning with awards made in 2017 subject to stockholder approval.
20182019 Proxy Statement | 7337
Compensation Discussion and Analysis
| Brighthouse Financial, Inc. |
Plan HighlightsCompensation Discussion and Analysis
This CD&A describes our executive compensation philosophy, policies, practices and objectives in the context of our compensation decisions for our NEOs for 2018, our first full year as an independent company.
The Employee Plan affords flexibilityCD&A is organized into four sections:
Section 1 – Executive Summary
Section 2 – Our 2018 Executive Compensation Program
Section 3 – Additional Compensation Practices and Policies
Section 4 – 2019 Compensation Program Preview
Brighthouse became an independent company on August 4, 2017, the effective date of our Separation from MetLife. We are one of the largest providers of annuities and life insurance in designing long-term equity and equity-based incentives that are responsive to evolving regulatory changes, compensation best practices and the strategy of Brighthouse through the incorporation of tailored, performance-based measures. The Employee Plan also contains a number of featuresUnited States. We specialize in products that are designed to help people protect and promote stockholder interestswhat they have earned and ensure it lasts. Our goal is to build a focused andbest-in-cost culture that awards are granted throughcreates value for our customers and our stockholders. We believe that our strategy of offering a disciplinedtargeted set of products to serve our customers and thoughtful process, including the following:
No Discounted Stock Options
The Employee Plan prohibits the grantdistribution partners, each of stock options withwhich is intended to produce positive statutory distributable cash flows on an exercise price less than the fair market valueaccelerated basis compared to our legacy products, will enhance our ability to invest in our business and distribute cash to our stockholders over time. We also believe that our product strategy of offering a more tailored set of new products and our decision to outsource a significant portion of our Common Stockclient administration and service processes is consistent with our focus on the date of grant.reducing our expense structure over time.
During 2018, our first full year as an independent company, we made significant progress toward executing our strategy that we believe will deliver long-term value for our stockholders.
No Repricing of Awards Without Prior Stockholder ApprovalNamed Executive Officers
The Employee Plan prohibitsFor 2018, our NEOs are our CEO, former CFO, the repricing of stock options and stock appreciation rights without stockholder approval.
No Grants of “Reload” Awards Without Stockholder Approval
The Employee Plan does not provide for “reload” awards (the automatic substitution of a new award of like kind and amount upon the exercise of a previously granted award) without stockholder approval.
No Annual “Evergreen” Provision
The Employee Plan provides a specific maximum share limitation of 7,000,000 Shares and does not contain an annual or automatic increase in the number of shares available for awards.
Cap on Full-Value Awards
The Employee Plan includes a limit on the number of Shares (1,000,000) that may be issuednext three most highly compensated executive officers as full-value awards (i.e., awards other than stock options or stock appreciation rights) to any one participant.
Prohibition of Certain Share Recycling, or “Liberal Share Counting,” Practices
The Employee Plan prohibits adding back to the total share authorization shares that were withheld, deducted, or delivered for tax payments relating to stock options or stock appreciation rights; used to pay the exercise price of stock options; repurchased on the open market with proceeds of stock option exercises; or not issued upon exercise for any reason (including as a result of the net settlement or net exercise)end of an outstanding stock option or share-settled stock appreciation right.2018, and one former executive officer who was not serving as of end of 2018.
No Dividends Paid Out on Unearned Performance Awards
| Name | Title | |
Eric Steigerwalt | President and Chief Executive Officer | |
Anant Bhalla | Former Executive Vice President and Chief Financial Officer(1) | |
John Rosenthal | Executive Vice President and Chief Investment Officer | |
Christine DeBiase | Executive Vice President, Chief Administrative Officer and General Counsel(2) | |
Conor Murphy | Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer(3) | |
Peter Carlson | Former Executive Vice President and Chief Operating Officer(4) |
The Employee Plan provides that dividend equivalents payable on performance awards may be paid only when the underlying award is paid or settled.
| (1) | Mr. Bhalla ceased serving as Chief Financial Officer effective February 27, 2019, and departed Brighthouse effective March 14, 2019. |
No “Liberal Change in Control” Definition
| (2) | Ms. DeBiase’s title was changed from Executive Vice President, General Counsel and Corporate Secretary, effective February 2, 2018. |
The Employee Plan’s definition of “change of control” for purposes of accelerating vesting of awards is not considered “liberal.” For example, mergers, consolidations, reorganizations, asset sales and asset dispositions only give rise to a change of control if they are consummated (with existing stockholders owning less than a majority of the voting power after the transaction), and not if they are merely approved by stockholders.
| (3) | Mr. Murphy was appointed Executive Vice President and Chief Operating Officer, effective June 5, 2018. Until that date, Mr. Murphy served as Executive Vice President and Chief Product and Strategy Officer. Mr. Murphy was also appointed Interim Chief Financial Officer, effective February 27, 2019. |
Minimum Vesting Requirement
Subject to the terms of the Plan, full value awards under the Employee Plan have a minimum vesting period of at least one year for awards subject to the achievement of performance goals and three years (at a rate of not greater than 1/3rd per year) for awards that vest solely based upon continued service.
| (4) | Mr. Carlson stepped down from the position of Executive Vice President and Chief Operating Officer effective June 4, 2018, and remained employed with Brighthouse through December 31, 2018. |
7438 | 20182019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Discussion and Analysis
|
Ten-Year Plan TermCompensation Philosophy
The Employee Plan prohibits granting awards after August 8, 2027 and limits the exercise term of stock options and stock appreciation rights to ten years from the grant date.
Independent Committee Administration
The Employee Plan is administered by our Compensation Committee has established a compensation program rooted in apay-for-performance philosophy, which is comprised solelyintended to align the interests and incentives of independent, outside,non-employee directors.
Plan Summary
The following isour NEOs with those of our stockholders by tying a summarysubstantial portion of the material provisions of the Employee Plan and is qualified in its entirety by referenceour NEOs’ compensation to the complete textachievement of the Employee Plan included in this Proxy Statement as Appendix 1.
Purpose, Duration, and Governance
The purpose of the Employee Plan is to promote the success and enhance the value of Brighthouse and its affiliates by linking the personal interests of participants in the Employee Plan to the interests of Brighthouse’s stockholders and to provide an incentive for outstanding performance. Subject to stockholder approval, the Employee Plan will remain in effect until the earlier of its termination in accordanceperformance metrics that are aligned with its terms, the tenth anniversary of the date it became effective, or the purchase or acquisition of all of the shares subject to the Employee Plan.
our strategy. The Compensation Committee (or another Committee designatedis guided by the Board) may make grants of nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards,following general principles and Stock-Based Awardspractices:
paying for performance:variable compensation should be based on Company and determines all of the terms of awards. Each award will be evidenced by a written Award Agreement, which may take electronic form.individual performance and results that drive increases in stockholder value;
Each award under the Employee Plan will constitute compensation for services performed or to be performed by the recipient. The Employee Plan does not require anyone eligible to receive an award to pay any monetary consideration for the award.
Share Authorization and Limitsproviding competitiveTarget Total Direct Compensation
The number of Shares reserved for issuance under the Employee Plan is seven million (7,000,000).
Awards intended to be eligible to be Performance-Based Compensation (as defined below) under Section 162(m) are subject to the following limits in any one fiscal year to any one individual:
Brighthouse does not currently anticipate that anyone will be granted awards in the amount of any of the award limits.
Upon the consummation of certain corporate events, such (“Target TDC”) opportunities (defined as a change in capitalization of Brighthouse, merger, or stock split, the Compensation Committee will, in order to prevent dilution or enlargement of award-holders’ rights, substitute or adjust share limits and terms of awards under the Employee Plan. The Compensation Committee may make adjustments in the terms and conditions of awards due to other unusual or nonrecurring events affecting Brighthouse or changes in applicable laws, regulations, or accounting principles, whenever the Committee determines appropriate to prevent unintended dilution or enlargement of the benefits of the award (“base salary plus short-term incentive(“Award AdjustmentsSTI”) and long-term incentive(“LTI”) compensation opportunities): we aim to offer compensation that enables Brighthouse to attract, motivate and retain high-performing employees;
aligning executives’ interests with stockholders’ interests:a significant portion of our NEOs’ Target TDC will be delivered in the form of stock-based incentives;
encouraging long-term decision-making:our long-term incentive compensation programs include awards with multi-year, overlapping incentive performance or restriction periods;
avoiding problematic pay practices: we do not provide excessive perquisites, excessivechange-in-control severance pay or excise taxgross-ups, and we will not reprice stock options without stockholder approval; and
reinforcing strong risk management:our compensation program is designed to avoid providing our employees with incentives to take excessive risks.
What’s New in Our 2018 Compensation Program
We regularly review our compensation program to help ensure that it motivates and rewards our associates for performance that supports our strategic goals. In 2018, our first full year as an independent company, we made the following changes to our compensation program:
Element of Our | Changes in 2018 | |
STI Awards | • Established quantitative metrics focusing on areas critical to the work of establishing us as an independent company and that drive long-term value creation. • For 2018, three equally-weighted metrics were used: • TSA Exits; • Annuity Sales; and • Adjusted Statutory Earnings. | |
LTI Awards | • Established an equity mix for 2018 LTI awards with three equally-weighted components: PSUs, RSUs and NQSOs. • Selected the following PSU performance metrics, which measure the Company’s success in executing its long-term strategy over the 2018-2020 performance period: corporate expense reduction (weighted 60%); and capital return (weighted 40%). | |
Clawback Policy | • Adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct. For additional information about our clawback policy, see “Compensation Discussion and Analysis – Section 3 – Additional Compensation Practices and Policies – Clawback Policy.” | |
For more information about our 2018 Compensation Program, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program.”
20182019 Proxy Statement | 7539
Compensation Discussion and Analysis
| Brighthouse Financial, Inc. |
Eligibility2018Say-on-Pay Vote and Stockholder Engagement
All employees of BrighthouseOur stockholders expressed strong support for our compensation program during our engagement meetings and its affiliates are eligible for awards under the Employee Plan. Directors who are not otherwise employed by Brighthouse or any affiliate are not eligible to receive awards under the Employee Plan (seeProposal 6, which seeks stockholderthrough their overwhelming approval of the Brighthouse Financial, Inc. 2017our 2018Non-ManagementSay-on-Pay Director Stock Compensation Plan, pursuant to which independent, non-employee membersvote (97% of the Board are eligible to receive equity-based awards)votes in favor of ourSay-on-Pay proposal). As of December 31, 2017, there were approximately 1,263 individuals who would have been eligible to participate in the Employee Plan.
Administration
The Compensation Committee will administerconsidered stockholder feedback and the Employee Plan. Actions taken by the Compensation Committee are final, conclusive,Say-on-Pay vote results in reviewing our 2018 executive compensation program and binding. The Compensation Committee has discretion to interpret the Employee Plan, determine eligibilitymaking compensation decisions for awards under the plan, establish the terms of awards and adopt rules and regulations for administering the Employee Plan. Subject to applicable restrictions in the Compensation Committee Charter, the Compensation Committee may delegate any of its administrative duties to any other person or persons. The Compensation Committee may also delegate any of its duties, except with respect to awards intended to be Performance-Based Compensation, to one or more Compensation Committee members or to one or more officers of Brighthouse or its affiliates, subject to periodic reports to the Compensation Committee regarding the nature and scope of the awards granted under such delegation, and subject to applicable restrictions in the Committee’s Charter.
Fair Market Value
For purposes of the Employee Plan,our NEOs. In particular, the Compensation Committee has the authority to determine fair market valueadopted quantitative compensation metrics for both STI and LTI awards that are aligned with respect to Shares using any of several alternative methods commonly used in compensation practices, including the average trading values of the stock overour near- and long-term strategy.
2018 Performance. As a period of days. The Compensation Committee may elect to use different methods of establishing fair market value at different times, or for different purposes, under the Employee Plan (such as using the average of a single day’s high and low trading prices fornewly independent company, Brighthouse’s strategic focus is on establishing the exercise price of a Stock Option, but afoundation for future growth. Consistent with ourmulti-daypay-for-performance average for valuing Shares delivered in lieu of a cash payment).
Minimum Vesting or Restriction Period
Awards under the Employee Plan are generally subject to minimum vesting or restriction periods. For awards that vest in whole or in part on the attainment of one or more performance goals, the vesting period will not be less than one year. For awards that vest solely based upon the participant’s continued service, the award cannot become vested as to more thanone-third of the Shares on each of the first and second anniversaries of the grant date.
Stock Options
Under the Employee Plan,philosophy, the Compensation Committee may grant optionsestablished metrics for STI and LTI awardsthat directly align with Brighthouse’s strategy. Although 2018 was a challenging year for our stock performance, the Board believes that management has developed a strategy that will lead to purchase Shareslong-term growth and that the Company has successfully executed on that strategy in 2018. To align the interests of our NEOs with those of our stockholders, their compensation is weighted heavily toward equity-based compensation whose realized value depends both on the performance of our stock and select performance metrics which we believe will be drivers of long-term value creation.
2018 STI Awards. The table below presents our 2018 metrics for STI Awards (“Stock OptionsSTI Metrics”), which measure our performance in the areas that are not intendedcritical to be incentive stock options withinmeeting our strategic goals over time. Brighthouse met or exceeded all 2018 STI Metrics targets, resulting in an aggregate Company Performance Factor of 118%. For additional information about our STI Awards, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Elements of 2018 Compensation” and “–2018 STI Awards for Our NEOs.” STI Awards are made under the meaningAmended and Restated Brighthouse Services, LLC Short-Term Incentive Plan (the “STI Plan”).
STI Metric | Performance Link | Performance (Payout | ||||||
| TSA Exits | Exiting our TSAs with MetLife is critical to achieving our strategic goal of controlling corporate expenses and establishing a cost-competitive company. | Target Achieved (100%) | ||||||
| Annuity Sales | Key indicator of our growth prospects and franchise stability. | Maximum Achieved (150%) | ||||||
| Adjusted Statutory Earnings | Important indicator of our financial health that measures our insurance companies’ ability to pay future distributions and the effectiveness of our hedging program. | Target Exceeded (105%) | ||||||
| 2018 Company Performance Factor | 118% | |||||||
2018 STI Award. The Independent Directors, on the Compensation Committee’s recommendation, approved CEO compensation that reflects ourpay-for-performance philosophy. Mr. Steigerwalt’s 2018 goals were a mix of Section 422strategic and operational objectives that measured his performance in leading Brighthouse and laying the foundation for achieving our strategic goals. In setting the STI payout percentage at the Company’s aggregate performance factor, the Independent Directors considered Brighthouse’s performance against the 2018 STI Metrics and Mr. Steigerwalt’s accomplishments of his 2018 goals. The following table highlights Mr. Steigerwalt’s 2018 STI Award for performance in 2018, as approved by the Code. No Stock Option may be exercised later than the tenth anniversary date of its grant. The Compensation Committee determines,Independent Directors in each Award Agreement, the extent to which an individual hasJanuary 2019.
| Name | Base Salary | 2018 STI Target | 2018 STI Payout Percentage | 2018 STI Award | ||||
Eric Steigerwalt | $900,000 | $1,800,000 | 118% | $2,124,000 |
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2018 LTI Award. In February 2018, the Independent Directors granted Mr. Steigerwalt a 2018 LTI Award at his LTI target of $4,500,000, consisting of 1/3rd RSUs, 1/3rd PSUs and 1/3rd NQSOs. The actual number of PSUs issued will depend on Brighthouse’s actual performance at the end of the 2018-2020 performance period.
Additional information about Mr. Steigerwalt’s 2018 STI and LTI Awards is presented in “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program” and “2018 Compensation Tables.”
2019 LTI Award. In January 2019, the Independent Directors also granted Mr. Steigerwalt a 2019 LTI Award at his LTI target of $4,500,000, consisting of 70% PSUs and 30% RSUs. The actual number of PSUs issued will depend on Brighthouse’s actual performance at the end of the 2019-2021 performance period. For more information about 2019 LTI Awards, see “Compensation Discussion and Analysis – Section 4 – 2019 Compensation Program Preview – 2019 LTI Awards.” Pursuant to SEC disclosure rules, 2019 LTI Awards are not included in the “2018 Compensation Tables.”
