| | | | | | | | | | 22
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | | 
| | Corporate Governance
| |
Why
| | Douglas A. Scovanner Age: 66 Director Since: November 2013 | | Prudential Committees: ● Audit ● Executive ● Risk (Chair) | | | | | | | | | Mr. Scovanner has been Founder and Managing Member of Comprehensive Financial Strategies, LLC, a management consulting firm, since October 2013. Previously, he served as CFO (1994 to 2012) and EVP (2000 to 2012) of Target Corporation (a North American retailer). Prior to joining Target Corporation, Mr. Scovanner held various management positions at The Fleming Companies, Inc., Coca-Cola Enterprises, Inc., The Coca-Cola Company and the Ford Motor Company. | 
| | Michael A. Todman Age: 64 Director Since: March 2016 | | Prudential Committees: ● Compensation (Chair) ● Executive ● Finance ● Risk | | Public Directorships: ● Brown-Forman Corporation ● Carrier Global Corporation ● Mondelēz International, Inc. | | | | | | Former Directorships Held during the Past Five Years: ● Newell Brands (May 2020) | | | | | | | Mr. Todman served as Vice Chairman of the Whirlpool Corporation (Whirlpool), a global manufacturer of home appliances, from November 2014 to December 2015. Mr. Todman previously served as President of Whirlpool International from 2006 to 2007 and 2010 to 2014, as well as President, Whirlpool North America, from 2007 to 2010. Mr. Todman held several senior positions with Whirlpool over his career. | | | | | 14 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | 
| | | Corporate Governance |
The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company is governed by a Board of Directors and committees of the Board that meet throughout the year. Directors discharge their responsibilities at Board and committee meetings through ongoing communication with one another and management. The Board has adopted Corporate Governance Principles and Practices to provide a framework for the effective governance of the Company. The Corporate Governance Principles and Practices are reviewed regularly and updated as appropriate. The full text of the Corporate Governance Principles and Practices, which includes the definition of independence adopted by the Board, the charters of the Corporate Governance and Business Ethics, Compensation and Audit Committees, the Lead Independent Director Charter, the Code of Business Conduct and Ethics and the Related Party Transaction Approval Policy can be found at www.prudential.com/governance. Copies of these documents also may be obtained from the Chief Governance Officer and Corporate Secretary. Governance is a continuing focus at the Company, starting with the Board and extending to management and all employees. Therefore, the Board reviews the Company’s policies and business strategies and advises and counsels the CEO and other executive officers who manage the Company’s businesses, including actively overseeing and reviewing, on at least an annual basis, the Company’s strategic plans. In addition, we solicit feedback from shareholders on corporate governance and executive compensation practices, among other items, and engage in discussions with various groups and individuals on these matters. Process for Selecting Directors The Corporate Governance and Business Ethics Committee screens and recommends candidates for nomination by the full Board. The Company’s By-laws provide that the size of the Board may range from 10 to 15 members, reflecting the Board’s current view of its optimal size. The Committee is assisted with its recruitment efforts by an independent third-party search firm, which recommends candidates who satisfy the Board’s criteria. The search firm also provides research and pertinent information regarding candidates, as requested. 
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 15 |
| | | | | | | Corporate Governance | |
|
Shareholder Nominations and Recommendations of Director Candidates Our By-laws permit a group of up to 20 shareholders who have owned at least 3% of our outstanding capital stock for at least three years to submit director nominees for up to 20% of our Board seats for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in our By-laws. Shareholders who wish to nominate directors for inclusion in our Proxy Statement or directly at an Annual Meeting in accordance with the procedures in our By-laws should follow the instructions under “Submission of Shareholder Proposals and Director Nominations” in this Proxy Statement. Shareholders who wish to recommend candidates for consideration should send their recommendations to the attention of Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, at 751 Broad Street, Newark, NJ 07102. The Committee will consider director candidates recommended by shareholders in accordance with the criteria for director selection described under “Director Criteria, Qualifications, Experience and Tenure.” Director Attendance During 2021, the Board of Directors held eleven meetings. Together, the directors attended 99% of the meetings of the full Board and the committees on which they served in 2021. Directors are expected to attend the annual meeting of shareholders. All directors at that time were present for the 2021 annual meeting of shareholders. Director Independence The current Board consists of 13 directors, two of whom are currently employed by the Company (Messrs. Lowrey and Falzon). The Board conducted an annual review and affirmatively determined that all of the non-employee directors (Mses. Hund-Mejean, Jones, Pianalto and Poon, and Messrs. Baltimore, Casellas, Krapek, Lighte, Paz, Scovanner and Todman) are “independent” as that term is defined in the listing standards of the NYSE and in Prudential’s Corporate Governance Principles and Practices. Independent Director Meetings The independent directors generally meet in an executive session at both the beginning and end of each regularly scheduled Board meeting, with the Lead Independent Director serving as Chair. Comprehensive Steps to Achieve Board Effectiveness The Board is committed to a rigorous self-evaluation process. Through evaluation, directors review the Board’s performance, including areas where the Board feels it functions effectively, and importantly, areas where the Board believes it can improve. 
| | | | 16 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Corporate Governance | |
|
| | | Board Leadership Currently, our Board Structure Is Right for Prudential and its Shareholders Prudential’s Board leadership structure consists of a Lead Independent Director, a Chairman (who is reviewed byalso our CEO) and strong committee chairs. The Board believes that our structure provides independent Board leadership and engagement while providing the benefit of having our CEO, the individual with primary responsibility for managing the Company’s day-to-day operations, chair regular Board meetings as key business and strategic issues are discussed.
The Board regularly reviews its leadership structure and it thoroughly evaluated whether to continue to combine or to split the chair and CEO roles. After considering the perspectives of the independent directors, the views of our significant shareholders, voting results of recent independent chair proposals, academic research, practical experience at peer companies, and benchmarking and performance data, the Board in 2021 determined that having the same individual as both Chairman of the Board and CEO is in the best interests of the Company and its shareholders. The Board will continue to monitor the appropriateness of this structure. | | | | In 2021, our Lead Independent Director, chair of the Corporate Governance and Business Ethics Committee, regularly. Upon John Strangfeld’s retirement,Chair of the Finance Committee, Vice Chairman, Chief Human Resources Officer and our Chief Governance Officer engaged with shareholders who hold a majority of our shares on their views on our Board leadership structure, human capital management and environmental sustainability. The discussions and feedback from these meetings have been shared with the Board again gave careful deliberation toand will be considered during the Board’s annual review of the appropriateness of its structureleadership structure. |
| | | Lead Independent Director Under our Corporate Governance Principles and determined that a combined Chairman-CEO role continues to be inPractices, the best interest of our firm and shareholders. As independent directors, we believe the current structure promotes an effective Board that enables us to provide strategic guidance, challenge management’s perspectives, and meet with relevant internal and external constituents important to the Company’s operational and regulatory initiatives. The independent directors annually selectelect a Chairman of the Board and, if the individual elected as Chairman of the Board is the CEO, they also elect an independent memberdirector to serve as the Lead Independent Director. As required by the Lead Independent Director Charter, theThe Lead Independent Director is precluded from serving longergenerally expected to serve for a term of at least one year, but for no more than three consecutive years.
Charles Lowrey, former executive vice president and chief operating officer of Prudential’s International Businesses, was appointed CEO on December 1, 2018. He will be appointed Chairman on April 5, 2019. Charlie’s successful leadership of the Company’s asset management, U.S. and international businesses enables him to bring a broad perspective of Prudential’s operations, a deep understanding of our people, and leadership skills that will serve the Company well Ms. Poon has served as it continues to grow.
The Board believes a Chairman-CEO structure provides Prudential with a clear and effective leadership role to communicate the Company’s business and long-term strategy to its clients, shareholders and the public. The combination also provides for robust and frequent communication between the Board’s independent directors and Company management. On behalf of our shareholders, the Board is committed to advancing our momentumLead Independent Director since her initial election in the market. This transition is the result of a thoughtful, phased and long-term approach to succession planning.May 2020.
Lead Independent Director:Key Responsibilities
| ●Calls meetings of the independent directors directors.● Presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors. ●Facilitates communication between the independent directors and our Chairman Chairman.●Provides independent Board leadership leadership.●Elected annually toand may serve no more than three years Setsyears.● Approves the agenda for all Board meetings and approves all Board material materials.●Communicates with shareholders and other key constituents, as appropriate | | ●Meets directly with the management andnon-management employees of our firm firm.●Engages with our other independent directors to identify matters for discussion at executive sessions of independent directors and advises our Chairman of any decisions reached, and suggestions made at the executive sessions sessions.●In collaboration with the Corporate Governance and Business Ethics Committee, addresses Board effectiveness, performance and composition composition.●Authorized to retain outside advisors and consultants who report directly to the Board on Board-wide issues | Culture at Prudential
At Prudential, nearly 50,000 employees from around the globe bring their diverse backgrounds and perspectives to work every day in
pursuit of the company’s shared purpose: making lives better by solving the financial challenges of a changing world.
Drawing on a wide range of expertise and experience across a multitude of disciplines, we are bound by our commitment to what we do
and how we work together.
This means that culture is a unique differentiator and a long-term competitive advantage for Prudential. It fuels our ability to execute in differentiated ways and is a critical underpinning of our talent strategy.
Therefore, we invest in understanding and developing our culture. We want to ensure that it is as inclusive and collaborative as it can be, and that it supports how we compete in an evolving marketplace.
In July 2018, Prudential asked thousands of employees across the United States to share their vision for our culture and for Prudential. Solicited in a spirit of candor and continual improvement, the results provided valuable guidance for our approach to business challenges and talent opportunities. These results were shared with the Board of Directors and senior leadership, and the feedback will help the company support a fully inclusive culture that unlocks the best-in-class execution, collaboration, and performance of our talent.issues.
|
| | | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 17 |
| | | | | | | Corporate Governance | |
|
Shareholder Engagement at Prudential 
| Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 23
| | 18 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | |
| Corporate Governance | |
|
|
A Message to Our Shareholders from Prudential’s Lead Independent Director, Christine A. Poon As your Lead Independent Director, it is an honor to work with our Board on behalf of Prudential’s stakeholders. This past year, the Company made significant progress against our transformation strategy for long-term growth even as we all continue to navigate the unprecedented challenges of the pandemic. Through it all, we have been guided by our commitment to making lives better by solving the financial challenges of our ever-changing world. The Board continues to be agile, adapting to changing circumstances. I attribute this to our directors’ skills, varied experiences, and diversity. Our 13 directors maintain broad and deep experience in strategy development, operational excellence, human capital and culture, sustainability, finance, and other important areas that are directly relevant to Prudential’s strategic priorities. In addition to bringing important skills, our Board members represent a wide range of backgrounds and individual experiences, which we believe are reflective of our global operations and diverse consumer base. Of our 13 director nominees, 11 are independent. Eighty two percent of our independent directors are diverse. Our average Board tenure is approximately nine years. We are proud of the continuing evolution of our Board and track record of refreshment. Regular shareholder feedback informs the Board’s thinking and allows us to continually broaden our perspective. I met with a number of our institutional investors throughout 2021. Our dialogue covered a broad range of topics, including the Board’s diverse composition and breadth of experience, the role of the Lead Independent Director, the Board’s oversight of our Company’s transformation strategy, our Company’s environmental commitment and commitment to stakeholders, and the Board’s oversight of our human capital and diversity initiatives. Investors’ viewpoints are shared with the entire Board, enhancing our decision-making. To enable shareholders to hear directly from our Board, we continue to release director video interviews in conjunction with our proxy statement. This year, we are featuring Wendy E. Jones, member of the Board’s Audit Committee, Gilbert F. Casellas, Chairman of Prudential’s Corporate Governance and Business Ethics Committee, and Robert Falzon, our Vice Chairman. While more work lies ahead, we are pleased with the Company’s progress against our transformation objectives. The Board recognizes that continued strong performance requires vigilant focus on our core business principles, including exceptional client service, operational excellence, and a culture that cultivates strong performing teams. Through our oversight of the Company’s strategic planning process, the Board and management are accountable for abiding by these principles. On behalf of the Board, thank you for your continuing trust and investment in Prudential. Christine A. Poon Lead Independent Director | | | Corporate Governance
| 
Christine A. Poon Prudential Lead Independent Director | | Ms. Poon was elected by Prudential’s independent directors to serve as Lead Independent Director effective May 12, 2020. She brings significant experience and knowledge to the Lead Independent Director role. Ms. Poon has served as a Prudential director since 2006. She currently chairs the Executive and Finance Committees and sits on the Investment and Risk Committees. Due to her Board experience and leadership, Ms. Poon understands the Company’s long-term strategic priorities. In addition, she possesses a deep understanding of Prudential and its industry’s legal, regulatory, and competitive frameworks. |
| Board Risk Oversight
The Board oversees the Company’s risk profileCulture at Prudential
Remote work arrangements for most employees in 2021 continued to present a challenging landscape for workplace culture, but Prudential has continued to connect our workforce by building engagement programs that inspire our employees to live our purpose and management’s processesembrace virtual team environments. These programs included new pro bono opportunities for assessingour Business Resource Groups to solve challenges for nonprofits while simultaneously building their skills and managing risk, through both the whole Board and through its committees. At least annually, the Board reviews strategic risks and opportunities facing the Company and certain of its businesses. Other important categories of risk are assigned to designated Board committees that report backconnecting them to the full Board. In general,company’s purpose. Another new engagement platform called Missions enables multi-faceted, virtual opportunities focused on topics such as health & wellness, civic engagement and sustainability, based on employee interests. Additionally, to help prepare for our hybrid workplace of the committees oversee the following risks:future, we equipped leaders with resources, tip sheets and presentations focused on creating behaviors that allow all five of our cultural aspirations—customer obsessed, outcomes driven, risk smart, tech forward and inclusive—to serve as guides towards creating a high-performing workplace where employees feel valued and interconnected. Audit Committee:insurance risk and operational risks, including model risk, as well as risks related to financial controls, legal, regulatory and compliance risks, and the overall risk management governance structure and risk management function;
|
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 19 |
| | | | | | | Compensation Committee:Corporate Governancethe design and operation of the Company’s compensation programs so that they do not encourage unnecessary or excessive risk-taking;
| |
|
Board Risk Oversight The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, through both the whole Board and its committees. At least annually, the Board reviews strategic risks and opportunities facing the Company and its businesses. Other important categories of risk are assigned to designated Board committees that report back to the full Board. In general, the committees oversee the following risks:  In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, Board committees hold joint meetings when appropriate and address certain issues at the full Board level. During 2021, the Risk Committee received updates from the Chief Risk Officer on the important strategic issues and risks facing the Company, including a discussion on the Own Risk and Solvency Assessment (“ORSA”) and the Company’s current and future initiatives to address climate and environmental related risks. In addition, the Board and committees review the performance and functioning of the Company’s overall risk management function. The Risk Committee currently includes the chairs of each of the other Board committees as well as another independent director who serves as Chair of the Committee. The principal activities of the Risk Committee are to: oversee the Company’s assessment and reporting of material risks by reviewing the metrics used by management to quantify risk, applicable risk limit structures and risk mitigation strategies; review the Company’s processes and procedures for risk assessment and risk management, including the related assumptions used across the Company’s businesses and material risk types; and receive reports from management on material and emerging risk topics that are reviewed by the Company’s internal management committees. The Company, under the Board’s oversight, is organized to promote a strong risk awareness and management culture. The Chief Risk Officer sits on many management committees and heads an independent enterprise risk management department; the General Counsel and Chief Compliance Officer also sit on key management committees and the functions they oversee operate independently of the businesses to separate management and oversight. Also, our employees are evaluated with respect to risk and ethics. | | | | 20 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Corporate Governance and Business Ethics Committee:the Company’s overall ethical culture, political contributions, lobbying expenses and overall political strategy, as well as the Company’s environmental risk (which includes climate risk), sustainability and corporate social responsibility to minimize reputational risk and focus on future sustainability; | | Finance Committee:liquidity risk, risks involving our capital management, the incurrence and repayment of borrowings, the capital structure of the enterprise, funding of benefit plans and statutory insurance reserves;
Investment Committee:investment risk, market risk and the strength of the investment function; and
Risk Committee:the governance of significant risks throughout the Company, the establishment and ongoing monitoring of our risk profile, risk capacity and risk appetite, and coordination of the risk oversight functions of the other Board committees.
In performing its oversight responsibilities, the Board and its committees review policies and guidelines that senior management uses to manage the Company’s exposure to material categories of risk. As these issues sometimes overlap, Board committees hold joint meetings when appropriate and address certain issues at the full Board level. During 2018, the Risk Committee received an update from the Chief Risk Officer on the important strategic issues and risks facing the Company. In addition, the Board and committees review the performance and functioning of the Company’s overall risk management function.
The Risk Committee is comprised of the chairs of each of the other Board committees and Mark Grier, our Vice Chairman, who supervises the Chief Risk Officer of the Company. The principal activities of the Risk Committee are to: oversee the Company’s assessment and reporting of material risks by reviewing the metrics used by management to quantify risk, applicable risk limit structures and risk mitigation strategies; review the Company’s processes and procedures for risk assessment and risk management, including the related assumptions used across the Company’s businesses and material risk types; and receive reports from management on material and emerging risk topics that are reviewed by the Company’s internal management committees.
The Company, under the Board’s oversight, is organized to promote a strong risk awareness and management culture. The Chief Risk Officer sits on many management committees and heads an independent enterprise risk management department; the General Counsel and Chief Compliance Officer also sit on key management committees and the functions they oversee operate independently of the businesses to separate management and oversight. Employee appraisals evaluate employees with respect to risk and ethics.
Cybersecurity Risk Oversight
In addition, the Board oversees the Company’s cyber risk management
|
Cybersecurity Risk Oversight In addition, the Board oversees the Company’s Information Security program. In order to respond to the threat of security breaches and cyberattacks, we have developed a program, overseen by the Company’s Chief Information Security Officer and our Information Security Office, that is designed to protect and preserve the confidentiality, integrity and continued availability of all information owned by, or in the care of, the Company. This program also includes a cyber incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident. Prudential has not had a material data security breach in three years. The Audit Committee, which is tasked with oversight of certain risk issues, including cybersecurity, receives reports from the Chief Information Security Officer, the Chief Information Officer and the Global Head of Operational Risk throughout the year. At least annually, the Board and the Audit Committee also receive updates about the results of program reviews, including exercises and response readiness assessments led by outside advisors who provide a third-party independent assessment of our technical program and internal response preparedness. The Audit Committee regularly briefs the full Board on these matters, and the full Board also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues. Cybersecurity Governance Highlights | ● | | Comprehensive reporting to our Board and Risk Committee by our Chief Information Security Officer and our Information Security Office that is designedin response to protect and preserve the confidentiality, integrity and continued availability of all information owned by, or in the care of, the Company. This program also includes a cyber incident response plan that provides controls and procedures for timely and accurate reporting of any material cybersecurity incident. The Audit Committee, which is tasked with oversight of certain risk issues, including cybersecurity, receives periodic reports from the Chief Information Security Officer, the Chief Information Officer and the Head of Operational Risk. The Board and the Audit Committee also periodically receive updates about the results of exercises and response readiness assessments led by outside advisors who provide a third-party independent assessment of our technical program and our internal response preparedness. The Audit Committee regularly briefs the full Board on these matters, and the full Board also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues. | | | | | | | | 24
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Corporate Governance
| key developments |
| ● | | Executive CompensationCross-functional approach to addressing cybersecurity risk, with Global Technology & Operations, Risk, OversightLegal, and Corporate Audit functions presenting on key topics
|
| ● | | We monitor the risks associatedGlobal presence with 24/7 cyber threat operations centers
|
| ● | | All employees with access to our compensation programsCompany’s systems receive comprehensive annual training on responsible information security, data security, and individual executive compensation decisions on an ongoing basis. Each year, management undertakes a review of the Company’s various compensation programscybersecurity practices and how to assess the risks arising fromprotect data against cyber threats |
| ● | | Relevant cybersecurity controls related to financial reporting are considered by our compensation policies and practices. Management presents these risk assessments to the Compensation Committee. The risk assessments have included a review of the primary design features of the Company’s compensation plans, the process to determine compensation pools and awards for employees and an analysis of how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s compensation plans allow for discretionary negative adjustments to the ultimate outcomes, which serves to mitigate risk-taking. Moreover, senior management is subject to share ownership and retention policies, and historically a large percentage of senior management compensation has been paidexternal auditor in the formcontext of Prudential’s annual external integrated audit
|
Executive Compensation Risk Oversight We monitor the risks associated with our compensation programs and individual executive compensation decisions on an ongoing basis. Each year, management undertakes a review of the Company’s various compensation programs to assess the risks arising from our compensation policies and practices. Management presents these risk assessments to the Compensation Committee. The risk assessments have included a review of the primary design features of the Company’s compensation plans, the process to determine compensation pools and awards for employees and an analysis of how those features could directly or indirectly encourage or mitigate risk-taking. As part of the risk assessments, it has been noted that the Company’s annual incentive plan allows for discretionary negative adjustments to the ultimate outcomes, which serves to mitigate risk-taking. Moreover, senior management is subject to share ownership and retention policies, and historically, a large percentage of senior management compensation has been paid in the form of long-term equity awards. In addition, senior management compensation is paid over a multiple-year cycle, a compensation structure that is intended to align incentives with appropriate risk-taking. The Company’s general risk management controls also serve to preclude decision-makers from taking excessive risk to earn the incentives provided under our compensation plans. The Compensation Committee agreed with the conclusion that the identified risks were within our ability to effectively monitor and manage, and that our compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company. Environmental Sustainability Environmental Sustainability is overseen by the Board of Directors and its Corporate Governance and Business Ethics Committee. The Company’s sustainability strategy is led by Prudential’s senior leaders, including Prudential’s Vice Chairman, as the enterprise wide sustainability Executive Sponsor. The Corporate Governance and Business Ethics Committee discusses environmental sustainability, ESG and climate objectives and strategy at least quarterly. This regular engagement gives the Board insight into the Company’s climate change strategy and environmental stewardship initiatives. In addition, the full Board also receives periodic briefings and education on core concepts and trends that impact our businesses and society as well as regular discussions in the Investment and Risk Committees. The Company also has a Climate Change Steering Committee, led by Prudential’s Vice Chairman, that guides climate policy for the enterprise. In November 2021, we announced our commitment to achieve net-zero emissions across our primary domestic and international home office operations by 2050. To accelerate the Company’s longstanding commitment to mitigate the impacts of climate change, we also set an interim goal to become carbon neutral by 2040. These actions are aligned with the latest climate science of limiting global warming to 1.5 degrees Celsius or lower, as specified in the Paris Climate Accord. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 21 |
| | | | | | | Succession PlanningCorporate Governance
| | The Board is actively engaged and involved in talent management. The Board reviews the Company’s “people strategy” in support of its business strategy at least annually and frequently discusses talent issues at its meetings. This includes a detailed discussion of the Company’s global leadership bench and succession plans with a focus on key positions at the senior officer level. As a result of this approach, the Board was well positioned to execute on its succession plan in 2018, including the appointment of Mr. Lowrey to succeed Mr. Strangfeld as CEO and Chairman and Mr. Falzon to succeed Mr. Grier as Vice Chairman.
In addition, the committees of the Board regularly discuss the talent pipeline for specific critical roles. High-potential
|
Human Capital Management and Succession Planning The Board believes that human capital management and succession planning, including inclusion and diversity, are paramount to the Company’s success and central to our long-term strategy. Our Company’s Corporate Social Responsibility Oversight Committee, comprising Board members and Prudential senior executives, in addition to the full Board, evaluates the Company’s commitment to inclusion and diversity and actively suggests policy enhancements. The Board has primary responsibility for CEO succession planning. In addition, the Board reviews the Company’s “people strategy” in support of its business strategy at least annually and frequently discusses talent issues at its meetings. This includes a detailed discussion of the Company’s global leadership bench and succession plans with a focus on key positions at the senior officer levels. In support of our commitment to talent development, throughout the year, high-potential leaders are given exposure and visibility to Board members through formal presentations and at informal events. This engagement gives the Board insight into the Company’s talent pool and our leaders’ succession plans. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs. Preliminary 2021 Consolidated U.S. Employer Information Report (EEO-1) The summary table below displays Prudential’s U.S. workforce by EEO-1 job category as of December 31, 2021. The preliminary results in the table are supplied in advance of the official EEO-1 filing, which will be filed in April 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Male | | | | Female | | | | SECTION D - EMPLOYMENT DATA JOB CATEGORIES | | Hispanic or Latino | | | | | | Native
Hawaiian
or Other
Pacific Islander | | | | | | Two or
more races | | | | | | | | Native
Hawaiian
or Other
Pacific Islander | | | | | | Two or
more races | | | | | Male | | Female | | White | | Black | | Asian | | Indian | | White | | Black | | Asian | | Indian | | Total | | | | | | | | | | | | | | | | | | | Executive/Senior Level Officials and Managers | | | | 23 | | | | | 9 | | | | | 336 | | | | | 15 | | | | | 0 | | | | | 44 | | | | | 0 | | | | | 3 | | | | | | | | | | 162 | | | | | 13 | | | | | 0 | | | | | 23 | | | | | 0 | | | | | 4 | | | | | 632 | | | | | | | | | | | | | | | | | | | First/Mid-Level Officials and Managers | | | | 150 | | | | | 93 | | | | | 2,269 | | | | | 105 | | | | | 5 | | | | | 519 | | | | | 3 | | | | | 35 | | | | | | | | | | 1,345 | | | | | 117 | | | | | 5 | | | | | 352 | | | | | 6 | | | | | 25 | | | | | 5,029 | | | | | | | | | | | | | | | | | | | Professionals | | | | 241 | | | | | 313 | | | | | 2,084 | | | | | 220 | | | | | 9 | | | | | 459 | | | | | 1 | | | | | 56 | | | | | | | | | | 2,746 | | | | | 550 | | | | | 8 | | | | | 492 | | | | | 4 | | | | | 68 | | | | | 7,251 | | | | | | | | | | | | | | | | | | | Sales Workers | | | | 73 | | | | | 44 | | | | | 655 | | | | | 131 | | | | | 1 | | | | | 53 | | | | | 7 | | | | | 31 | | | | | | | | | | 302 | | | | | 119 | | | | | 1 | | | | | 46 | | | | | 5 | | | | | 32 | | | | | 1,500 | | | | | | | | | | | | | | | | | | | Administrative Support Workers | | | | 83 | | | | | 226 | | | | | 365 | | | | | 101 | | | | | 1 | | | | | 26 | | | | | 0 | | | | | 7 | | | | | | | | | | 965 | | | | | 368 | | | | | 2 | | | | | 64 | | | | | 5 | | | | | 52 | | | | | 2,265 | | | | | | | | | | | | | | | | | | | Service Workers | | | | 4 | | | | | 4 | | | | | 8 | | | | | 7 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | | | | | | 1 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 24 | | | | | | | | | | | | | | | | | | | TOTAL | | | | 574 | | | | | 689 | | | | | 5,717 | | | | | 579 | | | | | 16 | | | | | 1,101 | | | | | 11 | | | | | 132 | | | | | | | | | | 5,521 | | | | | 1,167 | | | | | 16 | | | | | 977 | | | | | 20 | | | | | 181 | | | | | 16,701 | |
Communication with Directors Shareholders and other interested parties may communicate with any of the independent directors, including Committee Chairs and the Lead Independent Director, by using the following address: Prudential Financial, Inc. Board of Directors c/o Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary 751 Broad Street Newark, NJ 07102 Email: independentdirectors@ prudential.com Feedback on Executive Compensation: You can also provide feedback on executive compensation at the following website: www.prudential.com/ executivecomp.