Key Executive Compensation Practices
| What we do | | |||||
| Stock Ownership Guidelines. We have established stock ownership and retention guidelines that call for our NEOs to maintain significant stock ownership, thereby aligning their interests with those of our stockholders. | |||||
| Clawback Policy.We adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the | |||||
| Minimum Vesting Periods. Equity awards that are subject to achievement of performance goals generally have a vesting period of three years, and equity awards that vest based solely on continued service have a three-year vesting period (at a rate not greater thanone-third per year). | |||||
| Stockholder Engagement.Since the Separation, we have actively engaged with our stockholders on various topics, including our executive compensation program. We recognize the importance of our stockholders’ perspectives in the compensation-setting process and consider their feedback in the design of our compensation programs. | |||||
| Independent Compensation Consultant.Our Compensation Committee retained SBCG as its independent compensation consultant to advise on all aspects of our executive compensation program. | |||||
| Double-Trigger Vesting of Equity Awards upon a Change of Control.Outstanding awards that are substituted or assumed in a change of control only vest if the NEO is terminated or resigns with good reason. | |||||
| What we don’t do | | Gross-ups on Excise Taxes. We do not provide taxgross-up benefits in connection with payments upon a change of control. | ||||
| Reprice Stock Options.Our equity incentive plans prohibit us from repricing stock options or stock appreciation rights without stockholder approval. | |||||
| Excessive Perquisites. We provide limited perquisites to our executive officers. | |||||
| Hedging and Pledging.Our insider trading policy prohibits all employees and Directors from engaging in hedging or pledging transactions. | |||||
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Compensation Discussion and Analysis Section 2 – Our 2018 Executive Compensation Program | Brighthouse Financial, Inc. |
We have committed to a regular review of our compensation program to help ensure that it evolves with our maturing organization and continues to motivate and reward our associates for performance that supports our strategic goals. To this end, the rightCompensation Committee has approved several changes to exercise each Stock Option following terminationour compensation program, which are described in “Section 4 – 2019 Compensation Program Preview.”
Section 2 – Our 2018 Executive Compensation Program
2018 Compensation Setting Process
Our Human Resources organization (“HR”) was primarily responsible for performing market benchmarking and setting context for 2018 compensation recommendations for our NEOs and other members of employmentour senior management, which we collectively refer to as the Senior Leadership Management Group (the “SLMG”). In developing its recommendations, HR consulted with Brighthouse or its affiliates.Willis Towers Watson (“WTW”), which serves as management’s compensation consultant.
Our executive compensation pay positioning strategy aims to provide our executives with Target TDC that uses market median as an important reference point, but recognizes that the positioning of individual executives may vary due to a variety of factors, including criticality of role, skills, experience and strategic priorities. To determine pay positioning, we used WTW’s proprietary database of executive compensation at large diversified insurers (“DIS”) as our primary data point.
Role of the Compensation Committee and Others in Determining Compensation
Compensation Committee’s Role. The Compensation Committee may substitute Stock Appreciation Rights (as defined below)is responsible for any outstanding Stock Options, on termsestablishing and economic benefit equivalentimplementing our executive compensation philosophy and structure. Pursuant to its written charter, the responsibilities of the Compensation Committee include, among other things:
Assisting the Board in fulfilling its responsibility to oversee the development and administration of compensation programs for our executives and other employees;
Approving the goals and objectives relevant to our CEO’s compensation, evaluating at least annually our CEO’s performance in light of such Stock Options (“SAR Substitution”).
The exercise price of each Stock Option must begoals and objectives, and recommending, for approval by the Independent Directors, the CEO’s annual compensation based on 100%such evaluation;
Reviewing and approving on an annual basis the compensation of the fair market valueother executive officers of our Common Stock on the date of grant, set at a premium to the fair market value of our Common Stock on the date of grant, or indexedCompany (as determined by the Compensation Committee);
Reviewing and approving our equity andnon-equity incentive compensation plans and arrangements, and where appropriate or required, recommending such plans and arrangements for approval by the Board and/or our stockholders; and
Reviewing incentive compensation arrangements to confirm that incentive pay does not encourage our executive officers to take unnecessary risks, and reviewing and discussing the relationship between risk management policies and practices, corporate strategy and senior executive compensation.
Management’s Role. As discussed above, HR, in consultation with WTW, is primarily responsible for preparing Target TDC recommendations for our SLMG, which includes the NEOs. As part of ouryear-end compensation process, our CEO oversaw the review of each SLMG member’s performance during 2018. Based on the CEO’s assessment of each SLMG member’s performance, HR prepared and presented compensation recommendations for each SLMG member to the fair market valueCompensation Committee.
HR consulted with WTW to gather compensation data that was used to prepare Target TDC recommendations for the SLMG, which includes the NEOs. The CEO developed recommendations for all elements of our Common Stock onpay for the date of grant but in no event less than the fair market value of our Common Stock on the date of grant. The Compensation Committee may impose such restrictions on Shares acquired pursuant to exercise of a Stock Option as it determines advisable. The Compensation Committee determines, in each Award Agreement, the extent to which an individual has the right to retain and exercise Stock Options following termination of employment with Brighthouse or its affiliates.
Stock Appreciation Rights
Under the Employee Plan, the Compensation Committee may grant awards in the formmembers of the right to receive the difference in fair market value of a share of common stock on the date of exercise over theper-share price at which such right is granted (a “Stock Appreciation Right”).
Each Stock Appreciation Right would be evidenced by an Award Agreement that specifies the exercise price, the number of shares of common stock on which the Stock Appreciation Right is based,SLMG, other than himself, and other conditions and provisions determined by the Compensation Committee. No Stock Appreciation Right may be exercised later than the tenth anniversary of its date of grant. The Compensation Committee would determine, in each Award Agreement, the extent to which an individual has the right to exercise each Stock Appreciation Right following termination of employmentdiscussed these recommendations with Brighthouse or its affiliates.
The grant price of each Stock Appreciation Right must be based on 100% of the fair market value of our Common Stock on the date of grant, set at a premium to the fair market value of our Common Stock on the date of grant, or indexed (as determined by the Compensation Committee) to the fair market value of our Common Stock on the date of grant but in no event may be less than the fair market value of a share of Common Stock on the date of grant. Stock Appreciation Rights (subject to certain limitations) may be exercised on terms determined by the Compensation Committee. The Compensation Committee, determines, in each Award Agreement, the extent to which an individual has the right to retainconsultation with SBCG, reviewed and exercise a Stock Appreciation Right following termination of employment with Brighthouse or its affiliates.
In the Compensation Committee’s discretion, paymentapproved management’s compensation recommendations for an exercised Stock Appreciation Right may be in cash, Shares (based on fair market value on the date of exercise), or in a combinationall other members of the foregoing.SLMG, including our NEOs, as described below. The Compensation Committee may impose such restrictions on Shares acquired pursuant to exercise of a Stock Appreciation Right as it determines advisable.
United States Federal Income Tax Consequences of Stock Options and Stock
Appreciation Rights
The following is a brief summary of the federal income tax aspects of the issuance and exercise of Stock Options and Stock Appreciation Rights under the Employee Plan, based upon the federal income tax laws in effect on the date of this Proxy Statement. This summary is not intended to be exhaustive, and the exact tax consequences to anyone will depend upon his or her particular circumstances and other factors.Independent
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Generally, with respect to Stock Options,Directors approved the individual will not recognize income atTarget TDC and final compensation for our CEO, Mr. Steigerwalt, on the time the Stock Option is granted. On exerciserecommendation of the Stock Option, the individual recognizes ordinary income in an amount equal to the difference between the fair market value (as defined in the Code) of a Share on the date of exercise and the exercise price. At disposition of the Shares acquired upon the exercise of a Stock Option, any appreciation (or depreciation) after the date of exercise is treated as either short-term or long-term capital gain or loss, depending upon the length of time that the individual has held the Shares.
A Brighthouse subsidiary that employs a Stock Option recipient generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the individual in connection with the exercise of a Stock Option.
Generally, with respect to Stock Appreciation Rights, the individual will not recognize income at the time the Stock Appreciation Rights are granted. On exercise of the Stock Appreciation Rights, the individual recognizes ordinary income in an amount equal to the difference between the fair market value (as defined in the Code) of a Share on the date of exercise and the exercise price. If the individual received Shares upon exercise, any appreciation (or depreciation) after the date of exercise is treated as either short-term or long-term capital gain or loss, depending upon the length of time that the individual has held the Shares. A Company subsidiary that employs a Stock Appreciation Right recipient generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the individual in connection with the exercise of the Stock Appreciation Right.Compensation Committee.
Restricted Stock and Restricted Stock Units
Compensation Consultants’ Role.Under the Employee Plan,its written charter, the Compensation Committee may grant Shares subjecthas the authority to a periodretain advisers to assist it in which such Shares are subject to forfeiture based on discontinued service, the failure to achieve performance criteria, and/or the occurrencedischarge of other events as determined byits duties. In November 2017, the Compensation Committee (“retained SBCG as its independent compensation consultant. The Compensation Committee assessed SBCG’s independence in light of SEC standards and determined that no conflicts of interest or independence concerns exist. SBCG reports directly to the Compensation Committee, and the Compensation Committee has the sole authority to approve the fees and other terms of the retention of SBCG as its independent compensation consultant. SBCG is expected to attend all Compensation Committee meetings and to provide advice to the Compensation Committee on all aspects of the Company’s executive compensation program, including the form, mix and amount of Target TDC. SBCG has assisted the Compensation Committee in its implementation of our compensation principles and practices. SBCG has advised the Compensation Committee on the development of the Company’s 2018 STI and LTI compensation arrangements, including the STI and LTI metrics for 2018 and the forms of equity-based incentives awarded to members of the SLMG in 2018.
HR has retained WTW to provide assistance related to our executive compensation program. It is expected that WTW will continue to advise HR on matters related to our executive compensation program. Additional information about WTW’s role is provided above under the heading “Management’s Role.”
Establishing a Compensation Comparator Group. For compensation benchmarking purposes, we also used a group of peer companies within our industry that are similar to us in terms of assets and revenues and with which we compete for executive talent (the “Restricted Stock”), and may grant awards denominated in units subject to forfeiture (“Restricted Stock UnitComparator Group”). Restricted Stock Units mayHR, with input from WTW, initially constructed the Comparator Group and used the companies in the Comparator Group as the market reference for benchmarking and setting context for developing pay recommendations for our NEOs and other members of the SLMG. In constructing the Comparator Group, we aimed to select the most appropriate companies against which Brighthouse’s compensation-related performance should be paidmeasured. The Comparator Group consists of thirteen publicly-traded companies in cash, Shares, the insurance industry with assets and/or revenues between approximately 0.5 to 2.0 times those of Brighthouse. As Brighthouse exclusively sells individual life and annuities products in the U.S.,comparably-sized insurers with a combination thereof as determined bymeaningfully different business mix or with significant global operations were excluded from the Comparator Group.
Applying these criteria, in August 2018, the Compensation Committee.
Committee approved the below Comparator Group, which reflects the following changes from our 2017 comparator group: removed Aflac Incorporated, American National Insurance Company and Genworth Financial; and added Athene Holding Ltd. and AXA Equitable Holdings, Inc. The Comparator Group is divided into a primary tier of companies that the Compensation Committee may impose such conditionsconsidered more directly comparable to Brighthouse and a secondary tier of companies that the Compensation Committee considered relevant but less comparable, due to size, revenues, business mix or restrictions on Restricted Stock or Restricted Stock Units as it deems advisable. No Restricted Stock Unit will confer any voting rights, although holders of Restricted Stock do have voting rights during the period of restriction applicable to such awards. other factor.
| Primary Tier | Secondary Tier | |||
| American Equity Investment Life Holding Company | Assurant, Inc. | |||
Ameriprise Financial, Inc. | Principal Financial Group, Inc. | |||
Athene Holding Ltd. | Sun Life Financial lnc. | |||
AXA Equitable Holdings, Inc. | Unum Group | |||
CNO Financial Group, Inc. | Voya Financial, Inc. | |||
Lincoln National Corp. | ||||
Reinsurance Group of America, Inc. | ||||
Torchmark Corp. | ||||
The Compensation Committee will determine, in each Award Agreement,continue to annually review the extent to which an individual has the right to retain each Share of Restricted Stock or Restricted Stock Unit following termination of employment with Brighthouse or its affiliates.
Performance Shares and Performance Units
Under the Employee Plan, the Compensation Committee may grant awards denominated in Shares (“Performance Shares”) or units (“Performance Units”) whose value is determined as a functioncomposition of the extentComparator Group to which specified performance criteria have been achieved. Each Performance Share will have an initial value equal to the fair market valueinclude companies of a Share on the date of grant. To the extent the Compensation Committee establishes the initial value of a Performance Unit in relation to the value of a Share, each Performance Unit will have an initial value equal to the fair market value of a Share on the date of grant. The Compensation Committee may determine that a Performance Share or Performance Unit is payablesimilar size and business mix and with which Brighthouse competes in the form of cash, Shares, or a combination of the two, and may require the individual totalent market.
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2018 Target Total Direct Compensation
The following table shows the base salary, target STI opportunity (as a percentage of base salary) and target LTI opportunity (as a percentage of base salary) for each NEO that the Independent Directors (for Mr. Steigerwalt) and the Compensation Committee (for all other NEOs) approved in early 2018.
| Name | Base Salary | Target STI (as % of Base Salary) | Target LTI (as % of Base Salary) | Target TDC | ||||||||||||||||
Eric Steigerwalt | $900,000 | 200% | 500% | $7,200,000 | ||||||||||||||||
Anant Bhalla | $600,000 | 140% | 175% | $2,490,000 | ||||||||||||||||
John Rosenthal | $550,000 | 195% | 200% | $2,722,500 | ||||||||||||||||
Christine DeBiase | $600,000 | 120% | 175% | $2,370,000 | ||||||||||||||||
Conor Murphy (1) | $600,000 | 140% | 150% | $2,340,000 | ||||||||||||||||
Peter Carlson | $600,000 | 150% | 200% | $2,700,000 | ||||||||||||||||
| (1) | Reflects Mr. Murphy’s Target TDC as Executive Vice President and Chief Operating Officer, effective June 5, 2018. Prior to that date, Mr. Murphy’s Target TDC as Executive Vice President and Chief Product and Strategy Officer included base salary of $515,000, Target STI of 100%, and Target LTI of 150%. In January 2019, Mr. Murphy’s Target STI was changed to 145% and his Target LTI to 190%. |
As shown in the graphs below, our CEO’s Target TDC and the average Target TDC for our other NEOs (excluding Mr. Carlson) are heavily weighted toward variable,at-risk elements.
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retain any Shares received for a specified periodElements of time.2018 Compensation
Component | Form | Purpose | ||||||
| Base Salary | Cash (Fixed) | Base salary is intended to provide a fixed amount of compensation for services during the year. Base salary is determined based upon a variety of factors, including scope of responsibilities, individual performance, and market data. In line with ourpay-for-performance philosophy, Target TDC has been structured so that base salary is the smallest component. | ||||||
| Short-Term Incentive (STI) Awards | Cash (Variable) | STI awards are our annual cash incentive awards that reward our associates for their performance in 2018. Payout amounts were based upon the Company’s achievement of our 2018 STI Metrics approved by the Compensation Committee and upon the associate’s individual performance. | ||||||
| Long-Term Incentive (LTI) Awards | Equity (Variable) | LTI awards are our stock-based awards that reward our associates for their contributions to Brighthouse’s long-term success. 2018 LTI awards consisted of PSUs, RSUs and NQSOs. PSUs will be paid out at the end of a three-year performance period based on Brighthouse’s performance against quantitative goals. | ||||||
2018 STI Metrics. The Compensation Committee determines,established metrics for the 2018 STI Awards that directly align with Brighthouse’s strategic goals. This is consistent with ourpay-for-performance philosophy and helps ensure that the NEOs are compensated for their contributions to the Company’s achievement of the business goals set forth in the strategic plan. For each Award Agreement, the extent to which an individual has the right to retain each Performance Share or Performance Unit following termination of employment with Brighthouse or its affiliates.
Cash-Based Awards and Stock-Based Awards
Under the Employee Plan,STI Metric, the Compensation Committee may grant awards denominated in cash (“Cash-Based Awards”)approved a threshold (payout of 50% of target value), target (100% of target value) and equity-based or equity-related awards not otherwise described by the termsmaximum (150% of target value) level of performance based on its evaluation of the Employee Plan (“Stock-Based Awards”).likelihood of management achieving those performance levels. STI payouts were based upon the Company’s achievement of these metrics, as well as qualitative factors the Compensation Committee deemed appropriate, including each SLMG member’s performance and accomplishments during 2018. The Compensation Committee would determinebelieves the value,underlying goals for each STI metric were appropriately rigorous and any predicate performance criteria,represented a significant challenge for management to achieve. A summary of each Cash-Based Award,our 2018 STI Metrics and would determine whether the Cash-Based Award will be payable in cash, Shares (subject to such restrictions as are determined by the Compensation Committee), or a combination of the two, having a fair market value equal to the value of the Cash-Based Award. Stock-Based Awards may include the grant of Shares or payment of cash in such amounts and subject to such terms and conditions including, but not limited to, being subject to performance criteria, or in satisfaction of such obligations, as the Compensation Committee determines. The Compensation Committee determines, in each Award Agreement, the extent to which an individual has the right to receive each Cash-Based Award or Stock-Based Award following termination of employment with Brighthouse or its affiliates.rationale for their selection follows.
Dividends and Dividend Equivalents
Holders of Stock Options, Stock Appreciation Rights, Performance Shares, or Performance Units will not be credited with dividends or dividend equivalents on account of dividends declared or paid on Shares. The Compensation Committee may, in its discretion, provide for Restricted Stock or Restricted Stock Units to be credited with dividends paid on Shares or with dividend equivalents, and may determine in its discretion the form of payment of those dividends or dividend equivalents. The Compensation Committee can apply any restrictions on dividends or dividend equivalents that it deems appropriate, including not permitting payment of dividends or dividend equivalents while the amount is subject to an ongoing period of restrictions.
Performance-Based Compensation
The Compensation Committee may grant awards other than a Stock Option or Stock Appreciation Right that are intended to provide remuneration solely on account of the attainment of one or morepre-established, objective performance criteria under circumstances that are intended to be eligible to satisfy the requirements of Section 162(m) of the Code, as applicable (“Performance-Based Compensation”). The vesting, payment, or value of Performance-Based Compensation will be determined by the attainment of one or more goals based on one or more of the following “Performance Measures”:
STI Metric | Weighting | Performance Link | ||||||
| TSA Exits | 1/3rd | Exiting our TSAs with MetLife is a significant component of achieving our strategic goal of controlling corporate expenses and establishing a cost-competitive company. TSA Exits in 2018 represent a key directional indicator for reducing corporate expenses. Meeting our TSA Exits goal required extraordinary effort from organizations throughout Brighthouse, continued engagement with MetLife, and selection and onboarding of replacement systems and vendors. | ||||||
| Annuity Sales | 1/3rd | Annuity sales are important to our long-term value and vital to our growth prospects and franchise stability. Meeting our Annuity Sales goal involved achievement by organizations across the Company. Key challenges for achieving sales goals included building relationships with our distribution partners; building brand awareness and trust among our customers as a newly independent company; and aggressive and unexpected product lines and pricing from our competitors. | ||||||
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STI Metric | Weighting | Performance Link | ||||||
| Adjusted Statutory Earnings | 1/3rd | Adjusted Statutory Earnings is a key metric that measures our ability to grow distributable earnings while prudently managing risk. The payout target is anchored in Brighthouse’s 2018 base case financial plan. As an STI metric, it also reflects factors that the broad population of STI participants are most able to directly impact and influence. This metric is the product of performance across key aspects of management’s strategy: sales; capital management; and expense control. Adjusted Statutory Earnings (which we disclose in our 2018 Form10-K, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – The Parent Company – Liquidity and Capital – Adjusted Statutory Earnings”) begins with Statutorypre-tax net gain from operations (which is publicly disclosed in the statutory financial statements of our insurance companies) and includes certain adjustments to help management and investors better understand and evaluate those results. | ||||||
The Compensation Committee reviewed Brighthouse’s actual performance to confirm that Brighthouse’s actions to achieve these results were carried out safely and prudently and did not create unwarranted risk for the Company. In addition, our Internal Audit department reviewed and certified the Company’s actual performance results for each metric. The following table reflects the Company’s performance against each STI metric (payout percentages were rounded to the nearest whole number) and the 2018 Company Performance Factor approved by the Compensation Committee.
| STI Metrics | Payout Level Target | Actual Results | Payout Percentage | ||||||||||||
TSA Exits | 66 exits | 66 exits | 100 | % | |||||||||||
Annuity Sales | $ | 4.69B | $ | 5.90B | 150 | % | |||||||||
Adjusted Statutory Earnings | $ | 300M | $ | 324M | 105 | % | |||||||||
2018 Company Performance Factor | 118 | % | |||||||||||||
2018 Short-Term Incentive Awards
CEO Compensation. In early 2018, Mr. Steigerwalt and members of HR developed corporate performance goals (“CEO Goals”) that would be used to assess Mr. Steigerwalt’s performance during 2018. In February 2018, the Compensation Committee approved the CEO Goals and discussed the quantitative and qualitative metrics to measure performance against the CEO Goals. The CEO Goals, described in the table below, were a mix of strategic and operational objectives, and were intended to provide a framework for assessing Mr. Steigerwalt’s performance in leading Brighthouse and laying the foundation for achieving our strategic goals.
In February 2019, the Compensation Committee and the Independent Directors considered the Company’s performance overall, Mr. Steigerwalt’s performance against the CEO Goals, his other accomplishments in 2018 and Mr. Steigerwalt’s self-assessment of his performance. The following table describes the 2018 CEO Goals and Mr. Steigerwalt’s key accomplishments.
CEO | 2018 Accomplishments | |||
| Reduce corporate expenses | • Delivered TSA exits in line with plan. • Exceeded corporate expense reduction target, including reduction by more than $40 million in the second half of 2018 relative to the first half of 2018, keeping Brighthouse on track to deliver our planned $150 million of expense saves byyear-end 2020 (relative to the first twelve months post-Separation). | |||
Increase sales | • Achieved $5.9 billion in total annuity sales, significantly exceeding plan despite competitive headwinds. | |||
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CEO Goal | 2018 Accomplishments | |||
| Protect book value | • Oversaw hedging program to protect statutory capitalization and cash flows. • GAAP net income and book value results in line with expectations. | |||
Maturation and establishment of BHF, including product development and distribution growth | • Introduced FlexChoice Access, a new version of a lifetime withdrawal guarantee rider for our VA products. • Launched two new Fixed Deferred Annuity products with competitive crediting rates. • Launched arrangements for distribution of Shield product with key partners. • Developed SmartCare, a hybrid indexed universal life insurance product with long- term care benefits, which received regulatory approval in 47 jurisdictions. | |||
| Develop strong talent management and leadership | • Restructured the Senior Leadership Team, including the appointment of Conor Murphy as COO with responsibility for strategy and financial and operational matters, and Christine DeBiase as Chief Administrative Officer and General Counsel with responsibility for HR, Communications, Law, Government Relations and Tax. • Drove succession planning for senior officers and all critical roles. • Performed a comprehensive review of all target operating models to assess staffing levels and talent needs and optimize our human capital structure. • Developed a human capital scorecard to measure key employment metrics and launched a diversity and inclusion council to support our corporate culture and development goals. | |||
| Other accomplishments | • Drove the Company’s incorporation of capital requirements under NAIC VA capital reform into our CTE calculations. • Initiated our first stock repurchase program, two years ahead of plan. • Drove significant progress on our future state technology platform. • Supported execution of the sale of MetLife’s remaining stake in Brighthouse. | |||
The CEO delivered meaningful achievements against all 2018 CEO Goals. Based on equity;
The Compensation Committee has the discretion to alter the Performance Measures without obtaining stockholder approval of such changes to the extent that applicable tax or securities laws permit such alterations.
No Performance-Based Compensation will be payable unlessMr. Steigerwalt’s accomplishments, the Compensation Committee certifiesrecommended, and the Independent Directors approved, that Mr. Steigerwalt’s STI payout percentage be set at the Company’s aggregate performance factor of 118%, resulting in writing that the performance measures applicable to the award were satisfied. The Compensation Committee may not increase the valuea 2018 STI Award of an award of Performance-Based $2,124,000.
Compensation above the maximum value determined under the performance formula by the attainment of the applicable performance goal(s), butOther NEOs. In February 2019, the Compensation Committee may retainconsidered the discretion to reduce the value below such maximum.
As discussed above,NEOs’ overall performance and achievements in 2018. Mr. Steigerwalt also provided the Compensation Committee retainswith his assessment of the right to payNEOs’ 2018 performance. Our NEOs’ 2018 performance highlights are summarized below. Mr. Carlson stepped down from the position of Executive Vice President and Chief Operating Officer effective June 4, 2018. Mr. Carlson’s compensation that is not Performance-Based Compensation.
Change of Control
The following paragraphs describe how awards under the Employee Plan would be affected in the event of2018 reflects base salary and other payments described in a Change of Control (as defined below), except as otherwise provided in the Award Agreement or otherletter agreement between Mr. Carlson and Brighthouse Services, LLC (“Brighthouse Services”), dated June 8, 2018. See “Potential Payments Upon Termination or Change in Control” for additional information regarding the individual and Brighthouse.payments made to Mr. Carlson upon the termination of his employment.
Change of ControlAnant Bhalla, Former Executive Vice President and Chief Financial Officer, as defined in
Oversaw the Employee Plan, occurs if:
Commenced the persons who were serving as membersCompany’s implementation of Brighthouse’s Board (the “Incumbent Directors”) ceaseNAIC VA capital reform to constituteaddress a majoritymore than $1.0 billion increase in NAIC VA capital requirements. Led engagement with NAIC and consultants regarding development of the membersrequirements. Prudently managed the Company’s balance sheet to address initial impacts of Brighthouse’s Board (provided that any Directors electednew requirements.
Partnered with business organizations to improve the Board by a majority of the Incumbent Directors then still in office will be treated as Incumbent Directors for this purpose); orCompany’s profitability and capital profile.
The Compensation Committee may reasonably determine in good faith prior to the occurrence of a Change of Control that a successor to Brighthouse will honor or assume an award under the Employee Plan, or that the successor will substitute new rights (in each case as defined in the Employee Plan,
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John Rosenthal, Executive Vice President and Chief Investment Officer
Successfully executed comprehensive program to outsource or retain management of all investment asset classes.
Drove substantial annualized cost savings.
Implemented the target operating model for the Investments department’s asset management organization.
Planned and executed Treasury rotation trades that management believes will contribute substantial annualized net investment income. Identified additional trades to be implemented in 2019.
Christine DeBiase, Executive Vice President, Chief Administrative Officer and General Counsel
Led the Chief Administrative Officer organization in advising business partners on legal and regulatory matters, including with respect to capital actions, regulatory compliance, tax, corporate governance and government relations.
Executed comprehensive exercise to validate and reduce expenses across all organizations within the Chief Administrative Office.
Partnered with the Nominating and Governance Committee to recruit two new qualified director candidates, enhancing our Board’s skill set and diversity.
Key partner in presenting Board training and legal guidance on emerging issues.
Successfully drove a substantial number of TSA exits across the Chief Administrative Officer organization and supported business partners in planning and executing TSA exit strategy.
Conor Murphy, Executive Vice President and Chief Operating Officer
Assumed the COO role, and incorporated oversight of the finance, investor relations and operations functions.
Created SmartCare, our new hybrid life insurance policy with a long-term care rider, from idea generation to market-ready product approved in 47 jurisdictions (as of the end of 2018).
Created a new set of fixed annuity products, launched in conjunction with a reinsurance partnership with Athene Holding Ltd.
Launched various tailored andfee-based versions of our Shield annuity product and managed the Shield pricing process through an increasingly competitive landscape.
Designed and led the first full Board strategy session, which took place in January 2019.
The Compensation Committee considered the foregoing accomplishments and, based on Mr. Steigerwalt’s recommendations, approved the following STI Awards to our other NEOs:
Name
| STI Payout Percentage
| 2018 STI Award
| ||||||||
Anant Bhalla
|
| 114.46
| %
| $961,464
| ||||||
John Rosenthal
|
| 118
| %
| $1,265,550
| ||||||
Christine DeBiase
|
| 118
| %
| $849,600
| ||||||
Conor Murphy(1)
|
| 118
| %
| $828,344
| ||||||
| (1) | Mr. Murphy’s 2018 STI Award reflects his change of title during 2018 and has been prorated based on his service in two roles. The Committee approved Mr. Murphy’s promotion from Chief Product and Strategy Officer to COO, as of June 5, 2018. In accordance with the STI Plan, Mr. Murphy’s compensation was prorated for 155 days in his former role ($515,000 salary with 100% STI) and 210 days in his current role ($600,000 salary with 140% STI). |
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| Brighthouse Financial, Inc. | Compensation Discussion and Analysis Section 2 – Our 2018 Executive Compensation Program |
The 2018 STI amounts paid to all of our NEOs are reported in the“Non-Equity Incentive Compensation Plan” column of the “Summary Compensation Table.”
2018 Long-Term Incentive Awards
In February 2018, the Independent Directors, on the recommendation of the Compensation Committee, approved an LTI award for Mr. Steigerwalt, and the Compensation Committee approved LTI awards for our other NEOs. The table below shows the breakdown of award vehicles chosen for 2018 long-term equity incentive awards.
Type of Award | Percentage | Vesting Schedule | ||||||
| Performance Share Units | 1/3rd | Cliff vest after year 3; the actual number of shares vested, if any, is subject to achievement ofpre-established performance goals over the 2018-2020 performance period | ||||||
Restricted Stock Units | 1/3rd | Ratable vesting over 3 years (1/3rd vests at each anniversary) | ||||||
| Nonqualified Stock Options | 1/3rd | Ratable vesting over 3 years (1/3rd vests at each anniversary;10-year term; exercise price is closing price on grant date) | ||||||
Our 2018 LTI Awards were issued on March 1, 2018 (the “Grant Date”), subject to stockholder approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive Compensation Plan (the “Employee Plan”). The number of RSUs and PSUs awarded were determined by multiplying the dollar amount of the 2018 LTI Award by 1/3rd, and dividing the product by the closing price of Brighthouse’s common stock on the Grant Date (rounded down to the nearest whole share). The number of NQSOs to be granted was determined based upon a Black-Scholes valuation (rounded down to the nearest whole number). For NQSOs, the exercise price is the closing price of the Company’s common stock on the Grant Date. The table below shows each NEO’s LTI award based on the value of the LTI Award on the Grant Date.
| Name | LTI Award Value |
Number of RSUs |
Number of PSUs | Number of NQSOs | ||||||||||||||||
Eric Steigerwalt | $ | 4,500,000 | 28,053 | 28,053 | 92,137 | |||||||||||||||
Anant Bhalla | $ | 1,050,000 | 6,545 | 6,545 | 21,498 | |||||||||||||||
John Rosenthal | $ | 1,100,000 | 6,857 | 6,857 | 22,522 | |||||||||||||||
Christine DeBiase | $ | 1,006,250 | 6,272 | 6,273 | 20,602 | |||||||||||||||
Conor Murphy | $ | 772,500 | 4,815 | 4,815 | 15,816 | |||||||||||||||
Peter Carlson | $ | 1,200,000 | 7,480 | 7,480 | 24,570 | |||||||||||||||
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Compensation Discussion and Analysis Section 2 – Our 2018 Executive Compensation Program | Brighthouse Financial, Inc. |
anDetailed information on the 2018 LTI Awards for each NEO is reported in the “Grants of Plan-Based AwardsAlternative Award” table.