The Chief Governance Officer, Senior Vice President and Corporate Secretary of the Company reviews communications to the independent directors and forwards those communications to the independent directors as discussed below. Communications involving substantive accounting or auditing matters will be immediately forwarded to the Chair of the Audit Committee and the Company’s Corporate Chief Ethics Officer consistent with time frames established by the Audit Committee for the receipt of communications dealing with these matters. Communications that pertain tonon-financial matters will be forwarded promptly. Items that are unrelated to the duties and responsibilities of the Board will not be forwarded, such as: business solicitationsolicitations or advertisements; product-related inquiries; junk mail or mass mailings; resumes or otherjob-related inquiries; or spam and overly or overtly hostile, threatening, potentially illegal or similarly unsuitable communications. Feedback on Executive Compensation: You can also provide feedback on executive compensation at the following website: www.prudential.com/ executivecomp. | | | | 22 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 25
|
| | |
| | Corporate Governance | |
|
Committees of the Board of Directors The Board has established various committees to assist in discharging its duties, including: Audit, Compensation, Corporate Governance and Business Ethics, Executive, Finance, Investment and Risk. The primary responsibilities of each of the committees are set forth below, together with their current membership and the number of meetings held in 2018.2021. Committee charters can be found on our website at www.prudential.com/governance. Each member of the Audit, Compensation, and Corporate Governance and Business Ethics Committees has been determined by the Board to be independent for purposes of the NYSE Corporate Governance listing standards. In addition, directors who serve on the Audit Committee and the Compensation Committee meet additional, heightened independence and qualification criteria applicable to directors serving on these committees under the NYSE listing standards. | | | | | | | Committees | | Current Members in 2018 | | Description | | | | | | | Audit Committee Meetings in 2018:2021: 10 | | Martina-Hund Mejean (Chair) Wendy E. Jones Douglas A. Scovanner (Chair) Martina-Hund Mejean
George Paz | | The Audit Committee provides oversight of the Company’s accounting and financial reporting and disclosure processes, the adequacy of the systems of disclosure and internal control established by management, and the audit of the Company’s financial statements. The Audit Committee oversees insurance risk and operational risks, risks related to financial controls, and legal, regulatory, cybersecurity and compliance matters, and oversees the overall risk management governance structure and risk management function. | | Among other things, the Audit Committee: (1) appoints the independent auditor and evaluates its qualifications, independence and performance; (2) reviews the audit plans for and results of the independent audit and internal audits; and (3) reviews reports related to processes established by management to provide compliance with legal and regulatory requirements. The Board has determined that all of our Audit Committee members are financially literate and are audit committee financial experts as defined by the SEC. | | | | Compensation Committee Meetings in 2018: 72021: 6 | | Karl J. KrapekMichael A. Todman (Chair)
Thomas J. Baltimore Michael A. TodmanKarl J. Krapek
| | The Compensation Committee oversees the Company’s compensation and benefits policies and programs. For more information on the responsibilities and activities of the Compensation Committee, including the Committee’s processes for determining executive compensation, see the CD&A. | | | | Corporate Governance Governance & Business Ethics Committee
Meetings in 2018:2021: 7 | | Gilbert F. Casellas (Chair) Peter R. Lighte Sandra Pianalto | | The Corporate Governance and Business Ethics Committee oversees the Board’s corporate governance procedures and practices, including the recommendations of individuals for the Board, making recommendations to the Board regarding director compensation and overseeing the Company’s ethics and conflict of interestconflict-of-interest policies, its political contributions and lobbying expenses policy, and its strategy and reputation regarding ESG issues, including environmental stewardship, sustainability, climate, human capital management issues, including inclusion and diversity, and corporate social responsibility throughout the Company’s global businesses. | | | | Executive Committee(1) Meetings in 2018:2021: 0 | | Christine A. Poon (Chair) Thomas J. Baltimore (Chair) Gilbert F. Casellas Karl J. KrapekMartina Hund-Mejean
Charles F. Lowrey Christine A. Poon
Douglas A. Scovanner John R. StrangfeldMichael A. Todman
| | The Executive Committee is authorized to exercise the corporate powers of the Company between meetings of the Board, except for those powers reserved to the Board by ourBy-laws or otherwise. | | | | Finance Committee Meetings in 2018: 52021: 6 | | Christine A. Poon (Chair) George Paz Sandra Pianalto Michael A. Todman | | | | The Finance Committee oversees, takes actions, and approves policies with respect to capital, liquidity, borrowing levels, reserves, benefit plan funding and major capital expenditures. | | | | Investment
Committee
Meetings in 2018:2021: 4 | | Thomas J. Baltimore (Chair) Peter R. Lighte Christine A. Poon | | The Investment Committee oversees and takes actions with respect to the acquisition, management and disposition of invested assets; reviews the investment performance of the pension plan and funded employee benefit plans; and reviews investment risks and exposures, as well as the investment performance of products and accounts managed on behalf of third parties. | | | | Risk Committee Meetings in 2018:2021: 5 | | Douglas A. Scovanner (Chair) Thomas J. Baltimore (Chair) Gilbert F. Casellas Mark B. Grier
Karl J. KrapekMartina Hund-Mejean
Christine A. Poon DouglasMichael A. ScovannerTodman
| | The Risk Committee oversees the governance of significant risks throughout the enterprise by coordinating the risk oversight functions of each Board committee and seeing that matters are appropriately elevated to the Board. |
(1) | Charles Lowrey was elected to the Executive Committee on January 25, 2019
|
In addition to the above Committee meetings, the Board held eighteleven meetings in 2018.2021. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 23 |
| | | | | | | | 26
| | |
Corporate Governance | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement |
| | |
| | Corporate Governance
|
|
Certain Relationships and Related Party Transactions The Company has adopted a written Related Party Transaction Approval Policy that applies: to any transaction or series of transactions in which the Company or a subsidiary is a participant;
| ● | | to any transaction or series of transactions in which the Company or a subsidiary is a participant; |
when the amount involved exceeds $120,000; and
| ● | | when the amount involved exceeds $120,000; and |
when a related party (a director or executive officer of the Company, any nominee for director, any shareholder owning an excess of 5% of the total equity of the Company and any immediate family member of any such person) has a direct or indirect material interest (other than solely as a result of being a director or trustee or in any similar position or a less than 10% beneficial owner of another entity).
| ● | | when a related party (a director or executive officer of the Company, any nominee for director, any shareholder owning an excess of 5% of the total equity of the Company and any immediate family member of any such person) has a direct or indirect material interest (other than solely as a result of being a director or trustee or in any similar position or a less-than-10% beneficial owner of another entity). |
The policy is administered by the Corporate Governance and Business Ethics Committee. The Committee, which will consider relevant facts and circumstances in determining whether or not to approve or ratify such a transaction, and will approve or ratify only those transactions that are, in the Committee’sits judgment, appropriate or desirable under the circumstances. In the ordinary course of business, we may from time to time engage in transactions with other corporations or financial institutions whose officers or directors are also directors of Prudential Financial. In all cases, these transactions are conducted on anarm’s-length basis. In addition, from time to time executive officers and directors of Prudential Financial may engage in transactions in the ordinary course of business involving services we offer, such as insurance and investment services, on terms similar to those extended to employees of Prudential Financial and its subsidiaries and affiliates generally. The Corporate Governance and Business Ethics Committee has determined that certain types of transactions do not create or involve a direct or indirect material interest, including (i) any sales of financial services or products to a related party in the ordinary course of business on terms and conditions generally available in the marketplace (or at ordinary employee discounts, if applicable) and in accordance with applicable law and (ii) all business relationships between the Company and a 5% shareholder or a business affiliated with a director, director nominee or immediate family member of a director or director nominee made in the ordinary course of business on terms and conditions generally available in the marketplace and in accordance with applicable law. Pursuant to our policy, the Corporate Governance and Business Ethics Committee determined that there were threetwo transactions that qualifiedqualify as related party transactions since the beginning of 2018. The2021: Brett Sleyster, the son of Scott Sleyster, our Executive Vice President and Head of International Businesses, is employed as an Associate for PruVen Capital Partners GP, LLC (“PruVen Capital’’) and performs services for PruVen Capital and other affiliated and associated entities. Prudential provides 99% of PruVen Capital’s investable capital. Over a contract term of sixteen months, Brett Sleyster’s total expected compensation will be less than $190,000 and is similar to the compensation of other employees holding equivalent positions. Michael F. Falzon, the brother of Robert M. Falzon, our Vice Chairman, Michael F. Falzon, is ouremployed as a Vice President, Infrastructure Systems Development.Information Systems. In 2018,2021, the total compensation paid to Michael Falzon, including salary, bonus and the grant date value of long-term incentive awards, was approximately $600,000. Theson-in-law of Barbara Koster, our Senior Vice President and Chief Information Officer, Joshua D. Howard,less than $540,000. Michael Falzon’s compensation is an associate in Quantitative Management Associates, a subsidiary of the Company. In 2018, the total compensation paid to Mr. Howard, including salary and bonus, was approximately $165,000. The daughter of Timothy L. Schmidt, our Senior Vice President and Chief Investment Officer, Carley J. Berger, is an associate in the actuarial department. In 2018, the total compensation paid to Ms. Berger, including salary and bonus, was approximately $130,000. In all three cases, the individuals’ compensation was similar to the compensation of other employees holding equivalent positions. | | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 27
|
| | |
| | Corporate Governance
| |
Policy on Shareholder Rights Plan We do not have a shareholder rights plan. The Board will obtain shareholder approval prior to adopting a future shareholder rights plan unless the Board, in the exercise of its fiduciary duties, determines that under the circumstances then existing, it would be in the best interests of the Company and our shareholders to adopt a rights plan without prior shareholder approval. If a rights plan is adopted by the Board without prior shareholder approval, the plan must provide that it will expire within one year of adoption unless ratified by shareholders. Political Contributions and Lobbying Expenditure Oversight and Disclosure The Corporate Governance and Business Ethics Committee reviews and approves an annual report on political activities, contributions and lobbying expenses. It monitors and evaluates the Company’s ongoing political strategy as it relates to overall public policy objectives for the next year and provides guidance to the Board. We provide on our website a description of our oversight process for political contributions and a summary of Political Action Committee, or PAC, contributions. We also disclose semiannual information on dues, assessments and contributions of $10,000 or more to trade associations andtax-exempt advocacy groups and a summary of Company policies and procedures for political activity. This disclosure is available at www.prudential.com/governance under the heading “Political Activity & Contributions.” | The 2021 CPA-Zicklin Index of Corporate Political Disclosure and Accountability ranked Prudential as a Trendsetter company, the highest distinction. This is the seventh consecutive year that Prudential has been recognized for its disclosure, accountability, and political spending oversight. |
| | | | 24 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Corporate Governance | |
|
The 2018
CPA-Zicklin Index of Corporate Political Disclosure and Accountability ranked Prudential as a Trendsetter company, the highest distinction. This is the fourth consecutive year that Prudential has been recognized for its disclosure, accountability, and political spending oversight.
Environmental, Sustainability and Corporate Social Responsibility The Corporate Governance and Business Ethics Committee has oversight of environmental and climate issues and policies. In addition, three of our independent Board members sit on the Board’sour Corporate Social Responsibility Oversight Committee. These directors informThis Committee, in addition to inclusion and diversity, oversees the Company’s social responsibility efforts in impact investing, for financial and social returns, strategic philanthropy, employee engagement and corporate community involvement. 2018 investmentsOur 2021 activities in these areas include: 
$273 million in impact investments to non-profits and businesses that seek to create both a financial and social return. $52.5 million in grants to nonprofit organizations through The Prudential Foundation. $24.4 million in corporate contributions to non-profit organizations, including more than $5 million in projects serving U.S. veterans. More than 92,000 volunteer hours by U.S. Prudential employees impacting local communities across the country.
| | | | | | | | 28
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
25 |
Item 2 Item 2–Ratification of the Appointment of the Appointment of the
Independent Registered Public Accounting Firm |
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP (“PricewaterhouseCoopers” or “PwC”) as the Company’s independent registered public accounting firm (“independent auditor”) for 2019.2022. We are not required to have the shareholders ratify the selection of PricewaterhouseCoopers as our independent auditor. We nonetheless are doing so because we believe it is a matter of good corporate practice. If the shareholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers but may nevertheless retain it as the Company’s independent auditor. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interest of Prudential Financial and its shareholders. Representatives of PricewaterhouseCoopers will be present at the Annual Meeting and will have the opportunity to make a statement and be available to respond to appropriate questions by shareholders. FEES PAID TO PRICEWATERHOUSECOOPERSFees Paid to PricewaterhouseCoopers
The following is a summary and description of fees for services provided by PricewaterhouseCoopers in 20182021 and 2017.2020. Worldwide Fees (in millions) | | | | | | | | | | | | | Service | | 2018 | | | 2017 | | | | | Audit(1) | | $ | 52 | | | $ | 52 | | | | | Audit-Related(2) | | $ | 6 | | | $ | 5 | | | | | Tax(3) | | $ | 3 | | | $ | 3 | | | | | All Other(4) | | | — | | | $ | 1 | | | | | Total | | $ | 61 | | | $ | 61 | |
| | | | | | | | Service | | 2021 | | | 2020 | Audit (1) | | $ | 54 | | | $ 55 | Audit-Related (2) | | $ | 10 | | | $ 8 | Tax (3) | | $ | 2 | | | $ 2 | All Other | | $ | 0 | | | $ 0 | Total | | $ | 66 | | | $ 65 |
| (1) | The aggregate fees for professional services rendered for the integrated audit of the consolidated financial statements of Prudential Financial and, as required, audits of various domestic and international subsidiaries, the issuance of comfort letters, agreed-upon proceduresattest services required by regulation, consents and assistance with review of documents filed with the SEC. |
| (2) | The aggregate fees for assurance and related services, including internal control and financial compliance reports, agreed-upon proceduresattest services not required by regulation, and accounting consultation on new accounting standards, acquisitions and potential financial reporting requirements. |
| (3) | The aggregate fees for services rendered for tax return preparation, tax advice related to mergers and acquisitions and other international, federal and state projects and requests for rulings. In each of 2017 and 2018,2021, tax compliance and preparation fees totaled approximately $2$1.3 million and tax advisory fees totaled approximately $1$0.4 million. In 2020, tax compliance and preparation fees totaled approximately $1.5 million and tax advisory fees totaled approximately $0.5 million. |
(4) | The aggregate fees for all other services rendered, including for 2017 fees for business advisory services.
|
PricewaterhouseCoopers also provides services to domestic and international mutual funds and limited partnershipsinvestment vehicles, not consolidated by Prudential Financial, but which are managed by Prudential Financial. PricewaterhouseCoopers identified fees related to audit, audit-related, tax and all other services paid by these entities of $15$27 million in 20182021 and $14$25 million in 2017.2020. The Audit Committee has advised the Board of Directors that in its opinion thenon-audit services rendered by PricewaterhouseCoopers during the most recent fiscal year are compatible with maintaining its independence. PwCPricewaterhouseCoopers has been the Company’s independent auditor since it became a public company in 2001 and prior to that, from 1996.
| | | | 26 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 29
|
| | |
| | Item 2—2 Ratification of the Appointment of the Independent Registered Public Accounting Firm | |
|
In determining whether to reappoint the independent auditor, the Audit Committee annually considers several factors, including:
the length of time the firm has been engaged;
the firm’s independence and objectivity;
PwC’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the lead audit partner;
historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee, and the results of a management survey of PwC’s overall performance;
data related to audit quality and performance, including recent PCAOB inspection reports on the firm; and
the appropriateness of PwC’s fees, both on an absolute basis and as compared with its peers.
| | | | In determining whether to reappoint PwC as Prudential Financial’s independent auditor, the Audit Committee annually considers several factors, including: | ● the length of time the firm has been engaged; ● the firm’s independence and objectivity; ● the firm’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the Lead Audit Partner; ● the extent and quality of the firm’s communications with the Audit Committee; | | ● the results of a management survey of PwC’s overall performance; ● other data related to audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) inspection reports; and ● the appropriateness of the firm’s fees, both on an absolute basis and as compared with the Company’s peers. |
In accordance with SECSecurities and Exchange Commission (“SEC”) rules, independent audit partners are subject to rotation requirements limiting their number of consecutive years of service to our Company to no more than five. TheAs a result, in 2021, Prudential’s Audit Committee oversaw a rigorous process forof selecting the Company’sa new Lead Audit Partner with PwC. PwC provided a list of qualified potential lead audit partner includes Companypartners and the candidates were assessed based on their related experience and industry expertise. Interviews were conducted by senior management and the Audit Committee Chair vettingmet with and interviewed the independent auditor’s candidates.final candidate. The fullnew Lead Audit Partner selected was approved by the Audit Committee is consulted in connection with the final selectionand will assume oversight of the leadexternal audit partner.of Prudential Financial effective for the 2022 audit. AUDIT COMMITTEEAudit Committee PRE-APPROVALPre-Approval POLICIES AND PROCEDURESPolicies and Procedures
The Audit Committee has established a policy requiring itspre-approval of all audit and permissiblenon-audit services provided by the independent auditor. The policy identifies the guiding principles that must be considered by the Audit Committee in approving services so that the independent auditor’s independence is not impaired; describes the Audit, Audit-Related, Tax and All Other services that may be provided and thenon-audit services that may not be performed; and sets forth thepre-approval requirements for all permitted services. The policy provides for the generalpre-approval of specific types of Audit, Audit-Related and Tax services and a limited fee estimate range for such services on an annual basis. The policy requires specificpre-approval of all other permitted services. The independent auditor is required to report periodically to the Audit Committee regarding the extent of services provided in accordance with theirpre-approval and the fees for the services performed to date. The Audit Committee’s policy delegates to its Chair the authority to address requests forpre-approval of services with fees up to a maximum of $250,000 between Audit Committee meetings if the Company’s Chief Auditor deems it reasonably necessary to begin the services before the next scheduled meeting of the Audit Committee, and the Chair must report anypre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee may not delegate to management the Audit Committee’s responsibility topre-approve permitted services of the independent auditor. All Audit, Audit-Related, Tax and All Other services described above were approved by the Audit Committee before services were rendered. | The Board of Directors recommends that shareholders vote “FOR” ratification of the appointment of PricewaterhouseCoopers as the Company’s Independent Auditor for 2022. |
The Board of Directors recommends that shareholders vote“FOR” ratification of the appointment of PricewaterhouseCoopers as the Company’s Independent Auditor for 2019.
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 27 |
ENHANCING COMMUNICATION THROUGH AUDIT COMMITTEE REPORTING
The Center for Audit Quality and a group of nationally recognized U.S. corporate governance and policy organizations jointly released a paper entitled “Enhancing the Audit Committee Report: A Call to Action,” which encouraged audit committees of public companies to proactively consider strengthening their public disclosures to more effectively convey the critical work of audit committees to investors and stakeholders. Prudential was featured as an example of a company exhibiting voluntary practices strengthening audit committee disclosures.
| | | | | | | | 30
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement |
| | |
| | Item 2—2 Ratification of the Appointment of the Independent Registered Public Accounting Firm | |
|
REPORT OF THE AUDIT COMMITTEEReport of The Audit Committee
ThreeFour independent directors comprise the Audit Committee. The Committee operates under a written charter adopted by the Board.
In addition, the Board has determined that all of our Audit Committee members, Messrs. Paz and Scovanner and Ms.Mses. Hund-Mejean and Jones, satisfy the financial expertise requirements of the NYSE and havethat each of Messrs. Paz and Scovanner and Mses. Hund-Mejean and Jones has the requisite experience to be designated an audit committee financial expert as that term is defined by rules of the SEC. Management is responsible for the preparation, presentation and integrity of the financial statements of Prudential Financial and for maintaining appropriate accounting and financial reporting policies and practices, andas well as internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Prudential Financial’s independent auditor, PricewaterhouseCoopers, is responsible for auditing the consolidated financial statements of Prudential Financial and expressing an opinion as to their conformity with generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting in accordance with the requirements of the Public Company Accounting Oversight Board (“PCAOB”).PCAOB. In performing its oversight function, the Audit Committee reviewed and discussed the audited consolidated financial statements of Prudential Financial as of and for the year ended December 31, 20182021 and Management’s Annual Report on Internal Control Over Financial Reporting with management and Prudential Financial’s independent auditor. The Audit Committee also discussed with Prudential Financial’s independent auditor the matters required to be discussed by the independent auditor with the Audit Committee under the rules adopted by the PCAOB.PCAOB and the SEC, including the independent auditor’s communication of its Audit Report to the Audit Committee. This report includes critical audit matters, which are audit matters that were communicated or required to be communicated to the Audit Committee relating to accounts or disclosures that are material to Prudential Financial’s financial statements and that involved especially challenging, subjective or complex auditor judgment. The Audit Committee received from the independent auditor the written disclosures and the letters required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence and has discussed with the independent auditor its independence. The Audit Committee has discussed with, and received regular status reports from, Prudential Financial’s Chief Auditor and independent auditor on the overall scope and plans for their audits of Prudential Financial, including their scope and plans for evaluating the effectiveness of internal control over financial reporting. The Audit Committee meets with the Chief Auditor and the independent auditor, with and without management present, to discuss the results of their respective audits, in addition to private meetings with the Chief Financial Officer, Chief Risk Officer, General Counsel, Chief Actuary and Chief Compliance Officer. In determining whether to reappoint PricewaterhouseCoopers as Prudential Financial’s independent auditor, the Audit Committee took into consideration a number of factors, including the length of time the firm has been engaged, the firm’s independence and objectivity, PwC’s capability and expertise in handling the breadth and complexity of Prudential’s global operations, including the expertise and capability of the Lead Audit Partner, historical and recent performance, including the extent and quality of PwC’s communications with the Audit Committee, the results of a management survey of PwC’s overall performance, data related to audit quality and performance, including recent PCAOB inspection reports on the firm, and the appropriateness of PwC’s fees, both on an absolute basis and as compared with itsPrudential Financial’s peers. Based on the reports and discussions described in this report and subject to the limitations on the roles and responsibilities of the Audit Committee referred to above and in its Charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of Prudential Financial and Management’s Annual Report on Internal Control Over Financial Reporting be included in the Annual Report on Form10-K for the fiscal year ended December 31, 20182021 for filing with the SEC. THE AUDIT COMMITTEEThe Audit Committee
Martina Hund-Mejean (Chair) Wendy E. Jones George Paz Douglas A. Scovanner (Chair) Martina Hund-Mejean
George Paz
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 31
|
| | |
28 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | |
| | Item 3 Advisory Vote to Approve Named Executive Officer Compensation |
Item 3–Advisory Vote to Approve
Named Executive Officer Compensation
The Board is committed to excellence in governance and recognizes our shareholders’ interest in our executive compensation program. As a part of that commitment, and in accordance with SEC rules, our shareholders are being asked to approve anon-binding nonbinding advisory resolution on the compensation of our named executive officers, as reported in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to endorse or not endorse our 20182021 executive compensation program and policies for our named executive officers through the following resolution: RESOLVED, that the shareholders of Prudential approve, on an advisory basis, the compensation of the Company’s named executive officers set forth in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in this Proxy Statement. This vote is not intended to address any specific item of compensation, but rather our overall compensation policies and practices relating to our named executive officers. Accordingly, your vote will not directly affect or otherwise limit any existing compensation or award arrangement of any of our named executive officers. Because your vote is advisory, it will not be binding upon the Board. The Board and the Compensation Committee will, however, as it hasthey have done in prior years, take into account the outcome of the “Say on Pay” vote when considering future compensation arrangements. At the 2017 Annual Meeting, shareholders approved, on an advisory basis, holding “Say on Pay” votes annually, and the Board has adopted a policy providing for annual “Say on Pay” votes. Accordingly, the next “Say on Pay” vote will occur in 2020.2023. The Board of Directors recommends that shareholders vote“FOR” the advisory vote to approve our named executive officer compensation.
| | | | The Board of Directors recommends that shareholders vote “FOR” the advisory vote to approve our named executive officer compensation. |
| | | 32
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
29 |
Item 4–Shareholder Proposal RegardingItem 4 Shareholder Proposal to Adopt the Right to Act by Written Consent
|
In accordance with SEC rules, we have set forth below a shareholder proposal, along with the supporting statement of the shareholder proponent. The Company is not responsible for any inaccuracies it may contain. The shareholder proposal is required to be voted on at our Annual Meeting only if properly presented. As explained below, our Board unanimously recommends that you vote“AGAINST” the shareholder proposal. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California, 90278, beneficial owner of 5080 shares of Common Stock, is the proponent of the following shareholder proposal. The proponent has advised us that a representative will present the proposal and related supporting statement at the Annual Meeting. Proposal 4—Shareholder Right to Act by Written Consent Resolved, Shareholders request that our board of directors undertake suchtake the necessary steps as may be necessary to permit written consent by the shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to be consistent with applicable law and consistent with giving shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any topic for written consent consistent with applicable law.
Hundreds of major companies enable shareholder action by written consent. This proposal topic won majority shareholder support at 13 large companies in a single year. This included 67%-support at both Allstate and Sprint. This proposal topic also won 63%-support at Cigna Corp. in 2019. This proposal topic would have received higher votes than 63% to 67% at these companies if more shareholders had access to independent proxy voting advice. This proposal topic also won 85% support at the 2021 Conagra annual meeting without any special effort by the proponent. Taking action by written consent in place of a meeting is also a means shareholders can use to raise important matters outside the normal annual meeting cycle.cycle like the election of a new director. For instance the replacement of the director who received the most against votes. Mr. Thomas Baltimore received 67 million against votes in 2021 which equaled a negative percentage of 29%. This proposal topic won majority shareholder support at 13 major companieswas up to 40-times the negative votes of other Prudential directors. Mr. Charles Lowrey, Prudential Chairman and CEO, received the third highest negative votes of any Prudential director in a single year. This included 67%-support at both Allstate and Sprint. Hundreds of major companies enable shareholder action by written consent. This proposal topic would2021. If shareholders have received a vote still higher than 67% at Allstate and Sprint if all shareholders at Allstate and Sprint had access to independent proxy voting advice. More than 100 Fortune 500 companies provide for shareholders to call special meetings andthe right to act by written consent. Written consent, Mr. Baltimore and Prudential may be inspired to correct the factors behind Mr. Baltimore’s against votes and other directors might avoid getting in the situation Mr. Baltimore is a means to elect a director who could focus on the wisdom of stock repurchases:
Approved share repurchase plan of up to $1.5 Billion of common stock starting January 1, 2018
Approved share repurchase increase of $500 Million of common stock August 2016
There is a concern about share repurchases like the above. Stock buybacks can be a sign of short-termism for executives—sometimes boosting share price without boosting the underlying value, profitability, or ingenuity of the company. A dollar spent repurchasing a share is a dollar that cannot be spent on new equipment, an acquisition, entry into a new market or anything else.
Written consent is a means to elect a director who could focus on avoiding reoccurrences of events like these:
Putative Class Action Lawsuit over alleged improper charges on universal life policies holders to “cure defaults and/or reinstate lapses,” Pruco Life Insurance Company
May 2018
Regulator launched investigation over alleged role in Wells Fargo’s fraudulent accounts
December 2017
Criticism over alleged role in offshore tax havens
April 2017
The expectation is that, once this proposal is adopted, shareholders would not need to make use of this right of written consent because its mere existence will act as a guardrail to help ensue that our company is well supervised by the Board of Directors and management. Our Directors and management will want to avoid shareholder action by written consent and will thus be more alert in avoiding poor performance.in.
Please vote yes:Shareholder Right to Act by Written Consent—Proposal 4 
| | | | 30 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Item 4 Shareholder Proposal to Adopt the Right to Act by Written Consent | |
|
| Board of Directors’ Statement in Opposition to the Proposal Your Board recommends a vote against this proposal because it believes that the written consent process, as required by the proposal, is less transparent and less democratic than a shareholder meeting and deprives shareholders of a forum for discussion or the opportunity for them to make inquiries about proposed actions. Matters that are sufficiently important to require shareholder approval should be communicated in advance so they can be considered and voted upon by all shareholders. This proposal would allow a group of shareholders to take action by written consent without prior communication to all shareholders of the proposed actions or the reasons for the actions. We believe this proposal disenfranchises shareholders who would not have the opportunity to participate in the proposed process. Permitting shareholder action by written consent has the potential to create confusion, and the Board does not believe it is appropriate for a widely held public company. Our Board believes that every shareholder should have the opportunity to consider and vote upon shareholder actions. Our shareholders have the right to call a special meeting at a 10% threshold. This right, as well as our established shareholder communication and engagement mechanisms, provides shareholders the opportunity to raise important matters outside the annual meeting process. The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company has a strong governance structure in place, and the Board’s philosophy and policies are responsive to shareholders. In addition to the unrestricted right for shareholders to call special meetings at a 10% threshold, the Company has many other governance provisions in place that empower shareholders, including: ● a majority voting standard in uncontested director elections; ● no Shareholder Rights Plan; ● an annually elected Board; ● no supermajority voting provisions; ● independent board leadership, including a strong Lead Independent Director and strong committee chairs; and ● proxy access. Requiring that all shareholder business be acted upon at a meeting helps to confirm complete information is presented to shareholders to obtain their approval and is more democratic. The Board believes that the risk of abuse associated with the right to act by written consent, including bypassing procedural protections that offer transparency and advance notice, both of which are afforded with a shareholder meeting, make this proposal not in the best interest of all shareholders. In summary, the Board believes the adoption of this proposal is unnecessary because of our commitment to good corporate governance and the right of shareholders to call a special meeting at a 10% threshold. Furthermore, the Board believes that the written consent proposal would circumvent the protections, procedural safeguards and advantages provided to all shareholders by shareholder meetings. |
| Therefore, Your Board Recommends That You Vote “AGAINST” This Proposal. |
| | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | |
| | 33
31 |
| | |
| | Item 4–Shareholder Proposal Regarding
Right to Act by Written Consent
| | | Voting Securities and Principal Holders |
Board of Directors’ Statement in Opposition to the Proposal
Your Board recommends a vote against this proposal because it believes that the written consent process, as required by the proposal, is less transparent and less democratic than a shareholder meeting and deprives shareholders of a forum for discussion or the opportunity for them to make inquiries about proposed actions. Matters that are sufficiently important to require shareholder approval should be communicated in advance so they can be considered and voted upon by all shareholders. This proposal would allow a group of shareholders to take action by written consent without prior communication to all shareholders of the proposed actions or the reasons for the actions. We believe this proposal disenfranchises shareholders who would not have the opportunity to participate in the proposed process. Permitting shareholder action by written consent has the potential to create confusion, and the Board does not believe it is appropriate for a widely held public company.
Our Board believes that every shareholder should have the opportunity to consider and vote upon shareholder actions. Our shareholders have the right to call a special meeting at a 10% threshold. This right, as well as our established shareholder communication and engagement mechanisms, provides shareholders the opportunity to raise important matters outside the annual meeting process.
The Company is committed to good corporate governance, which helps us compete more effectively, sustain our success and build long-term shareholder value. The Company has a strong governance structure in place, and the Board’s philosophy and policies are responsive to shareholders. In addition to the unrestricted right for shareholders to call special meetings at a 10% threshold, the Company has many other governance provisions in place that empower shareholders, including:
a majority voting standard in uncontested director elections;
no Shareholder Rights Plan;
an annually elected Board;
no supermajority voting provisions;
independent board leadership, including a strong Lead Independent Director and strong committee chairs; and
Requiring that all shareholder business be acted upon at a meeting helps to confirm complete information is presented to shareholders to obtain their approval and is more democratic. The Board believes that the risk of abuse associated with the right to act by written consent, including bypassing procedural protections that offer transparency and advance notice, both of which are afforded with a shareholder meeting, make this proposal not in the best interest of all shareholders.
In summary, the Board believes the adoption of this proposal is unnecessary because of our commitment to good corporate governance and the right of shareholders to call a special meeting at a 10% threshold.Furthermore, the Board believes that the written consent proposal would circumvent the protections, procedural safeguards and advantages provided to all shareholders by shareholder meetings.