The 2018 PSUs will reward our NEOs for Brighthouse’s performance over the 2018-2020 performance period. The actual number of shares issued, if any, at the end of the performance period will depend on the Company’s actual performance. This is consistent with ourpay-for-performance philosophy and helps ensure that the NEOs are compensated for their contributions to the Company’s achievement of the business goals set forth in the strategic plan. Each PSU compensation metric (“PSU Metric”). In has a threshold (payout of 50% of target value), target (100% of target value) and maximum (150% of target value) level of performance. The Compensation Committee believes the event thatunderlying goals for each PSU Metric are appropriately rigorous and represent a participant holds an Alternative Award, the vesting or exercisabilitysignificant challenge for management to achieve. A summary of the award will not be accelerated by reasonPSU Metrics, the weighting and the rationale for each follow.
2018 PSU Metrics | Weighting | Performance Link | ||||||
| Corporate Expense Reduction | 60% | Expense reduction by 2020 aligns with Brighthouse’s publicly disclosed targets. As a result of Brighthouse’smid-year separation from MetLife, the comparative measurement period is July 1, 2017 – June 30, 2018 versus annualized expenses from July 1, 2020 – December 31, 2020. | ||||||
| Capital Return | 40% | Our capital return goal is consistent with our publicly disclosed targets. Capital return (e.g., through dividends or stock repurchases) is a key metric that demonstrates alignment with stockholders’ interests. | ||||||
The treatment of outstanding equity awards upon a termination of employment or a change in control are described below under the heading “Potential Payments Upon Termination or Change of Control. If the successor makes no Alternative Award, the Change ofin Control will affect awards as described below..”
If a successor does not honor or assume outstanding awards, outstanding Stock Options and Stock Appreciation Rights will become immediately exercisable and, if an individual’s employment is involuntarily terminated for any reason other than Cause (as definedFounders’ Grants
Founders’ Grants, in the Employee Plan) within 12 months following the Changeform of Control, the individual will have until the earlier of the term of the Stock Option or Stock Appreciation Right or 12 months following such termination date to exercise the Stock Options or Stock Appreciation Rights. Any forfeiture provisions or other restrictions on Restricted Stock or Restricted Stock Units will lapse. The target payout opportunities attainable under all outstanding awards of performance-based Restricted Stock, performance-based Restricted Stock Units, Performance Units, and Performance Shares (including awards intended to be Performance-Based Compensation) will be deemed fully earned based on attainment of target performance as of the effective date of the Change of Control, and the vesting of all such awards denominated in Shares or cash will be accelerated and be paid to individuals in the specified form within 30 days following the effective date of the Change of Control. All Cash-Based Awards and Stock-Based Awards will vest immediately and be paid as determined by the Compensation Committee.
Rather than the treatment discussed in the preceding paragraph, the Compensation Committee may unilaterally determine that all outstanding awardsRSUs under the Employee Plan, were aone-time award that were a central element of the total compensation delivered to our NEOs in Fiscal 2017. The Founders’ Grants were authorized by the Board on August 9, 2017. For all NEOs other than Mr. Murphy, the number of RSUs awarded was based on the amount of value being delivered, divided by the closing price of the Company’s common stock on September 8, 2017 (the first Friday after one month of public trading), which was $54.54. For Mr. Murphy, the number of RSUs awarded was based on the amount of the award divided by the closing price of the Company’s common stock on September 11, 2017 (the date he was hired), which was $55.11. Since the Founders’ Grants were subject to stockholder approval of the Employee Plan at our 2018 Annual Meeting, for the purposes of SEC disclosure rules, the Founders’ Grant awards were deemed granted in 2018, and accordingly are cancelled andreported in our Fiscal 2018 compensation tables. For additional information about the Founders’ Grants, see our 2018 Proxy Statement.
The table below shows the value of each award,NEO’s Founders’ Grant approved in August 2017 as determined bywell as the Compensation Committee in accordance withnumber of RSUs into which the Employee Plan and Award Agreement, will be paid out in cash in an amountvalue was converted based on the Change of Control Price (no payment, however, will be made on account of a Stock Option or Stock Appreciation Right using a value higher than the fair market value on the dateclosing price of the settlement). “Change of Control Price” means the highest price per Share offered in conjunction with the Change of Control (determined by the Compensation Committee in good faith if any part of the price is payable other than in cash) or, if the Change of Control occurs solely due to a change in the composition of the Board, the highest fair market value of the SharesCompany’s common stock on any of the 30 trading days prior to the Change of Control.September 8, 2017.
Amendment and Termination; Miscellaneous Terms
The Compensation Committee or Board may, at any time, amend, suspend, or terminate the Employee Plan in whole or in part, except that Stock Options and Stock Appreciation Rights will not be repriced, replaced, or regranted through cancellation or by lowering the exercise price of a previously granted Stock Option or Stock Appreciation Right, or by grant of another award or payment in cash, without stockholder approval (other than in the case of an Award Adjustment or SAR Substitution). To the extent necessary under any applicable law, regulation, or exchange requirement, no amendment will be effective unless approved by the stockholders of Brighthouse. No termination, amendment, or suspension of the Employee Plan will adversely affect in any material way any award previously granted under the Employee Plan without the written consent of the award recipient.
The Employee Plan does not limit the right of Brighthouse or any of its affiliates to establish any other compensation or benefit plans or programs. Except as otherwise stated in any other benefit plan or program, no award under the Employee Plan is treated as compensation for purposes of calculating anyone’s rights under any such other plan or program.
No awards under the Employee Plan may be sold, transferred, pledged, or assigned other than by will or the laws of descent and distribution, except that the Compensation Committee may provide for transfers
| Name | Founders’ Grant Value | Number of RSUs | ||||||||
Eric Steigerwalt | $9,000,000 | 165,016 | ||||||||
Anant Bhalla | $2,100,000 | 38,503 | ||||||||
John Rosenthal | $2,200,000 | 40,337 | ||||||||
Christine DeBiase | $2,012,500 | 36,899 | ||||||||
Conor Murphy | $1,545,000 | 28,034 | ||||||||
Peter Carlson | $2,400,000 | 44,004 | ||||||||
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without consideration. ExceptFounders’ Grants awarded to our NEOs were subject to the Company’s achievement of one or more performance criteria during the performance period that began on September 8, 2017 and ended on September 30, 2018 (the “Performance Period”). The performance criteria, which are listed below, were established in order to qualify the Founders’ Grants as so provided byperformance-based compensation under Section 162(m) of the Code:
Improvement in the Company’s statutory surplus position over the Performance Period;
Combined risk-based capital ratio of at least 400% on an authorized control level as of the end of the Performance Period;
Positive GAAP operating return on equity as of the end of the Performance Period;
Insurer financial strength rating of at least‘A-’ from one or more credit rating agencies as of the end of the Performance Period;
Positive value of new business sold during the Performance Period for the annuity segment of the Company measured as of the end of the Performance Period; or
VA funding at a level of CTE95 or above as of the end of the Performance Period.
At the end of the Performance Period, our CFO (at that time) and Compensation Committee no other award made undercertified that Brighthouse achieved an Insurer Financial Strength Rating of at least‘A-’, allowing vesting and payout of the Employee Plan may be sold, transferred, pledged, or assigned other than by will or the laws of descent and distribution.Founders’ Grants on September 30, 2018.
ClawbackTemporary Incentive Deferred Compensation Plan
AllThe Temporary Incentive Deferred Compensation Plan (the “Temporary Plan”) was established prior to the Separation to help Brighthouse attract, retain and motivate employees who forfeited MetLife equity awards in connection with the Separation and/or did not receive MetLife equity awards in 2017 in anticipation of the Separation. (For additional information about the Temporary Plan, see our 2018 Proxy Statement.) Deferred compensation credits for forgone awards under the EmployeeTemporary Plan are subjectwere established at the level consistent with the equity award the recipient would have been eligible to any Brighthouse performance-basedreceive from MetLife. Deferred compensation recoupment policycredits in effectrespect of forgone 2017 MetLife equity awards vest over three years from time to time.
the grant date at a rate ofAdditional Informationone-third
The total number per year. Deferred compensation credits in respect of additional Shares that Brighthouse proposes to reserve for issuanceforfeited RSUs vestone-third per year from the date MetLife granted the forfeited award, while deferred compensation credits in respect of forfeited stock options and forfeited performance shares cliff vest on the third anniversary of the date MetLife granted the forfeited award. Amounts credited under the EmployeeTemporary Plan earn interest based upon the Applicable Federal Rate published by the Internal Revenue Service, as described in the Temporary Plan, and which is 7,000,000. Underreset annually on December 1. For 2018, amounts under the EmployeeTemporary Plan each Share issued, regardlesswere credited with interest at a rate of 3.08% for the period of January 1, 2018 to November 30, 2018, and a rate of 3.80% for the period of December 1, 2018 to December 31, 2018. In the event of a change of control of Brighthouse, no amendments can be made to the Temporary Plan that would decrease the amount of deferred compensation credited to participants under the Temporary Plan as of the date of the change of control or modify the time or form of award that causes the payment, will count equally as one Share deducted from the total number of shares reserved for issuance as compensation.
Assuming stockholder approval of the Employee Plan, at Brighthouse’s forecasted pace of granting awards that normally pay out in Shares or allow the purchase of Shares, assuming stable future rates (based on current rates) of each of compensation, award recipient population, award forfeitures, Shares withheld for tax purposes, and Share price, Brighthouse currently expects the total number of Shares reserved for issuance to last for approximately three years, beginning with awards made in 2017 subject to stockholder approval.
If stockholders approve the Employee Plan, Brighthouse plans to file with the SEC, as soon as practicable following such approval, a Registration Statement on FormS-8 to register the Shares available for issuancedistributions under the Employee Plan.
The Board of Directors recommends that stockholders voteFORthe approval of the Brighthouse Financial, Inc. 2017 Stock and Incentive CompensationTemporary Plan.
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The table below shows the total amount of each type of deferred compensation credited to each NEO under the Temporary Plan in 2017. Certain awards to our NEOs under the Temporary Plan were subject to stockholder approval of the Temporary Plan and accordingly under the SEC’s disclosure rules such awards are treated as though granted in 2018 and are reported in the “Grants of Plan-Based Awards” table.
| Name | Credit in Lieu of 2017 MetLife Equity Award | Credit for Forfeited MetLife Equity Awards – | Credit for Forfeited MetLife Equity Awards – Performance Shares | Credit for Forfeited MetLife Equity Awards – Stock Options | Total Temporary Plan Credits | ||||||||||||||||||||
Eric Steigerwalt | $ | 1,200,000 | $ | - | $ | - | $ | - | $ | 1,200,000 | |||||||||||||||
Anant Bhalla | $ | 368,000 | $ | 150,000 | $ | 300,000 | $ | - | $ | 818,000 | |||||||||||||||
John Rosenthal | $ | 700,200 | $ | - | $ | - | $ | - | $ | 700,200 | |||||||||||||||
Christine DeBiase | $ | 307,100 | $ | - | $ | - | $ | - | $ | 307,100 | |||||||||||||||
Conor Murphy | $ | - | $ | 305,900 | $ | 458,600 | $ | - | $ | 764,500 | |||||||||||||||
Peter Carlson | $ | - | $ | 398,000 | $ | 1,187,500 | $ | 507,373 | $ | 2,092,873 | |||||||||||||||
Awards to our NEOs under the Temporary Plan are subject to the achievement of one or more performance goals, which were established in order to qualify such awards as performance-based compensation under Section 162(m) of the Code. For the 2018 performance period, the performance goals established by our Compensation Committee were:
Insurer financial strength ratings for Brighthouse Life Insurance Company of at least“A-” from one or more of the four major credit rating agencies;
Funding backing the variable annuity segment at a level of CTE95 or above; or
Positivepre-tax income from continuing operations excluding (i) net derivative gains/losses and (ii) net investment gains/losses.
In February 2019, the CFO (at that time) and Compensation Committee certified that the Company maintained an insurer financial strength rating of at leastA- from one or more credit rating agencies for the 2018 performance period. As a result, we made payments to our NEOs under the Temporary Plan in respect of 2018. These payments in respect of 2018 are reported in the“Non-Equity Incentive Compensation Plan” column of the “Summary Compensation Table.” The Compensation Committee did not consider the Founders’ Grants as a component of Fiscal 2018 Target TDC.
Awards to our NEOs under the Temporary Plan that will be paid after our 2019 Annual Meeting were subject to stockholder approval of the material terms of the performance goals under the Temporary Plan, which was received at our 2018 Annual Meeting. In February 2019, the Compensation Committee established new 162(m) performance goals for the 2019 performance period under the Temporary Plan.
Payments under the Temporary Plan may be made to our NEOs in connection with certain terminations of employment. See the “Potential Payments Upon Termination or Change in Control” table and accompanying narrative disclosure below for additional information.
Section 3 – Additional Compensation Practices and Policies
2018Say-on-Pay Vote and Stockholder Engagement
At our 2018 Annual Meeting, greater than 97% of the votes cast by our stockholders voted “FOR” ourSay-on-Pay proposal to approve the compensation paid to our NEOs. The Compensation Committee considered the results of this vote in reviewing our 2018 executive compensation program and making compensation decisions for our NEOs. The
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| Brighthouse Financial, Inc. | Compensation Discussion and Analysis Section 3 – Additional Compensation Practices and Policies |
Compensation Committee also considered stockholders’ views and feedback they shared during our 2018-2019 stockholder engagement program, as discussed in greater detail above (see “Stockholder Engagement”). During our engagements, stockholders overwhelmingly expressed approval of our 2017 compensation program and the quality of our compensation-related disclosures. Our stockholders also expressed support for our 2018 executive compensation program, including our use of quantitative compensation metrics that are aligned with the Company’s strategy to drive long-term value creation.
Stock Ownership and Retention Guidelines
We have implemented stock ownership and retention guidelines for members of the SLMG, including our NEOs, effective January 1, 2018. The guidelines are intended to align the interests of the SLMG members with those of our stockholders and call for the officers subject to the guidelines to obtain and maintain significant ownership in our stock. The ownership guidelines were set as a multiple of the officer’s base salary as in effect on January 1, 2018, converted into a number of Shares based upon the closing price of our common stock on January 2, 2018, which was $57.67, and then rounded up to the nearest hundred. The ownership levels applicable to our current NEOs are as follows.
| Name | Multiple of Base Salary | Number of Shares | ||||||||
Eric Steigerwalt | 6x | 93,700 | ||||||||
John Rosenthal | 3x | 28,700 | ||||||||
Christine DeBiase | 3x | 30,000 | ||||||||
Conor Murphy | 3x | 26,800 | ||||||||
Officers subject to the guidelines must retain at least 50% of the netafter-tax Shares acquired from settlement or exercise of stock-based awards until the applicable ownership level is achieved. Officers are expected to meet the applicable stock ownership guideline within five years of becoming subject to the guidelines. Shares that are included in determining an officer’s stock ownership level include Shares owned outright (or jointly with a spouse or in a trust over which an executive has investment control) and net Shares received from exercise and/or settlement of stock-based awards under the Employee Plan. Shares underlying unvested equity awards are not included in determining an officer’s ownership level.
Brighthouse Savings Plan and Auxiliary Savings Plan. Our employees, including our NEOs, are eligible to participate in the Brighthouse Services, LLC Savings Plan and Trust (the “Brighthouse Savings Plan”), which is atax-qualified 401(k) plan. In addition, certain employees, including our NEOs, are eligible to participate in the Brighthouse Services, LLC Auxiliary Savings Plan (the “Auxiliary Plan”). Participants in the Auxiliary Plan receive company matching and profit-sharing contributions that cannot be made to the Brighthouse Savings Plan because a participant’s compensation exceeds certain tax qualified plan contribution limits imposed under the Code. Employees who elect to participate in the Brighthouse Savings Plan and who also elect to participate in the Brighthouse Services, LLC Voluntary Deferred Compensation Plan (“VDCP”) will be eligible to receive matching contributions in the Auxiliary Plan on amounts deferred into the VDCP equal to the amount of matching contributions that would have been made to the Brighthouse Savings Plan. For the Company matching and profit-sharing contributions made under the Brighthouse Savings Plan and Auxiliary Plan during 2018, see the “All Other Compensation” column in theSummary Compensation Table. Company matching and profit-sharing contributions in the Brighthouse Savings Plan and the Auxiliary Plan become 100% vested after the participant completes two years of service. Under the Auxiliary Plan, in the event of a change of control, all participants will be fully vested in all contributions, including earnings, under the Auxiliary Plan. In addition, no amendments can be made to the Auxiliary Plan after a change of control that would decrease the value of benefits
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Compensation Discussion and Analysis Section 3 – Additional Compensation Practices and Policies | Brighthouse Financial, Inc. |
accrued to any participant under the Auxiliary Plan as of the date of the change of control or change the time or form of distribution under the Auxiliary Plan to eliminate lump sum distributions or further defer the timing of payment.
Voluntary Deferred Compensation Plan. The VDCP, a nonqualified deferred compensation plan, allows a select group of highly compensated employees the opportunity to defer between 10% and 50% of eligible base salary and from 10% to 80% of STI awards. Amounts deferred are notionally invested in investment tracking funds selected by the participant. Participants can elect to have deferred compensation accounts paid, or begin to be paid, in a specific year, which cannot be earlier than May of the third calendar year following the year the compensation was earned and may elect to receive distributions in either a single lump sum or up to 15 annual installments. In the event of a participant’s death before distributions commence or are completed, the participant’s account balance will be paid in a single lump sum to the participant’s beneficiary. In the event of a change of control, no amendments can be made to the VDCP after a change of control that would decrease the amount in a participant’s deferred compensation account accrued under the VDCP as of the date of the change of control or modify the time or form of distributions under the VDCP.
Proposal 6Termination and Change in Control Benefits
Approval ofIn November 2018, the Compensation Committee approved and adopted the Brighthouse Financial, Inc. 2017
Non-Management Director Stock Compensation Plan
On August 9, 2017, the Board approved the Brighthouse Financial, Inc. 2017Non-Management Director Stock CompensationServices, LLC Executive Severance Pay Plan (the “DirectorSeverance Plan”), subject to stockholder approval. The Directorprovide severance pay and related benefits to certain terminated executive officers in consideration of a release of employment-related claims. See the “Potential Payments Upon Termination or Change in Control” table for additional information about amounts that would be payable to our NEOs under the Severance Plan.
In November 2018, the Compensation Committee also approved and adopted the Brighthouse Services, LLC Change of Control Severance Pay Plan provides Brighthouse with(the “Change of Control Plan”) to retain our senior executive officers while a means to pay stock-based compensation to independent, non-employee memberstransaction is pending or during thetwo-year transition period following the close of our Board of Directors, which alignsa transaction and align their interests with those of our stockholders, encourages decisions and rewards performance that contributespromoting maximum stockholder value without impinging on Brighthouse’s flexibility to engage in or successfully transition after a transaction. Under the long-term growthterms of Brighthouse’s business, and enhances stockholder value.
If stockholders do not approve the DirectorChange of Control Plan, Brighthouse will not be authorizeda covered participant is eligible to compensate Directorsreceive severance payments if the participant is terminated involuntarily without cause or if the participant discontinues employment for “good reason,” in Shares. Brighthouse would needeither case within two years of a change of control, or following the occurrence of a potential change of control, if the participant is terminated involuntarily without cause within six months prior to make significant changes to its compensation practicesa change of control. See the “Potential Payments Upon Termination or Change in Control” table for additional information about amounts that would limit its flexibilitybe payable to provide competitive compensation and thus its ability to attract, motivate, and retain highly qualified individuals to serve as Directors.
The following is a summaryour NEOs under the Change of provisions of the Director Plan and is qualified in its entirety by reference to the complete text of the Director Plan included in this Proxy Statement as Appendix 2.Control Plan.
Purpose, Duration,As of December 31, 2018, we had no employment agreements or offer letters with any of our NEOs that provide for individual severance or change in control benefits. On June 8, 2018, Mr. Carlson entered into a letter agreement with Brighthouse Services in connection with his retirement from Brighthouse. On March 15, 2019, Mr. Bhalla entered into a Separation Agreement, Waiver and GovernanceGeneral Release with Brighthouse Services in connection with his separation from Brighthouse. Payments made pursuant to these individual agreements are described in detail following the“Potential Payments Upon Termination or Change in Control” table.
The purposeEquity awards held by our NEOs may vest and become payable in the event of the Director Plan is to promote the long term intereststermination or a change of Brighthouse and its stockholders by strengthening Brighthouse’s ability to attract, motivate, and retain highly qualified individuals as Eligible Directors (as hereinafter defined) upon whose judgment, initiative, and efforts the financial success and growth of the business of Brighthouse largely depend, and to provide an additional incentive for such individuals through stock ownership and other rights that promote and recognize the financial success and growth of Brighthouse and create value for stockholders. The Director Plan will remain in effect until the earlier of its terminationcontrol in accordance with its terms, or the purchase or acquisition of all of the shares subject to the Director Plan.
The Board (or another Committee authorized by the Board) may make awards of Nonqualified Stock Options, Restricted Stock, Restricted Stock Units, and Stock-Based Awards under the Director Plan, and determines all of the terms of awards. Eachthe Employee Plan and the applicable award will be evidenced by a written agreement with or written statement issued to the Director who received(including the award (such Director, aagreement supplement).
In addition, certain amounts credited to our NEOs under the Temporary Plan may vest and become payable in the event of the NEO’s death or termination on or following the NEO’s “Director ParticipantRule of 65 Date,” and such document,which is the date that the sum of a participant’s age plus years of service (which includes MetLife service) equals or exceeds 65, provided the participant has at least five years of service. See the “Director Award AgreementPotential Payments Upon Termination or Change in Control”).
Each award table for additional information about amounts that would be payable to our NEOs under the DirectorEmployee Plan will be compensation for services performed orand the Temporary Plan.
Stock-Based Award Timing Practices
Stock-based LTI awards are expected to be performed bygranted on an annual basis to our executive officers, including the recipient. The Director Plan does not provide for anyone eligible to receive an award to pay any monetary consideration forNEOs, in connection with Board and Compensation Committee meetings occurring in the award.
Share Authorization and Limits
A totalfirst quarter of four hundred thousand (400,000) Shares have been reserved for issuance under the Director Plan. Assuming stockholder approval of the Director Plan, at the Company’s forecasted pace of granting awards that normally pay out in Shares or allow the purchase of Shares, assuming stable future rateseach year, although
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(based on current rates) of compensation, award recipient population, award forfeitures, and Share price, the Company currently expects the total number of Shares reserved for issuance to last for at least three years, beginning withstock-based awards made in 2017 subject to stockholder approval.
The maximum aggregate number of Shares that may be granted fromtime-to-timein any one calendar yearconnection with the hiring or change in responsibilities of an executive officer.
Tax Deductibility of Executive Compensation
The Tax Cuts and Jobs Act (“TCJA”), which was signed into law on December 22, 2017, eliminated the exception for deductibility of performance-based compensation under Section 162(m) of the Code, except for compensation payable pursuant to binding contracts in effect on November 2, 2017 that are not materially modified after that date. As a result, compensation payable to any one Eligible Director underof our NEOs in excess of $1 million after 2017 will not be deductible, except to the Director Plan cannot exceedextent paid pursuant to a grandfathered arrangement. While the numberCompany and the Compensation Committee considered the availability of Shares with an aggregate Fair Market Value on162(m) deductions when we designed our executive compensation program prior to this change in tax law, the grant date equalCompany and the Compensation Committee reserved the right to $2 million. This limitation will be determined usingpayone-thirdnon-deductible compensation if necessary or appropriate to retain and incent key executives whose performance is important to our success. As a result of the Shares underlying Stock Options.elimination of the exception to the limit in Section 162(m) for performance-based compensation, the amount ofnon-deductible compensation paid after 2017 will increase.
UponHedging and Pledging Prohibition
Our insider trading policy prohibits all Directors and employees, including our NEOs, from engaging in speculative transactions, including short sales, hedging and trading in put and call options, with respect to the occurrenceCompany’s securities. The insider trading policy also prohibits Directors and employees, including our NEOs, from pledging Company securities.
Our Board believes that it is in the best interests of certain corporate events, such asthe Company and its stockholders to create and maintain a change in capitalization of Brighthouse, merger, or stock split,culture that emphasizes integrity and accountability and that reinforces the Company’spay-for-performance compensation philosophy. In August 2018, the Board shall, to prevent dilution or enlargement of Director Participants’ rights, substitute or adjust Share limitsapproved and terms of awards under the Director Plan. The Board may make adjustments in the terms and conditions of awards due to other unusual or nonrecurring events affecting Brighthouse or changes in applicable laws, regulations, or accounting principles, whenever the Board determines appropriate to prevent unintended dilution or enlargement of the benefits of the award (“Award Adjustments”).
Eligibility
Under the Director Plan, all independent members of the Board of Directors who are not employees of Brighthouse or any of its affiliates (collectively, theadopted a performance-based compensation recoupment policy (the “Eligible DirectorsClawback Policy”) are eligible for awards. Asthat allows Brighthouse to seek recoupment of December 31, 2017, there were six Eligible Directors.
Administration
Ourincentive compensation in the circumstances described in the following table. The Board willdelegated to the Compensation Committee authority to administer the Director Plan. Actions taken by the Board are final, conclusive, and binding. The Board has discretion to interpret the Director Plan, establish the terms of awards, and adopt rules and regulations for administering the Director Plan. The Board may delegate any of its administrative duties to others.
Fair Market Value
For purposes of the Director Plan, the Board has theClawback Policy, including authority to determine fair market valuein its judgment and sole discretion whether to seek recoupment of Shares using any of several alternative methods commonly used in compensation practices, including the average trading values of Shares over a period of days. The Board may elect to use different methods of establishing fair market value at different times, or for different purposes, under the Director Plan (such as using the average of a single day’s high and low trading prices for establishing the exercise price of an option, but amulti-day average for valuing stock delivered in lieu of a cash payment).compensation.
Conduct or Event | Covered Persons | Compensation Subject to | Covered Period | |||||||||
| Fraud or misconduct causing a material financial restatement | CEO, CFO, Chief Accounting Officer or any employee who materially contributed to the fraud or misconduct | Any incentive compensation | Three years prior to the date the Company determines a restatement is necessary | |||||||||
Conduct, or failure to supervise, which results in material financial or reputational harm | Any employee who engaged in the misconduct | Any incentive compensation | Period of misconduct | |||||||||
| Material inaccuracy in performance metrics | Executive officers and any employee who materially contributed to, or failed to supervise with respect to, the material inaccuracy | Excess incentive compensation that was, or will be, paid based on the inaccurate metric | Three years prior to achievement of the performance metric | |||||||||
UnderAt the Director Plan, the Board may grant Stock OptionsCompensation Committee’s March 2019 meeting, SBCG presented a compensation risk assessment report that are not intended to meet the requirements of Section 422 of the Code. Each Stock Option Director Award Agreement will specify the exercise price, the number of Shares subject to the Stock Option,it prepared and other conditions and provisions determined by the Board. No Stock Option may be exercised later than the tenth anniversary date of its grant. The Board will determine,developed in each Director Award Agreement, the extent to which a Director Participant has the right to exercise each Stock Option following termination of directorshipconsultation with Brighthouse. In addition, the Director Plan includes provisions for the treatment of Stock Options upon or following termination of directorship with Brighthouse,Brighthouse’s management, including due to the Director Participant’s death, disability, or retirement.our Chief Risk Officer, based on
2019 Proxy Statement | 55
Compensation Discussion and Analysis Section 4 – 2019 Compensation Program Review | Brighthouse Financial, Inc. |
—its review of our compensation programs. SBCG highlighted the compensation governance policies and Board-level controls in place to manage compensation-related risk and the risk-balancing and risk-mitigating features of our 2018 compensation program, including our strong Clawback Policy, balanced pay mix, caps on incentive payouts and the Compensation Committee’s ability to exercise discretion. Following a discussion of SBCG’s assessment and findings, the Compensation Committee concluded that the risks arising from the Company’s compensation programs are not reasonably likely to have a material adverse impact on the Company.
Section 4 – 2019 Compensation Program Preview
This section provides a preview of our 2019 executive compensation program, including changes we have made from our 2018 executive compensation program.
84 |2019 STI Metrics
The Compensation Committee approved metrics for the 2019 STI Awards that directly align with Brighthouse’s strategic goals. The below table presents a summary of each of the three equally-weighted metrics and the rationale for selecting each.
STI Metric | Weighting | Performance Link | ||||||
| Corporate Expense Target | 1/3rd | Prudent corporate expense control supports our pursuit of becoming abest-in-cost company. This metric aligns with our publicly disclosed target of reducing costs by $150 million on arun-rate basis by 2020 and an additional $25 million in 2021. | ||||||
| Sales | 1/3rd | Key indicator of our growth prospects and franchise stability. Annuity sales are the core component of the metric; sales of SmartCare, our new hybrid life insurance product, will act as a payout modifier. | ||||||
| Normalized Statutory Earnings | 1/3rd | Key metric that measures our ability to grow distributable earnings while prudently managing risk. Calculation of the metric begins with Statutorypre-tax net gain from operations (which is publicly disclosed in the statutory financial statements of our insurance companies) and includes certain adjustments to help management and investors better understand, evaluate and forecast those results. (Calculation of this metric is consistent with the 2018 STI Metric “Adjusted Statutory Earnings.”) | ||||||
All other features of the 2019 STI Awards are fundamentally unchanged from 2018.
2019 LTI Awards
The Compensation Committee carefully considered the decision to use PSUs as part of its 2018 LTI pay mix. In our 2018 Proxy Statement, we stated that as the Company matures and gains historical data that would make long-term goal setting more precise, we expect to adopt a heavier weighting of PSUs for future LTI awards. Over the past year, the Compensation Committee has continued to review the LTI program, taking into account the Company’s long-term strategy and feedback from our stockholders, and has increased the weighting to 70% PSUs/30% RSUs for the CEO and to 60% PSUs/40% RSUs for all other members of our SLMG.
56 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Discussion and Analysis
|
The exercise price2019 PSUs measure Brighthouse’s performance over the 2019-2021 performance period. The actual number of each Stock Option must be based on 100%shares issued, if any, at the end of the fair market value of the Sharesperformance period will depend on the date of grant, set at a premium toCompany’s actual performance. We believe the fair market value of the Shares on the date of grant, or indexed (as determined by the Board) to the fair market value of Shares on the date of grant but in no event less than the fair market value of a Share. The Board may impose such restrictions on Shares acquired pursuant to exercise of a Stock Option as it determines advisable.
United States Federal Income Tax Consequences of Stock Options
The following is aunderlying goals for each PSU Metric are appropriately rigorous. A brief summary of the federal income tax aspectsPSU Metrics, the weighting and the rationale for each follow.
LTI Metric | Weighting | Performance Link | ||||||
| Statutory Expense Ratio | 60% | This metric reflects the ratio of statutory earnings expenses to statutory premiums and fee income, and measures our performance in key strategic areas of expense management and top line growth. | ||||||
| Capital Return | 40% | Our capital return goal is consistent with our publicly disclosed targets. Capital return (e.g., through dividends or stock repurchases) is a key metric that demonstrates alignment with stockholders’ interests. | ||||||
2019 Target TDC Opportunities
Target TDC for all of our NEOs, except for Mr. Murphy, remains the issuancesame for 2019. In January 2019, the Compensation Committee approved changes to Mr. Murphy’s Target TDC, setting his Target STI at 145% of base salary, and exercisehis Target LTI at 190% of Stock Options underbase salary.