THEREFORE, YOUR BOARD RECOMMENDS THAT YOU VOTE“AGAINST” THIS PROPOSAL.
| | | | | | | | 34
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
Voting Securities and Principal Holders
Beneficial Ownership The following table shows allthose entities that are the beneficial owners of more than 5% of the Company’s Common Stock: | | | | | | | | | | | | Name and Address of Beneficial Owner | | Amount and Nature | | | Percent of Class | | The Vanguard Group 100 Vanguard Boulevard, Malvern, PA 19355 | | | 32,028,683 | (1) | | | 7.75% | | BlackRock, Inc. 55 East 52nd Street, New York, NY 10055 | | | 27,744,199 | (2) | | | 6.70% | | Wellington Management Group LLP 280 Congress Street, Boston, MA 02210 | | | 20,906,480 | (3) | | | 5.06% | |
| | | | | | | | | Name and Address of Beneficial Owner | | Amount and Nature | | | Percent of Class | | | | | The Vanguard Group 100 Vanguard Boulevard
Malvern, PA 19355 | | | 30,542,505(1) | | | | 8.08% | | | | | BlackRock, Inc. 55 East 52nd Street
New York, NY 10055 | | | 31,718,312(2) | | | | 8.4% | |
| (1) | Based on information as of December 31, 20182021 contained in a Schedule 13G/A filed with the SEC on February 12, 201910, 2022 by The Vanguard Group. |
| The Schedule 13G/A indicates that The Vanguard Group has sole investmentdispositive power with respect to 31,457,13628,977,425 of the shares, shared investmentdispositive power with respect to 571,5471,565,080 of the shares, sole voting power with respect to 481,973none of the shares, and shared voting power with respect to 98,092607,485 of the shares. |
| (2) | Based on information as of December 31, 20182021 contained in a Schedule 13G/A filed with the SEC on February 11, 20193, 2022 by BlackRock, Inc. The Schedule 13G/A indicates that BlackRock, Inc. has sole investmentdispositive power with respect to all of the shares, sole voting power with respect to 22,872,23627,292,112 of the shares, and shared investmentdispositive and voting power with respect to none of the shares. |
(3) | Based on information as of December 31, 2018 contained in a Schedule 13G filed with the SEC on February 12, 2019 by Wellington Management Group LLP. Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP (the “Wellington Group”). The Schedule 13G indicates that the Wellington Group has shared investment power with respect to all of the shares, shared voting power with respect to 4,855,934 of the shares, and sole investment and voting power with respect to none of the shares.
|
To our knowledge, except as noted above, no person or entity is the beneficial owner of more than 5% of our Common Stock. The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 8, 2019,11, 2022, by: each Director, Director Nominee and Named Executive Officer, and
all current Directors and Executive officers of Prudential Financial as a group.
| | | | | | | | | | | | | | | | | | | | | | | | | | | Name of Beneficial Owner | | Common Stock | | | Number of shares
Subject to
Exercisable Options | | | Total Number of Shares
Beneficially Owned(1) | | | Director Deferred Stock
Units / Additional
Underlying Units9(2),(3),(4) | | | Total Shares
Beneficially Owned
Plus Underlying
Units | | | | | | | | Thomas J. Baltimore, Jr. | | | 250 | | | | | | | | 250 | | | | 47,635 | | | | 47,885 | | Gilbert F. Casellas | | | 500 | | | | | | | | 500 | | | | 31,152 | | | | 31,652 | | Martina Hund-Mejean | | | 128 | | | | | | | | 128 | | | | 19,577 | | | | 19,705 | | Karl J. Krapek | | | 1,000 | | | | | | | | 1,000 | | | | 43,354 | | | | 44,354 | | Peter R. Lighte | | | 80 | | | | | | | | 80 | | | | 7,475 | | | | 7,555 | | George Paz | | | 500 | | | | | | | | 500 | | | | 7,472 | | | | 7,972 | | Sandra Pianalto | | | 451 | | | | | | | | 451 | | | | 7,033 | | | | 7,484 | | Christine A. Poon | | | 11,583 | | | | | | | | 11,583 | | | | 13,726 | | | | 25,309 | | Douglas A. Scovanner | | | 12,000 | | | | | | | | 12,000 | | | | 15,349 | | | | 27,349 | | Michael A.Todman | | | 450 | | | | | | | | 450 | | | | 7,475 | | | | 7,925 | | John R. Strangfeld | | | 307,094 | 5 | | | 827,205 | | | | 1,134,299 | | | | 243,908 | | | | 1,378,207 | | Mark B. Grier | | | 405,481 | | | | 482,449 | | | | 887,930 | | | | 202,705 | | | | 1,090,635 | | Charles F. Lowrey | | | 56,982 | | | | 159,230 | | | | 216,212 | | | | 171,695 | | | | 387,907 | | Robert Falzon | | | 64,809 | | | | 106,490 | | | | 171,299 | | | | 135,787 | | | | 307,086 | | Stephen Pelletier | | | 8,596 | | | | 32,378 | | | | 40,974 | | | | 200,841 | | | | 241,815 | | Scott Sleyster | | | 49,885 | | | | 148,552 | | | | 198,437 | | | | 153,925 | | | | 352,362 | | Kenneth Tanji | | | 16,824 | | | | 64,573 | | | | 81,397 | | | | 40,744 | | | | 122,141 | | All directors and executive officers as a group (23 persons) | | | 1,040,781 | | | | 2,050,204 | | | | 3,090,985 | | | | 1,510,816 | | | | 4,601,801 | |
| ● | | each Director and Named Executive Officer; and |
(1)● | | all current Directors and Executive Officers of Prudential Financial as a group. |
| | | | | | | | | | | | | | | | | | | | | | Name of Beneficial Owner | | Common
Stock | | | Number of Shares
Subject to Exercisable
Options | | | Total Number of Shares
Beneficially Owned1 | | | Director Deferred Stock
Units / Additional
Underlying Units2,3,4,5 | | | Total Shares Beneficially
Owned Plus Underlying
Units | | | | | | | | Thomas J. Baltimore, Jr. | | | 500 | | | | | | | | 500 | | | | 69,578 | | | | 70,078 | | | | | | | | Gilbert F. Casellas | | | 500 | | | | | | | | 500 | | | | 36,155 | | | | 36,655 | | | | | | | | Martina Hund-Mejean | | | 128 | | | | | | | | 128 | | | | 29,181 | | | | 29,309 | | | | | | | | Wendy E. Jones | | | 1,000 | | | | | | | | 1,000 | | | | 4,284 | | | | 5,284 | | | | | | | | Karl J. Krapek | | | 38,455 | | | | | | | | 38,455 | | | | 7,309 | | | | 45,764 | | | | | | | | Peter R. Lighte | | | 80 | | | | | | | | 80 | | | | 15,028 | | | | 15,108 | | | | | | | | George Paz | | | 500 | | | | | | | | 500 | | | | 15,024 | | | | 15,524 | | | | | | | | Sandra Pianalto | | | 451 | | | | | | | | 451 | | | | 14,510 | | | | 14,961 | | | | | | | | Christine A. Poon | | | 11,583 | | | | | | | | 11,583 | | | | 15,747 | | | | 27,330 | | | | | | | | Douglas A. Scovanner | | | 14,398 | | | | | | | | 14,398 | | | | 21,800 | | | | 36,198 | | | | | | | | Michael A. Todman | | | 3,325 | | | | | | | | 3,325 | | | | 15,028 | | | | 18,353 | | | | | | | | Charles F. Lowrey | | | 87,571 | | | | 213,253 | | | | 300,824 | | | | 313,336 | | | | 614,160 | | | | | | | | Robert M. Falzon | | | 122,008 | 6 | | | 171,202 | | | | 293,210 | | | | 249,817 | | | | 543,027 | | | | | | | | Scott G. Sleyster | | | 80,525 | | | | 143,534 | | | | 224,059 | | | | 140,419 | | | | 364,478 | | | | | | | | Andrew F. Sullivan | | | 13,989 | | | | 21,685 | | | | 35,674 | | | | 122,860 | | | | 158,534 | | | | | | | | Kenneth Y. Tanji | | | 4,141 | | | | 73,749 | | | | 77,890 | | | | 96,682 | | | | 174,572 | | | | | | | | | All directors and executive officers as a group (22 persons) | | | 430,092 | | | | 750,892 | | | | 1,180,984 | | | | 1,464,517 | | | | 2,645,501 | |
| 1 | Individual directors and executive officers, as well as all directors and executive officers as a group, beneficially own less than 1% of the shares of Common Stock outstanding, as of March 8, 2019.11, 2022. |
(2)2 | Includes the following number of shares or share equivalents in deferred units through the Deferred Compensation Plan for Non-Employee Directors and the Prudential Insurance Company of America Deferred Compensation Plan, as to which no voting or investment power exists: Mr. Baltimore 47,635;69,578; Mr. Casellas, 31,152;36,155; Ms. Hund-Mejean, 19,577;29,181; Ms. Jones 4,284; Mr. Krapek 43,354;7,309; Mr. Lighte, 7,475;15,028; Mr. Paz, 7,472;15,024; Ms. Pianalto, 7,033;14,510; Ms. Poon, 13,726;15,747; Mr. Scovanner, 15,349;21,800; Mr. Todman, 7,475;15,028; Mr. Strangfeld, 10,935; Mr. Pelletier, 34,166;Sleyster 16,573; and Mr. Sleyster, 80,111.Sullivan 4,021. |
(3)3 | Includes the following shares representing the target number of shares to be received upon the attainment of ROE goals under the performance share program described under “Compensation Discussion and Analysis”: Mr. Strangfeld, 83,821; Mr. Grier, 68,156; Mr. Lowrey, 52,586;233,293; Mr. Falzon, 42,434; Mr. Pelletier, 39,757;186,015; Mr. Sleyster, 26,007;91,508; Mr. Sullivan 88,378; and Mr. Tanji 12,203.71,685. |
(4)4 | Includes the following unvested stock options: Mr. Strangfeld, 149,152; Mr. Grier, 134,549; Mr. Lowrey, 119,109;31,157; Mr. Falzon, 93,353; Mr. Pelletier, 126,918;24,775; Mr. Sleyster, 47,807;14,265; Mr. Sullivan 12,388; and Mr. Tanji 28,541.9,760. |
(5)5 | Includes 4,400 shares held by the Johnfollowing unvested restricted stock units: Mr. Lowrey, 48,886; Mr. Falzon, 39,027; Mr. Sleyster, 18,073; Mr. Sullivan 18,073; and Mary K. Strangfeld Foundation.Mr. Tanji 15,237. |
| 6 | | | | Includes 1,100 shares held by The Falzon Family Private Foundation. |
| | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
32 | | |
| | 35
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | |
| | Voting Securities and Principal Holders
| | | Compensation of Directors |
Compliance with Section 16(a) of the Exchange Act
Each Director and executive officer of the Company and any greater than 10% beneficial owner of Common Stock is required to report to the SEC, by a specified date, his or her transactions involving our Common Stock. Based solely on a review of the copies of reports furnished to the Company and written representations that no other reports were required to be filed, the Company believes that for transactions during 2018 all reports required by Section 16(a) were timely filed. Prior to 2018, six reports for Thomas Baltimore, Director, reporting an inadvertent purchase of 65 shares and inadvertent sales of a total of 315 shares were not timely filed due to an oversight by the broker effecting the transactions without any knowledge of Mr. Baltimore.
| | | | | | | | 36
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
Compensation of Directors
The Corporate Governance and Business Ethics Committee reviews the compensation of ournon-employee nonemployee directors periodically (generally every three years) and recommends changes to the Board when it deems appropriate. For December 2018, our Non-Executive Chairman, John Strangfeld, was paid $125,000 for his service on the Board as anon-employee. It is expected that he will receive $375,000 for his service through April 5, 2019.
The following table describes the components of thenon-employee nonemployee directors’ compensation for 2018:2021: | | | | Compensation Element | | Director Compensation Program | | | Compensation ElementAnnual Cash Retainer
| | Director Compensation Program
| Annual Cash Retainer
| | $150,000, which may be deferred, at the director’s option | | | | Annual Equity Retainer | | $150,000 in restricted stock units that vest after one year (or, if earlier, on the date of the next Annual Meeting) | | | | Board and Committee Fees | | None | | | | Chair Fee | | $35,000 for the Audit and Risk Committees $30,000 for the Compensation Committee $20,000 for all other committees(1) | | | | Lead Independent Director Fee | | $50,000 | | | Meeting Fee for membersMembers of the Company’s Corporate Social Responsibility Oversight Committee(2) | | $1,250 per meeting (fee contingent on meeting attendance) | | | | New Director Equity Award(one-time grant) | | $150,000 in restricted stock units that vest after one year | | | | Stock Ownership Guideline | | Ownership of Common Stock or deferred stock units that have a value equivalent to six times the annual cash retainer to be satisfied within six years of joining the Board(3) |
| (1) | Includes other standing committees and anynon-standing committee of the Board that may be established from time to time, but excludingexcludes the Executive Committee. |
| (2) | This is a committee comprised ofcomprising members of management and the Board. This Committeecommittee typically meets on a separate day following the Board and Board committee meetings. Thenon-employee nonemployee directors on this committee currently consist of Mr.Messrs. Casellas Ms. Pianaltoand Lighte and Ms. Poon.Pianalto. The Corporate Social Responsibility Oversight Committee met three times in 2018.2021. |
| (3) | As of December 31, 2018,2021, each of ournon-employee nonemployee directors satisfied this guideline, with the exception of Ms. Pianalto, and Messrs. Lighte, Paz and Todman,Jones, who joined the Board within the last five years, each of whomin January 2021. Ms. Jones has six years to satisfyfrom the guideline after he ordate she joined the Board.Board to fulfill the stock ownership requirement. For purposes of the stock ownership guideline, once anon-employee nonemployee director satisfies his or her stock ownership level, the director will be deemed to continue to satisfy the guideline without regard to fluctuation in the value of the Common Stock owned by the director. |
We maintain a Deferred Compensation Plan forNon-Employee Nonemployee Directors (the “Plan”). Since 2011, 50% of the annual Board and committee retainer has been awarded in restricted stock units that vest after one year (or if earlier, on the date of the next Annual Meeting). Anon-employee nonemployee director can elect to invest theany cash portion of his or her retainer and fees andvested equity retainer upon vesting in accounts under the Plan that replicate investments in either shares of our Common Stock or the Fixed Rate Fund. The Fixed Rate Fund which accrues interest in the same manner as funds invested in the Fixed Rate Fund offered under the Prudential Employee Savings Plan (“PESP”). As elected by the director, the Plan provides for distributions to commence upon or following termination of Board service or while a director remains on the Board. Each director receives dividend equivalents on the restricted stock units contained in his or her deferral account under the Plan, which are equal in value to the dividends paid on our Common Stock. The dividend equivalents credited to the account are then reinvested in the form of additional stock units. Under our director compensation program, if anon-employee nonemployee director satisfies the stock ownership guideline, the restricted stock units granted as the annual equity retainer are payable upon vesting in cash or shares of our Common Stock (at the director’s option) and may be deferred beyond vesting at the director’s election. If a director does not satisfy the stock ownership guideline, the restricted stock units are automatically deferred until termination of Board service. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 33 |
DIRECTOR STOCK OWNERSHIP GUIDELINE
Each director is expected, within six years of joining the Board, to own Common Stock or deferred stock units that have a value equivalent to six times his or her annual cash retainer.
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 37
|
| | |
| | Compensation of Directors | |
|
20182021 Director Compensation Table
Mr. Strangfeld retired as CEO on November 30, 2018, but remains on the Board as Non-Executive Chairman until April 5, 2019. As a member of the Board and an employee, he did not receive director compensation. As anon-employee Non-Executive Chairman, he received $125,000 for his service in December 2018. This amount is included in the 2018 Summary Compensation Table for Mr. Strangfeld under “All Other Compensation.”
| | | | Fees Earned or Paid in | | | | | | | | | | Fees Earned or Paid in | | | | | | | Name | | Cash($) | | | Stock Awards($)(1) | | | All Other Compensation($)(2) | | | Total($) | | | Cash($) | | | Stock Awards($)(1) | | | All Other Compensation($)(2) | | | Total($) | | | Thomas J. Baltimore | | | 255,000 | | | | 150,000 | | | | | | 405,000 | | | $ | 170,000 | | | | $150,000 | | | | | $ | 320,000 | | | Gilbert F. Casellas | | | 173,750 | | | | 150,000 | | | | 5,000 | | | | 328,750 | | | $ | 173,750 | | | | $150,000 | | | | | $ | 323,750 | | | Martina Hund-Mejean | | | 150,000 | | | | 150,000 | | | | | | 300,000 | | | $ | 185,000 | | | | $150,000 | | | | | $ | 335,000 | | | Wendy E. Jones(3) | | | $ | 150,000 | | | | $300,000 | | | | | $ | 450,000 | | | Karl J. Krapek | | | 180,000 | | | | 150,000 | | | | 5,000 | | | | 335,000 | | | $ | 150,000 | | | | $150,000 | | | | | $ | 300,000 | | | Peter R. Lighte | | | 150,000 | | | | 150,000 | | | | 10,000 | 3 | | | 310,000 | | | $ | 153,750 | | | | $150,000 | | | | | $ | 303,750 | | | George Paz | | | 150,000 | | | | 150,000 | | | | 5,000 | | | | 305,000 | | | $ | 150,000 | | | | $150,000 | | | | $5,000 | | | $ | 305,000 | | | Sandra Pianalto | | | 153,750 | | | | 150,000 | | | | 5,000 | | | | 308,750 | | | $ | 153,750 | | | | $150,000 | | | | $5,000 | | | $ | 308,750 | | | Christine A. Poon | | | 172,500 | | | | 150,000 | | | | | | 322,500 | | | $ | 225,000 | | | | $150,000 | | | | | $ | 375,000 | | | Douglas A. Scovanner | | | 185,000 | | | | 150,000 | | | | | | 335,000 | | | $ | 185,000 | | | | $150,000 | | | | | $ | 335,000 | | | Michael A. Todman | | | 150,000 | | | | 150,000 | | | | 5,000 | | | | 305,000 | | | $ | 180,000 | | | | $150,000 | | | | | $ | 330,000 | |
| (1) | Represents amounts that are in units of our Common Stock. The amounts reported represent the aggregate grant date fair value of the restricted stock units granted during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Codification Topic 718.718 (“ASC Topic 718”). Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Stock on the date of grant, which is then recognized, subject to market value changes, over the requisite service period of the award. The aggregate balance in each of thenon-employee nonemployee directors’ accounts in the Deferred Compensation Plan denominated in units (which includes all deferrals from prior years and earned units deferred in 2018)2021) and their value as of December 31, 2021 were as follows: Mr. Baltimore: 47,63569,578 and $3,884,634;$7,531,123 ; Mr. Casellas: 31,15236,155 and $2,540,446;$3,913,417; Ms. Hund-Mejean: 19,57729,213 and $1,596,504;$3,162,015; Ms. Jones: 2,230 and $241,375; Mr. Krapek: 43,3547,309 and $3,535,519;$791,126; Mr. Lighte: 7,47515,028 and $609,586;$1,626,631; Mr. Paz: 7,47215,024 and $609,342;$1,626,198; Ms. Pianalto: 7,03314,546 and $573,541;$1,574,459; Ms. Poon: 13,72615,747 and $1,119,355;$1,704,455; Mr. Scovanner: 15,34923,113 and $1,251,711;$2,501,751; and Mr. Todman: 7,47515,028 and $609,586.$1,626,631. |
| (2) | Represents amounts for 2018Amounts represent matching charitable contributions.
|
| (3) | Both Mr. Lighte’s 2017 and 2018 contributions were matchedMs. Jones received a grant of restricted stock units valued at $150,000 upon joining the Board in 2018.January 2021.
|
| | | | 34 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | 
| 38
| | |
| | Notice of Annual Meeting of Shareholders Compensation
Discussion and 2019 Proxy Statement |
Compensation Discussion and Analysis
In this section, we describe the material components of our executive compensation program for our NEOs, whose compensation is set forth in the 20182021 Summary Compensation Table and other compensation tables contained in this Proxy Statement. We also provide an overview of our executive compensation philosophy and our executive compensation program. In addition, we explain how and why the Compensation Committee of our Board (the “Committee”) arrived at the specific compensation decisions involving the NEOs for 2018. NAMED EXECUTIVE OFFICERS (NEOS)
Charles F. Lowrey, our CEO;
John R. Strangfeld, our former CEO (andNon-Executive Chairman until April 5, 2019);
Kenneth Y. Tanji, our Executive Vice President and CFO;
Robert M. Falzon, our Vice Chairman (and former CFO);
Mark B. Grier, our Vice Chairman;
Stephen Pelletier, our Executive Vice President and Chief Operating Officer, U.S. Businesses; and
Scott G. Sleyster, our Executive Vice President and Chief Operating Officer, International Businesses.
On December 1, 2018, as part of our previously announced succession plan:
Charles F. Lowrey, previously our Chief Operating Officer, International Businesses, was named CEO, succeeding John R. Strangfeld;
Robert M. Falzon, previously our Executive Vice President and CFO, was named Vice Chairman;
Kenneth Y. Tanji, previously our Senior Vice President and Treasurer, was named Executive Vice President and CFO; and
Scott G. Sleyster, previously our Senior Vice President and Chief Investment Officer, was named Executive Vice President and Chief Operating Officer, International Businesses.
Since two individuals served as each of CEO and CFO for a portion of 2018, there are seven NEOs for 2018.2021.
| | | | | | | | | | Notice2021 Named Executive Officers (NEOs)
For the purposes of Annual Meeting of Shareholdersthis CD&A, the Summary Compensation Table, and 2019other tables set forth in this Proxy Statement, | | |
| | 39
|
| our NEOs for the 2021 fiscal year were: |
| | | 
| | Compensation Discussion and Analysis: Executive Summary
|
Executive Summary
Executive Compensation Highlights
The Compensation Committee has instituted a number of changes to our executive compensation program over the last several years to align with evolving competitive and governance practices, respond to feedback from our shareholders, and strengthen the link to performance and rigor of our program. These changes have included:
• | | Strengthening the rigor of our Annual Incentive Program by setting target and maximum awards for senior executives, including the NEOs. | |
• | | Establishing Long-Term Incentive Target Opportunities for the NEOs. | |
• | | Requiring deferral of 30% of each NEO’s annual incentive award and 10% of other senior executives’ annual incentive awards into the Book Value Performance Program. | |
• | | For awards granted in 2018, adding a modifier to the Performance Shares Program that will increase (or decrease) the number of shares and units earned by up to 10% depending on the increase (or decrease) in the representation of diverse persons among our senior management during the 2018 through 2020 performance period. | |
• | | Increasing our CEO’s stock ownership guideline from five to seven times base salary. | |
• | | Expanding the clawback policy for executive officers to cover all incentive-based awards, to address both a material financial restatement or misconduct, and to require disclosure to shareholders of action taken with regard to compensation recovery following a material financial restatement or misconduct. | |
• | | Diversifying the performance metrics used to determine awards under our Annual Incentive Program and applying a greater weight to relative ROE performance versus peer companies as a factor under our Annual Incentive Program beginning in 2016 and Performance Shares Program beginning in 2017. | |
• | | Limiting the contribution to earnings from specified classes ofnon-coupon investments and prepayment fee and call premium income when calculating the performance measures in our Annual Incentive Plan and Performance Shares Program. | |
| | | | | | Charles F. Lowrey | | Kenneth Y. Tanji | | Robert M. Falzon | | Scott G. Sleyster | | Andrew F. Sullivan | | Chairman & CEO | | Executive Vice President & CFO | | Vice Chairman | | 40Executive Vice
President & Head of International
Businesses
| | |Executive Vice
President & Head of
U.S. Businesses
|
Compensation Highlights | ● | | NoticePay for Performance. Incentive program payouts were consistent with company performance. Our annual incentive program paid out above target (reflecting strong results in 2021). The Performance Share component of Annual Meetingour Long-Term Incentive Program delivered less than the target number of Shareholders and 2019 Proxy Statement
|
| | shares (corresponding to less strong ROE performance over the 2019-2021 period). |
| | |
● | | Compensation Discussion and Analysis: Executive Summary
|
Total Direct Compensation Summary
(1) | 30%Balanced Metrics Supporting the Execution of Our Strategy. In 2021, the Annual Incentive Awards were mandatorily deferred into thedesign of our annual incentive program incorporated a new metric related to our cost savings commitments, we incorporated Book Value per Share into our Performance Program.
Share Program, and we expanded the list of companies against which we measure relative performance to better capture our competition in the current marketplace. |
(2) | Represents long-term awards granted●
| | Performance Emphasis in 2018 and 2019Pay Mix. On average, 91% of our NEOs’ total direct compensation for 2017 and 20182021 was performance respectively.based. |
(1) | 30%●
| | Inclusion and Diversity Performance Modifier. Following the successful achievement of our goal to increase diverse representation among our senior management over 2018-2020 by 5%, we again incentivized Prudential’s senior leadership to increase Company diversity over 2021-2023 using a modifier within our long-term incentive program, this time with multiple diversity goals, greater reach within the Annual Incentive Awards were mandatorily deferred intoorganization, an emphasis on Black and LatinX representation, and additional focus on improving the Book Value Performance Program.lived experience of our Black colleagues. |
(2) | Represents long-term awards granted in February 2018 for 2017 performance.
|
(3) | Represents long-term awards granted in November 2018 for 2018 performance.
|
(4) | Performance-based compensation
|
(5) | Includes mandatory deferral of 30% of annual incentive
|
(6) | Based on average amounts
|
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
● | | |
| | 41
Ensuring Compensation Motivates and Rewards Strong Performance.Upon reviewing the compensation packages for our Chairman & CEO and Vice Chairman versus their external peers, the Committee decided that their 2021 results and outstanding leadership warranted increases to their base salaries and target incentive compensation levels for 2022. |
| | |
| | Compensation Discussion and Analysis: Executive Summary
|
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 35 |
| | | | | | | | WHAT WE DOCompensation Discussion and Analysis
| |
|
2021 NEOs’ Total Direct Compensation at a Glance (thousands) The following illustrations depict the amount and mix of pay delivered to our CEO and other NEOs for the 2021 performance year, including salary paid in 2021 and incentive awards granted in February 2022 for 2021 performance. 
| | | | | 
| | | | WHAT WE DON’T DO
|
(1) Represents averages for the NEOs as a group, excluding Mr. Lowrey. | | | | 36 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | 
| | Establish target and maximum awards under our Annual Incentive Program.
| | | | |
| 
| | | CEO participation in our severance plan.
| | | | | |
| | Establish target awards in our Long-Term Incentive Program.
| | | | |
| | | Executive officer severance payments and benefits exceeding 2.99 times salary and cash bonus without shareholder approval.
|
| | Apply a formulaic framework based on the Company’s financial results relative topre-established targets for each incentive program.
| | | | | | | | | | | |
| | Exercise limited or no discretion to increase formulaic incentive compensation awards.
| | | | |
| | | Excise tax“gross-ups” upon change in control.
| | | | | |
| | Use balanced performance metricsfor annual incentive and performance share/unit awards that consider both the Company’s absolute performance and its relative performance versus peers.
| | | | |
| | | Discounting, reloading orre-pricing of stock options without shareholder approval.
| | | | | |
| | Rigorous goal setting aligned to our externally disclosed annual and multiyear financial targets.
| | | | |
| | | “Single-trigger” accelerated vesting of equity-based awards upon change in control.
| | | | | |
| | 86% or more of our NEOs’ target total direct compensation is performance based.
| | | | |
| | | Multiyear guaranteed incentive awards for senior executives.
| | | | | |
| | Defer 30% of our NEOs’ and 10% of other senior executives’ annual incentive awardsinto the Book Value Performance Program.
| | | | |
| | | Employment agreements with NEOs.
| | | | | |
| | Impose stock ownership requirements, and retention of 50% of equity-based awards.
| | | | |
| | | Employee hedging or pledging of Company securities.
| | | | | |
| | Maintain an enhanced clawback policy covering all executive officer incentive-based awards for material financial restatements and misconduct.
| | | | | | | | | | | | | |
| | Limit perquisitesto items that serve a reasonable business purpose.
| | | | | | | | | | | | | |
| | Closely monitor risks associated with our compensation programs and individual compensation decisions to confirm that they do not encourage excessive risk-taking.
| | | | | | | | | | | | | |
| | Tie long-term diversity improvement to our performance share and unit awards.
| | | | | | | | |
Consideration of Most Recent “Say on Pay” Vote | | | Following our 20182021 Annual Meeting of Shareholders, the Committee reviewed the results of the shareholder advisory vote on NEO compensation (the “Say on Pay” Vote) that was held at the meeting with respect to the 20172020 compensation actions and decisions for Mr. StrangfeldLowrey and the other NEOs. Approximately 96%92.1% of the votes cast on the proposal were voted in support of the compensation of our NEOs. After careful consideration, and given the recent extensive changes we have made, in the recent past, the Committee did not make any changes to our executive compensation program and policies as a result of the most recent Say on Pay vote. | |  92.1% of the votes cast on the proposal were voted in support of the compensation of our NEOs. |
Opportunity for Shareholder Feedback The Committee carefully considers feedback from our shareholders regarding our executive compensation program. Shareholders are invited to express their views to the Committee as described under “Communication with Directors” in this Proxy Statement. In addition, the advisory vote on the compensation of theour NEOs provides shareholders with an opportunity to communicate their views on our executive compensation program. You should read this CD&A in conjunction with the advisory vote that we are conducting on the compensation of theour NEOs (see “Item 3—Advisory Vote to Approve Named Executive Officer Compensation”). This CD&A, as well as the accompanying compensation tables, contains information that is relevant to your voting decision. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 37 |
| | | | | | | | 42
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement |
| | |
| | Compensation Discussion and Analysis | |
|
Philosophy and Objectives of Our Executive Compensation Program The philosophy underlying our executive compensation program is to provide an attractive, flexible, and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of executive officers and other key employees necessary to deliver sustained high performance to our shareholders, customers, and communities where we have a strong presence.communities. Our executive compensation program is an important component of these overall human resources policies. Equally important, we view compensation practices as a means for communicating our goals and standards of conduct and performance and for motivating and rewarding employees in relation to their achievements. Overall, the same principles that govern the compensation of all our salaried employees apply to the compensation of our executive officers. Within this framework, we observe the following principles: Retain and hiretop-caliber executives: Executive officers should have base salaries and employee benefits that are market competitive and that permit us to hire and retain world-class talent in our critical roles and high-caliber individuals at all levels;
| ● | | Hire and retain top-caliber executives: Executive officers should have base salaries and employee benefits that are market-competitive and that facilitate hiring and retention of world-class talent in our critical roles and high-caliber individuals at all levels; |
Pay for performance: A significant portion of the compensation of our executive officers should vary with business performance and each individual’s contribution to that performance;
| ● | | Pay for performance: A significant portion of the compensation of our executive officers should vary with business performance and each individual’s contribution to that performance; |
Reward long-term growth and profitability: Executive officers should be rewarded for achieving long-term results;
| ● | | Reward long-term growth and profitability: Executive officers should be rewarded for achieving long-term results; |
Align compensation with shareholder interests: The interests of our executive officers should be linked with those of our shareholders through the risks and rewards of the ownership of our Common Stock; and
| ● | | Align compensation with shareholder interests: The interests of our executive officers should be linked with those of our shareholders through the risks and rewards of the ownership of our Common Stock; and |
Reinforce succession planning process: The overall compensation program for our executive officers should reinforce our robust succession planning process.
| ● | | Reinforce succession planning process: The overall compensation program for our executive officers should reinforce our robust succession planning process. |
2018 Incentive Compensation Programs
To create a strong link between our incentive compensation opportunities and our short-term and longer-term objectives, we use two specific programs: our Annual Incentive Program and our Long-Term Incentive Program. Each year we review the metrics and design of both programs to ensure they are closely linked to our business strategy, are easily understood by employees, and are aligned with shareholder interests. | ● | | Annual Incentive Program. Our Annual Incentive Program is designed to reward strong financial and operational performance that furthers our short-term strategic objectives. For 2021 and 2022, financial and operational performance is determined based on the following three equally weighted annual performance metrics: |
Annual Incentive Program. The Annual
| – | | EPS as compared to our pre-established EPS target; |
| – | | Cost savings, on a run-rate basis, from our transformation initiatives as compared to a pre-established target; and |
| – | | ROE relative to the median ROE of the Performance Peer Group. |
| ● | | Long-Term Incentive Program. Our Long-Term Incentive Program ties the majority of our executives’ target total compensation to the achievement of our multiyear financial results and other goals related to long-term value creation. For grants made in February 2021 and February 2022, we awarded: |
| – | | performance shares that reward the achievement of our ROE performance versus our peers, increases in adjusted book value per share (“BVPS”) and increases in the market value of our Common Stock; and |
| – | | restricted stock units (“RSUs”) that reward increases in the market value of our Common Stock. |
Grants prior to February 2021 under our Long-Term Incentive Program, is designed to reward strong financialsome of which are still outstanding, were made in the form of performance shares, stock options, and operational performance that furthers our short-term strategic objectives. Financial performance is primarily determined based on three equally-weighted performance metrics: (i) EPS achievement relative to our externally disclosed EPS targets; (ii) year-over-year growth in EPS; and (iii) relative ROE as compared to a group of peer companies.cash-settled book value units. | Inclusion and Diversity We view inclusion and dimensions of diversity as a moral and business imperative and a long-standing source of competitive advantage. As such, we also include goals related to our commitments to advance inclusion, diversity, and racial equity as metrics within grants of performance shares in certain years. This inclusion and diversity metric applies a modifier of plus or minus 10% to our Company performance results. The performance shares granted to all U.S.-based recipients in February 2021 contain an inclusion and diversity modifier that holds Prudential leaders accountable to advance diverse representation across our organization and improve the lived experience of our Black colleagues. |
Long-Term Incentive Program. Our Long-Term Incentive Program consists of three parts that incent long-term value creation: performance shares and units that reward the achievement of our long-term ROE goals and increases in the market value of our Common Stock (as well as, for awards granted in 2018, increases in our senior management diversity); book value units that reward increases in book value per share; and stock options that reward increases in the market value of our Common Stock.
| | | | 38 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
ANNUAL COMPENSATION-RELATED RISK EVALUATION
We monitor the risks associated with our compensation programs, as well as the components of our programs and individual executive compensation decisions, on an ongoing basis. Our compensation risk assessment occurs in two parts: a review of the Company’s compensation programs and a review of compensation decisions and payments, with a focus on our senior executives. In January 2019, our Chief Risk Officer presented to the Committee a review of Prudential’s compensation programs, including the executive compensation program, to assess the risks arising from our compensation policies and practices. The Committee agreed with the review’s findings that these risks were within our ability to effectively monitor and manage and that these compensation programs do not encourage unnecessary or excessive risk-taking and do not create risks that are reasonably likely to have a material adverse effect on the Company. Also, in June 2018, our Chief Risk Officer presented a study of the payouts under the compensation programs. The Committee agreed with the study’s findings that our compensation practices, including payouts, adhere to best market practices and do not encourage undue or excessive risk-taking.