The Compensation Committee has reviewed the Director Plan, based uponCD&A and discussed the federal income tax laws in effectCD&A with management. Based on the date of thisCompensation Committee’s review and discussion with management, the Compensation Committee recommended to the Board that the CD&A be included in the Company’s Proxy Statement. This summary is not intended to be exhaustive, and the exact tax consequences to any Director Participant will depend upon his or her particular circumstances and other factors.
Generally, a Director Participant will not recognize income at the time the Stock Option is granted. On exercise of the Stock Option, the Director Participant recognizes ordinary income in an amount equal to the difference between the fair market value (as defined by the Code) of the Shares on the date of exercise and the Option Price (as defined in the Director Plan). At disposition, any appreciation (or depreciation) after date of exercise is treated either as short-term or long-term capital gain or loss, depending upon the length of time that the Director Participant has held the Shares. Brighthouse will generally be entitled to a federal income tax deduction equal to the ordinary income recognized by the Director Participant on exercise of the Stock Option.
Restricted Stock and Restricted Stock UnitsCompensation Committee
Under the Director Plan, the Board may grant awards of Restricted Stock and Restricted Stock Units. Restricted Stock Units may be paid in cash, Shares, or a combination thereof as determined by the Board. The Board may impose such conditions or restrictions on Restricted Stock or Restricted Stock Units as it deems advisable.Diane Offereins (Chair)
No Restricted Stock Unit will confer any voting rights. The Board will determine, in each Director Award Agreement, the extent to which a Director Participant has the right to retain each Share of Restricted Stock or Restricted Stock Unit following termination of directorship with Brighthouse. In addition, the Director Plan includes provisions for the treatment of Restricted Stock or Restricted Stock Units upon or following termination of directorship with Brighthouse, including due to the Director Participant’s death, disability, or retirement.Irene Chang Britt
Stock-Based AwardsEileen Mallesch
Under the Director Plan, the Board may grant awards in the form of Stock-Based Awards. Stock-Based Awards may include the grant of Shares or payment of cash in such amounts and subject to such terms and conditions or in satisfaction of any obligation of Brighthouse or an Affiliate to an Eligible Director, as the Board determines. The Board will determine, in each Director Award Agreement, the extent to which a Director Participant has the right to receive each Stock-Based Award following termination of directorship with Brighthouse. In addition, the Director Plan includes provisions for the treatment of Stock-Based Awards upon or following termination of directorship with Brighthouse, including due to the Eligible Director’s death, disability, or retirement.Paul Wetzel
20182019 Proxy Statement | 8557
Compensation Tables Summary Compensation Table | Brighthouse Financial, Inc. |
The information reported in the Summary Compensation Table for 2018 is for the entire 2018 fiscal year. The information reported for 2017 is for the period from August 5, 2017, the first day following the Separation, to December 31, 2017, which we refer to as “Fiscal 2017.” The footnotes to the Summary Compensation Table and the accompanying narrative describe the manner in which the 2018 compensation for our NEOs was calculated.
Summary Compensation Table for 2018
Name and Title
| Year
| Salary
| Bonus
| Stock
| Option
| Non-Equity
| Nonqualified
| All Other
| Total
| |||||||||||||||||||||||
Eric Steigerwalt |
|
2018 |
| $900,000 | $- | $10,635,968 | $1,155,398 | $2,550,703 | $- | $295,302 | $15,537,371 | |||||||||||||||||||||
|
2017 |
|
|
$349,049 |
|
$- |
|
$1,507,192 |
|
$- |
|
$115,853 |
|
|
$1,972,094 |
| ||||||||||||||||
Anant Bhalla | 2018 | $600,000 | $- | $2,481,623 | $269,585 | $1,311,796 | $- | $146,731 | $4,809,735 | |||||||||||||||||||||||
| 2017 |
|
| $233,641 |
| $- |
| $688,444 |
| $- |
| $63,753 |
|
| $985,838 |
| ||||||||||||||||
John Rosenthal |
|
2018 |
| $550,000 | $- | $2,599,853 | $282,426 | $1,514,531 | $- | $177,069 | $5,123,879 | |||||||||||||||||||||
|
2017 |
| $218,109 | $- | $894,708 | $- | $75,297 | $1,188,114 | ||||||||||||||||||||||||
Christine DeBiase | 2018 | $597,917 | $- | $2,378,256 | $258,349 | $958,800 | $- | $137,120 | $4,330,442 | |||||||||||||||||||||||
| 2017 |
|
| $224,232 |
| $- |
| $534,024 |
| $- |
| $50,041 |
|
| $808,297 |
| ||||||||||||||||
Conor Murphy |
|
2018
|
| $557,500 | $- | $1,811,638 | $198,333 | $1,095,097 | $- | $218,113 | $3,880,681 | |||||||||||||||||||||
Peter Carlson | 2018 | $600,000 | $- | $2,836,168 | $308,108 | $700,000 | $- | $3,013,080 | $7,457,356 | |||||||||||||||||||||||
| 2017
|
| $237,862 | $- | $771,139 | $- | $55,044 | $1,064,045 | ||||||||||||||||||||||||
| (1) | Salary. Amounts reported in the Salary column reflect the actual amount of base salary earned by each NEO in that year for services to Brighthouse and its subsidiaries. Mr. Murphy’s salary reflects his base salary at the rate of $515,000 from January 1, 2018 to June 4, 2018, and at the rate of $600,000 from June 5, 2018 to December 31, 2018. Ms. DeBiase’s salary reflects her base salary at the rate of $575,000 from January 1, 2018 to February 1, 2018, and at the rate of $600,000 from February 2, 2018 to December 31, 2018. For the relationship of each NEO’s 2018 base salary earnings to that officer’s 2018 Total TDC, see page “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – 2018 Target Total Direct Compensation.” |
| (2) | Stock Awards.Amounts reported in this column reflect the aggregate grant date fair value calculated in accordance with ASC Topic 718, modified to exclude the effect of estimated forfeitures, of both the 2018 LTI awards granted as RSUs and PSUs under the Employee Plan and the Founders’ Grant awards described below. For a description of the methodology and assumptions made in determining the aggregate grant date fair value of Share awards, see Note 10 of the Notes to the Consolidated and Combined Financial Statements in our 2018 Form10-K. |
58 | 2019 Proxy Statement
Compensation Tables
|
Dividends and Dividend Equivalents
Holders of Stock Options will not be credited with dividends or dividend equivalents on account of dividends declared or paid on Shares. The Board may, in its discretion, provide for Restricted Stock or Restricted Stock Units to be credited with dividends paid on Shares or with dividend equivalents, and may determine in its discretion the form of payment of those dividends or dividend equivalents, although dividends, dividend equivalents or other distributions will be withheld until the end2018 LTI Awards – For further discussion of the period of restrictionperformance goals applicable to such award.
Minimum Vesting or Restriction Period
Awards under the Director Plan are generally subject to minimum vesting or restriction periods. ForPSU awards granted in connection with Brighthouse’s annual meeting of stockholders, the vesting period for such awards will be from2018, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – 2018 Long-Term Incentive Awards.” The table below reports the grant date until the earlierfair value of the first anniversaryRSUs and PSUs (at the target performance level) granted as part of the 2018 LTI Award.
Name
| Grant Date Value of
|
Grant Date Value of 2018 PSUs at Target Performance Level
| |||||||||||||
Eric Steigerwalt
|
| $1,349,349
|
|
| $1,349,349
|
| |||||||||
Anant Bhalla
|
| $314,815
|
|
| $314,815
|
| |||||||||
John Rosenthal
|
| $329,822
|
|
| $329,822
|
| |||||||||
Christine DeBiase
|
| $301,683
|
|
| $301,731
|
| |||||||||
Conor Murphy
|
| $231,602
|
|
| $231,602
|
| |||||||||
Peter Carlson
|
| $359,788
|
|
| $359,788
|
| |||||||||
The following table reports the hypothetical grant date andfair value of the PSUs if maximum performance was achieved, in each case as of the date of the next annual meeting of stockholders. For all other awards, the vesting period shall not be less than one year.
Amendment and Termination; Miscellaneous Terms
The Board may, at any time, amend, suspend, or terminate the Director Plan in whole or in part, provided that Stock Options will not be repriced, replaced, or regranted through cancellation, or by lowering the exercise price of a previously granted Stock Option, or by grant of another award or payment in cash, without stockholder approval (other than Award Adjustments). To the extent necessary under any applicable law, regulation, or exchange requirement, no amendment will be effective unless approved by the stockholders of Brighthouse. No termination, amendment, or suspension of the Director Plan will adversely affect in any material way any award previously granted under the Director Plan without the written consent of the Director Participant.
No awards under the Director Plan may be sold, transferred, pledged, or assigned other than by will or the laws of descent and distribution, except that the Board may provide for transfers without consideration.
If stockholders approve the Director Plan, Brighthouse plans to file with the SEC, as soon as practicable following such approval, a Registration Statement on FormS-8 to register the Shares available for issuance under the Director Plan.
The Board of Directors recommends that stockholders voteFORthe approval of the Brighthouse Financial, Inc. 2017Non-Management Director Stock CompensationEmployee Plan. Maximum payout of the PSUs is 150% of target.
Name | Grant Date Value of 2018 | ||||||||||||||
Eric Steigerwalt | $2,024,000 | ||||||||||||||
Anant Bhalla | $472,198 | ||||||||||||||
John Rosenthal | $494,709 | ||||||||||||||
Christine DeBiase | $452,573 | ||||||||||||||
Conor Murphy | $347,378 | ||||||||||||||
Peter Carlson | $539,682 | ||||||||||||||
862019 Proxy Statement | 2018 Proxy Statement59
Compensation Tables Summary Compensation Table | Brighthouse Financial, Inc. |
Founders’ Grants– In 2017, each NEO received a Founders’ Grant in the form of RSUs under the Employee Plan, subject to stockholder approval of our Employee Plan, which was received at our 2018 Annual Meeting on May 23, 2018. Founders’ Grants were aone-time award and were a central element of the total compensation delivered to our NEOs in Fiscal 2017. For all NEOs other than Mr. Murphy, the number of RSUs awarded was based on the amount of the award divided by the closing price of the Company’s common stock on September 8, 2017 (the first Friday after one month of public trading), which was $54.54. For Mr. Murphy, the number of RSUs awarded was based on the amount of the award divided by the closing price of the Company’s common stock on September 11, 2017 (the date he was hired), which was $55.11. For a detailed discussion of the Founders’ Grants, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program – Founders’ Grants.” The table below shows for each NEO the value of the Founders’ Grant award in Fiscal 2017, the number of RSUs granted and the grant date fair value of the Founders’ Grant award on the date of stockholder approval.
Name
| Founders’ Grant Award
| Number of RSUs
|
Grant Date Fair Value
| ||||||||||||
Eric Steigerwalt
|
| $9,000,000
|
|
| 165,016
|
|
| $7,937,270
|
| ||||||
Anant Bhalla
|
| $2,100,000
|
|
| 38,503
|
|
| $1,851,994
|
| ||||||
John Rosenthal
|
| $2,200,000
|
|
| 40,337
|
|
| $1,940,210
|
| ||||||
Christine DeBiase
|
| $2,012,500
|
|
| 36,899
|
|
| $1,774,842
|
| ||||||
Conor Murphy
|
| $1,545,000
|
|
| 28,034
|
|
| $1,348,435
|
| ||||||
Peter Carlson
|
| $2,400,000
|
|
| 44,004
|
|
| $2,116,592
|
| ||||||
| (3) | Option Awards. Amounts reported in this column reflect 2018 LTI awards granted as stock options under the Employee Plan. Each of these awards had a per option exercise price equal to the closing price of a Share on the grant date of $53.47. Amounts in this column reflect the grant date fair value (as of May 23, 2018) calculated in accordance with ASC Topic 718, modified to exclude the effect of estimated forfeitures. For a description of the methodology and assumptions made in determining the aggregate grant date fair value of the option awards, see Note 10 of the Notes to the Consolidated and Combined Financial Statements in our 2018 Form10-K. |
| (4) |
|
Approval of the material terms of the performance
goals under the Brighthouse Services, LLC
Temporary Incentive Deferred Compensation Plan,
as amended
Name STI Award Temporary Plan Eric Steigerwalt Anant Bhalla John Rosenthal Christine DeBiase Conor Murphy Peter CarlsonPrior to the Separation, the Board of Directors of Brighthouse approved the Brighthouse Services, LLC Temporary Incentive Deferred Compensation Plan, as amended (the “ ”). The Temporary Plan was adopted for the purpose of enabling $2,124,000 $ 426,703 $ 961,464 $ 350,332 $ 1,265,550 $ 248,981 $ 849,600 $ 109,200 $ 828,344 $ 266,753 $ - $ 700,000
60 | 2019 Proxy Statement
| Brighthouse | Compensation Tables
|
The table below shows the amount, including interest, earned by each NEO for 2018 in respect of the different types of credits under the Temporary Plan.
Name
| Fiscal 2018
| Fiscal 2018 MetLife Equity
| Fiscal 2018 MetLife Equity Shares
| Fiscal 2018
| ||||||||||||||||
Eric Steigerwalt
| $
| 426,703
|
| $
| -
|
| $
| -
|
| $
| -
|
| ||||||||
Anant Bhalla
| $
| 140,000
|
| $
| 52,583
|
| $
| 157,749
|
| $
| -
|
| ||||||||
John Rosenthal
| $
| 248,981
|
| $
| -
|
| $
| -
|
| $
| -
|
| ||||||||
Christine DeBiase
| $
| 109,200
|
| $
| -
|
| $
| -
|
| $
| -
|
| ||||||||
Conor Murphy
| $
| -
|
| $
| 106,859
|
| $
| 159,895
|
| $
| -
|
| ||||||||
Peter Carlson
| $
| -
|
| $
| 144,257
|
| $
| 422,665
|
| $
| 133,078
|
| ||||||||
| (5) | All Other Compensation. This column includes contributions made by the Company for each NEO in respect of 2018 to the Brighthouse Savings Plan and the Auxiliary Plan, in the following amounts: |
Name
| Brighthouse
| Auxiliary Plan
| ||||||
Eric Steigerwalt
|
| $23,857
|
|
| $271,445
|
| ||
Anant Bhalla
|
| $24,263
|
|
| $122,468
|
| ||
John Rosenthal
|
| $24,313
|
|
| $152,756
|
| ||
Christine DeBiase
|
| $24,137
|
|
| $112,983
|
| ||
Conor Murphy
|
| $23,408
|
|
| $85,293
|
| ||
Peter Carlson
|
| $12,258
|
|
| $78,178
|
| ||
For Mr. Murphy, the amount disclosed in this column also includes amounts paid by the Company for relocation and related expenses ($106,593, of which $46,880 was reimbursements for the payment of taxes) under the Brighthouse relocation policy, annual corporate credit card fees and his spouse’s travel, meals and related incidental expenses for a business conference in 2018 to which spouses were invited.
For Mr. Carlson, the amount disclosed in this column also includes the following amounts to be paid to Mr. Carlson in connection with his separation from the Company in 2018: a cash payment of $900,000 in lieu of his participation in the STI Plan; an additional cash payment of $1,300,000; and $722,643 under the Temporary Plan for credits that vested upon his separation from the Company. For additional information regarding the separation benefits paid to Mr. Carlson, see “Potential Payments on Termination or Change of Control.”
| (6) | Mr. Bhalla ceased serving as Chief Financial Officer effective February 27, 2019, and departed Brighthouse effective March 14, 2019. |
| (7) | Mr. Murphy was appointed Executive Vice President and Chief Operating Officer effective June 5, 2018. Until that date, Mr. Murphy served as Executive Vice President and Chief Product and Strategy Officer. Mr. Murphy was appointed Interim Chief Financial Officer effective February 27, 2019. |
| (8) | Mr. Carlson stepped down from the position of Executive Vice President and Chief Operating Officer effective June 4, 2018, and remained employed with Brighthouse through December 31, 2018. |
2019 Proxy Statement | 61
Compensation Tables Grants of Plan-Based Awards | Brighthouse Financial, Inc. |
Grants of Plan-Based Awards in 2018
The table below presents individual awards granted to each NEO for 2018. For information about these awards, see “Compensation Discussion and Analysis – Section 2 – Our 2018 Executive Compensation Program.”