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 43
|
| | |
| | Compensation Discussion and Analysis | |
|
The figure below illustrates the portions of our NEOs 2018 target total direct compensation that are driven by the various performance metrics under our incentive programs*. Our programs are designed to align the interests of our executives with the interests of our shareholders and to link the drivers of short-term and long-term value creation with our executive compensation.
*The image above is a graphical representation of the components and drivers of total direct compensation. The illustration represents the average target total direct compensation values for our NEOs.
**Represents Book Value Performance Program (11%) and 30% mandatory deferral of Annual Incentive Awards (equates to 10.8% of target total direct compensation).
Our Annual Incentive Program and Long-Term Incentive Program share one common performance measure: our relative ROE, that is, our ROE as compared to the ROE of the North American Life Insurance subset of our peer group. The Committee believes that our relative ROE is a core value proposition for our shareholders and, accordingly, that relative ROE performance over both the short term and long term merits inclusion as a performance measure in each of our incentive programs.
| | | | | | | | 44
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Compensation Discussion and Analysis
| |
How We Make Compensation Decisions
Role of the Compensation Committee
The Committee is responsible to our Board for overseeing the development and administration of our compensation and benefits policies and programs. The Committee, which consists of three independent directors, is responsible for the review and approval of all aspects of our executive compensation program. Among its duties, the Committee is responsible for formulating the compensation recommendations for our CEO and approving all compensation recommendations for our officers at the senior vice president level and above, including:
annual review and approval of incentive program design, goals and objectives for alignment with our compensation and business strategies;
evaluation of individual performance results in light of these goals and objectives;
evaluation of the competitiveness of each executive officer’s total compensation package; and
approval of any changes to the total compensation package, including, but not limited to, base salary, annual and long-term incentive award opportunities, payouts, and retention programs.
Following review and discussion, the Committee submits its recommendations for compensation for these executive officers to the independent members of our Board for approval.
The Committee is supported in its work by our Chief Human Resources Officer, his staff, and the Committee’s executive Compensation Consultant, as described below.
The Committee’s charter, which sets out its duties and responsibilities and addresses other matters, can be found on our website at www.prudential.com/governance.
Role of the Chief Executive Officer
Within the framework of the compensation programs approved by the Committee and based on management’s review of market competitive positions, each year our CEO recommends the level of base salary increase (if any), the annual incentive award, and the long-term incentive award value for our officers at the senior vice president level and above, including the other NEOs. These recommendations are based upon an assessment of each executive officer’s performance, the performance of the individual’s respective business or function, and retention considerations. The Committee reviews our CEO’s recommendations and approves any compensation changes affecting our executive officers as it determines in its sole discretion. Given our recent leadership transition, our former CEO and our current CEO made joint recommendations for compensation paid in respect of 2018.
Our CEO does not play any role with respect to any matter affecting his own compensation and is not present when the Committee discusses and formulates his compensation recommendation.
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 45
|
| | |
| | Compensation Discussion and Analysis
| |
Role of the Compensation Consultant
The Committee has retained Frederic W. Cook & Co., Inc. as its executive Compensation Consultant. The Compensation Consultant reports directly to the Committee, and the Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant attends meetings of the Committee, as requested, and communicates with the Committee Chair between meetings.
The Compensation Consultant provides various executive compensation services to the Committee pursuant to a written consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of our executive compensation program and evolving industry practices and providing market information and analysis regarding the competitiveness of our program design and our award values in relationship to performance.
During 2018, the Compensation Consultant performed the following specific services:
Provided a presentation on executive compensation trends and external developments.
Provided an annual competitive evaluation of total compensation for the NEOs, as well as overall compensation program share usage, dilution, and fair value expense.
Provided recommendations on CEO total direct compensation to the Committee at its February meeting, without prior review by our CEO.
Reviewed with our current and former CEOs their compensation recommendations with respect to the other officers.
Reviewed Committee agendas and supporting materials in advance of each meeting, and raised questions/issues with management and the Committee Chair, as appropriate.
Reviewed drafts and commented on the CD&A and related compensation tables for the Proxy Statement.
Reviewed the compensation peer group used for competitive analyses.
Attended Committee meetings when requested by the Committee Chair.
Assisted with compensation actions related to the leadership succession plan.
The Compensation Consultant provided no services to management during 2018.
The Committee retains sole authority to hire the Compensation Consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.
The total amount of fees paid to the Compensation Consultant for services to the Committee in 2018 was $214,961. The Compensation Consultant received no other fees or compensation from us, except for $3,400 to participate in a general industry survey of long-term compensation. The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to the listing standards of the NYSE and SEC rules and concluded that no conflict of interest exists that would prevent the Compensation Consultant from serving as an independent consultant to the Compensation Committee.
| | | | | | | | 46
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Compensation Discussion and Analysis
| |
Compensation Peer Group The Committee uses compensation data compiled from a group of peer companies in the insurance, asset management, and other diversified financial services industries generally selected from the Standard & Poor’sS&P 500 Financials Indexindex (the “Peer“Compensation Peer Group”). The Committee periodically reviews and updates the Compensation Peer Group, as necessary, upon recommendation of the Compensation Consultant.its compensation consultant. We believe the Compensation Peer Group represents the industries with which we currently compete for executive talent, and also includes our principal business competitors.talent. | | | | | | | | | | | | | | | | | | | | Although included within the broad financial services sector, we exclude from the Compensation Peer Group companies such as property and casualty insurers and investment banking firms that predominantly offer different products, have substantially different business models and with whom we have less direct competition for executive talent. For 2018, theOur Compensation Peer Group consistedwas unchanged in 2021, consisting of the following 20 companies:
| | | | | | | | | North American Life Insurance Companies | | Consumer Finance
Companies
| | Consumer Finance Companies | | | | Asset Management and
Custody Banks | | | | Diversified Banks | | | | | Diversified Banks●
| | | | | | | | • AFLAC, Inc.
•● Lincoln National
•● Manulife Financial
Corporation
•● MetLife, Inc.
•● Principal Financial Group
•● Sun Life Financial Inc.
| | | | •
● American Express
Company •● Capital One Financial
Corporation
| | | | •
● Ameriprise Financial, Inc. •● The Bank of New York
Mellon Corporation
•● BlackRock, Inc.
•● Franklin Resources, Inc.
•● Northern Trust
Corporation
•● State Street Corporation
| | | | •
● Bank of America Corporation •● Citigroup Inc.
•● JPMorgan Chase & Co.
•● PNC Financial Services Group, Inc.
•● U.S. Bancorp
•● Wells Fargo & Company
| | | | | | | | | | | |
Performance Peer Group ROE performance versus peers is a key performance measure under our Annual Incentive Program and our Performance Shares Program. For performance year 2020, we measured our relative ROE performance against the North American Life Insurance subset of the Compensation Peer Group (as listed above). In the 2021 performance year, the Committee expanded our Performance Peer Group to better reflect our competitors in the current marketplace for the purpose of measuring relative ROE for Performance Shares and Annual Incentive Awards. For the 2021 performance year the Performance Peer Group is shown below. For performance year 2022, Athene was removed from the Performance Peer Group due to its merger with Apollo. | | | | | | | | | | | | | ● AFLAC, Inc. ● American Equity Investment Life
Insurance Co. ● Athene ● Equitable Holdings ● Brighthouse Financial | | ● CNO Financial Group ● Globe Life ● Lincoln National ● MetLife, Inc. | | ● Principal Financial Group ● Reinsurance Group of America ● Unum Group ● Voya Financial |
Use of Competitive Data We compete in several different businesses, most of which are involved in helping individuals and institutions grow and protect their assets. These businesses draw their key employees from different segments of the marketplace. Our executive compensation program is designed with the flexibility to be competitive and motivational within the various marketplaces in which we compete for executive talent, while being subject to centralized design, approval, and control.
The Committee relies on various sources of compensation information to ascertain the competitive market for our executive officers, including the NEOs. To assess the competitiveness of our executive compensation program, we analyze Peer Grouppeer group compensation data obtained from peer company proxy materials, as well as compensation and benefits survey data provided by national compensation consulting firms, such as Willis Towers Watson, McLagan Partners and Mercer. As part of this process, we measure actual pay levels within each compensation component and in the aggregate. We also review themarket practices related to pay mix, of our compensation components with respect to fixed versus variable, short term versus long term,incentive program design, and cash versus equity-based pay. This information is then presented to the Committee for its reviewother compensation-related policies and use.practices. The Committee generally comparesreviews the compensation of each NEOexecutives in relation to each of the 25th, the 50th and the 75th percentiles of theour Compensation Peer Group at least once per year. A broad range of data is considered for similar positions. In addition, the Committee takes into accountto ascertain whether the NEOs are appropriately positioned above or below the median to properly reflect various factors, such as our performance, within the Peer Group, the unique characteristics of the individual’seach position, and anyapplicable succession and retention considerations. In general, compensation levels for an executive officer who is new to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance who are viewed as critical to retain would be positioned at the higher end of the competitive range. For example, due to their promotions in December 2018, Messrs. Lowrey’s and Tanji’s target total direct compensation is at or below the Peer Group median for their respective positions. Generally, differences in the levels of total direct compensation among the NEOs are primarily driven by tenure and an established track record of performance in their current and prior roles, along with the scope of their responsibilities, differences in the competitive market pay range for similar positions, and considerations of internal equity. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 39 |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 47
|
| | |
| | Compensation Discussion and Analysis | |
|
Components of Our ExecutiveHow We Make Compensation ProgramDecisions
In addition to rigorous policies, which are structured to create a strong and direct link between pay and performance, we are committed to protect and further our shareholders’ interests. Feedback obtained each year through engagement with our shareholders is incorporated into compensation-related decision-making. Our pay governance processes hold the following tables,three independent directors who comprise the Compensation Committee responsible for the principal componentsoversight and approval of various activities and decisions.(1) These activities and decisions are guided by the recommendations and advice of both management (including our CEO, Chief Human Resources Officer, and the Executive Leadership Team (“ELT”)) and the Committee’s independent executive compensation program, we present their purpose, key characteristic and type of performance measured (if applicable). We measure the program’s competitiveness both by comparing relevant market data with the target and actual amounts paid at each executive officer positionconsultant (FW Cook), as well as by salary grades, which are composed of many positions that we consider to have similar responsibilities. Total Direct Compensationoutlined below:
| | | | | | | | Activity | | Levels Impacted | | Management’s
Role | | Compensation Consultant’s Role | Set Competitive Target Compensation | | CEO / Vice Chair | | None(2) | | Recommend | | ELT | | Recommend | | Advise | | SVPs | | Recommend | | Advise upon Request | | | | | Make Performance Based Compensation ComponentDecisions, Including Long-Term Incentive Grants and Approving Cash/Stock Payouts(3) | | CEO / Vice Chair | | None(2) | | Recommend | | ELT | | Recommend | | Advise | | SVPs | | Recommend | | Review | | | | | PurposeOversee Incentive Program Design, Terms and Conditions, Performance and Funding
| | CEO / Vice Chair | | None(2) | | Advise on Design | | ELT | | Recommend | | Advise on Design | | SVPs | | Recommend | | Review | | | | | Key CharacteristicPromote/Appoint Employees to Senior Executive Positions(3)
| | CEO / Vice Chair
ELT & SVPs | | N/A
Performance Measured
| Base SalaryRecommend
| | Advise
• Compensate executive officers fairly for the responsibility of the position held
| | Fixed
| | Individual
| Annual Incentive Awards
| | • Motivate and reward executive officers for achieving our short-term business objectives
• Provide balance by rewarding performance relative to our Peer Group
| | Variable
| | Corporate and Individual
| Long-Term Incentive Awards
| | • Motivate executive officers by linking incentives to the achievement of our multiyear financial and other goals, our relative performance, and the performance of our Common Stock and book value over the long term
• Reinforce the link between the interests of our executive officers and shareholders
| | Variable
| | Corporate
| Other Forms of Compensation
Advise upon Request | | | | | Compensation ComponentIncorporate Evolving Competitive and World-Class Governance Practices in Our Program
| | N/A | | Adopt and Enforce | | Advise and/or Recommend |
| (1) | PurposeThe Committee’s charter, which sets out its full list of duties and responsibilities and addresses other matters, can be found on our website at www.prudential.com/governance.
|
| (2) | Our CEO and Vice Chairman do not play any role with respect to matters affecting their own compensation and are not present when the Committee discusses their recommendations. |
| (3) | In addition to Compensation Committee approval of the items listed, additional approval by the full Board of Directors is also required for awards, payouts, and appointments to senior executive positions. |
The compensation consultant reports directly to the Committee and provided no services to management in 2021. The compensation consultant’s advisory services primarily include: | ● | | Key Characteristicproviding expert input on industry trends, as well as executive compensation developments from a broader perspective;
|
| ● | | assessing the extent to which our pay levels and practices are competitively aligned with market practice; and |
| ● | | facilitating objective, data-based compensation decisions in succession and annual pay planning processes. |
The Committee retains sole authority to hire the compensation consultant, approve its compensation, determine the nature and scope of its services, evaluate its performance, and terminate and replace (or supplement) its engagement with an alternative consultant at any time. The total amount of fees paid to the compensation consultant for services to the Committee in 2021 was $166,426. The compensation consultant received no other fees or compensation from us. The Committee has assessed the independence of the compensation consultant pursuant to the listing standards of the NYSE and SEC rules and concluded that no conflict of interest exists that would prevent the compensation consultant from serving as an independent consultant to the Committee. | | | | 40 | | | Health & Welfare, and Retirement Plans
| | • Provide benefits that promote employee health and support employees in attaining financial security
| | Fixed
| | | Perquisites and Other Personal Benefits
| | • Provide a business-related benefit to our Company, and assist in attracting and retaining executives
| | Fixed
| | | Post-Employment Compensation
| | • Provide temporary income following an executive’s involuntary termination of employment, and in the case of a change of control, also provide continuity of management
| | Fixed
| | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
In keeping with our commitment to diversity and inclusion in practice, the performance shares and units awarded to executives at the senior vice president level and above (and equivalents) in February 2018 were made subject to a performance objective intended to improve the representation of diverse persons among our senior management over the 2018 through 2020 performance period:
If we meet our goal of increased representation of diverse persons by five percentage points or more over this period, payouts will be increased by up to 10%.
If there is no change in representation, payouts will be decreased by 5%.
If such representation decreases over this period, payouts will be decreased by up to 10%.
| | | | | | | | 48
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement |
| | |
| | Compensation Discussion and Analysis | |
|
The following discussion contains information regarding certain performance measures and goals. These measures and goals are disclosed in the limited context of our executive compensation program. Shareholders should not apply these performance measures and goals to other contexts.
FORMULAIC FRAMEWORK FOR INCENTIVE PROGRAMSFormulaic Framework for Incentive Programs
Awards underThe determination of award levels for each of our incentive programs are funded at the level determinedis formulaically driven by our financial and operating results relative topre-established targets and performance relative to peer companies under formulas for each incentive program.companies. The Board believes it generally should exercise limited or no discretion to increase our NEOs’ formula-based awards. Each year, the Compensation Committee reviews the metrics underlying the formulaic approach of both our annual and long-term incentive programs and makes changes as appropriate to align with business strategy and shareholder interests. The metrics approved by the Committee for awards granted, earned, paid out, or still outstanding are described throughout this CD&A. For the annualpurposes of our incentive program, the formula uses three equally weightedprograms:
| ● | | EPS is Earnings Per Share of Common Stock (diluted), based on after-tax adjusted operating income (“AOI”); |
| ● | | ROE is operating return on average equity (and for peer companies is based on a comparable financial metric determined from quarterly financial reports); and |
| ● | | Adjusted book value per share, or BVPS, is based on Prudential Financial’s total equity excluding certain balance sheet items. |
| ● | | Cost savings is the cumulative cost savings, measured on a run-rate basis, that we have achieved from our transformation initiatives. |
The EPS, ROE and BVPS compensation performance metrics in each case based on after-tax adjusted operating income: (i) EPS relative toare non-GAAP financial measures. Please see Appendix A for our externally disclosed EPS targets; (ii) year-over-year growth in EPS;calculation of these measures and (iii) relative ROE as compareda reconciliation to the North American Life Insurance subset of our Peer Group. Similarly, under our performance shares program, payments are determined based on our average ROE results over the three-year performance period, as compared to both a performance scale set at the start of the period and the ROE results of the North American Life Insurance subset of our Peer Group over that period, giving equal weight to each. The Book Value Performance Program tracks our adjusted book value per share. Adjusted book value per share excludes the impact on attributed equity of accumulated other comprehensive income and of foreign currency exchange rate remeasurement included in net income or loss, as described in Appendix A to this Proxy Statement.most directly comparable GAAP financial measures. To more accurately reflect the operating performance of our business, the Committee has approved apre-determined predetermined framework of adjustments to our reported financial results for incentive program purposes. Generally, these adjustments are made to excludeone-time or unusual items and external factors that are inconsistent with the assumptions reflected in our financial plans. The standard adjustments to reported financial results under our formulaic framework may vary from year to year and may have either a favorable or unfavorable impact on the funding of the Annual Incentive Award Poolmeasures used in our annual and may affect other performance measures, such as the calculation of adjusted book value per share under our Book Value Performance Program. long-term incentive programs. Standard adjustments to reported financial results are made: to exclude the impact of market unlockings in our Individual Annuities, Individual Life and International Insurance businesses (including, for 2018, adjustments to reflect updated estimates of profitability based on market performance in relation to our assumptions);
to exclude the impact of changes in our assumptions for investment returns, actuarial experience, and customer behavioral expectations (mortality, morbidity, lapse, and similar factors and reserve refinements);
to exclude integration costs or make other adjustments related to merger and acquisition activity (for 2018, we added back the earnings that were included in our 2018 EPS guidance attributable to our businesses in Italy and Poland, which were classified as divested and run-off businesses in 2018 following the signing of definitive agreements to sell those businesses);
for accounting-related changes not included in our annual operating plan (for 2018, we excluded the impacts on our earnings stemming from the Tax Cuts and Jobs Act due to the change in our effective tax rate and the impact of related management actions);
to exclude earnings from specified classes ofnon-coupon investments and prepayment fee and call premium income from fixed maturity investments outside of a range of-10% to +10% of these earnings, combined, that are included in our EPS guidance range (this resulted in an adjustment for 2018, as these earnings fell below our EPS guidance expectations by more than 10%); and
for other items not considered representative of the results of operations for the period or not included in guidance, as approved by the Committee (there were none in 2018).
| ● | | to exclude the impact of changes in our assumptions for investment returns, actuarial experience, and customer behavioral expectations (e.g., mortality, morbidity, lapse, and similar factors and reserve refinements); | |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
● | | |
| | 49
|
| | |
| | Compensation Discussionto exclude integration costs or make other adjustments related to unplanned merger and Analysis
| | acquisition activity (for 2021, we added back the earnings that were included in our 2021 plan attributable to our Full Service Retirement business that was held for sale and excluded the gain on the sale of PGIM’s joint venture in Italy); |
| ● | | to exclude variable investment income (i.e., earnings from non-coupon investments and prepayment fee and call premium income from fixed maturity | |
| investments) outside of a range of -10% to +10% of this income that is included in our annual financial plan (this resulted in an adjustment for 2021, as this income exceeded our expectations by more than 10%); | |
| ● | | for accounting-related changes not included in our annual operating plan (there were none in 2021); and | |
| ● | | for other items not considered representative of the results of operations for the period and not included in our financial plan, as approved by the Committee (for 2021, we excluded unplanned costs relating to a debt reduction initiative and underwriting losses due to COVID-19 outside of a range of forecasted mortality results). | |
Direct Compensation Components Annually, the Compensation Committee reviews thea competitive analysis of total direct compensation for the NEOs. Based on this evaluation, the Committee may selectively adjust the base salary, annual incentive award target, and long-term award target amounts of the NEOs. In determining any adjustments, the Committee takes into account the following factors: level of experience and impact in the role; changes in market data; and compensation positioning overall and by component. Executives new to their current roles are positioned towards the lower end of their competitive range while executives with more experience are generally positioned at the higher end of the range. BASE SALARYBase Salary
Base salary is the principal fixed component of the total direct compensation of our executive officers, including the NEOs, and is determined by considering the relative importance of the position, the competitive marketplace, and the individual’s performance and contributions. Base salaries are reviewed annually and, typically, are increased infrequently and then mostly at the time of a change in position or assumption of new responsibilities. SALARY DECISIONS
In connection with the succession planning changesEffective February 28, 2022, Messrs. Lowrey and Falzon received base salary increases of $100,000 and $40,000, respectively, in 2018, the Committee made the followingrecognition of their time in role and 2021 performance. Neither had received a salary decisions effective as ofincrease since their promotion to their current positions on December 1, 2018: Mr. Lowrey’s salary was increased to $1,200,000; Mr. Tanji’s salary was increased to $600,000; Mr. Falzon’s salary was increased to $1,000,000; and Mr. Sleyster’s salary was increased to $700,000.2018.
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 41 |
| | | | | | | Compensation Discussion and Analysis | |
|
Annual Incentive Awards At least once a year,The Committee reviews the Committee reviewsstructure of the Annual Incentive Program at least once per year, including the enterprise-wide metrics, targets, and makes changes as needed.standard adjustments that comprise our formulaic framework. The Committee approvedselects metrics that it believes provide a balanced view of the 2018 Annual Incentive Program for our most senior executives, includingCompany’s performance each year, with targets that are linked to the NEOs, on the following termsCompany’s financial plan and conditions.
TARGET AWARD OPPORTUNITIESstrategic objectives.
The target and maximum annual incentive award opportunities for each of the NEOs for 2018 were as follows: | | | | | | | | | | | | Named Executive Officers | | Target Annual Incentive Award
Opportunity | | | Maximum Annual Incentive Award Opportunity | | Charles F. Lowrey | | | $4,000,000 | | | | $ 8,000,000 | | John R. Strangfeld | | | $6,000,000 | | | | $12,000,000 | | Kenneth Y. Tanji | | | $ 852,150 | | | | $ 1,704,300 | | Robert M. Falzon | | | $3,000,000 | | | | $ 6,000,000 | | Mark B. Grier | | | $5,100,000 | | | | $10,200,000 | | Stephen Pelletier | | | $4,000,000 | | | | $ 8,000,000 | | Scott G. Sleyster | | | $1,539,000 | | | | $ 3,078,000 | |
Each year, the Committee establishes an annual Performance Factor that is the primary driver in determining the amountfunding of the annual incentive award for each NEO and most of our U.S.-based, non-investment professional population is determined by applying the Final Performance Factor to each individual’s annual incentive target for the performance year. The Final Performance Factor is derived from a formulaic calculation using the metrics and targets established by the Committee at the outset of the performance period.
Guided by our “pay for performance” philosophy, each individual’s actual annual incentive award may be higher or lower than the calculated level of funding, recognizing differences in individual performance. At the most senior levels, including and especially for our NEOs, we typically apply less differentiation, reflecting our belief that our senior leadership team has a collective responsibility for the performance outcomes selected by the Committee for the year. Each NEO’s award opportunity range is $0 to a maximum of 1.5 times the individual’s target for each performance year. For the 2022 performance year, the target annual incentive awards for Messrs. Lowrey and Falzon have been increased from their 2021 targets to $3,750,000 and $3,000,000, respectively, in recognition of their outstanding leadership in areas such as the execution of our NEOs.transformation and positioning Prudential at the forefront of efforts to drive change in societal issues such as racial equity. Pre-Established 2021 and 2022 Annual Incentive Award Opportunity Ranges 
For 2018, we used the following process2021 performance year, each NEO’s annual incentive award is equal to determine thishis target multiplied by the 2021 Final Performance Factor:Factor. Establish InitialCalculating the 2021 Final Performance Factor
Consistent with the formulaic framework for our Annual Incentive Program
The Committee’s principal consideration in determining annual incentive awards was the Committee established an Initial2021 Final Performance Factor based onof 1.215, representing the followingaverage of three financial metrics, giving equal weight to each (i.e., each metric is weightedone-third):metrics: EPS for 2018, on an AOI basis, assessed relative to our EPS target range (the “EPS Target Factor”);
| ● | | EPS, on an AOI basis, assessed relative to our EPS target range (the “EPS Target Factor”); |
Growth in EPS, on an AOI basis, for 2018 as compared to 2017 (the “EPS Growth Factor”); and
| ● | | Cost savings, on a run-rate basis, from transformation initiatives, assessed relative to our target for cumulative cost savings achieved by year-end 2021 (the “Cost Savings Factor”); and |
| ● | | ROE for 2018 as compared to the median ROE for 2018 achieved by the North American Life Insurance subset of the median ROE achieved by the Performance Peer Group (the “Relative ROE Factor”). The Initial Performance Factor was applied to the target annual incentive award opportunity for each NEO to determine that NEO’s annual incentive funding.
|
For purposes of the 2018 Annual Incentive Program, we use information for 2021 AOI, EPS and ROE were calculatedand cumulative cost savings that we estimate as follows: EPS is Earnings Per Share of Common Stock (diluted), based onafter-tax adjusted operating income (“AOI”).
ROE is determined usingafter-tax AOI divided by adjusted book value, and for our peer companies is determined based on the comparable financial metric from each peer company’s quarterly financial reports, in each case, based on a rolling quarterly average for the four quarters ended September 30, 2018.
For more information regarding our 2018 annual measures of EPS, AOI and ROE, as well as adjusted book value, see Appendix A to this Proxy Statement.
| | | | | | | | 50
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Compensation Discussion and Analysis
| |
We applied our preset formulaic framework to our January 2019 estimate of our 2018 reported AOI, EPS, and ROE.2022.
Standard Adjustments We make standard adjustments to estimated AOI, EPS, and ROE under our formulaic framework that may vary from year to year and may have either a favorablenet positive or unfavorablenegative impact on the funding of the Annual Incentive Award Pool.our estimates. For 2018,2021, these standard adjustments resulted in the following changesa net negative impact to EPS: | | | | | EPS (January Estimate) | | $ | 11.68 | | Market Unlockings | | | + 0.11 | | Actuarial Assumptions | | | + 0.31 | | M&A Adjustments | | | + 0.03 | | Adjustments for the Tax Cuts and Jobs Act | | | - 0.66 | | Non-Coupon Investments/Prepayment Fee and Call Premium Income | | | + 0.15 | | EPS (Annual Incentive Program) | | $ | 11.62 | |
The market unlockings adjusted our reported results for our Individual Annuities, Individual LifeAOI, EPS and International Insurance businesses to exclude the impact of actual market performance relative to our plan assumption. The adjustment for 2018 market unlockings increased EPS under the Annual Incentive Program by approximately $0.11.ROE.
Annually, based on Company-specific data, industry data, and the current long-term economic outlook, we update our actuarial assumptions on long-term market returns and customer behavioral expectations (e.g., mortality, morbidity, and | | | | 42 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Compensation Discussion and Analysis | |
|
lapses). These updates and related refinements result in a cumulative revaluation of our reserves and the carrying values of our deferred acquisition costs. While GAAP requires these updates to be reported in the current period, they are not representative of annual performance since they relate to outcomes in both prior and future years. For these reasons, they are excluded from EPS under the Annual Incentive Program (regardless of whether they are positive or negative). In 2018,2021, the adjustments to account for these updates increased EPS under the Annual Incentive Program by approximately $0.31.$0.06. Our EPS guidance for 2018 included a full yearWe limit the impact of earnings attributable to our Pramericavariable investment income on the calculation of Italy and Pramerica of Poland operations. However, we classified those businesses as divested and run-off businesses in 2018 upon the signing of definitive agreements to sell them, and earnings from those operations were excluded from EPS at that time. As a result, we increased EPS under the Annual Incentive ProgramProgram. We do so by approximately $0.03 to add backexcluding earnings from those operations.
As the adoption of the Tax Cuts and Jobs Act was uncertain at the time we issued our EPS guidance for 2018, we did not assume any impacts from the Tax Act in our guidance range. As a result, we have excluded the impact of the Tax Act on earnings when calculating EPS under the Annual Incentive
Program. This adjustment resulted in a decrease to EPS under the Annual Incentive Program of approximately $0.66.
Finally, we limit earnings volatility from specified classes ofnon-coupon investments and prepayment fee and call premium income by excluding these earnings that are outside of a range of-10% to +10% from that assumed in our EPS guidance range.annual financial plan. For 2018,2021, this adjustment decreased EPS under the Annual Incentive Program by approximately $3.07 as these earnings significantly exceeded our expectations.
In 2021, our financial plan included a full year of earnings attributable to our Full Service Retirement business that we subsequently agreed to sell and reported in divested and run-off businesses. We added back those earnings that were excluded from EPS as a result. We also excluded from EPS the earnings impact from the unplanned sale of PGIM’s joint venture in Italy. As a result of these M&A adjustments, we decreased EPS under the Annual Incentive Program by approximately $0.07. Other items not considered representative of operating results or included in our annual financial plan are also excluded from EPS under the program. In 2021, we added back to EPS unplanned costs relating to a debt reduction initiative and excluded from EPS underwriting losses due to COVID-19 outside of a forecasted range of mortality results. These adjustments increased EPS under the Annual Incentive Program by approximately $0.15 as these earnings fell below our EPS guidance expectations by more than 10%.$1.39. In the aggregate, these standard adjustments under our preset formulaic framework had a net negative effect of $0.06 to$1.69 on EPS under the Annual Incentive Program. | | | | | | | | | | | | | EPS (January Estimate) | | $ | 14.37 | | | | Actuarial Assumption Updates | | | +0.06 | | | | Variable Investment Income | | | -3.07 | | | | M&A Adjustments | | | -0.07 | | | | Other Items | | | +1.39 | | | | EPS (Annual Incentive Program) | | $ | 12.68 | |
Using EPS and ROE as adjusted above, we take the following steps to calculate the Final Performance Factor: Step 1: Establish EPS Target Factor The following table on the right depicts the EPS scale target range for 2018. This target range2021 which is aligned to our publicly disclosedpre-established EPS guidance range.target. Our adjusted EPS for 20182021 of $11.62$12.68 per share of Common Stock corresponds to an EPS Target Factor of 1.034.1.228. | | | | | | | | | | 2021 EPS | | | EPS Target Factor(1) | | | | | | | | $14.56 or above | | | 1.50 | | | | | | | $11.45 | | | 1.05 | | | | Target Range | | | $11.20 | | | 1.00 | | | | | | | | $10.95 | | | 0.95 | | | | | | | | $7.83 or below | | | 0.50 |
| | | | | | | | | | | | | | | 2018 EPS(1) | | | EPS Target Factor(2) | | | | | | $14.89 or above | | | | 1.50 | | | | | $11.70 | | | | 1.05 | | Target Range | | | $11.45 | | | | 1.00 | | | | | | $11.20 | | | | 0.95 | | | | | | $8.02 or below | | | | 0.50 | |
(1) | Determined on an AOI basis, subject to certain adjustments.
|
(2) | The EPS Target Factor is interpolated on a straight-line basis between the EPS data points.
|
Step 2: Establish EPS GrowthCost Savings Factor The table on the right depicts a range of potential cost savings aligned to our pre-established target of $500 million of cumulative cost savings from transformation initiatives to be achieved by year-end 2021. Our adjusted EPS for 2018run-rate cost savings achieved by year-end 2021 was $11.62 per share of Common Stock, an increase of $0.54 per share from our adjusted EPS of $11.08 for 2017. This$625 million, which corresponds to an EPS Growtha Cost Savings Factor of 1.049.1.375. | | | | Cost Savings (in millions) | | Cost Savings Factor(1) | | | $650 or More | | 1.500 | | | $600 | | 1.250 | | | $500 | | 1.000 | | | $400 | | 0.500 | | | Below $400 | | 0.000 |
Step 3: Establish Relative ROE Factor Our adjusted ROE for 20182021 was 13.5%12.9%, which is 0.20.5 percentage points lowerhigher than the median 20182021 ROE for the North American Life Insurance subset of thePerformance Peer Group. This corresponds to a Relative ROE Factor of 0.983 based1.042. | | | | ROE +/-Peer Median | | Relative ROE Factor(1) | | | 4% or more | | 1.50 | | | 3% | | 1.25 | | | 0% | | 1.00 | | | -3% | | 0.75 | | | 4% or less | | 0.00 |
(1) Interpolated on a straight-line basis between the scale depicted below.data points displayed. | | | | | | | | | | | | | | | | | ROE +/- Peer Median(1) | | | | Relative ROE Factor(2) | | | | | | 3% | | | | 1.25 | | | | | | 2% | | | | 1.17 | | | | | | 1% | | | | 1.08 | | | | | | 0% | | | | 1.00 | | | | | | -1% | | | | 0.92 | | | | | | -2% | | | | 0.83 | | | | | | -3% | | | | 0.75 | | |
(1) | Determined on an AOI basis, subject to certain adjustments as discussed above.
|
(2) | The Relative ROE Factor is interpolated on a straight-line basis between the ROE +/- Peer Median data points.
|
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 51
|
| | |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | Compensation Discussion and Analysis43
| |
Step 4: Determine Final Performance Factor.
Weighting each of the EPS Target Factor (1.034), the EPS Growth Factor (1.049), and the Relative ROE Factor (0.983) byone-third, we arrived at an Initial Performance Factor of 1.022.
Once the Initial Performance Factor is determined, the Board believes it generally should not exercise meaningful discretion to increase the Performance Factor for strategic or other considerations. For the last four years, the Committee has not made any discretionary adjustments based on these considerations.
Based on the foregoing, the Final Performance Factor for 2018 was determined to be 1.022. This factor was then applied to the target award opportunity for each NEO to determine that NEO’s annual incentive award, with minor adjustments primarily due to rounding.
The following table summarizes the calculation of the Final Performance Factor.
Summary of 2018 Performance Factor Mechanics
| | | | | | | | Step 1: Establish EPS Target FactorCompensation Discussion and Analysis
| | | 2018 EPS (on AOI basis)
| | $
| 11.68
|
| Standard adjustments
| | $
| - 0.06
| |
Determination of 2021 Final Performance Factor The table on the right summarizes the calculation of the Final Performance Factor for 2021. | | | | | EPS under Annual Incentive Program | | $
| 11.62
| | EPS of $11.62 translates to an EPS Target Factor of
| | | 1.034(1)1.228
| | | | Step 2: Establish EPS GrowthCost Savings Factor
| | | 2018 EPS (on AOI basis)
| | | $1.375
| 11.68
| | Standard adjustments
| | $
| - 0.06
| | EPS under Annual Incentive Program
| | $
| 11.62
| | 2017 EPS under Annual Incentive Program
| | $
| 11.08
| | EPS Growth under Annual Incentive Program
| | $
| 0.54
| | EPS Growth of $0.54 translates to an EPS Growth Factor of
| | | 1.049
| | | | Step 3 : Establish Relative ROE Factor
| | | 2018 ROE Performance
| | | 1.042 | 13.5%
| | 2018 Peer Median ROE Performance
| | | 13.7%
| | ROE performance as compared to median ROE performance for life insurer peers
| | | -0.2%
| | Unfavorable ROE of -0.2% translates to a Relative ROE
Factor of
| | | 0.983(1)
| | | | Step 4: Determine Final Performance Factor
| | | EPS Target Factor (1.034) times 1/3
| | | 0.345
| | EPS Growth Factor (1.049) times 1/3
| | | 0.349
| | Relative ROE Factor (0.983) times 1/3
| | | 0.328
| | Initial Performance Factor | | | 1.215 | 1.022
| (2) | | | | | | Discretionary Adjustments madeMade by the Committee for 2018 | | | None | | | | Final Performance Factor | | | 1.022 1.215
| |
(1) | Based on interpolation on the scales above.
(2) Average of EPS Target Factor, Cost Savings Factor and Relative ROE Factor. |
Long-Term Incentive Program In order to motivate and reward our executive officers for their contributions toward achieving our business objectives, long-term incentives comprise the majority of each NEO’s target total compensation opportunity, which is linked to our multiyear ROE, adjusted book value and Common Stock performance. In February 2022, the Committee established a target long-term award opportunity for each of the NEOs. To set these long-term award targets, the Committee considered: | ● | | a competitive market analysis of the NEO’s total compensation and the portion of total compensation provided as long-term incentives, relative to similar roles at companies in our Compensation Peer Group; |
| ● | | the Company’s and each NEO’s individual performance and his or her expected future contributions; |
| ● | | the NEO’s level of experience in his or her role; and |
| ● | | retention considerations. |
The values at target of long-term incentives granted to our NEOs in February 2022 are depicted in the table below. 75% of each NEO’s grant was delivered in performance shares and 25% was delivered in restricted stock units (“RSUs”). The number of performance shares (at target) and RSUs awarded to an NEO is determined by dividing the value of the award by the closing market price of our Common Stock on the grant date. | | | | | | Named Executive Officer | | Target Long-Term Award Opportunity | | | | Charles F. Lowrey | | | $12,500,000 | | | | Kenneth Y. Tanji | | | $ 3,600,000 | | | | Robert M. Falzon | | | $10,000,000 | | | | Scott G. Sleyster | | | $ 4,400,000 | | | | Andrew F. Sullivan | | | $ 4,400,000 | |
Burn Rate In assessing our equity grant practices, including the choice and mix of vehicles to use for long-term incentive awards, the Committee considers various factors including market practice and internal measures such as our burn rate. Burn rate is a measure of share usage and it quantifies the rate at which a company is utilizing its share reserve by expressing the number of equity awards granted as a percentage of the weighted-average undiluted number of shares of Common Stock outstanding during the year. Our burn rate for the 2021 fiscal year with regard to our 2021 Omnibus Plan was 0.92%. Performance Shares Performance shares align the majority of our NEOs’ long-term incentives to the achievement of goals that are established each year to drive long-term performance. The Committee selects metrics for the performance shares program that it believes will provide a balanced indication of the Company’s success over each ensuing three-year period. Prior to 2021, the Committee selected ROE relative to both the Company’s financial plan and the performance of life insurer peers, which provided an opportunity for 0-1.25 times the target number of shares to be earned. Beginning in February 2021, we use growth in adjusted book value per share relative to our financial plan as a performance metric (replacing ROE relative to plan). Also, at that time, we expanded our ROE performance peer group and expanded the opportunity range to 0-1.5 times the target number of shares. Additionally, for performance shares granted in February 2021, we reviewed and expanded our inclusion and diversity goals which apply a +/-10% modifier to the plan for our NEOs and other senior leaders. | | | 52
44 | | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | |
| | Compensation Discussion and Analysis | |
|
Annual Incentive Award Decisions for 2018Performance Share Awards
The principal driver ofNEOs currently have three performance share awards outstanding. In February 2022, the actual annual incentiveCommittee granted the performance share awards for the NEOs2022-2024 performance period. The key features of these outstanding awards are: | | | | | | | | | | | | | | | | | | | | | | Performance Measures, Weights, and Targets | | Method to Determine Number of Shares to be Awarded | | | | | | | | 2020-2022 Performance Period | | | | | | | | | | | | | | | | | | Final payout will be 0-1.25 times the target number of shares based: | | | Absolute ROE | | | | Absolute ROE Factor(1) | | | | | | | | ROE +/-Peer Median | | | | Relative ROE Factor(1) | | | | | 14.0% or more | | | | 1.25 | | | | | | | | 3% or more | | | | 1.25 | | ● ½ on average ROE vs. plan | | | 12.5% | | | | 1.00 | | | | | | | | 0% | | | | 1.00 | | ● ½ on average ROE vs. the median ROE of the North American Life Insurance subset of the Compensation Peer Group | | | 11.0% | | | | 0.75 | | | | | | | | -3% | | | | 0.75 | | | | | 10.0% or less | | | | 0.00 | | | | | | | | -4% or less | | | | 0.00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021-2023 Performance Period | | | | | | | | | | | | | | | | | | Final payout will be 0-1.65 times the target number of shares based: | | | BVPS Growth | | | | BVPS Growth Factor(1) | | | | | | | | ROE +/-Peer Median | | | | Relative ROE Factor(1) | | | | | 10.5% or more | | | | 1.50 | | | | | | | | 4% or more | | | | 1.50 | | ● ½ on average annual BVPS growth | | | 7.0% | | | | 1.00 | | | | | | | | 3% | | | | 1.25 | | ● ½ on average ROE vs. the median ROE of the Performance Peer Group ● with an inclusion and diversity modifier of +/-10% based: | | | 3.5% | | | | 0.50 | | | | | | | | 0% | | | | 1.00 | | | | | less than 3.5% | | | | 0.00 | | | | | | | | -3% | | | | 0.75 | | | | | | | | | | | | | | | | | -4% or less | | | | 0.00 | | | | | | | | | | | | | | | | | | | | | | |
| – | | 1/3 on increasing the representation of diverse employees in top positions |
| – | | 1/3 on increasing the representation of diverse employees at one level below Vice President |
| – | | 1/3 on improvements to the lived experience of our Black employees as measured via employee engagement scores |
A positive modifier applies if we achieve or exceed these goals, and a negative modifier applies if we maintain status quo or see a decrease in diverse representation and Black employee engagement, as more fully described and quantified below. | | | | | | | | | | | | | | | | | | | | | | | | | | | 2022-2024 Performance Period | | | | | | | | | | | | | | | | | | Final payout will be 0-1.50 times the target number of shares based: ● ½ on average annual BVPS growth ● ½ on average ROE vs. the median ROE of the Performance Peer Group | | | BVPS Growth | | | | BVPS Growth Factor(1) | | | | | | | | ROE +/-Peer Median | | | | Relative ROE Factor(1) | | | | | 11.5% or more | | | | 1.50 | | | | | | | | 4% or more | | | | 1.50 | | | | | 8% | | | | 1.00 | | | | | | | | 3% | | | | 1.25 | | | | | 4.5% | | | | 0.50 | | | | | | | | 0% | | | | 1.00 | | | | | less than 4.5% | | | | 0.00 | | | | | | | | -3% | | | | 0.75 | | | | | | | | | | | | | | | | | -4% or less | | | | 0.00 | | | | | | | | | | | | | | | | | | | | | | |
2021-2023 Inclusion and Diversity Talent Goals Prudential is committed to improving diverse representation at leadership levels and improving the Final Performance Factor. The Committee also considers individual performancelived experience of our Black colleagues. For 2021-2023, our Inclusion and contributions in determining final awards.Diversity Modifier is determined by averaging factors ranging from -10% to +10% for each of three goals: At the beginning of 2018, Mr. Strangfeld discussed with the Committee, and each other NEO discussed with his manager, the key factors for determining awards under our Annual Incentive Program and the NEO’s expected contributions to that performance.
| | | | | | | | | | | | | | | | | | | 1) Increase the diverse(2) representation among the leaders in our top ~600 U.S. positions by 10% As part of this, increase representation of Black/LatinX employees by at least 25% | | Change in Representation(1) | | | | | | | | Change in Black/LatinX Representation(1) | | | | Increase by 10% or more | | | +5% | | | | 
| | | | Increase by 25% or more | | | | +5% | | | | No Change | | | -5% | | | | Increase by 20% or less | | | | 0% | | | | Decrease by 2% or more | | | -10% | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2) Increase the representation of people of color(3) in U.S. positions one level below Vice President by 8% As part of this, increase representation of Black/LatinX employees by at least 25% | | Change in Representation(1) | | | | | | | | Change in Black/LatinX Representation(1) | | | | Increase by 8% or more | | | +5% | | | |
| | | | Increase by 25% or more | | | | +5% | | | | No Change | | | -5% | | | | Increase by 20% or less | | | | 0% | | | | Decrease by 2% or more | | | -10% | | | | | | | | | | | | | |
| | | | | | | | | | | 3) Close the gap in the employee engagement quotient (EQ) scores of our Black employees relative to other employees (average of EQ scores measured in 2022 & 2023) | | Mr. LowreyGap in EQ Scores of our Black Employees(1)
| | | | | | | | | Improve to 0 points or less | | | +10% | | | | | | | | | | | | | |  | | | | ANNUAL INCENTIVE AWARD DECISION
Consistent with the Final Performance Factor, Mr. Lowrey’s incentive award was $4,100,000, or approximately 1.025 times his target award amount. This award compares to an annual incentive award of $4,440,000 for 2017, representing a decrease of 7.7%.
Of the $4,100,000, $1,230,000 was mandatorily deferred into the Book Value Performance Program.
| | | | | | | | | | | | | | | |
No change (3 points) | | | KEY PERFORMANCE ACHIEVEMENTS-2%
| In assessing the individual performance of Mr. Lowrey, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | | | | | Decline to 5 points or more | | • His individual development that led to execution of the Company’s leadership succession, culminating in the appointment of Mr. Lowrey as Chief Executive Officer effective December 1, 2018;
• His comprehensive succession planning for the International Businesses, including the successful transition of the leadership of the International Businesses to Mr. Sleyster, who replaced Mr. Lowrey as Executive Vice President and Chief Operating Officer, International Businesses, effective December 1, 2018;
• Leading the International Insurance business that earnedpre-tax AOI of $3.3 billion for 2018, a 2% increase from 2017, excluding the impact of changes in currency exchange rates;
• His contributions to the successful adaptation to current market conditions of major product lines serving death protection and retirement needs in our key international markets through multiple distribution channels, including a 16% increase in U.S. dollar product sales in Japan in 2018 compared to 2017;*
• His leadership in growing our Life Planner count by 2% in 2018 compared to 2017, including achieving record levels in Japan and Brazil;
* Sales are based on annualized new business premiums.
| | | -10% | |
| (1) | • His leadership of our Latin America operations that experienced continued business momentum in 2018, includingInterpolated on a straight-line basis between the expansion of distribution capabilities in our Brazil operations;data points displayed.
• His role in the Company’s constructive engagement with international regulators on emerging issues, including his leadership in influencing the development of revised insurance capital standards;
• Continuing to evolve the International Businesses’ strategy by focusing on key markets, including further advancing our business strategy in Africa and completing the sale of our Pramerica of Poland subsidiary; and
• Enhancing collaboration across our International and U.S. Businesses, including expansion of our Financial Wellness platform.
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| (2) | |Our definition of “diverse” includes people of color, women, LGBTQ+, differently-abled, and veterans.
|
| (3) | 53Our definition of “people of color” includes Black, Hispanic, Asian, Pacific Islander, Native American, Alaskan natives, and Hawaiian natives.
|
| | |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | Compensation Discussion and Analysis45
| |
| | | | | | | | | | | | | | | | Mr. Strangfeld
| | | | | | | | | | | | | | | | | | | | | | | | | |  | | | | ANNUAL INCENTIVE AWARD DECISION
Based on the Final Performance FactorCompensation Discussion and the Committee’s evaluation of his performance as CEO during 2018, in February 2019, the Committee recommended, and the independent members of our Board approved, an annual incentive award of $6,132,000 for Mr. Strangfeld for 2018, representing approximately 1.022 times his target award amount. This award compares to an annual incentive award of $6,660,000 for 2017, representing a decrease of 7.9%. Of the $6,132,000, $1,839,600 was mandatorily deferred into the Book Value Performance Program.
| | | | | | | | | | | | | | | | | | Analysis | | KEY PERFORMANCE ACHIEVEMENTS
|
For performance shares, ROE is determined using after-tax AOI divided by adjusted book value and is subject to the standard adjustments described earlier in this CD&A. BVPS growth is defined as the average of the annual growth rates in adjusted book value per share for each year in the performance period. Our calculation of ROE and BVPS is shown in Appendix A. Dividend equivalents are paid retroactively on the lower of (i) the final number of performance shares paid out and (ii) the target number of shares. Performance Share Payouts for the 2019–2021 Performance Period In February 2022, the NEOs received payouts with respect to the performance share and unit awards that were granted in February 2019 for the 3-year performance period ended December 31, 2021. The Committee decided to settle both the performance share and unit awards in Common Stock (aside from a relatively small portion of performance units that the NEOs had previously elected to defer, that remain cash-settled). These awards were paid at 0.937 times the target number of shares and units initially awarded, based 50% on our average ROE performance against our financial plan set at the start of the period and 50% on our average ROE performance relative to the North American Life Insurance subset of our Compensation Peer Group. The earnout factor of 0.937 for these awards was determined as follows: In assessing the individual performance of Mr. Strangfeld as CEO, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| ● | | As of December 31, 2021, our 3-year average ROE was 12.19%, which corresponds to an Absolute ROE Factor of 0.949 based on the scale depicted on the right. |
| | | | Absolute ROE | | Absolute ROE Factor(1) | 14.0% or more | | 1.25 | 12.5% | | 1.00 | 11.0% | | 0.75 | 10.0% or less | | 0.00 |
| ● | | As of September 30, 2021, our 3-year average ROE was 12.5%, which is 0.9 percentage points lower than the median 3-year average ROE for the North American Life Insurance subset of our Compensation Peer Group. This corresponds to a Relative ROE Factor of 0.925 based on the scale depicted on the right. |
| | | | ROE +/-Peer Median | | Relative ROE Factor(1) | 3% or more | | 1.25 | 0% | | 1.00 | -3% | | 0.75 | -4% or less | | 0.00 |
| | | | | | | ● | | • Facilitating the Company’s leadership succession plans, including the appointment of Charles M. Lowrey as Chief Executive OfficerThe 0.949 and Robert M. Falzon as Vice Chairman;
0.925 factors were averaged to arrive at a 0.937 final • After-taxearn-out AOI of $5.02 billion and EPS, based onafter-tax AOI, of $11.69 in 2018, reflecting strong core performance from our businesses. EPS, based onafter-tax AOI, increased 10.5% versus 2017;factor. • Operating return on average equity of 12.7% for 2018, at thehigh-end of our objective of 12% to 13% over the near-to-intermediate term;
• Growth in adjusted book value per share of our Common Stock to $96.06 at December 31, 2018 versus $88.67 per share at December 31, 2017, an increase of $7.39, or 8.3%, after payment of four quarterly dividends totaling $3.60 per share;
• Returned $3.0 billion of capital to shareholders, representing an increase in shareholder distributions of approximately 20% from 2017. The Company has one of the highest dividend yields among its peers and targets the allocation of 65% of earnings over time towards capital distributions and accretive actions;
• For PGIM, 16th consecutive year of positive institutional third-party net flows;
• For Retirement, net flows of $12.6 billion for 2018, including $16 billion of pension risk transfer transactions and record Full Service plan sales;
* Sales are based on annualized new business premiums.
| | | | • Individual Annuities gross sales of $8.3 billion, up 40% from 2017;
• Continued business growth in International Insurance, with constant dollar revenues up 3% from 2017;
• For Group Insurance, gross sales of $559 million, up 27% from 2017;*
• Introduction of new products and rebalancing of product mix in order to adapt to changing market conditions, diversify risks and maintain appropriate returns;
• Continued progress in implementing our U.S. Financial Wellness strategy, including growth in our Prudential Pathways program and the launch of LINK by Prudential, providing customers with a personalized online experience;
• The Company’s constructive engagement and advocacy with U.S. federal, state and international regulators, including its successful advocacy with the Financial Stability Oversight Council and the resulting decision to rescind Prudential’s designation as a nonbank systemically important financial institution; and
• Our successful campaign of corporate and community engagement, including dedicated efforts to revitalize Newark, NJ and to promote education, training and meaningful employment for Veterans and military spouses throughout the U.S.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | The final performance share/unit payouts to the NEOs in February 2022 for the 2019-2021 performance period were: | | | | | | | | Named Executive Officers | | Target Number of
Shares/Units Awarded | | | Actual Number of
Shares/Units Awarded | | | | Charles F. Lowrey | | | 53,342 | | | 49,982 | | | | Kenneth Y. Tanji | | | 16,710 | | | 15,658 | | | | Robert M. Falzon | | | 42,418 | | | 39,747 | | | | Scott G. Sleyster | | | 24,422 | | | 22,884 | | | | Andrew F. Sullivan | | | 8,998 | | | 8,432 |
Restricted Stock Units (RSUs) NEOs receive 25% of their long-term incentive awards in RSUs. One third of the RSUs granted vest in each of the three years following the end of the month in which the grant date occurs. 54
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
46 | | Compensation Discussion and Analysis
| | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
OTHER NEOS
In the case of the other NEOs, Messrs. Lowrey and Strangfeld formulated recommendations for each individual based on the Final Performance Factor and the assessment of their performance and presented these recommendations to the Committee for its consideration. Based on the Final Performance Factor, as well as these recommendations and its own evaluation of their performance, the Committee recommended, and the independent members of our Board approved, the following annual incentive awards for each of the other NEOs:
| | | | | | | | | | | | | | Mr. Tanji
| | | | | | | | | | | | | | | | | | | | | |  | | | | ANNUAL INCENTIVE AWARD DECISION
Mr. Tanji’s incentive award was $1,100,000, or approximately 1.29 times his target award amount. Of the $1,100,000, $110,000 was mandatorily deferred into the Book Value Performance Program.
| |
|
|
| | | | | | | | | | | | | | KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Tanji, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | • His individual development that contributed to the Company’s leadership succession plans, including the appointment of Mr. Tanji as Executive Vice President and Chief Financial Officer effective December 1, 2018;
• His leadership of talent management and succession planning initiatives for the Finance organization, including the successful transition of his prior responsibilities as Senior Vice President
and Treasurer;
• His acumen in capital management and cash flow planning, including the return of $3.0 billion to shareholders during 2018 through our share repurchase program and Common Stock dividends, representing an increase in shareholder distributions of approximately 20% from 2017. The Company has one of the highest dividend yields among its peers and targets the allocation of 65% of earnings over time towards capital distributions and accretive actions;
| | | | • His effective oversight of our liquidity position, including $5.5 billion of highly liquid assets* at the parent company level at December 31, 2018;
• His leadership of strategies to manage the impacts of the Tax Cuts and Jobs Act on our statutory capital and financial leverage position;
• His role in the Company’s constructive engagement with state insurance regulators, including facilitating the completion of their first consolidated group-wide examination of Prudential with no reportable findings; and
• His key role in management of the statutory capital position of our insurance companies, resulting in capital above our “AA” financial strength targeted levels for our major U.S. insurance subsidiaries and strong solvency margins in our international insurance subsidiaries as of December 31, 2018.
| | | | | | | * Predominantly includes cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds; excludes cash held in an intra-company liquidity account at Prudential Financial, Inc.
| | | | | | | | | | | | | | | |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 55
|
| | |
| | Compensation Discussion and Analysis | |
|
| | | | | | | | | | | | | Mr. Falzon
| | | | | | | | | | | | | | | | | | | | | |  | | | | ANNUAL INCENTIVE AWARD DECISION
Consistent
Book Value Performance Program Beginning with the Final Performance Factor, Mr. Falzon’s annual incentive award was $3,070,000, or approximately 1.023 times his target award amount. This award compares to an annual incentive award of $3,330,000 for 2017, representing a decrease of 7.8%. Of the $3,070,000, $921,000 was mandatorily deferred into the Book Value Performance Program. | |
|
|
| | | | | | | | | | | | | | KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Falzon, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | | | | | | • His individual development that led to execution of the Company’s overall leadership succession plans, including the appointment of Mr. Falzon as Vice Chairman effective December 1, 2018;
• His leadership of talent management and succession planning initiatives for the Finance organization, including the successful transition of his prior responsibilities as Chief Financial Officer to Mr. Tanji, effective December 1, 2018;
• After-tax AOI of $5.02 billion and EPS, based onafter-tax AOI, of $11.69 in 2018, reflecting strong core performance from our businesses. EPS, based onafter-tax AOI, increased 10.5% versus 2017;
• Operating return on average equity of 12.7% for 2018, at thehigh-end of our objective of 12% to 13% over the near-to-intermediate term;
• His acumen in capital management and cash flow planning, including the return of $3.0 billion to shareholders during 2018, through our share repurchase program and Common Stock dividends. The Company has one of the highest dividend yields
| | | | among its peers and targets the allocation of 65% of earnings over time towards capital distributions and accretive actions;
• His key role in management of the statutory capital position of our insurance companies, resulting in capital above our “AA” financial strength targeted levels for our major U.S. insurance subsidiaries and strong solvency margins in our international insurance subsidiaries as of December 31, 2018;
• His effective oversight of our liquidity position, including $5.5 billion of highly liquid assets* at the parent company level at December 31, 2018;
• His effective supervision of internal financial and accounting functions as Chief Financial Officer; and
• His leadership in the Company’s ongoing engagement and advocacy with U.S. federal, state and international regulators, including its successful advocacy with the Financial Stability Oversight Council and the resulting decision to rescind Prudential’s designation as a nonbank systemically important financial institution.
| | | | | | | * Predominantly includes cash, short-term investments, U.S. Treasury securities, obligations of other U.S. government authorities and agencies, and/or foreign government bonds; excludes cash held in an intra-company liquidity account at Prudential Financial, Inc.
| | | | | | | | | | | | | | | |
| | | | | | | | 56
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Compensation Discussion and Analysis
| |
| | | | | | | | | | | | | | | Mr. Grier
| | | | | | | | | | | | | | | | | | | | | |  | | | | ANNUAL INCENTIVE AWARD DECISION
Consistent with the Final Performance Factor, Mr. Grier’s incentive award was $5,200,000, or approximately 1.020 times his target award amount. This award compares to an annual incentive award of $5,660,000 for 2017, representing
a decrease of 8.1%. Of the $5,200,000, $1,560,000 was mandatorily deferred into the Book Value Performance Program.
| | | | | | | | | | | | | | | | | | KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Grier, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | • After-tax AOI of $5.02 billion and EPS, based onafter-tax AOI, of $11.69 in 2018, reflecting strong core performance from our businesses. EPS, based onafter-tax AOI, increased 10.5% versus 2017;
• Operating return on average equity of 12.7% for 2018, at thehigh-end of our objective of 12% to 13% over the near-to-intermediate term;
• Growth in adjusted book value per share of our Common Stock to $96.06 at December 31, 2018, versus $88.67 per share at December 31, 2017, an increase of $7.39, or 8.3%, after payment of four quarterly dividends totaling $3.60 per share;
• His leadership in enhanced capital management, including the return of $3.0 billion to shareholders during 2018, through our share repurchase program and Common Stock dividends, representing an increase in shareholder distributions of approximately 20% from 2017;
| | | | • His oversight of risk management, including the continued implementation of new risk management frameworks and risk mitigation initiatives;
• Facilitating the Company’s leadership succession, including the ongoing transition of his responsibilities to Mr. Falzon; and
• His successful service as spokesman for both our Company and industry regarding the evolving regulatory initiatives affecting the insurance and financial services industries,
and his leadership of the Company’s advocacy with the Financial Stability Oversight Council concerning the rescinding of Prudential’s designation as a nonbank systemically important financial institution.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 57
|
| | |
| | Compensation Discussion and Analysis
| |
| | | | | | | | | | | | | | | Mr. Pelletier
| | | | | | | | | | | | | | | | | | | | | |  | | | | ANNUAL INCENTIVE AWARD DECISION
Consistent with the Final Performance Factor, Mr. Pelletier’s incentive award was $4,100,000, or approximately 1.025 times his target award amount. This award compares to an annual incentive award of $4,700,000 for 2017, representing a decrease of 12.8%. Of the $4,100,000, $1,230,000 was mandatorily deferred into the Book Value Performance Program.
| | | | | | | | | | | | | | | | | | KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Pelletier, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | • His leadership of the U.S. Businesses and implementation of our Financial Wellness strategy, including:
• the launch of LINK by Prudential, providing customers with a personalized online experience;
• growth in our Prudential Pathways program; and
• enhanced customer engagement strategies such as a digital financial wellness platform;
• For PGIM, 16th consecutive year of positive institutional third-party net flows;
• Retirement net flows of $12.6 billion for 2018, including the continued expansion of our leading position in the pension risk transfer market, with $16 billion of pension risk transfer transactions in 2018 and record Full Service plan sales in 2018;
* Sales are based on annualized new business premiums.
| | | | • Individual Annuities gross sales of $8.3 billion, up 40% from 2017;
• Enhancing collaboration across our U.S. and International Businesses, including expansion of our Financial Wellness platforms;
• For Group Insurance, gross sales of $559 million, up 27% from 2017;*
• His role in the introduction of new products and rebalancing of product mix in order to adapt to changing market conditions, diversify risks and maintain appropriate returns; and
• His role in talent management and succession planning for the U.S. Businesses, including the transition of several new leadership positions within the organization.
| | | | | | | | | | | | | |
| | | | | | | | 58
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Compensation Discussion and Analysis
| |
| | | | | | | | | | | | | | | Mr. Sleyster
| | | | | | | | | | | | | | | | | | | | | | 
| | | | ANNUAL INCENTIVE AWARD DECISION
Mr. Sleyster’s incentive award was $1,800,000, or approximately 1.17
times his target award amount. Of the $1,800,000, $180,000 was mandatorily deferred into the Book Value Performance Program.
| | | | | | | | | | | | | | | | | | KEY PERFORMANCE ACHIEVEMENTS
In assessing the individual performance of Mr. Sleyster, the Committee identified and examined a broad range of corporate and individual performance factors, including:
| | | | | | | • His individual development that contributed to the Company’s leadership succession, including the appointment of Mr. Sleyster as Executive Vice President and Chief Operating Officer, International Businesses effective December 1, 2018 and the successful transition of the role of Chief Investment Officer;
• His role as Chief Investment Officer and leadership of the overall investment function during 2018, including the generation of net investment income (excludingnon-coupon investments and prepayment fee and call premium income) of $3.3 billion in 2018, an increase of 4% from 2017;
• His oversight of the Company’s variable annuities hedging program and other risk mitigation initiatives;
• His partnership with the Company’s businesses on numerous product enhancements and the development of comprehensive asset/liability matching strategies for all product offerings;
| | | | • His leadership in growing the Company’s alternative asset strategy, which has included investments in limited partnerships and limited liability companies, real estate, derivative instruments and other investments;
• His role in supporting strategic priorities of the International Businesses, including the advancement of our business strategy in Asia and Africa; and
• His leadership in integratingESG-related investment initiatives into the investment function and leading anESG-based dialogue across our businesses.
| | | | | | | | | | | | | |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 59
|
| | |
| | Compensation Discussion and Analysis
| |
Long-Term Incentive Program
We provide a long-term incentive opportunity to motivate and reward our executive officers for their contributions toward achieving our business objectives by tying these incentives to the performance of our Common Stock and book value over the long term, to further reinforce the link between the interests of our executive officers and our shareholders, and to motivate our executive officers to improve our multiyear financial performance.