Name
| Grant Type
| Grant Date (1)
| Estimated future payouts undernon-equity plan awards
| Estimated future payouts under
| All Other (#)
| All Other
| Exercise
| Grant Date Fair Value of Stock and Option Awards (3)
| ||||||||||||||||||||||||||||||||||||||
Threshold ($) (2)
| Target ($)
| Maximum ($) (2)
| Threshold
| Target (#)
| Maximum
| |||||||||||||||||||||||||||||||||||||||||
Eric Steigerwalt
| Short-Term Incentive
| $
| 900,000
|
| $
| 1,800,000
|
| $
| 2,700,000
|
| ||||||||||||||||||||||||||||||||||||
Founders’ Grant (RSUs) (4)
|
| 5/23/18
|
|
| 165,016
|
| $
| 7,937,270
|
| |||||||||||||||||||||||||||||||||||||
Credit In Lieu of 2017 Award (5)
|
| 2/16/18
|
| $
| 426,703
|
| ||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (6)
|
| 5/23/18
|
|
| 28,053
|
| $
| 1,349,349
|
| |||||||||||||||||||||||||||||||||||||
Performance Share Units (7)
|
| 5/23/18
|
|
| 14,026
|
|
| 28,053
|
|
| 42,079
|
| $
| 1,349,349
|
| |||||||||||||||||||||||||||||||
Non-Qualified Stock Options (8)
|
| 5/23/18
|
|
| 92,137
|
| $
| 53.47
|
| $
| 1,155,398
|
| ||||||||||||||||||||||||||||||||||
Anant Bhalla (9)
| Short-Term Incentive
| $
| 420,000
|
| $
| 840,000
|
| $
| 1,260,000
|
| ||||||||||||||||||||||||||||||||||||
Founders’ Grant (RSUs) (4)
|
| 5/23/18
|
|
| 38,503
|
| $
| 1,851,994
|
| |||||||||||||||||||||||||||||||||||||
Credit In Lieu of 2017 Award (5)
|
| 2/16/18
|
| $
| 140,000
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2016 RSUs (10)
|
| 2/16/18
|
| $
| 52,583
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2016 Performance Shares (11)
|
| 2/16/18
|
| $
| 157,749
|
| ||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (6)
|
| 5/23/18
|
|
| 6,545
|
| $
| 314,815
|
| |||||||||||||||||||||||||||||||||||||
Performance Share Units (7)
|
| 5/23/18
|
|
| 3,272
|
|
| 6,545
|
|
| 9,817
|
| $
| 314,815
|
| |||||||||||||||||||||||||||||||
Non-Qualified Stock Options (8) |
| 5/23/18
|
|
| 21,498
|
| $
| 53.47
|
| $
| 269,585
|
| ||||||||||||||||||||||||||||||||||
John Rosenthal
| Short-Term Incentive
| $
| 536,250
|
| $
| 1,072,500
|
| $
| 1,608,750
|
| ||||||||||||||||||||||||||||||||||||
Founders’ Grant (RSUs) (4)
|
| 5/23/18
|
|
| 40,337
|
| $
| 1,940,210
|
| |||||||||||||||||||||||||||||||||||||
Credit In Lieu of 2017 Award (5)
|
| 2/16/18
|
| $
| 248,981
|
| ||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (6)
|
| 5/23/18
|
|
| 6,857
|
| $
| 329,822
|
| |||||||||||||||||||||||||||||||||||||
62 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Tables Grants of Plan-Based Awards |
Name
| Grant Type
| Grant Date (1)
| Estimated future payouts undernon-equity plan awards
| Estimated future payouts under
| All Other (#)
| All Other
| Exercise
| Grant Date Fair Value of Stock and Option Awards (3)
| ||||||||||||||||||||||||||||||||||||||
Threshold ($) (2)
| Target ($)
| Maximum ($) (2)
| Threshold
| Target (#)
| Maximum
| |||||||||||||||||||||||||||||||||||||||||
Performance Share Units (7)
|
| 5/23/18
|
|
| 3,428
|
|
| 6,857
|
|
| 10,285
|
| $
| 329,822
|
| |||||||||||||||||||||||||||||||
Non-Qualified Stock Options (8)
|
| 5/23/18
|
|
| 22,522
|
| $
| 53.47
|
| $
| 282,426
|
| ||||||||||||||||||||||||||||||||||
Christine DeBiase
| Short-Term Incentive
| $
| 360,000
|
| $
| 720,000
|
| $
| 1,080,000
|
| ||||||||||||||||||||||||||||||||||||
Founders’ Grant (RSUs) (4)
|
| 5/23/18
|
|
| 36,899
|
| $
| 1,774,842
|
| |||||||||||||||||||||||||||||||||||||
Credit In Lieu of 2017 Award (5)
|
| 2/16/18
|
| $
| 109,200
|
| ||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (6)
|
| 5/23/18
|
|
| 6,272
|
| $
| 301,683
|
| |||||||||||||||||||||||||||||||||||||
Performance Share Units (7)
|
| 5/23/18
|
|
| 3,136
|
|
| 6,273
|
|
| 9,409
|
| $
| 301,731
|
| |||||||||||||||||||||||||||||||
Non-Qualified Stock Options (8)
|
| 5/23/18
|
|
| 20,602
|
| $
| 53.47
|
| $
| 258,349
|
| ||||||||||||||||||||||||||||||||||
Conor Murphy
| Short-Term Incentive
| $
| 420,000
|
| $
| 840,000
|
| $
| 1,260,000
|
| ||||||||||||||||||||||||||||||||||||
Founders’ Grant (RSUs) (4)
|
| 5/23/18
|
|
| 28,034
|
| $
| 1,348,435
|
| |||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2017 RSUs (12)
|
| 2/16/18
|
| $
| 53,543
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2017 Performance Shares (13)
|
| 5/23/18
|
| $
| 164,583
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2016 RSUs (10)
|
| 2/16/18
|
| $
| 53,316
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2016 PSUs (11)
|
| 2/16/18
|
| $
| 159,895
|
| ||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (6)
|
| 5/23/18
|
|
| 4,815
|
| $
| 231,602
|
| |||||||||||||||||||||||||||||||||||||
Performance Share Units (7)
|
| 5/23/18
|
|
| 2,407
|
|
| 4,815
|
|
| 7,222
|
| $
| 231,602
|
| |||||||||||||||||||||||||||||||
Non-Qualified Stock Options (8)
|
| 5/23/18
|
|
| 15,816
|
| $
| 53.47
|
| $
| 198,333
|
| ||||||||||||||||||||||||||||||||||
Peter Carlson (14)
| Short-Term Incentive
| $
| 450,000
|
| $
| 900,000
|
| $
| 1,350,000
|
| ||||||||||||||||||||||||||||||||||||
Founders’ Grant (RSUs) (4)
|
| 5/23/18
|
|
| 44,004
|
| $
| 2,116,592
|
| |||||||||||||||||||||||||||||||||||||
2019 Proxy Statement | 63
Compensation Tables Grants of Plan-Based Awards | Brighthouse Financial, Inc. |
Name
| Grant Type
| Grant Date (1)
| Estimated future payouts undernon-equity plan awards
| Estimated future payouts under
| All Other (#)
| All Other
| Exercise
| Grant Date Fair Value of Stock and Option Awards (3)
| ||||||||||||||||||||||||||||||||||||||
Threshold ($) (2)
| Target ($)
| Maximum ($) (2)
| Threshold
| Target (#)
| Maximum
| |||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2017 RSUs (12)
|
| 2/16/18
|
| $
| 72,111
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2017 Performance Shares (13)
|
| 5/23/18
|
| $
| 431,020
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2017 Stock Options (15)
|
| 5/23/18
|
| $
| 215,510
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2016 RSUs (10)
|
| 2/16/18
|
| $
| 72,146
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2016 Performance Shares (11)
|
| 2/16/18
|
| $
| 422,665
|
| ||||||||||||||||||||||||||||||||||||||||
Credit for Forfeited 2016 Stock Options (16)
|
| 2/16/18
|
| $
| 133,078
|
| ||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (6)
|
| 5/23/18
|
|
| 7,480
|
| $
| 359,788
|
| |||||||||||||||||||||||||||||||||||||
Performance Share Units (7)
|
| 5/23/18
|
|
| 3,740
|
|
| 7,480
|
|
| 11,220
|
| $
| 359,788
|
| |||||||||||||||||||||||||||||||
Non-Qualified Stock Options (8)
|
| 5/23/18
|
|
| 24,570
|
| $
| 53.47
|
| $
| 308,108
|
| ||||||||||||||||||||||||||||||||||
| (1) | The Founders’ Grants under our |
The credits under the Temporary Plan disclosed in this table were awarded in connection with the Separation. The grant date reported in this column for |
The 2018 LTI awards of PSUs, RSUs and NQSOs under the Employee Plan |
| (2) | For the STI and PSUs, the Threshold and Maximum reflect 50% and 150% of target, respectively. |
| (3) | Amounts reported in this column reflect the aggregate grant date fair value of all equity-based awards granted to the NEOs in 2018 calculated in accordance with ASC Topic 718, modified to exclude the effect of estimated |
64 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Tables
|
| forfeitures. For a description of the |
| (4) | Founders’ Grants of RSUs were subject to the Company’s achievement of one or more performance goals established by the Compensation Committee. All Founders’ Grants vested on September 30, 2018. |
| (5) | Represents the second tranche, including interest, of the credit under the Temporary Plan
|
| (6) | The Compensation Committee awarded RSUs to our NEOs as part of their 2018 LTI Awards under the Employee Plan. RSUs are scheduled to ratably vest at a rate ofone-third of the award on the first three anniversaries of March 1, 2018. The value at vesting will depend on Brighthouse’s stock price at the time of vesting. For additional information about the RSUs, see “Compensation Discussion & Analysis – Section 2 – Our 2018 Executive Compensation Program – 2018 Long-Term Incentive Awards.” |
| (7) | The Compensation Committee awarded PSUs to our NEOs as part of their 2018 LTI Awards under the Employee Plan. PSUs are scheduled to cliff vest on March 1, 2021. Whether any PSUs actually vest and the value at vesting will depend both on Brighthouse’s stock price at the time of vesting and on Brighthouse’s actual achievement of metrics approved by the Compensation Committee (Corporate Expense Reduction (60%) and Capital Return (40%)). Each PSU Metric has a threshold performance |
| (8) | The Compensation Committee awarded NQSOs to our NEOs as part of their 2018 LTI Awards under the Employee Plan. NQSOs are scheduled to ratably vest at a rate ofone-third of the award on each of the first three anniversaries of March 1, 2018, and expire on February 29, 2028. The exercise price of the NQSOs was the closing price of the Company’s common stock on the grant date of March 1, 2018. For additional information about the NQSOs, see “Compensation Discussion & Analysis – Section 2 – Our 2018 Executive Compensation Program – 2018 Long-Term Incentive Awards.” |
| (9) | Mr. Bhalla departed Brighthouse as of March 14, 2019. Amounts reported in this table for Mr. Bhalla have not been adjusted to reflect the separation agreement between Mr. Bhalla and Brighthouse Services, which provided that (i) the post-separation treatment of Mr. Bhalla’s equity awards was in accordance with the Employee Plan and the applicable award agreements, and (ii) the post-separation treatment of Mr. Bhalla’s Temporary Plan credits was in accordance with the Temporary Plan. |
| (10) | Represents the final tranche, including interest, of the credit under the Temporary Plan
|
| (11) | Represents the full value, including interest, of the credit under the Temporary Plan |
| (12) | Represents the second tranche, including interest, of the credit under the Temporary Plan awarded in respect of a MetLife restricted stock unit award granted by MetLife in 2017 that had not vested and was forfeited as a result of the Separation. This portion of the credit vested on March 1, 2019, and was subject to the achievement of one or more 2018 performance goals established by the Compensation Committee on February 16, 2018. |
2019 Proxy Statement | 65
Compensation Tables Grants of Plan-Based Awards | Brighthouse Financial, Inc. |
| (13) | Represents the full value, including interest, of the credit under the Temporary Plan awarded in respect of a MetLife performance share award granted by MetLife in 2017 that was forfeited as a result of the Separation. This credit will vest in full on February 20, 2020, and is subject to the achievement of one or more performance goals established by the Compensation Committee for the 2017, 2018, and 2019 performance periods. |
| (14) | Mr. Carlson departed Brighthouse on December 31, 2018. Amounts reported in this table for Mr. Carlson have not been adjusted to reflect the separation agreement between Mr. Carlson and a Brighthouse Services, which provided that the post-separation treatment of Mr. Carlson’s equity awards was in accordance with the Employee Plan and the applicable award agreements, and the post-separation treatment of Mr. Carlson’s Temporary Plan credits was in accordance with the Temporary Plan. |
| (15) | Represents the full value, including interest, of the credit under the Temporary Plan awarded in respect of a MetLife stock option award granted by MetLife in 2017 that had not vested and was forfeited as a result of the Separation. This credit will vest in full on February 28, 2020, and is subject to the achievement of one or more performance goals established by the Compensation Committee for the 2017, 2018 and 2019 performance periods. |
| (16) | Represents the full value, including interest, of the credit under the Temporary Plan awarded in respect of a MetLife stock option award granted by MetLife in 2016 that had not vested and was forfeited as a result of the Separation. This credit vested on February 23, 2019, and was subject to the achievement of one or more performance goals established by the Compensation Committee for the 2017 and 2018 performance periods. |
66 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Tables Outstanding Equity Awards at 2018 FiscalYear-End |
Outstanding Equity Awards at 2018 FiscalYear-End
The table below provides information concerning unexercised options and stock-based awards that have not vested for each NEO as of December 31, 2018.