TARGET AWARD OPPORTUNITIES
In February 2019, the Committee established a target long-term award opportunity for each of the NEOs (other than Mr. Strangfeld). To set these long-term award targets, the Committee considered:
a competitive market analysis of the NEO’s total compensation and the portion of total compensation provided as long-term incentives, relative to similar roles at companies in our compensation peer group;
the NEO’s individual performance and his or her expected future contributions;
the NEO’s level of experience in his or her role; and
retention considerations.
The specific long-term target award opportunity for each NEO (other than Mr. Strangfeld) is as follows:
| | | | | | | Named Executive Officers | | Target Long-Term
Award Opportunity
| | | | Charles F. Lowrey | | | $8,300,000 | | | | Kenneth Y. Tanji | | | $2,600,000 | | | | Robert M. Falzon | | | $6,600,000 | | | | Mark B. Grier | | | $8,000,000 | | | | Stephen Pelletier | | | $4,750,000 | | | | Scott G. Sleyster | | | $3,800,000 | | | |
Our practice is to grant long-term incentive awards annually in the form of a balanced mix of performance shares and units, stock options, and book value units to our officers at the level of senior vice president and above, including the NEOs, in amounts that are consistent with competitive practice.
The mix of long-term incentives granted in 2019 to the NEOs is shown in the table below:
| | | | | Performance Shares and Units | | | 60 | % | Stock Options | | | 20 | % | Book Value Units | | | 20 | % |
Long-term incentive awards may also be granted when an individual is promoted to a senior executive position to recognize the increase in the scope of his or her role and responsibilities. From time to time, we may make special awards in the form of restricted stock units to recognize major milestones, or selective awards in situations involving a leadership transition.
In addition, for all long-term incentive awards granted prior to 2019, the total payout amount to any NEO subject, or who would have otherwise been subject, to Section 162(m) may not exceed 0.4% of the highestpre-tax AOI reported for any of the three fiscal years ended prior to the year of payment, provided that there is positive AOI in at least one fiscal year during which the award is outstanding for at least 276 days of that year.
| | | | | | | | 60
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Compensation Discussion and Analysis
| |
PERFORMANCE SHARES AND UNITS
Performance shares and units align the majority of our long-term incentive values to: (i) the achievement of our ROE objective and (ii) our relative ROE performance as compared to our life insurer peers,grants in each case over a three-year performance period. Award payouts generally range from 0% to 125% of the target number of shares and units. For the February 2016 awards with respect to the 2016 to 2018 performance period, the preliminary payout was based on the average ROE achievement over the three-year performance period relative to the goals set at the start of the period as established by the Committee, subject to a relative performance modifier. The modifier provides a balance between absolute performance and performance relative to the North American Life Insurance subset of the Peer Group and is based on the Company’s three-year performance in ROE,2021, we incorporated adjusted book value per share growth and EPS growth. The modifier increased or decreased the award payment by up to 10% within the 0% to 125% range.
For the remaining awards, the preliminary payout is based on two equally weighted financial metrics: (i) average ROE achievement over the three-year performance period relative to the goals set at the start of the period(“BVPS”) as established by the Committee and (ii) average ROE achievement over the three-year performance period relative to the median ROE results over this period of the North American Life Insurance subset of the Peer Group. This methodology for thea metric in our performance shares and units program further solidifies the balance between absolute performance and performance relative to our life insurer peers. Accordingly,with pre-established targets for growth over a three-year period. This replaces the use of cash-settled book value units that were previously granted under our Book Value Performance Program. We also discontinued the mandatory deferral of a relative performance modifier was eliminated starting with the February 2017 awards.
In addition, the February 2018portion of annual incentive awards with respectinto book value units. Nevertheless, portions of previously granted book value units vested and were paid to the 2018 to 2020 performance period granted to officers atNEOs in 2021, and additional cash payouts on these book value units will continue through February 2023.
Under the senior vice president level and above and equivalents (including the NEOs) are subject to a modifier that can increase (or decrease) the payout by up to 10% based on the achievement of our diversity and inclusion goals over the three-year performance period. Performance unit awards are denominated in share equivalents and have the same value as the performance share awards on the award payment date. Dividend equivalents are paid retroactively on the final number of performance shares and units paid out, up to the target number of shares and units.
ROE is determined usingafter-tax AOI divided by adjusted book value. The ROE figures are also subject to standard adjustments as part of our formulaic framework.
While the program allows the Committee to make a discretionary adjustment by up to 15% of the earned shares and units based on quantitative and qualitative factors, the Committee has rarely exercised discretion and did not exercise discretion for the 2016 awards that paid out in February 2019.
STOCK OPTIONS
Stock options provide value based solely on stock price appreciation. Stock options are granted with a maximum term of 10 years.One-third of the option grants vest on each of the first three anniversaries of the date of grant. The exercise price is based on the closing market price of a share of our Common Stock on the NYSE on the date of grant.
BOOK VALUE PERFORMANCE PROGRAM
The Book Value Performance Program, is intended to link the incentive payments to adjusted book value per share—a key metric in valuing insurance companies, banks, and investment firms that is closely followed by investors. Wewe calculate adjusted book value per shareBVPS by dividing our adjusted book value by the number of shares of our Common Stockdiluted shares outstanding. Our calculations of adjusted book value and adjusted book value per share, as described in Appendix A to this Proxy Statement,BVPS exclude certain balance sheet items that are not, and may never be, reflected in the income statement.statement, as described in Appendix A. Unlike the financial measures based on AOI that are used in other aspects of our executive compensation program, the adjusted book value per shareBVPS metric takes into consideration realized gains and losses in our investment portfolio.
The Tax Cuts and Jobs Act enacted in December 2017 has had a beneficial impact on our adjusted book value due to the remeasurement of net deferred tax liabilities resulting from the reduction in the U.S. tax rate. The Committee excludes this benefit from the calculation of adjusted book value per share for purposes of valuing the book value units that were granted prior to enactment of the Tax Cuts and Jobs Act.
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 61
|
| | |
| | Compensation Discussion and Analysis
| |
The key features of the Book Value Performance Program for our NEOs are:
Awards are granted and denominated in book value units that are funded from two sources:
| | – | | | | | Adjusted Book Value Per Share 12/31/20 | | | $94.79 | | | BVPS increases (or decreases) as a result of the allocation of 20% of a participant’s long-term incentive award value forCompany’s net income (or loss). BVPS decreases when the year as determined by the Committee; andCompany pays dividends on its Common Stock. BVPS may also increase or decrease due to other items, including share repurchase activity. |
| – | | a mandatory deferral of 30% of their annual incentive award.
|
Once granted, these units track the value of adjusted book value per share of our Common Stock, which excludes(1) Excluding total accumulated other comprehensive income and thenon-economic effects of foreign currency exchange rate remeasurement ofnon-yen liabilities and assets included in net income or loss.
One-third of a participant’s annual award of book value units is distributed in cash in each of the three years following the year of grant.
(1) | Excluding total accumulated other comprehensive income, the cumulative impact of gains and losses resulting from foreign currency exchange rate remeasurement and the remeasurement of certain deferred taxes included in net income.remeasurement.
|
(2) | December 31, 2017 amount has been revised as a result of the elimination of Gibraltar Life’sone-month reporting lag in 2018.
|
(3) | Does not include the impact of changes in share count or adjustments to earnings for purposes of calculating diluted earnings per share. |
(4) | (3) Includes realized investment gains and losses and related charges and adjustments, and results from divested and run-off businesses. businesses, and other impacts. |
(5) | (4) Includes amounts related to the cumulative effect of changes in accounting principlesstock based compensation programs and foreign currency exchange rate remeasurement formerly recorded in accumulated other comprehensive income. |
| | | | (6) | Used for grantsAdjusted Operating Income(2)
| | | $14.58 | | | Other Earnings ltems(3) | | | $4.93 | | | Net lncome(2) | | | $19.51 | | | Dividends | | | $(4.60) | | | Share Repurchases | | | $0.49 | | | Other(4) | | | $(1.47) | | | = Change in Adjusted Book Value Per Share | | | $13.93 | | | Adjusted Book Value Per Share 12/31/21 | | | $108.72 | | | * For a reconciliation of book value units made priorAdjusted Book Value to the enactment of the Tax Cuts and Jobs Act in December 2017.most comparable GAAP measure, see Appendix A to this Proxy Statement. | | | | |
For a reconciliation of Adjusted Book Value to the most comparable GAAP measure, see Appendix A to this Proxy Statement.
| | | | | | | | | | | | | | 62
| | |
| | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Compensation Discussion and Analysis
| |
The NEOs’ awards, distributions and accumulated holdings under the Book Value Performance Program are as follows: | | | | | Number of Book
Value Units
Held at
January 1, 2018
(#) | | Value of Book
Value Units Held at
January 1, 2018(¹)
($) | | Value of Book Value
Units
Distributed in 2018(²)
($) | | Number of Book
Value Units
Awarded in 2018
(#) | | Value of Book
Value Units
Awarded in 2018(³)
($) | | Number of Book
Value Units Held at
December 31, 2018
(#) | | Value of Book
Value Units Held at
December 31,
2018(4) ($) | | | Name | | | Number of Book
Value Units Held at January 1, 2021 (#) | | | Value of Book
Value Units Held at
January 1, 2021(1)($) | | | Value of Book
Value Units
Distributed in 2021(2)($) | | | Number of Book
Value Units Held at
December 31, 2021(#) | | | Value of Book
Value Units Held at
December 31, 2021(3)($) | | | Charles F. Lowrey | | 60,942 | | | 5,212,979 | | | 2,764,738 | | | 25,851 | | | 2,282,126 | | | 54,472 | | | 5,116,665 | | | | 58,542 | | | | 5,549,196 | | | | 2,710,994 | | | | 29,942 | | | 3,255,294 | | | John R. Strangfeld | | 103,036 | | | 8,813,699 | | | 4,611,376 | | | 66,298 | | | 5,998,170 | | | 115,425 | | | 10,888,761 | | | | | Kenneth Y. Tanji | | 7,824 | | | 669,265 | | | 349,602 | | | 3,733 | | | 329,549 | | | 7,470 | | | 702,433 | | | | 15,725 | | | | 1,490,573 | | | | 644,572 | | | | 8,925 | | | 970,326 | | | Robert M. Falzon | | 43,996 | | | 3,763,418 | | | 1,925,249 | | | 20,380 | | | 1,799,146 | | | 41,869 | | | 3,934,906 | | | | 46,399 | | | | 4,398,161 | | | | 2,141,117 | | | | 23,811 | | | 2,588,732 | | | Mark B. Grier | | 85,174 | | | 7,285,784 | | | 3,816,282 | | | 37,360 | | | 3,298,141 | | | 77,920 | | | 7,320,727 | | | | | Stephen Pelletier | | 53,692 | | | 4,592,814 | | | 2,358,338 | | | 26,734 | | | 2,360,078 | | | 52,856 | | | 4,971,553 | | | | | Scott G. Sleyster | | 21,765 | | | 1,861,778 | | | 915,192 | | | 12,370 | | | 1,092,024 | | | 23,436 | | | 2,206,445 | | | | 25,045 | | | | 2,374,016 | | | | 1,154,921 | | | | 12,861 | | | 1,398,248 | | Andrew F. Sullivan | | | | 13,749 | | | | 1,303,268 | | | | 596,040 | | | | 7,461 | | | 811,160 |
| (1) | Represents the aggregate market value of the number of book value units held at January 1, 20182021 obtained by multiplying the book value per shareBVPS of $85.54$94.79 as of December 31, 20172020 by the number of book value units outstanding.outstanding for units granted in 2019 and 2020, and multiplying BVPS (adjusted for the Tax Act) of $96.68 by the number of outstanding book value units granted prior to 2018. |
| (2) | Represents the aggregate market value distributed on March 2, 2018 for all NEOs.in 2021. |
| (3) | Represents the aggregate market value awarded on February 13, 2018 for all NEOs, and November 30, 2018 for Mr. Strangfeld.
|
(4) | Represents the aggregate market value of the number of book value units held at December 31, 2018,2021 obtained by multiplying the book value per shareBVPS of $96.06$108.72 as of December 31, 2021 by the number of outstanding book value units granted in 2018, and multiplying the book value per share (adjusted for tax reform legislation) of $92.01 by the number of outstanding book value units granted prior to 2018.outstanding. |
LONG-TERM INCENTIVE AWARD DECISIONS FOR 2018
In connection with the retirement of John R. Strangfeld as CEO, in November 2018, the Committee granted a long-term incentive award to Mr. Strangfeld for the 2018 performance year of $10 million to reward performance and long-term value creation. The award is equal to the target long-term incentive award opportunity established by the Committee for Mr. Strangfeld for 2018. In approving this award, the Committee considered a number of factors, including Mr. Strangfeld’s nearly full year of service in 2018, his long service as a high performing CEO, his agreement to remain on the Board through a transition period ending on April 5, 2019 and his key role in supporting a smooth leadership succession, which the Committee and the Board believe will drive continued value creation.
In February 2019, the Committee granted long-term incentive awards to each of the NEOs other than Mr. Strangfeld. The award amount was based upon the competitive analysis of long-term incentive compensation and total direct compensation for each of the NEOs. To determine the amount of the specific long-term incentive award for each NEO, the Committee considered each individual’s performance during 2018 and market data for the comparable executive officer position at the companies in the Peer Group, as well as his or her potential future contributions to the Company, the current value of prior year long-term incentive awards and retention considerations.
These awards, including Mr. Strangfeld’s award, were granted in the form of performance shares (30%), performance units (30%), stock options (20%), and book value units (20%) under the Book Value Performance Program (in addition to the mandatory deferral of 30% of each NEO’s annual incentive award under this program). With respect to the NEOs (other than Mr. Strangfeld, whose award is discussed below), the Committee determined that this long-term incentive mix would appropriately reward the NEOs for their 2018 performance, motivate them to work towards achieving our long-term objectives, further reinforce the link between their interests and the interests of our shareholders, and provide a balanced portfolio composed of performance shares and units (which provide value based upon attainment of specific performance goals and performance relative to peers), stock options (which provide value based solely on stock price appreciation) and book value units (which provide value based on changes in our adjusted book value per share).
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 63
|
| | |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | Compensation Discussion and Analysis47
| |
The following table presents the long-term incentive awards granted to Mr. Strangfeld in November 2018 and to each other NEO in February 2019, including our Book Value Performance Program, and includes the mandatory deferrals of 30% of their annual incentive award. Awards are expressed as target compensation dollar values in the table. The 2019 awards generally will not be reported in the Summary Compensation Table until the 2020 Proxy Statement. For discussion of the long-term incentive awards granted in February 2018 for 2017 performance and included in this year’s Summary Compensation Table, see the CD&A in our 2018 Proxy Statement.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Named Executive Officer | |
| Compensation Value of
Book Value Units(1) |
| |
| Compensation Value of
Stock Options |
| |
| Compensation Value of
Performance Shares |
| |
| Compensation Value of
Performance Units |
| | | Total | | Charles F. Lowrey | | | 2,890,000 | | | | 1,660,000 | | | | 2,490,000 | | | | 2,490,000 | | | | 9,530,000 | | | | | | | | John R. Strangfeld | | | 3,839,600 | | | | 2,000,000 | | | | 3,000,000 | | | | 3,000,000 | | | | 11,839,600 | | | | | | | | Kenneth Y. Tanji | | | 630,000 | | | | 520,000 | | | | 780,000 | | | | 780,000 | | | | 2,710,000 | | | | | | | | Robert M. Falzon | | | 2,241,000 | | | | 1,320,000 | | | | 1,980,000 | | | | 1,980,000 | | | | 7,521,000 | | | | | | | | Mark B. Grier | | | 3,160,000 | | | | 1,600,000 | | | | 2,400,000 | | | | 2,400,000 | | | | 9,560,000 | | | | | | | | Stephen Pelletier | | | 2,180,000 | | | | 950,000 | | | | 1,425,000 | | | | 1,425,000 | | | | 5,980,000 | | | | | | | | Scott G. Sleyster | | | 940,000 | | | | 760,000 | | | | 1,140,000 | | | | 1,140,000 | | | | 3,980,000 | | | | | | | |
(1) | Includes amounts that were mandatorily deferred from the Annual Incentive Program (10% for Messrs. Tanji and Sleyster; 30% for other NEOs) that total $1,230,000 for Mr. Lowrey, $1,839,600 for Mr. Strangfeld; $110,000 for Mr. Tanji, $921,000 for Mr. Falzon; $1,560,000 for Mr. Grier; $1,230,000 for Mr. Pelletier, and $180,000 for Mr. Sleyster.
|
PERFORMANCE SHARE AND PERFORMANCE UNIT AWARDS
The NEOs currently have three performance share and unit awards outstanding. In February 2019 (or November 2018, in the case of Mr. Strangfeld), the Committee granted the performance share and unit awards for the 2019 to 2021 performance period. The key features of these three awards are as follows:
| | | | | | | | | | | | | | Performance
Period
| | Performance
Measures
| | Performance Measure
Targets
| | Shares/Units to Be Awarded
Relative to Performance
Measure Targets
| | Actual Number of Shares/Units Awarded
| 2017–2019 | | - ROEand
- Relative ROE versus life
insurer peer group
Weighted equally
| | Average ROE of 12% for the performance period
and
Average ROE equal to the median performance of the North American Life Insurance subset of the Peer Group for the performance period
| | ROE Measure
0% at 9.5% ROE or below
100% at target ROE of 12%
125% at 13.5% ROE or above
Relative ROE Measure
0% if relative ROE trails peer group by 4% or more
100% if relative ROE equals peer group
125% if relative ROE exceeds peer group by 3% or more
| | Between 0% and 125% of the target award opportunity based on:
• average ROE relative to performance measure targets (as shown to the left)
and
• average ROE relative to the median performance of the North American Life Insurance subset of the Peer Group (as shown to the left)
To be determined by the Committee in February 2020
| 2018–2020 | | - ROEand
- Relative ROE versus life
insurer peer group
Weighted equally
- Diversity and Inclusion
Objective
| | Average ROE of 12.5% for the performance period
and
Average ROE equal to the median performance of the North American Life Insurance subset of the Peer Group for the performance period
Diversity and Inclusion Objective:
Improve representation of diverse persons in senior management by 5 percentage points over 2018 through 2020 performance period
| | ROE Measure
0% at 10% ROE or below
100% at target ROE of 12.5%
125% at 14% ROE or above
Relative ROE Measure
0% if relative ROE trails peer group by 4% or more
100% if relative ROE equals peer group
125% if relative ROE exceeds peer group by 3% or more
Employee Diversity
–10% if representation decreases by 2 percentage points or more
–5% if no change in representation
+10% if representation increases by 5 percentage points or more
| | Between 0% and 137.5% of the target award opportunity based on:
• average ROE relative to performance measure targets (as shown to the left)
and
• average ROE relative to the median performance of the North American Life Insurance subset of the Peer Group (as shown to the left)
and
• change in the representation of diverse persons in senior management (as shown to the left)
To be determined by the Committee in February 2021
| 2019–2021 | | - ROEand
- Relative ROE versus life
insurer peer group
Weighted equally
| | Average ROE of 12.5% for the performance period
and
Average ROE equal to the median performance of the North American Life Insurance subset of the Peer Group for the performance period
| | ROE Measure
0% at 10% ROE or below
100% at target ROE of 12.5%
125% at 14% ROE or above
Relative ROE Measure
0% if relative ROE trails peer group by 4% or more
100% if relative ROE equals peer group
125% if relative ROE exceeds peer group by 3% or more
| | Between 0% and 125% of the target award opportunity based on:
• average ROE relative to performance measure targets (as shown to the left)
and
• average ROE relative to the median performance of the North American Life Insurance subset of the Peer Group (as shown to the left)
To be determined by the Committee in February 2022
|
| | | | | 64 | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement |
| | |
| | Compensation Discussion and Analysis
| |
Performance Goals
The Performance Shares and Units Program aligns long-term compensation to the achievement of our multiyear ROE goals and our relative performance as compared to our North American life insurer peers. Under the 2017-2019 program, our target ROE objective was 12%. Based on updated multiyear ROE projections that consider the estimated impact of the Tax Cuts and Jobs Act, the target ROE objective under the 2018-2020 and 2019-2021 programs was increased to 12.5%. As indicated in the previous table, the threshold level of ROE performance to earn any award, and the ROE achievement required to earn a maximum award, have been aligned to these changes in our multiyear ROE goals.
For awards granted for the 2016-2018 and 2017-2019 performance periods, the Committee excluded the impact of the Tax Cuts and Jobs Act from the calculation of the Company’s ROE for 2017 and 2018 and expects to similarly exclude this impact from the ROE calculations for 2019.
2016-2018 Performance Period
In February 2019, the NEOs received payouts with respect to the performance share and unit awards that were granted in February 2016 for the three-year performance period ended December 31, 2018. These awards were paid at 1.142 times the target number of shares and units initially awarded based on our average ROE relative to our ROE targets for the
three-year performance period, and adjusted for the relative performance modifier.
| | | | | | | | Average ROE over
the 2016-2018
Performance Period
| | Goal:
| | | 13.0%
| | Actual(1):
| | | 13.35%
| | Earnout Factor:
| | | 1.142 | |
(1) | Actual figures are subject to standard adjustments as under the Annual Incentive Program for each year.
|
The final award payments to the NEOs in February 2019 for the 2016 to 2018 performance period were:
| | | | | | | | | | | | | | Named Executive Officers | | Target
Number of
Shares/Units
Awarded(1) | | Actual
Number of
Shares/Units
Awarded(1) | Charles F. Lowrey | | | | 39,480 | | | | | 45,088 | | John R. Strangfeld | | | | 83,116 | | | | | 94,920 | | Kenneth Y. Tanji | | | | 5,818 | | | | | 6,646 | | Robert M. Falzon | | | | 33,246 | | | | | 37,968 | | Mark B. Grier | | | | 66,492 | | | | | 75,934 | | Stephen Pelletier | | | | 37,402 | | | | | 42,714 | | Scott G. Sleyster | | | | 21,610 | | | | | 24,680 | |
(1) | Target and actual number of awards are 50% shares and 50% units.
|
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 65
|
| | |
| | Supplemental Compensation Analysis
| |
Supplemental Compensation Analysis
TOTAL DIRECT COMPENSATION
The following table illustrates the Committee’s perspective on the total direct compensation (base salary, annual incentive award, and long-term incentives) of the NEOs for the 2017 and 2018 performance years. This table is not a substitute for the compensation tables required by the SEC and included under “Executive Compensation” contained in this Proxy Statement. However, we believe it provides a more accurate picture of how the Committee viewed its compensation actions for the NEOs based on our performance for each of these two years:
| | | | | | | | | | | | | | | | | | | | | Named Executive Officer | | | | | | | | 2017
Compensation | | | 2018
Compensation | | | Percentage
Change | | Charles F. Lowrey | | | | | | | | | | | | | | | | | | | | | Base Salary | | | | | | | | | | | $ 770,000 | | | | $ 1,200,000 | (¹) | | | 55.84% | | Annual Incentive | | | | | | | | | | | $ 4,440,000 | (²) | | | $ 4,100,000 | (³) | | | -7.66% | | Long-Term Incentive(4) | | | | | | | | | | | $ 4,750,000 | | | | $ 8,300,000 | | | | 74.74% | | Total | | | | | | | | | | | $ 9,960,000 | | | | $13,600,000 | | | | 36.55% | | John R. Strangfeld | | | | | | | | | | | | | | | | | | | | | Base Salary | | | | | | | | | | | $ 1,400,000 | | | | $ 1,400,000 | (¹) | | | 0.00% | | Annual Incentive | | | | | | | | | | | $ 6,660,000 | (²) | | | $ 6,132,000 | (³) | | | -7.93% | | Long-Term Incentive(4) | | | | | | | | | | | $10,000,000 | | | | $10,000,000 | | | | 0.00% | | Total | | | | | | | | | | | $18,060,000 | | | | $17,532,000 | | | | -2.92% | | Kenneth Y. Tanji(5) | | | | | | | | | | | | | | | | | | | | | Base Salary | | | | | | | | | | | — | | | | $ 600,000 | (¹) | | | — | | Annual Incentive | | | | | | | | | | | — | | | | $ 1,100,000 | (³) | | | — | | Long-Term Incentive(4) | | | | | | | | | | | — | | | | $ 2,600,000 | | | | — | | Total | | | | | | | | | | | — | | | | $ 4,300,000 | | | | — | | Robert M. Falzon | | | | | | | | | | | | | | | | | | | | | Base Salary | | | | | | | | | | | $ 770,000 | | | | $ 1,000,000 | (¹) | | | 29.87% | | Annual Incentive | | | | | | | | | | | $ 3,330,000 | (²) | | | $ 3,070,000 | (³) | | | -7.81% | | Long-Term Incentive(4) | | | | | | | | | | | $ 4,000,000 | | | | $ 6,600,000 | | | | 65.00% | | Total | | | | | | | | | | | $ 8,100,000 | | | | $10,670,000 | | | | 31.73% | | Mark B. Grier | | | | | | | | | | | | | | | | | | | | | Base Salary | | | | | | | | | | | $ 1,190,000 | | | | $ 1,190,000 | | | | 0.00% | | Annual Incentive | | | | | | | | | | | $ 5,660,000 | (²) | | | $ 5,200,000 | (³) | | | -8.13% | | Long-Term Incentive(4) | | | | | | | | | | | $ 8,000,000 | | | | $ 8,000,000 | | | | 0.00% | | Total | | | | | | | | | | | $14,850,000 | | | | $14,390,000 | | | | -3.10% | | Stephen Pelletier | | | | | | | | | | | | | | | | | | | | | Base Salary | | | | | | | | | | | $ 770,000 | | | | $ 770,000 | | | | 0.00% | | Annual Incentive | | | | | | | | | | | $ 4,700,000 | (²) | | | $ 4,100,000 | (³) | | | -12.77% | | Long-Term Incentive(4) | | | | | | | | | | | $ 4,750,000 | | | | $ 4,750,000 | | | | 0.00% | | Total | | | | | | | | | | | $10,220,000 | | | | $ 9,620,000 | | | | -5.87% | | Scott G. Sleyster(5) | | | | | | | | | | | | | | | | | | | | | Base Salary | | | | | | | | | | | — | | | | $ 700,000 | (¹) | | | — | | Annual Incentive | | | | | | | | | | | — | | | | $ 1,800,000 | (³) | | | — | | Long-Term Incentive(4) | | | | | | | | | | | — | | | | $ 3,800,000 | | | | — | | Total | | | | | | | | | | | — | | | | $ 6,300,000 | | | | — | |
| (1) | Salary value represents the annualized salary for the new roles for Messrs. Lowrey, Tanji, Falzon and Sleyster. For Mr. Strangfeld, the value represents the annualized salary at the time of his retirement.
| |
| (2) | 30% of this amount was mandatorily deferred into the Book Value Performance Program, which is part of the Long-Term Incentive Program. These amounts total $1,332,000 for Mr. Lowrey, $1,998,000 for Mr. Strangfeld, $999,000 for Mr. Falzon, $1,698,000 for Mr. Grier, and $1,410,000 for Mr. Pelletier.
| |
| (3) | For Messrs. Lowrey, Strangfeld, Falzon, Grier and Pelletier, 30% of this amount was mandatorily deferred into the Book Value Performance Program, which is part of the Long-Term Incentive Program. For Messrs. Tanji and Sleyster, the deferral rate was 10%. These amounts total $1,230,000 for Mr. Lowrey, $1,839,600 for Mr. Strangfeld, $110,000 for Mr. Tanji, $921,000 for Mr. Falzon, $1,560,000 for Mr. Grier, $1,230,000 for Mr. Pelletier, and $180,000 for Mr. Sleyster.
| |
| (4) | Represents the compensation value of long-term awards for each performance year. For example, the long-term values under the “2018 Compensation” column represent awards made in February 2019 for the 2018 performance year, excluding amounts mandatorily deferred from the annual incentive awards. For Mr. Strangfeld, the value in the 2018 column represents the compensation value of long-term awards made in November 2018 for the 2018 performance year.
| |
| (5) | 2017 Compensation and Percentage Change are not provided for Messrs. Tanji and Sleyster as they became NEOs initially in 2018.
| |
| | | | | | | | 66
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Supplemental Compensation Analysis
| |
TOTAL SHAREHOLDER RETURN
The chart below shows our absolute Total Shareholder Return (“TSR”) and percentile ranking relative to the 20 companies in our Peer Group over the three time periods indicated.
| | | | | | | | | | | | | | | | Total Shareholder Return | | | | 1-Year | | | 3-Year | | | 5-Year | | Cumulative TSR | | | -26% | | | | 11% | | | | 3% | | Annualized TSR | | | -26% | | | | 3% | | | | 1% | | Percentile Rank | | | 28% | | | | 46% | | | | 23% | |
For most of this period, Prudential was the only life insurer among
the Peer Group that was subject to federal regulation as anon-bank
systemically important financial institution. We believe the
uncertainty concerning the additional regulatory requirements that
accompanied this designation may have negatively impacted our
TSR over that period.
CEO REALIZED AND REALIZABLE PAY ANALYSIS
The total compensation of our NEOs as reported in the 2018 Summary Compensation Table is calculated in accordance with SEC rules. Under these rules, we are required to show the grant date fair value of equity and equity-based awards, even though the ability of our executive officers to realize value from such awards is contingent on the achievement of certain performance conditions (including, in the case of stock options, the sustained increase in our stock price). For each of our executives serving as CEO during 2018, the accompanying chart compares his total compensation, as measured based on actual compensation received (or, with regard to pending awards, realizable pay based on the applicable performance elements and stock value at a relatively current time), to the amounts reported for him in the Summary Compensation Table for the periods shown.
The chart illustrates that our executive compensation program is designed so that the amount of compensation that our CEO actually receives, or is expected to receive, may be higher or lower than the amount we are required to report in the Summary Compensation Table, depending on the performance of our Common Stock and our performance relative to our key financial objectives. It demonstrates the strong alignment of the interests of our executive officers with those of our shareholders.
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 67
|
| | |
| | Supplemental Compensation Analysis
| |
CEO TOTAL COMPENSATION — Charles F. Lowrey
Grant Date Fair Value vs. Realized and Realizable Gains (in thousands)
| | |  | |  |
| | | | | • Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, book value units and stock options awarded each year.
• Total compensation based on realized and realizable pay is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2015 and paid in February 2018 based on an earnout factor of 1.104 times target valued at the closing price on December 29, 2017 (the last trading day of 2017), $114.98; performance shares and units awarded in 2016 and 2017 valued at target based on the $114.98 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2017 at $85.54 per unit; and the intrinsic value of stock options awarded in each year based on the $114.98 share price at year end.
• For 2017, a key reason for the difference between grant date and realized/realizable pay is that the intrinsic value of the stock options at year-end is significantly less than the grant date fair value of the options. The primary reason for the difference between the grant date and realized value for years 2015 and 2016 is that the stock price at the end of 2017 was significantly higher than on the grant dates.
| | | | • Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, book value units and stock options awarded each year.
• Total compensation based on realized and realizable pay is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2016 and paid in February 2019 based on an earnout factor of 1.142 times target valued at the closing price on December 31, 2018 (the last trading day of 2018), $81.55; performance shares and units awarded in 2017 and 2018 valued at target based on the $81.55 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2018 at $96.06 per unit (awards granted prior to 2018 valued at $92.01); and the intrinsic value of stock options awarded in each year based on the $81.55 share price at year end.
• For years 2017 and 2018, a key reason for the difference between grant date and realized/realizable pay is that the intrinsic value of the stock options at year-end is significantly less than the grant date fair value of the options. The primary reason for the difference between the grant date and realized value for 2016 is that the stock price at the end of 2018 was higher than on the grant date.
|
| | | | | | | | 68
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Supplemental Compensation Analysis
| |
CEO TOTAL COMPENSATION — John R. Strangfeld
Grant Date Fair Value vs. Realized and Realizable Gains (in thousands)
| | |  | |  |
| | | | | • Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, book value units and stock options awarded each year.
• Total compensation based on realized and realizable pay is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2015 and paid in February 2018 based on an earnout factor of 1.104 times target valued at the closing price on December 29, 2017 (the last trading day of 2017), $114.98; performance shares and units awarded in 2016 and 2017 valued at target based on the $114.98 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2017 at $85.54 per unit; and the intrinsic value of stock options awarded in each year based on the $114.98 share price at year end.
• For 2017, a key reason for the difference between grant date and realized/realizable pay is that the intrinsic value of the stock options at year-end is significantly less than the grant date fair value of the options. The primary reason for the difference between the grant date and realized value for years 2015 and 2016 is that the stock price at the end of 2017 was significantly higher than on the grant dates.
| | | | • Total compensation based on grant date fair value is the sum of base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the grant date fair values of the performance shares and units, book value units and stock options awarded each year.
• Total compensation based on realized and realizable pay is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); performance shares and units awarded in 2016 and paid in February 2019 based on an earnout factor of 1.142 times target valued at the closing price on December 31, 2018 (the last trading day of 2018), $81.55; performance shares and units awarded in 2017 and 2018 valued at target based on the $81.55 share price; the actual book value units awarded each year but paid in three annual tranches including unpaid portions valued as of December 31, 2018 at $96.06 per unit (awards granted prior to 2018 valued at $92.01); and the intrinsic value of stock options awarded in each year based on the $81.55 share price at year end.
• For years 2017 and 2018, a key reason for the difference between grant date and realized/realizable pay is that the intrinsic value of the stock options at year-end is significantly less than the grant date fair value of the options. The primary reason for the difference between the grant date and realized value for 2016 is that the stock price at the end of 2018 was higher than on the grant date.
|
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 69
|
| | |
| | Compensation Discussion and Analysis | |
|
Post-Employment Compensation
Retirement Plans We view retirement benefits as a key component of our executive compensation program because they encourage long-term service. Accordingly, we offer our employees, including the NEOs, a comprehensive benefits program that provides the opportunity to accumulate adequate retirement income. This program includes both defined benefit and defined contribution plans, as well as two supplemental retirement plans whichthat allow highly compensated employees (that is, employees whose compensation exceeds the limits established by the Internal Revenue Code for covered compensation and benefit levels) to receive the same benefits they would have earned but for these limitations. Further, we sponsor three supplemental executive retirement plans (“SERPs”) for certain eligible executive officers, including the NEOs, to offset the potential loss or forfeiture of retirement benefits under certain limited circumstances or to provide additional benefits to certain key executives. For descriptions of these plans, including their titles, see “Pension Benefits.” We also maintain the Prudential Insurance Company of America Deferred Compensation Plan (the “Deferred Compensation Plan”). We offer this plan to our executive officers, including the NEOs, as a competitive practice. For a description of this plan, see “Nonqualified Deferred Compensation.” Periodically, we compare the competitiveness of our benefits programs for our employees, including retirement benefits, against other employers with whom we broadly compete for talent. It is our objective to provide our employees with a benefits package that is at or around the median of the competitive market when compared to other employers. Severance and Change in Control Arrangements Our Board has adopted a policy prohibiting us from entering into any severance or change in controlchange-in-control agreement with any of our executive officers, including the NEOs, that provides for payments and benefits that exceed 2.99 times the sum of the executive officer’s base salary and most recently earned cash bonus,annual incentive award, without shareholder approval or ratification. We do not provide excise tax payments, reimbursements, or“gross-ups” to any of our executive officers. While our other executive officers are eligible for severance payments in the event of an involuntary termination of employment without “cause,” neither our former CEO nor our current CEO is not a participant in the severance program (discussed below) providing this benefit. To enable us to offer competitive total compensation packages to our executive officers, as well as to promote the ongoing retention of these individuals when considering potential transactions that may create uncertainty as to their future employment with us, we offer certain post-employment payments and benefits to our executive officers, including the NEOs, upon the occurrence of several specified events. These payments and benefits are provided under two separate programs: the Prudential Severance Plan for Senior Executives (the “Severance Plan”); and
| ● | | the Prudential Severance Plan (the “Severance Plan”); and |
the Prudential Financial Executive Change in Control Severance Program.
| ● | | the Prudential Financial Executive Change in Control Severance Program. |
We have not entered into individual employment agreements with our NEOs. Instead, the rights of our NEOs with respect to post-employment compensation upon specific events, including death, disability, severance or retirement, or a change in control of the Company, are covered by these two programs. We use plans, rather than individually negotiated agreements, to provide severance and change in controlchange-in-control payments and benefits for several reasons. First, a “plan” approach provides us with the flexibility to change the terms of these arrangements from time to time. An employment agreement would require that the affected NEO consent to any changes. Second, this approach is more transparent, both internally and externally. Internal transparency eliminates the need to negotiate severance or other employment separation payments and benefits on acase-by-case basis. In addition, it assures each of our NEOs that the severance payments and benefits he receivesthey receive are comparable to one another. As previously noted, our executive officers, including the NEOs, except for our CEO, are eligible for severance payments and benefits in the event of an involuntary termination of employment without “cause.” These executive officers and our CEO are also eligible for “double trigger”“double-trigger” severance payments and benefits in the event of an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a change in control of the Company. Our equity awards are also designed to be “double trigger,“double-trigger,” so long as such awards are allowed to continue in effect following any change in control transaction on substantially equivalent terms and conditions to those applicable prior to such transaction. | | | | | | | | 70
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Compensation Discussion and Analysis
| |
The payment of these awards at target achievement rewards the executive officer for his or her expected performance prior to the change in controlchange-in-control transaction. For detailed information on the estimated potential payments and benefits payable to the NEOs in the event of their termination of employment, including following a change in control of the Company, see “Potential Payments Upon Termination or Change in Control.” | | | | 48 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Compensation Discussion and Analysis | |
|
Perquisites and Other Personal Benefits We generally do not provide our executive officers, including the NEOs, with perquisites or other personal benefits, except for the use of Company aircraft, Company-provided cars and drivers, executive physicals and, in the case of our CEO and Vice Chairman, security services. These items are provided because we believe that they serve a necessary business purpose and represent an immaterial element of our executive compensation program. The cost allocated to the personal use of Company-provided cars and drivers, including commuting expenses, the cost of the executive physicals, and the incremental cost associated with the security services, to the extent not reimbursed to us, are reported in the Summary Compensation Table. Our executive officers, including the NEOs, are required to reimburse us for the incremental cost of any personal use of Company aircraft. We do not provide tax reimbursements or any other tax payments with respect to perquisites, including excise tax“gross-ups,” to any of our executive officers. Perquisites and other personal benefits represent an immaterial element of our executive compensation program.
Other Compensation RelatedCompensation-Related Policies In addition to the other components of our executive compensation program, we maintain the policies described below. These policies are consistent with evolving best practices and help confirm that our executive compensation program does not encourage our executive officers to engage in behaviors that are beyond our ability to effectively identify and manage risk. Clawback Policy Our clawback policy covers all executive officers (including the NEOs), applies to all incentive-based compensation (including stock options and other equity awards) paid to or in respect of an executive officer, and includes separate triggers for material financial restatements and improper conduct (including failure to report). The policy provides that if (i) the Company is required to undertake a material restatement of any financial statements filed with the SEC or (ii) an executive officer engages in improper conduct that either has had, or could reasonably be expected to have, a significant adverse reputational or economic impact on the Company or any of its affiliates or divisions, then the Board may, in its sole discretion, after evaluating the associated costs and benefits, seek to recover all or any portion of the incentive-based compensation paid to any such executive officer during the three-year period preceding the restatement, or the occurrence of the improper conduct, as the case may be. The policy also requires us to disclose to our shareholders, not later than the filing of the next proxy statement, the action taken by the Board, or the Board’s decision not to take action, with regard to compensation recovery following the occurrence of a material restatement or improper conduct, so long as such event has been previously disclosed in our SEC filings. For purposes of the policy, a “restatement” means any material restatement (occurring after the effective date of the policy) of any of the Company’s financial statements that have been filed with the SEC under the Exchange Act or the Securities Act of 1933, as amended. “Improper conduct” means willful misconduct (including, but not limited to, fraud, bribery or other illegal acts) or gross negligence, which, in either case, includes any failure to report properly, or to take appropriate remedial action with respect to, such misconduct or gross negligence by another person. Other Long-Term Compensation Recovery Policies We maintain a “resignation notice period” requirement as part of the terms and conditions of all long-term incentive awards granted to certain designated grades of executives, including the NEOs. The requirement is applicable to awards granted in 2015 and subsequent years. The requirement is intended to reduce the adverse and disruptive effect of a sudden voluntary departure | | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 71
|
| | |
| | Compensation Discussion and Analysis
| |
of an executive subject to the requirement, and requires him or her to provide notice for a specified period prior to the effective date of a voluntary resignation, or otherwise risk forfeiting his or her outstanding long-term incentive awards. The terms and conditions of long-term incentive awards also provide for forfeiture in the event a recipient violates applicablenon-solicitation ornon-competition noncompetition agreements. Process for Approving Long-Term Incentive Awards
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 49 |
The Committee approves long-term incentive awards (including stock options, book value units, performance shares, performance units and restricted stock units) on an annual basis at its regularly scheduled February meeting.
The Committee has delegated authority to management to approve long-term incentive awards for new hires, promotions, and retention purposes within specified limits to employees below the level of senior vice president. The Committee approves any long-term incentive awards to newly hired or promoted senior executives. From time to time, the Committee may make special long-term incentive awards to recognize major milestones or in situations involving a leadership transition. For example, in November 2018, the Committee granted a long-term incentive award to Mr. Strangfeld upon his retirement as CEO in respect of the 2018 performance year.
Under the terms of our 2016 Omnibus Plan, which was approved by shareholders in 2016, stock options are required to be priced at the fair market value of our Common Stock on the date of grant, which is based on the closing market price of our Common Stock on the date of grant. Beginning in February 2019, the number of shares of our Common Stock subject to a stock option grant to an individual is determined by dividing the compensation value of the grant by the fair value of each stock option based on the closing market price of our Common Stock on the NYSE on the grant date. Beginning in February 2019, the number of performance shares and units or restricted stock units awarded to an individual is determined by a formula that divides the compensation value of the award by the closing market price of our Common Stock on the NYSE on the grant date. Previously, the fair value of stock options and the number of performance shares and units and restricted stock units awarded was based on the average closing market price of our Common Stock on the NYSE for the final20-day trading period in the month prior to the grant date.
| | | | | | | Compensation Discussion and Analysis | |
|
Stock Ownership Guidelines We have adopted stock ownership guidelines for our executive officers to encourage them to build their ownership position in our Common Stock over time by direct market purchases, making investments available through the PESP and the Deferred Compensation Plan, and retaining shares they earn under their long-term incentive awards. The guidelines are framed in terms of stock value as a percentage of base salary as follows:salary. | | | | | | Position | | Stock Value as a Percentage of Base Salary | | | Chief Executive Officer | | 700% | Chief Executive Officer
| | | 700%
| | Vice Chairman and Executive Vice President | | 300% | | 300%
| | Senior Vice President | | | 200% | |
Each of the NEOs meetshas met his individual stock ownership level, with the exception of Messrs. Lowrey and Tanji due to their promotions as of December 1, 2018.Underguideline. Under the current stock ownership guidelines, once an executive officer attains his or her individual ownership level, he or she will remain in compliance with the guidelines despite future changes in our stock price and base salary, as long as his or her holdings do not decline below the number of shares at the time the stock ownership guidelines were met. Stock Retention Requirements We have adopted stock retention requirements for our executive officers. Each executive officer is required to retain 50% of the net shares (after payment of the applicable exercise price (if any), fees, and taxes) acquired upon the exercise of stock options or the payment or vesting of any performance shares and restricted stock units. The executive officer is required to hold such shares until the later of one year following the date of acquisition of such shares (even if thisone-year holding period extends beyond termination of employment) or the date that he or she satisfies our stock ownership guidelines. | | | | | | | | 72
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Compensation Discussion and Analysis
| |
Prohibition of Derivatives Trading, and Hedging and Pledging of Our Securities Our Board has adopted a policy prohibiting all employees, including the NEOs, and members of the Board from engaging in any hedging transactions with respect to any of our equity securities held by them, which includes the purchase of any financial instrument (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) designed to hedge or offset any decrease in the market value of such equity securities. Our Board has also adopted a policy prohibiting our Section 16 officers and members of the Board from pledging, or using as collateral, our securities to secure personal loans or other obligations, whichand includes holding shares of our Common Stock in a margin account. | Policy on Rule 10b5-1 Trading Plans POLICY ON RULE10b5-1 TRADING PLANS
We have a policy governing the use by executive officers ofpre-established trading plans for sales of our Common Stock and exercises of stock options for shares of our Common Stock. We believe our Rule10b5-1 policy reflects best practice and is effective in complying with legal requirements. Under the policy: | • | | ●All Rule10b5-1 trading plans must bepre-cleared precleared by our law and compliance departments. | |
| • | | ●A trading plan may be entered into, modified or terminated only during an open trading window and while not in possession of materialnon-public nonpublic information. | |
| | | | 50 | | • NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | No trade may occur
Compensation Discussion and Analysis | |
|
| | | | | | | | | | | | Supplemental CEO Pay Analysis | | | | | The total compensation of our NEOs as reported in the 2021 Summary Compensation Table is calculated in accordance with SEC rules. Under these rules, we are required to show the grant date fair value of equity and equity-based awards. The ability of our executive officers to realize value from such awards is contingent on the achievement of certain performance conditions (including, in the case of stock options, the sustained increase in our stock price). The accompanying chart compares our CEO’s total compensation, as measured based on actual compensation received (or, with regard to pending awards, realizable pay based on the applicable performance elements and stock value at a relatively current time), to the amounts reported for him in the Summary Compensation Table for the first 30 days afterperiods shown. The chart illustrates that our executive compensation program is designed so that the trading planamount of compensation that our CEO actually receives, or is established. No modificationexpected to receive, may be higher or terminationlower than the amount we are required to report in the Summary Compensation Table, depending on the performance of a plan may affect any tradeour Common Stock and our performance relative to our key financial objectives. It demonstrates the strong alignment of the interests of our executive officers with those of our shareholders. | | | | | | | | | 
| | • Total Compensation based on Grant Date Fair Value is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program, as applicable); and the grant date fair values of the performance shares and units, restricted stock units, book value units and stock options awarded each year. • Total Compensation based on Realized and Realizable Gains is the sum of: base salary; actual annual incentive payout for the performance year (excluding the portion mandatorily deferred into the long-term Book Value Performance Program); the value of the final performance shares and units distributed following the three-year performance period using the closing price at the end of the period (or, if the performance period has not yet completed, the value of the target number of performance shares and units assuming the latest year end share price); the number of RSUs scheduled to occur within 30 days.vest in February each year assuming the preceding year end share price (for vested shares) or the latest year end share price (for unvested shares); actual payouts for vested tranches of book value units (or estimated values to be paid for unvested tranches assuming the latest year end book value per share); and the intrinsic value of stock options awarded in each year based on the latest year end share price. | | | | | The difference between Mr. Lowrey’s realized/realizable pay vs. grant date fair value for 2021 is primarily attributable to the 33% increase in the fair market value of Prudential Common Stock from the date the awards were granted until the end of the year. Our stock price increased more moderately from the time of grant in 2019 and 2020 to December 31, 2021 (16% and 13%, respectively). Coupled with below-target performance on the 2019-2021 performance share program, this yielded marginal net gains versus grant date fair values. | | |
DEDUCTIBILITY OF EXECUTIVE COMPENSATIONDeductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code limits a publicly held corporation’s ability to take a tax deduction for compensation paid to certain executive officers (“covered employees”) in excess of $1 million. Prior to 2018, certain performance-based compensation was exempt from the $1 million deduction limit. This performance-based exception was repealed for taxable years beginning after December 31, 2017, such that compensation paid to covered employees in excess of $1 million after 2017 is not tax deductible, unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The Company intends to avail itself of this transition relief, to the extent applicable, for compensation paid pursuant to written, binding contracts that were in effect on November 2, 2017. Notwithstanding changes to the tax deductibility requirements of Section 162(m), the Committee continues to believe that a significant portion of our executive officers’ compensation should be tied to measures of performance of our businesses. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 51 |
COMPENSATION COMMITTEE REPORT
| | | | |
| | | Compensation Committee Report |
The Compensation Committee of our Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on its review and these discussions, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form10-K for the year endedDecember 31, 2018.2021. The Compensation Committee THE COMPENSATION COMMITTEE
Karl J. KrapekMichael A. Todman (Chair)
Thomas J. Baltimore Michael A. TodmanKarl J. Krapek
| | | | 52 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | |
| | | CEO Pay Ratio |
| | | The ratio of our CEO’s annual total compensation ($19,809,318) to that
of our median compensated employee ($114,931) for 2021 was: This ratio is a reasonable estimate calculated in a manner consistent
with Item 402(u) of the SEC’s Regulation S-K. | | 172 to 1 |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 73
|
2018 CEO Pay Ratio
In accordance with SEC rules, for 2018, we determined the annual total compensation of our median compensated employee and present a comparison of that annual total compensation to the annual total compensation of our CEO.
| • | | The 2018 annual total compensation of our CEO was $26,634,837. This reflects a combination of the total compensation of Messrs. Lowrey and Strangfeld for the period they each served as CEO in 2018.
| |
| • | | The 2018 annual total compensation of our median compensated employee was $104,092.
| |
| • | | Accordingly, the ratio of our CEO’s annual total compensation to the annual total compensation of our median compensated employee for 2018 was 256 to 1*.
| |
*This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of the SEC’s RegulationS-K.
Calculating the 2018 CEO Pay Ratio
| | | | | | | | | Determining the Median Compensated Employee
| | Jurisdictions Excluded from Employee Population
(number of employees estimated as of October 1, 2017)
| To calculate the 20182021 CEO pay ratio, we used the same median compensated employee that
we used for purposes of calculating the 2017 CEO pay ratio for 2020, as there has been no change
in our employee population or employee compensation arrangements that we believe would
significantly impact the CEO pay ratio. As described more completely in● In 2020, we identified our 2018 Proxy Statement, to determine this median compensated employee:
• Weemployee from among 40,769 employees
across the eight countries from which we collected compensation data, for allas shown in the
shaded rows in the table to the right. This population comprised 95.2% of our estimated
global population of 42,832 employees as of October 1, 2017, excluding employees in countries that, in the aggregate, comprise less than 5% of our global employee population (considered“de minimis” under SEC rules). We also excluded from this populationSeptember 30, 2020. These figures exclude
independent contractors and other individuals classified asnon-employees nonemployees in their
respective jurisdictions based on our employment and payroll tax records;jurisdictions.
•● We included data for employees in the following six countries, comprising 95.6% of our global employee population: the United States, Japan, Ireland, Taiwan, Brazil, and Korea. This excludes approximately 2,000 employees from 14 jurisdictions,used “Total Cash Pay” as shown in the table on the right. As of October 1, 2017, Prudential had an aggregate of 44,857 employees, of2020 as our compensation measure, which, 18,311 were U.S. employees and 26,546 were non-U.S. employees. This total excludes independent contractorsfor
these purposes, includes base salary, short-term incentives (e.g., payments under our
Annual Incentive Program), cash commissions and other individuals classifiedsimilar payments earned. We
annualized Total Cash Pay for employees who were not employed for the entire period, and
we did not make any cost-of-living adjustments.
Our “median compensated employee” is the individual who earned Total Cash Pay at the
midpoint of this group of 40,769 employees. Determining Annual Total Compensation We determined annual total compensation for our median compensated employee by obtaining
compensation data for this employee consistent with the methodology we use to calculate total
compensation as non-employees,it appears in the 2021 Summary Compensation Table. Accordingly, it includes
base salary earned and paid from January 1, 2021 through December 31, 2021, non-equity
incentive plan payments made for the performance period January 1, 2021 through
December 31, 2021, equity incentives and options awards granted during the fiscal year, and
other compensation earned and/or paid in 2021, such as certain sales associates. | | | | Country Company contributions to retirement
savings plans. In addition, for purposes of calculating the CEO pay ratio, SEC rules permit us to
include in annual total compensation any compensation and benefits made available to
employees broadly, such as medical and dental benefits. We elected to include amounts
representing employer medical and dental contributions in determining the annual total
compensation of our median employee.
| | Estimated Employees
as of September 30, 2020 | | Country | | Employees | | (Estimate) Japan | | 20,961 | | United States | | 16,336 | | Ireland | | 1,626 | | Brazil | | 796 | | Argentina | | 436 | | United Kingdom | | 321 | | Mexico | | 204 | | Singapore | | 89 | | Taiwan | | 1,402 | | Malaysia | | 328 | | India | | 195 | | Germany | | 64 | | Luxembourg | | 18 | | France | | 17 | | Australia | | 16 | | Hong Kong | | 6 | | Netherlands | | 5 | | Italy | | 5 | | China | | 3 | | Switzerland | | 3 | | Canada | | 1 | | | | | | | | | Poland
| | 406
| | | | | | Malaysia
| | 381
| | | | | | | Argentina
| | 357
| | | | | | Italy
| | 330
| | | | | | United Kingdom
| | 188
| | | | | | Mexico
| | 139
| | | | | | Singapore
| | 72
| | | | | | Germany
| | 58
| | | | | | Luxembourg
| | 13
| | | | | | France
| | 10
| | | | | | Australia
| | 7
| | | | | | Hong Kong
| | 5
| | | | | | China
| | 2
| | | | | | India
| | 2
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| • | | We used “Total Cash Pay”The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to apply various methodologies and apply various assumptions and, as our compensation measure, which, for these purposes, included base salary, short-term incentive payments (e.g., payments under our Annual Incentive Program), cash commissions and other similar payments. We annualized Total Cash Pay for permanent employees hired during the period and did not make anycost-of-living adjustments.
|
Our “median compensated employee” is an individual who earned Total Cash Pay at the midpoint, that is, the point at which half of the global employee population earned more Total Cash Pay and half of the global employee population earned less Total Cash Pay.
| | | | | | | | 74
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | 2018 CEO Pay Ratio
| |
Determining 2018 Annual Total Compensation
We determined 2018 annual total compensation for our median compensated employee by obtaining compensation data for this employee for 2018 consistent with the methodology we use to calculate total compensation for 2018 as it appears in the 2018 Summary Compensation Table. Accordingly, it includes base salary earned and paid from January 1, 2018 through December 31, 2018,non-equity incentive plan payments made for the performance period January 1, 2018 through December 31, 2018, equity incentives and options awards granted during the fiscal year, and other compensation earned and/or paid in 2018, such as Company contributions to retirement savings plans. In addition, for purposes of calculating the CEO pay ratio, SEC rules permit us to include in annual total compensation any compensation and benefits made available to employees broadly, such as medical and dental benefits. We elected to include amounts representing employer medical and dental contributions in determining the 2018 annual total compensation of our median employee.
Messrs. Lowrey and Strangfeld each served as CEO in 2018. For purposes of the 2018 CEO pay ratio, we calculated our CEO’s annual total compensation for 2018 by adding Mr. Strangfeld’s annual total compensation as reflected in the 2018 Summary Compensation Table (but excluding the amount he received for service as a non-employee Director in December 2018) to Mr. Lowrey’s salary as CEO starting December 1, 2018. We also included an amount representing their pro-rata portions of employer medical and dental contributions.
The SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and apply various assumptions and, as a a
result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies.
| | | | | | | | Notice of Annual Meeting of ShareholdersWe determined annual total compensation for our CEO, Mr. Lowrey, using the amount reported in our 2021 Summary Compensation Table, increased to include an amount representing employer medical and 2019 Proxy Statement dental contributions for him.
| | |
| | 75
|
| | |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 53 |
| | | | |
| | | Executive Compensation |
Executive Compensation
20182021 Summary Compensation Table
The following table presents,sets forth information regarding fiscal years 2021, 2020 and 2019 compensation for the years ended December 31, 2018, 2017, and 2016, the compensation of Messrs. Lowrey and Strangfeld, who each served as our principal executive officer in 2018, Messrs. Tanji and Falzon, who each served as our principal financial officer in 2018, and Messrs. Grier, Pelletier and Sleyster, our three most highly compensated executive officers (other than the principal executive officer and principal financial officer) who were serving as executive officers as of December 31, 2018. For information on the role of each compensation component within the total compensation packages of the NEOs, please see the relevant descriptionexcept fiscal year 2019 where Mr. Sullivan is not provided because he was not an NEO in the “Compensation Discussion and Analysis (“CD&A”). The compensation data in this table is presented in accordance with the SEC disclosure rules. For the Compensation Committee’s view of 2018 performance year compensation, see “Supplemental Compensation Analysis — Total Direct Compensation” in the CD&A.year.
 Name & Principal Position Year Salary ($)(1) Bonus ($) Charles F. Lowrey, 2018 794,808 - Chief Executive Officer 2017 770,000 - 2016 770,000 - John R. Strangfeld, 2018 1,332,692 - Chairman and Former 2017 1,400,000 - Chief Executive Officer 2016 1,400,000 - Ken Tanji 2018 446,404 - Executive Vice President and Chief Financial Officer Robert M. Falzon, 2018 783,269 - Vice Chairman and Former 2017 770,000 - Chief Financial Officer 2016 759,231 - Mark B. Grier, 2018 1,190,000 - Vice Chairman 2017 1,190,000 - 2016 1,190,000 - Stephen Pelletier,(8) 2018 770,000 - Executive Vice 2017 770,000 - President and Chief 2016 770,000 - Operating Officer, U.S. Scott Sleyster 2018 549,231 - Executive Vice President and Chief Operating Officer, International Businesses Name & Principal Position Year Salary ($) (1) Stock Awards ($) (2) 2018 794,808 2,499,088 Charles F. Lowrey, 2017 770,000 3,142,303 Chief Executive Officer 2016 770,000 2,510,533 John R. Strangfeld, 2018 1,332,692 11,029,456 Former Chief Executive Officer and current 2017 1,400,000 6,284,606 non-executive Chairman 2016 1,400,000 5,285,346 Kenneth Y. Tanji,(7) 2018 446,404 381,597 Executive Vice President and Chief Financial Officer Robert M. Falzon, 2018 783,269 2,104,664 Vice Chairman (and former 2017 770,000 2,513,842 Chief Financial Officer) 2016 759,231 2,114,113 Mark B. Grier, 2018 1,190,000 4,209,114 Vice Chairman 2017 1,190,000 5,027,684 2016 1,190,000 4,228,226 Stephen Pelletier, 2018 770,000 2,499,088 Executive Vice President and Chief 2017 770,000 2,828,183 Operating Officer, U.S. Businesses 2016 770,000 2,378,393 Scott G. Sleyster,(7) 2018 549,231 1,578,552 Executive Vice President and Chief Operating Officer, International Businesses Non-Equity Incentive Change in Pension All Other Option Awards ($) (3) Plan Compensation ($)(4) Value ($)(5) Compensation ($)(6) Total ($) 854,897 5,478,255 661,825 68,585 10,357,459 1,030,568 5,915,828 889,770 50,853 11,799,322 885,869 5,805,597 811,276 48,130 10,831,405 3,756,846 8,789,157 1,217,090 525,561 26,650,802 2,061,108 9,273,376 7,972,080 120,229 27,111,399 1,864,985 8,947,438 6,844,507 101,979 24,444,255 63,568 1,111,611 59,264 19,024 2,081,468 701,436 4,120,282 333,217 48,988 8,091,856 824,460 4,259,475 731,136 50,158 9,149,071 746,006 3,794,452 534,157 45,420 7,993,379 1,402,872 7,354,361 940,560 82,751 15,179,658 1,648,892 7,778,282 1,839,665 76,967 17,561,490 1,491,997 7,506,580 1,467,470 80,641 15,964,914 832,968 5,315,371 9,015,161 71,250 18,503,838 927,500 5,793,200 5,585,850 68,726 15,973,459 839,253 4,655,628 4,931,849 64,298 13,639,421 263,038 2,308,958 125,875 23,287 4,848,942
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name & Principal Position | | Year | | | Salary ($)(1) | | | Stock Awards
($)(2) | | | Option Awards
($)(3) | | | Non-Equity
Incentive Plan
Compensation
($)(4) | | | Change in
Pension Value
($)(5) | | | All Other
Compensation
($)(6) | | | Total ($) | | Charles F. Lowrey, Chairman and Chief
Executive Officer | | | 2021 | | | | 1,200,000 | | | | 11,300,123 | | | | 0 | | | | 6,425,878 | | | | 781,247 | | | | 92,489 | | | | 19,799,737 | | | | | 2020 | | | | 1,246,154 | | | | 4,980,063 | | | | 1,682,442 | | | | 5,889,715 | | | | 1,133,852 | | | | 58,028 | | | | 14,990,254 | | | | | 2019 | | | | 1,200,000 | | | | 4,980,009 | | | | 1,666,665 | | | | 6,085,252 | | | | 1,128,436 | | | | 72,577 | | | | 15,132,939 | | Kenneth Y. Tanji, Executive Vice President and Chief Financial Officer | | | 2021 | | | | 650,000 | | | | 3,600,102 | | | | 0 | | | | 2,487,048 | | | | 193,827 | | | | 21,963 | | | | 6,952,940 | | | | | 2020 | | | | 623,077 | | | | 1,560,093 | | | | 527,040 | | | | 1,767,572 | | | | 531,777 | | | | 30,821 | | | | 5,040,380 | | | | | 2019 | | | | 600,000 | | | | 1,560,046 | | | | 522,102 | | | | 1,643,475 | | | | 491,659 | | | | 50,093 | | | | 4,867,375 | | Robert M. Falzon, Vice Chairman | | | 2021 | | | | 1,000,000 | | | | 9,000,132 | | | | 0 | | | | 5,119,124 | | | | 371,334 | | | | 37,161 | | | | 15,527,751 | | | | | 2020 | | | | 1,038,461 | | | | 3,960,006 | | | | 1,337,850 | | | | 4,636,117 | | | | 937,141 | | | | 76,941 | | | | 11,986,516 | | | | | | 2019 | | | | 1,000,000 | | | | 3,960,144 | | | | 1,325,304 | | | | 4,754,861 | | | | 938,263 | | | | 104,406 | | | | 12,082,978 | | Scott G. Sleyster, Executive Vice President and
Head of International Businesses | | | 2021 | | | | 700,000 | | | | 4,400,070 | | | | 0 | | | | 3,306,392 | | | | 302,044 | | | | 31,375 | | | | 8,739,881 | | | | | 2020 | | | | 726,923 | | | | 2,280,076 | | | | 770,274 | | | | 2,936,921 | | | | 922,521 | | | | 35,383 | | | | 7,672,098 | | | | | 2019 | | | | 700,000 | | | | 2,280,038 | | | | 763,062 | | | | 2,750,399 | | | | 950,152 | | | | 52,236 | | | | 7,495,887 | | Andrew F. Sullivan, Executive Vice President and
Head of U.S. Businesses | | | 2021 | | | | 700,000 | | | | 4,400,070 | | | | 0 | | | | 2,939,353 | | | | 235,623 | | | | 29,942 | | | | 8,304,988 | | | | | 2020 | | | | 726,923 | | | | 1,980,003 | | | | 668,934 | | | | 2,519,639 | | | | 344,172 | | | | 32,101 | | | | 6,271,772 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | The amounts reported in theSalary column for 20182021 include elective contributions of a portion of their base salary to the SESP by Messrs. Lowrey, Strangfeld, Tanji, Falzon, Grier, Pelletier,Sleyster and SleysterSullivan in the amounts of $20,792, $42,308, $6,856, $20,331, $36,600, $19,800,$36,400, $14,092, $28,400, $16,400 and $10,969,$16,400, respectively. |
| (2) | The amounts reported in theStock Awards column represent the aggregate grant date fair value, foras calculated under ASC 718, of performance shares andat target, performance units at target, and restricted stock units in each respective year. The maximum number of performance shares and performance units payable for 20182021, 2020, and 2019 is 1.375 times the target amounts. For awards granted in 20171.65, 1.25, and 2016 the maximum number of performance shares and performance units payable is 1.25 times the target amounts.amounts, respectively. The grant date fair value is calculated in the manner described in the Grants of Plan-Based Awards table. |
| For awards granted in February 2018, the maximum performance shares and units payable and valued at the grant date price of $106.89 to Messrs. Lowrey, Strangfeld, Tanji, Falzon, Grier, Pelletier, and Sleyster are 32,148 or $3,436,300; 67,682 or $7,234,529; 4,910 or $524,830; 27,074 or $2,893,940; 54,146 or $5,787,666; 32,148 or $3,436,300; and 20,306 or $2,170,508,Based on the fair market value on the date of grant ($81.43 per share), the maximum values for the 2021 stock awards granted to Messrs. Lowrey, Tanji, Falzon, Sleyster, and Sullivan are $16,808,944, $5,355,163, $13,387,662, $6,545,099, and $6,545,099, respectively. For Mr. Strangfeld, additional awards were made in November 2018 to recognize 2018 performance. For awards made in November 2018, the maximum performance shares and units payable and valued at the grant date price of $93.76 to Mr.Strangfeld is 84,590 or $7,931,158.
|
| | | | | | | | 76
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Executive Compensation
| |
| For 2017, the maximum performance shares and units payable and valued at the grant date price of $110.45 to Messrs. Lowrey, Strangfeld, Falzon, Grier, and Pelletier are 35,564 or $3,928,044; 71,126 or $7,855,867; 28,450 or $3,142,303; 56,900 or $6,284,605; and 32,008 or $3,535,284, respectively.
|
| For 2016, the maximum performance shares and units payable and valued at the grant date price of $63.59 to Messrs. Lowrey, Strangfeld, Falzon, Grier, and Pelletier are 49,350 or $3,138,167; 103,896 or $6,606,747; 41,558 or $2,642,673; 83,116 or $5,285,346; and 46,754 or $2,973,087, respectively.
|
| (3) | The amounts reported in theOptions Awards column represent the aggregate grant date fair value of stock options granted in each respective year for the prior year’s performance as calculated under ASC Topic 718. The assumptions made in calculating the grant date fair value amounts for these stock options are incorporated herein by reference to the discussion of those assumptions found below in the Grants of Plan-Based Awards Table. Note that the amounts reported in this column do not necessarily correspond to the actual economic value that will be received by the NEOs from the options. |
| | | | 54 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 77
|
| | |
| | Executive Compensation | |
|
| (4) | The aggregate amounts reported in theNon-Equity Incentive Plan Compensation column for 2018 represent the sum of (i) the annual incentives paid in February 2019 forfollowing each performance in 2018, excluding 30%year (which do not include the portion of the totalperformance year 2019 annual incentive carved out toincentives mandatorily deferred into the Book Value Performance Program for Messrs. Lowrey, Strangfeld, Falzon, Grier and Pelletier. For Messrs. Tanji and Sleyster, the annual incentive carve out was 10%, as the awards reflect performance in their prior roles; andProgram); (ii) the value of the book value units paid in February 2019; for 2017, they represent annual incentives paid in February 2018of each year for performance in 2017, excluding 30% ofover the total annual incentive carved out to the Book Value Performance Program, and the value of theprior 3 years; (iii) offcycle book value units paid in February 2018, and additionally in April and December 2017November 2020 for Mr. Pelletier; for 2016, they represent annual incentives paid in February 2017 for performance in 2016, excluding 30% of the total annual incentive carved out to the Book Value Performance Program,Sullivan; and the value of the book value units paid in February 2017, and additionally in April 2016 for Mr. Pelletier, as shown below: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2018 | | | 2017 | | | 2016 | | | | | | | | | Name | | Annual Incentive
Award | | | Book Value Units
Value Paid | | | Annual Incentive
Award | | | Book Value Units
Value Paid | | | Annual Incentive
Award | | | Book Value Units
Value Paid | | | | | | | | | | Charles F. Lowrey | | | $2,870,000 | | | | $2,608,046 | | | | $3,108,000 | | | | $2,764,738 | | | | $2,789,500 | | | | $2,951,704 | | | John R. Strangfeld | | | $4,292,400 | | | | $4,496,757 | | | | $4,662,000 | | | | $4,611,376 | | | | $4,183,200 | | | | $4,764,238 | | | Kenneth Y. Tanji | | | $ 990,000 | | | | $ 341,611 | | | | — | | | | — | | | | — | | | | — | | | Robert M. Falzon | | | $2,149,000 | | | | $1,970,395 | | | | $2,331,000 | | | | $1,925,249 | | | | $2,093,000 | | | | $1,701,452 | | | Mark B. Grier | | | $3,640,000 | | | | $3,714,361 | | | | $3,962,000 | | | | $3,816,282 | | | | $3,556,000 | | | | $3,950,580 | | | Stephen Pelletier | | | $2,870,000 | | | | $2,445,371 | | | | $3,290,000 | | | | $2,503,200 | | | | $2,789,500 | | | | $1,866,128 | | | Scott G. Sleyster | | | $1,620,000 | | | | $1,048,958 | | | | — | | | | — | | | | — | | | | — | | | | | | | | |
| For Mr. Lowrey, 2018, 2017, and 2016 also include the value of(iv) carried interest payments of $209, $43,090, and $64,393, respectively. for Mr.Lowrey, as follows:
|
| For Mr. Falzon, 2018, 2017, and 2016 also include the value of carried interest payments of $887, $3,226, and $15,600, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | | | | | | 2020 | | | | | | 2019 | | | | | Annual Incentive
Award ($) | | | Book Value Units
Value Paid ($) | | | | | | Annual Incentive
Award ($) | | | Book Value Units
Value Paid ($) | | | | | | Annual Incentive
Award ($) | | | Book Value Units
Value Paid ($) | | | | | | | | | | | Charles F. Lowrey | | | 4,253,000 | | | | 2,172,878 | | | | | | | | 3,119,000 | | | | 2,710,994 | | | | | | | | 3,167,500 | | | | 2,780,211 | | | | | | | | | | | Kenneth Y. Tanji | | | 1,883,000 | | | | 604,048 | | | | | | | | 1,123,000 | | | | 644,572 | | | | | | | | 1,169,000 | | | | 474,475 | | | | | | | | | | | Robert M. Falzon | | | 3,402,000 | | | | 1,717,124 | | | | | | | | 2,495,000 | | | | 2,141,117 | | | | | | | | 2,590,000 | | | | 2,164,861 | | | | | | | | | | | Scott G. Sleyster | | | 2,430,000 | | | | 876,392 | | | | | | | | 1,782,000 | | | | 1,154,921 | | | | | | | | 1,620,500 | | | | 1,129,899 | | | | | | | | | | | Andrew F. Sullivan | | | 2,430,000 | | | | 509,353 | | | | | | | | 1,890,000 | | | | 629,639 | | | | | | | | — | | | | — | |
For Mr. Lowrey, 2020 and 2019 include the value of carried interest payments of $59,721 and $137,541, respectively. These carried interest payments relate to carried interest programs in our PGIM business. While Mr. Lowrey is no longer entitled to invest in or be granted new carried interests in these programs, he will continue to receive distributions from these pre-existing arrangements if and when they are earned. |
| The carried interest payments relate to carried interest programs in which Mr. Falzon and Mr. Lowrey participate as a result of previous positions held within the Company’s Investment Management Business. While Mr. Falzon and Mr. Lowrey are no longer entitled to invest in or be granted new carried interests in these programs, they will continue to receive distributions from thesepre-existing arrangements if and when they are earned.
|
| (5) | The amounts reported in theChange in Pension Valuecolumn represent the change in the actuarial present value of each NEO’s accumulated benefit under the Merged Retirement Plan, the Supplemental Retirement Plan, and the SERPs, as applicable, determined using interest rate and mortality rate assumptions consistent with those used for our consolidated financial statements, as well as above-market earnings on December 31, 2015, December 31, 2016, December 31, 2017, and December 31, 2018, as applicable; namely, the RP 2014 generational mortality table with white collar adjustments, and an adjustment to reflect recent Prudential-specific experience for 2015, 2016, 2017 and 2018, an interest discount rate 4.50% for 2015, 4.15% for 2016, 3.65% for 2017 and 4.30% for 2018, a Cash Balance Formula interest crediting rate of 4.25% for 2015, 2016, 2017, and 2018, and a PSI Cash Balance Formula interest crediting rate of 5.00% for 2015, 2016, 2017 and 2018. The amounts represented above may fluctuate significantly in a given year dependingcompensation that is deferred on a number of factorsbasis that affect the formula to determine pension benefits, including age, years of service, and the measurement of average annual earnings. |
| Messrs. Strangfeld and Pelletier accrue pension benefits under the Traditional Pension Formula andis not tax-qualified. Messrs. Lowrey, Tanji, Falzon, Grier,Sleyster and SleysterSullivan accrue pension benefits under the Cash Balance Formula (both formulas are described(described in the “Pension Benefits” section of this Proxy Statement). In accordance with the provisions of the Traditional Pension Formula, the years of earnings used for determining Average Eligible Earnings change every two years (most recently on January 1, 2018).
|
For 2021, the amounts reported in this column include payments from the Supplemental Retirement Plan for Messrs. Lowrey, Tanji, Falzon, Sleyster, and Sullivan of $23,597, $3,812, $15,613, $8,146, and $3,224, respectively; and above-market interest on the SESP for Messrs. Lowrey, Tanji, Falzon, Sleyster and Sullivan of $10,452, $2,405, $5,766, $7,099, and $1,582, respectively. | The amounts reported in this column include payments from the Supplemental Retirement Plan of $20,990 for Mr. Lowrey, $10,643 for Mr. Falzon, and $31,095 for Mr. Grier in 2016; $17,274 for Mr. Lowrey, $8,928 for Mr. Falzon, and $11,847,072 for Mr. Grier in 2017; and $16,170 for Mr. Lowrey, $2,026 for Mr. Tanji, $10,819 for Mr. Falzon, $38,848 for Mr. Grier, and $4,178 for Mr. Sleyster in 2018; and above-market interest on the SESP of $3,158 for Mr. Lowrey, $10,388 for Mr. Strangfeld, $1,138 for Mr. Falzon, $7,239 for Mr. Grier, and $2,433 for Mr. Pelletier in 2016; $1,341 for Mr. Lowrey, $4,281 for Mr. Strangfeld, $562 for Mr. Falzon, $3,016 for Mr. Grier, and $1,062 for Mr. Pelletier in 2017; and $475 for Mr. Lowrey, $1,494 for Mr. Strangfeld, $89 for Mr. Tanji, $210 for Mr. Falzon, $1,057 for Mr. Grier, $380 for Mr. Pelletier, and $365 for Mr. Sleyster in 2018.
|
| (6) | The amounts reported in theAll Other Compensation column for 2021 are itemized in the supplemental “All Other Compensation” table below. |
(7) | Messrs.Tanji and Sleyster became NEOs initially in 2018.
|
| | | | | | | | 78
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Executive Compensation
| |
All Other Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | | | Perquisites(1) | | | Board Compensation(2) | | | PESP Contributions(3) | | | SESP Contributions(3) | | | Total | | Charles F. Lowrey | | | 2018 | | | | $ 36,793 | | | | | | | | $11,000 | | | | $20,792 | | | | $ 68,585 | | | | | 2017 | | | | $ 20,053 | | | | | | | | $10,800 | | | | $20,000 | | | | $ 50,853 | | | | | | 2016 | | | | $ 17,330 | | | | | | | | $10,600 | | | | $20,200 | | | | $ 48,130 | | John R. Strangfeld* | | | 2018 | | | | $347,253 | | | | $125,000 | | | | $11,000 | | | | $42,308 | | | | $525,561 | | | | | 2017 | | | | $ 64,229 | | | | | | | | $10,800 | | | | $45,200 | | | | $120,229 | | | | | | 2016 | | | | $ 47,964 | | | | | | | | $ 8,615 | | | | $45,400 | | | | $101,979 | | Kenneth Y. Tanji | | | 2018 | | | | $ 1,168 | | | | | | | | $11,000 | | | | $ 6,856 | | | | $ 19,024 | | Robert M. Falzon | | | 2018 | | | | $ 17,657 | | | | | | | | $11,000 | | | | $20,331 | | | | $ 48,988 | | | | | 2017 | | | | $ 19,358 | | | | | | | | $10,800 | | | | $20,000 | | | | $ 50,158 | | | | | | 2016 | | | | $ 17,478 | | | | | | | | $ 8,173 | | | | $19,769 | | | | $ 45,420 | | Mark B. Grier | | | 2018 | | | | $ 35,151 | | | | | | | | $11,000 | | | | $36,600 | | | | $ 82,751 | | | | | 2017 | | | | $ 29,367 | | | | | | | | $10,800 | | | | $36,800 | | | | $ 76,967 | | | | | | 2016 | | | | $ 33,041 | | | | | | | | $10,600 | | | | $37,000 | | | | $ 80,641 | | Stephen Pelletier | | | 2018 | | | | $ 40,450 | | | | | | | | $11,000 | | | | $19,800 | | | | $ 71,250 | | | | | 2017 | | | | $ 37,926 | | | | | | | | $10,800 | | | | $20,000 | | | | $ 68,726 | | | | | | 2016 | | | | $ 35,806 | | | | | | | | $ 8,292 | | | | $20,200 | | | | $ 64,298 | | Scott G. Sleyster | | | 2018 | | | | $ 1,318 | | | | | | | | $11,000 | | | | $10,969 | | | | $ 23,287 | |
* | Mr. Strangfeld’s last day as CEO was November 30, 2018.
|
| | | | | | | | | | | | | | | | | | Name | | Perquisites ($)(1) | | | PESP Contributions ($)(2) | | | SESP Contributions ($)(2) | | | Total ($) | | Charles F. Lowrey | | | 44,489 | | | | 11,600 | | | | 36,400 | | | | 92,489 | | Kenneth Y. Tanji | | | 1,271 | | | | 6,600 | | | | 14,092 | | | | 21,963 | | Robert M. Falzon | | | 2,161 | | | | 6,600 | | | | 28,400 | | | | 37,161 | | Scott G. Sleyster | | | 4,206 | | | | 10,769 | | | | 16,400 | | | | 31,375 | | Andrew F. Sullivan | | | 2,119 | | | | 11,423 | | | | 16,400 | | | | 29,942 | |
| (1) | For all NEOs, the amounts reported in thePerquisites column for 2018 includerepresent the costs of commuting and limited personal use of Company-provided cars and reflect our determination of the costs allocable to the actual commuting and personal use of each individual based on a formula that takes into account various expenses, including costs associated with the driver and fuel. For Mr. Pelletier, this amount was $40,450 for 2018. In addition, for Messrs. Strangfeld and Grier, the amountsamount reported for 2018 includeincludes the incremental cost for security services whichof $40,908 for Mr. Strangfeld amounted to $217,468, as he changed his principal residence in 2018 resulting in higher security installation costs. Also,Lowrey and $135 for Mr. Strangfeld, the amount reported in 2018 includes $106,100 for the cost of transitional career consulting services. Finally, for certain NEOs, amounts reported for 2018 include the cost of physical examinations.Falzon. |
| (2) | Mr. Strangfeld received $125,000 for his service as a non-employee Non-Executive Chairman for the month of December 2018.
|
(3) | The amounts reported in thePESP Contributions andSESPContributions columns represent our contributions to the account of each NEO under (a) The Prudential Employee Savings Plan (the “PESP”), a defined contribution plan whichthat provides employees with the opportunity to contribute up to 50% of eligible earnings in any combination ofbefore-tax, Roth 401(k) and/orafter-tax contributions (subject to Internal Revenue Code limits) and (b) the Prudential Supplemental Employee Savings Plan, anon-qualified plan whichthat provides employees who exceed the Internal Revenue Code earnings limit ($275,000290,000 in 2018)2021) with the opportunity to defer up to 4% of eligible earnings in excess of the earnings limit. We match 100% of the first 4% of an employee’sbefore-tax or Roth 401(k) deferrals under the PESP and 100% of an employee’s deferrals under the SESP. |
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 55 |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 79
|
| | |
| | Executive Compensation | |
|
Grants of Plan-Based Awards The following table presents, for each of the NEOs, information concerning awards under our Long-TermAnnual Incentive Program (including our Book Value Performance Program)for performance year 2021 and grants of equity awards made during 20182021 for 2017 performance. 2018 Grants of Plan-Based Awards Table2020 performance under our Long-Term Incentive Program.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts
UnderNon-Equity Incentive
Plan Awards ($)(1) | | | Estimated Future Payouts
Under Equity Incentive
Plan Awards(2) | | | All Other
Option
Awards;
Number of
Securities
Underlying
Options (#)(3) | | | Exercise
or Base
Price of
Option
Awards
($/Sh) | | | Grant Date
Fair Value of
Stock and
Option
Awards ($)(4) | | | | Grant Date | | | Number of Book
Value Units (#) | | | Target
($) | | | Maximum
($) | | | Target
(#) | | | Maximum
(#) | | | | | | | | Charles F. Lowrey, Chief Executive Officer | |
| Annual
Incentive |
| | | n/a | | | | | | | | 4,000,000 | | | | 8,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/13/2018 | | | | | | | | | | | | | | | | 11,690 | | | | 16,074 | | | | | | | | | | | | 1,249,544 | | | | | PU | | | | 2/13/2018 | | | | | | | | | | | | | | | | 11,690 | | | | 16,074 | | | | | | | | | | | | 1,249,544 | | | | | Option | | | | 2/13/2018 | | | | | | | | | | | | | | | | | | | | | | | | 30,885 | | | $ | 106.89 | | | | 854,897 | | | | | | BVU | | | | 2/13/2018 | | | | 25,851 | | | | 2,282,126 | | | | | | | | | | | | | | | | | | | | | | | | | | John R. Strangfeld, Chairman (and Former Chief
Executive Officer) | |
| Annual
Incentive |
| | | n/a | | | | | | | | 6,000,000 | | | | 12,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/13/2018 | | | | | | | | | | | | | | | | 24,611 | | | | 33,841 | | | | | | | | | | | | 2,630,670 | | | | | PU | | | | 2/13/2018 | | | | | | | | | | | | | | | | 24,611 | | | | 33,841 | | | | | | | | | | | | 2,630,670 | | | | | Option | | | | 2/13/2018 | | | | | | | | | | | | | | | | | | | | | | | | 65,020 | | | $ | 106.89 | | | | 1,799,754 | �� | | | | BVU | | | | 2/13/2018 | | | | 45,289 | | | | 3,998,113 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 11/30/2018 | | | | | | | | | | | | | | | | 30,760 | | | | 42,295 | | | | | | | | | | | | 2,884,058 | | | | | PU | | | | 11/30/2018 | | | | | | | | | | | | | | | | 30,760 | | | | 42,295 | | | | | | | | | | | | 2,884,058 | | | | | Option | | | | 11/30/2018 | | | | | | | | | | | | | | | | | | | | | | | | 81,268 | | | $ | 93.76 | | | | 2,003,256 | | | | | BVU | | | | 11/30/2018 | | | | 21,009 | | | | 2,000,057 | | | | | | | | | | | | | | | | | | | | | | | | | | Kenneth Y. Tanji Executive Vice President and Chief Financial Officer | |
| Annual
Incentive |
| | | n/a | | | | | | | | 852,150 | | | | 1,704,300 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/13/2018 | | | | | | | | | | | | | | | | 1,785 | | | | 2,455 | | | | | | | | | | | | 190,799 | | | | | PU | | | | 2/13/2018 | | | | | | | | | | | | | | | | 1,785 | | | | 2,455 | | | | | | | | | | | | 190,799 | | | | | Option | | | | 2/13/2018 | | | | | | | | | | | | | | | | | | | | | | | | 2,357 | | | $ | 106.89 | | | | 65,242 | | | | | BVU | | | | 2/13/2018 | | | | 3,733 | | | | 329,549 | | | | | | | | | | | | — | | | | | | | | | | | | | | Robert M. Falzon, Vice Chairman (and Former Chief Financial Officer) | |
| Annual
Incentive |
| | | n/a | | | | | | | | 3,000,000 | | | | 6,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/13/2018 | | | | | | | | | | | | | | | | 9,845 | | | | 13,537 | | | | | | | | | | | | 1,052,332 | | | | | PU | | | | 2/13/2018 | | | | | | | | | | | | | | | | 9,845 | | | | 13,537 | | | | | | | | | | | | 1,052,332 | | | | | Option | | | | 2/13/2018 | | | | | | | | | | | | | | | | | | | | | | | | 26,008 | | | $ | 106.89 | | | | 719,901 | | | | | BVU | | | | 2/13/2018 | | | | 20,380 | | | | 1,799,146 | | | | | | | | | | | | — | | | | | | | | | | | | | | Mark B. Grier, Vice Chairman | |
| Annual
Incentive |
| | | n/a | | | | | | | | 5,100,000 | | | | 10,200,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/13/2018 | | | | | | | | | | | | | | | | 19,689 | | | | 27,073 | | | | | | | | | | | | 2,104,557 | | | | | PU | | | | 2/13/2018 | | | | | | | | | | | | | | | | 19,689 | | | | 27,073 | | | | | | | | | | | | 2,104,557 | | | | | Option | | | | 2/13/2018 | | | | | | | | | | | | | | | | | | | | | | | | 52,016 | | | $ | 106.89 | | | | 1,439,803 | | | | | BVU | | | | 2/13/2018 | | | | 37,360 | | | | 3,298,141 | | | | | | | | | | | | | | | | | | | | | | | | | | Stephen Pelletier,(8) Executive Vice President and Chief Operating Officer, U.S. | |
| Annual
Incentive |
| | | n/a | | | | | | | | 4,000,000 | | | | 8,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/13/2018 | | | | | | | | | | | | | | | | 11,690 | | | | 16,074 | | | | | | | | | | | | 1,249,544 | | | | | PU | | | | 2/13/2018 | | | | | | | | | | | | | | | | 11,690 | | | | 16,074 | | | | | | | | | | | | 1,249,544 | | | | | Option | | | | 2/13/2018 | | | | | | | | | | | | | | | | | | | | | | | | 30,885 | | | $ | 106.89 | | | | 854,897 | | | | | BVU | | | | 2/13/2018 | | | | 26,734 | | | | 2,360,078 | | | | | | | | | | | | | | | | | | | | | | | | | | Scott G. Sleyster Executive Vice President and Chief Operating Officer, International Businesses | |
| Annual
Incentive |
| | | n/a | | | | | | | | 1,539,000 | | | | 3,078,000 | | | | | | | | | | | | | | | | | | | | | | | | | PS | | | | 2/13/2018 | | | | | | | | | | | | | | | | 7,384 | | | | 10,153 | | | | | | | | | | | | 789,276 | | | | | PU | | | | 2/13/2018 | | | | | | | | | | | | | | | | 7,384 | | | | 10,153 | | | | | | | | | | | | 789,276 | | | | | Option | | | | 2/13/2018 | | | | | | | | | | | | | | | | | | | | | | | | 9,753 | | | $ | 106.89 | | | | 269,963 | | | | | BVU | | | | 2/13/2018 | | | | 12,370 | | | | 1,092,024 | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards ($)(1) | | | Estimated Future Payouts
Under Equity