Name
| Option Awards
| Stock Awards
| |||||||||||||||||||||||||||||||||||||||||
Number of
| Number of
| Equity
| Option
| Option
| Number that Have Not
| Market or Units Have (#) (3)
| Equity
| Equity
| |||||||||||||||||||||||||||||||||||
Eric Steigerwalt
|
|
|
|
|
|
|
|
|
|
|
|
|
| 28,053
|
|
| $855,055
|
|
|
|
|
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,026
|
|
$427,512
|
| ||||||||||||||||||||||
|
92,137
|
|
|
|
|
|
$53.47
|
|
|
2/29/2028
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Anant Bhalla(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,545
|
|
|
$199,492
|
|
|
|
|
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,272
|
|
$99,731
|
| ||||||||||||||||||||||
|
21,498
|
|
|
|
|
|
$53.47
|
|
|
2/29/2028
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
John Rosenthal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,857
|
|
|
$209,001
|
|
|
|
|
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,428
|
|
$104,485
|
| ||||||||||||||||||||||
|
22,522
|
|
|
|
|
|
$53.47
|
|
|
2/29/2028
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Christine DeBiase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,272
|
|
|
$191,171
|
|
|
|
|
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,136
|
|
$95,585
|
| ||||||||||||||||||||||
|
20,602
|
|
|
|
|
|
$53.47
|
|
|
2/29/2028
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Conor Murphy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,815
|
|
|
$146,761
|
|
|
|
|
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,407
|
|
$73,365
|
| ||||||||||||||||||||||
|
15,816
|
|
|
|
|
|
$53.47
|
|
|
2/29/2028
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Peter Carlson(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,480
|
|
|
$227,990
|
|
|
|
|
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,740
|
|
$113,995
|
| ||||||||||||||||||||||
|
24,570
|
|
|
|
|
|
$53.47
|
|
|
2/29/2028
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
| (1) | Represents NQSOs granted on March 1, 2018, and approved by stockholders on May 23, 2018, of whichone-third vests annually on March 1 of each of 2019, 2020 and 2021. |
| (2) | Represents RSUs granted on March 1, 2018, and approved by stockholders on May 23, 2018.One-third of the total award vests annually on March 1 of each of 2019, 2020 and 2021. |
| (3) | The market value of RSUs was determined by multiplying the number of shares by $30.48, the closing price of the Company’s common stock on December 31, 2018. |
| (4) | Represents PSUs granted on March 1, 2018, and approved by stockholders on May 23, 2018, paid at threshold (50% of target value). The PSUs will cliff-vest on March 1, 2021, subject to achievement of specified performance criteria. |
2019 Proxy Statement | 67
Compensation Tables Option Exercises and Stock Vested | Brighthouse Financial, Inc. |
| (5) | The market value of PSUs was determined by multiplying the number of shares paid at threshold (50% of target value) by $30.48, the closing price of the Company’s common stock on December 31, 2018. |
| (6) | Mr. Bhalla departed Brighthouse as of March 14, 2019. In accordance with the terms of |
| (7) | All of Mr. Carlson’s awards reported in this table were cancelled as of December 31, 2018, per the terms of the Employee Plan, applicable award agreements and his separation agreement. |
Option Exercises and Stock Vested in 2018
The following table provides information regarding all RSUs and PSUs held by the NEOs that vested during 2018 and options that were exercised by NEOs during 2018.
Stock Awards
| ||||||||||
Name
| Number of Shares
| Value Realized on
| ||||||||
Eric Steigerwalt
|
|
165,016
|
|
|
$7,300,308
|
| ||||
Anant Bhalla
|
|
38,503
|
|
|
$1,703,373
|
| ||||
John Rosenthal
|
|
40,337
|
|
|
$1,784,509
|
| ||||
Christine DeBiase
|
|
36,899
|
|
|
$1,632,412
|
| ||||
Conor Murphy
|
|
28,034
|
|
|
$1,240,224
|
| ||||
Peter Carlson
|
|
44,004
|
|
|
$1,946,737
|
| ||||
| (1) | Represents vesting of the Founders’ Grants on September 30, 2018. |
| (2) | Represents the number of vested Founders’ Grants Shares multiplied by the $44.24 closing price of the Company’s common stock on September 30, 2018. |
68 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Tables Nonqualified Deferred Compensation |
Nonqualified Deferred Compensation in 2018
The table below presents nonqualified deferred compensation paid to our NEOs for 2018.
Name | Plan Name | Executive in Last Fiscal Year ($) | Company ($)(1) | Aggregate Gains (Losses) in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(2) | ||||||||||||||||||||||||
Eric Steigerwalt | Auxiliary Plan | $- | $271,445 | ($28,886 | ) | $- | $499,468 | |||||||||||||||||||||||
Anant Bhalla | Auxiliary Plan | $- | $122,468 | ($17,644 | ) | $- | $204,562 | |||||||||||||||||||||||
John Rosenthal | Auxiliary Plan | $- | $152,756 | ($16,594 | ) | $- | $313,482 | |||||||||||||||||||||||
Christine DeBiase | Auxiliary Plan | $- | $112,983 | ($12,205 | ) | $- | $180,735 | |||||||||||||||||||||||
Conor Murphy | Auxiliary Plan | $- | $85,293 | ($3,546 | ) | $- | $85,728 | |||||||||||||||||||||||
Peter Carlson | Auxiliary Plan | $- | $78,178 | ($10,190 | ) | $- | $142,658 | |||||||||||||||||||||||
| (1) | Amounts in this column are reported as components of employer contributions to the Auxiliary Plan for Fiscal 2017 in the “All Other Compensation” column of theSummary Compensation Table above. |
| (2) | Amounts in this column that were previously reported as compensation in the |
Auxiliary Plan
NEOs and other eligible employees who elected to contribute a portion of their eligible compensation under thetax-qualified Brighthouse Savings Plan in 2018 received a Company matching contribution which is equal to 100% of up to the first 6% of their eligible compensation in that plan in 2018. In addition, anon-elective Company contribution equal to 3% of the compensation is allocated to eligible employees in that plan in 2018. The Code limits compensation that is eligible for employer contributions under the Brighthouse Savings Plan. In 2018, the Company could not make contributions based on compensation over $275,000.
NEOs and other eligible employees who elected to participate in the Brighthouse Savings Plan during 2018 were credited under the Auxiliary Plan with a percentage of their eligible compensation beyond the compensation limit. The Company contribution, including both the matching andnon-elective contribution, was determined using the same employee contribution rate and Company contribution rate as applied under the Brighthouse Savings Plan. This Company contribution is credited to an account established for the employee under the nonqualified Auxiliary Plan. Auxiliary Plan balances are paid in a lump sum as soon as administratively practicable after termination of employment.
Amounts in the Auxiliary Plan are subject to the requirements of Section 409A of the Code (“Section 409A”). Payments to the top 50 highest paid officers that are due upon separation from service are delayed for six months following their separation, in compliance with Section 409A.
Employees may choose from a number of simulated investments for their Auxiliary Plan accounts. These simulated investments were identical to the core funds offered under the Brighthouse Savings Plan in 2018. Employees may change the simulated investments for new Company contributions to their Auxiliary Plan accounts at any time.
2019 Proxy Statement | 69
Compensation Tables Nonqualified Deferred Compensation | Brighthouse Financial, Inc. |
The following table shows the simulated investment return for each of the alternatives under the Auxiliary Plan for calendar year 2018.
Fund Name | 2018 Return | ||||
Schwab Government Money Fund – Investor Shares | 1.50 | % | |||
Western Asset Core Bond Fund Class Investor Shares | -0.67 | % | |||
Vanguard Inflation-Protected Securities Fund Admiral Shares | -1.39 | % | |||
Vanguard Value Index Fund Admiral Shares | -5.43 | % | |||
Vanguard 500 Index Fund Admiral Shares | -4.43 | % | |||
VanguardMid-Cap Index Fund Admiral Shares | -9.23 | % | |||
Vanguard Small Cap Index Fund Admiral Shares | -9.31 | % | |||
Fidelity Nasdaq Composite Index | -3.18 | % | |||
Fidelity Overseas Fund | -14.69 | % | |||
Vanguard Emerging Markets Stock Index Fund Admiral Shares | -14.58 | % | |||
Cohen & Steers Real Estate Securities Fund, Inc. Class Institutional | -4.29 | % | |||
American Funds 2010 Target Date Retirement Fund – Class R6 | -2.49 | % | |||
American Funds 2015 Target Date Retirement Fund – Class R6 | -2.72 | % | |||
American Funds 2020 Target Date Retirement Fund – Class R6 | -2.69 | % | |||
American Funds 2025 Target Date Retirement Fund – Class R6 | -3.47 | % | |||
American Funds 2030 Target Date Retirement Fund – Class R6 | -4.16 | % | |||
American Funds 2035 Target Date Retirement Fund – Class R6 | -5.14 | % | |||
American Funds 2040 Target Date Retirement Fund – Class R6 | -5.52 | % | |||
American Funds 2045 Target Date Retirement Fund – Class R6 | -5.58 | % | |||
American Funds 2050 Target Date Retirement Fund – Class R6 | -5.61 | % | |||
American Funds 2055 Target Date Retirement Fund – Class R6 | -5.65 | % | |||
American Funds 2060 Target Date Retirement Fund – Class R6 | -5.64 | % | |||
70 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Tables Potential Payments Upon Termination or Change in Control |
Potential Payments Upon Termination or Change in Control
The following table sets forth, for each NEO, an estimate of potential payments the NEO would have received at, following, or in connection with a termination of employment under the circumstances described below on December 31, 2018 (the “Trigger Date”).
| Trigger Events(1) | ||||||||||||||||||||||
| Name | Benefits and Payments | Voluntary Termination(2) | Involuntary Not- For-Cause Termination(3) | Change of Control with no Termination(4) | Involuntary Not-For-Cause or Good Reason Termination in Connection with Change in Control(5) | Death(6) | ||||||||||||||||
Eric Steigerwalt | Base Salary | $ 900,000 | $1,800,000 | |||||||||||||||||||
| Annual STI | $3,600,000 | $5,400,000 | ||||||||||||||||||||
| Temporary Plan –Forfeited(7) | ||||||||||||||||||||||
| Temporary Plan – 2017 Equity(8) | $ 862,661 | $ 862,661 | $ 862,661 | $ | 862,661 | |||||||||||||||||
| RSUs(9) | $ 855,055 | $ 855,055 | $ 855,055 | $ 855,055 | $ | 855,055 | ||||||||||||||||
| PSUs(10) | $ 855,055 | $ 855,055 | $ 855,055 | $ 855,055 | $ | 855,055 | ||||||||||||||||
| Stock Options(11) | ||||||||||||||||||||||
| Miscellaneous Payments(12) | $ 29,416 | $ 53,874 | ||||||||||||||||||||
| Total | $2,572,772 | $7,102,189 | $1,710,111 | $9,826,646 | $ | 2,572,772 | ||||||||||||||||
Anant Bhalla | Base Salary | $ 600,000 | $1,200,000 | |||||||||||||||||||
| Annual STI | $1,680,000 | $2,520,000 | ||||||||||||||||||||
| Temporary Plan –Forfeited(7) | $ 210,332 | $ 210,332 | $ | 210,332 | ||||||||||||||||||
| Temporary Plan –2017 Equity(8) | $ 273,694 | $ 273,694 | $ | 273,694 | ||||||||||||||||||
| RSUs(9) | $ 199,492 | $ 199,492 | $ | 199,492 | ||||||||||||||||||
| PSUs(10) | $ 199,492 | $ 199,492 | $ | 199,492 | ||||||||||||||||||
| Stock Options(11) | ||||||||||||||||||||||
| Miscellaneous Payments(12) | $ 29,416 | $ 53,874 | ||||||||||||||||||||
| Total | $ 0 | $2,793,443 | $ 398,983 | $4,656,883 | $ | 883,009 | ||||||||||||||||
John Rosenthal | Base Salary | $ 550,000 | $1,100,000 | |||||||||||||||||||
| Annual STI | $2,145,000 | $3,217,500 | ||||||||||||||||||||
| Temporary Plan – Forfeited(7) | ||||||||||||||||||||||
| Temporary Plan – 2017 Equity(8) | $ 503,363 | $ 503,363 | $ 503,363 | $ | 503,363 | |||||||||||||||||
| RSUs(9) | $ 209,001 | $ 209,001 | $ 209,001 | $ 209,001 | $ | 209,001 | ||||||||||||||||
| PSUs(10) | $ 209,001 | $ 209,001 | $ 209,001 | $ 209,001 | $ | 209,001 | ||||||||||||||||
| Stock Options(11) | ||||||||||||||||||||||
| Miscellaneous Payments(12) | $ 29,416 | $ 53,874 | ||||||||||||||||||||
| Total | $ 921,366 | $3,645,782 | $ 418,003 | $5,292,739 | $ | 921,366 | ||||||||||||||||
Christine DeBiase | Base Salary | $ 600,000 | $1,200,000 | |||||||||||||||||||
| Annual STI | $1,440,000 | $2,160,000 | ||||||||||||||||||||
| Temporary Plan – Forfeited(7) | ||||||||||||||||||||||
| Temporary Plan – 2017 Equity(8) | $ 220,769 | $ 220,769 | $ 220,769 | $ | 220,769 | |||||||||||||||||
| RSUs(9) | $ 191,171 | $ 191,171 | $ 191,171 | $ 191,171 | $ | 191,171 | ||||||||||||||||
| PSUs(10) | $ 191,171 | $ 191,171 | $ 191,171 | $ 191,171 | $ | 191,171 | ||||||||||||||||
| Stock Options(11) | ||||||||||||||||||||||
| Miscellaneous Payments(12) | $ 29,416 | $ 53,874 | ||||||||||||||||||||
| Total | $ 603,111 | $2,672,527 | $ 382,341 | $4,016,984 | $ | 603,111 | ||||||||||||||||
2019 Proxy Statement | 71
Compensation Tables Potential Payments Upon Termination or Change in Control | Brighthouse Financial, Inc. |
| Trigger Events(1) | |||||||||||||||||||||||||||
| Name | Benefits and Payments | Voluntary Termination(2) | Involuntary Not- For-Cause Termination(3) | Change of Control with no Termination(4) | Involuntary Not-For-Cause or Good Reason Termination in Connection with Change in Control(5) | Death(6) | |||||||||||||||||||||
| Base Salary | $ 600,000 | $1,200,000 | |||||||||||||||||||||||||
| Annual STI | $1,680,000 | $2,520,000 | |||||||||||||||||||||||||
| Temporary Plan – Forfeited(7) | $ 486,197 | $ 486,197 | $486,197 | ||||||||||||||||||||||||
| Temporary Plan – 2017 Equity(8) | |||||||||||||||||||||||||||
Conor Murphy | RSUs(9) | $ 146,761 | $ 146,761 | $146,761 | |||||||||||||||||||||||
| PSUs(10) | $ 146,761 | $ 146,761 | $146,761 | ||||||||||||||||||||||||
| Stock Options(11) | |||||||||||||||||||||||||||
| Miscellaneous Payments(12) | $ 29,416 | $ 53,874 | |||||||||||||||||||||||||
| Total | $ 0 | $2,795,614 | $ 293,522 | $4,553,593 | $779,720 | ||||||||||||||||||||||
| (1) | The |
All values for equity-related payments assume the triggering event took place on the Trigger Date, on which the closing price of the Company’s common stock was $30.48. |
| (2) | If an NEO voluntarily terminates employment after the NEO’s Rule of 65 Date (other than a termination for “Cause”): (a) awards under the Employee Plan continue to vest on the same schedule as if the NEO remained employed with Brighthouse; and (b) credits in respect of forgone 2017 MetLife equity awards under the Temporary Plan immediately vest and will be paid on the payment schedule set forth in the Plan, subject to the achievement of the performance metrics established for each tranche. Mr. Steigerwalt, Mr. Rosenthal, and Ms. DeBiase have satisfied Rule of 65 conditions; Mr. Bhalla and Mr. Murphy have not, and therefore do not receive any additional payouts or vesting of outstanding awards on a voluntary resignation. |
| (3) | Under the terms of the Severance Plan, an NEO who is involuntarily terminated not for cause would receive: (a) a lump sum equal to the sum of the NEO’s base salary plus the target STI award for the year of separation; (b) a lump sum in lieu of STI award payment equal to the prorated target STI award in the year of termination (plus, if the termination occurs before the prior year’s STI award was paid, a lump sum in lieu of STI award payment equal to the prior year’s STI award); and (c) a lump sum equal to 12 months of premiums at COBRA rates and executive outplacement services. Payment of these severance benefits is conditioned on the NEO’s execution of a separation agreement, waiver and general release within the required time period, and abiding by certain covenants, including those contained in the Agreement to Protect Corporate Property (the “ATPCP”), andnon-interference with the Company’s business. |
Treatment of equity awards granted in 2018 is as provided in the Employee Plan and the applicable award agreement. If the NEO is terminated without Cause after the NEO’s Rule of 65 Date, awards continue to vest on the same schedule as if the NEO remained employed with Brighthouse. If the NEO is terminated without Cause before the NEO’s Rule of 65 Date, then: (a) RSUs – all unvested RSUs would be forfeited; (b) PSUs – a prorated number of PSUs would be payable based on the number of months that lapse after the most recent vesting event, divided by the total number of months in the vesting period (36), provided at least one |
72 | 2019 Proxy Statement
| Brighthouse Financial, Inc. | Compensation Tables Potential Payments Upon Termination or Change in Control |
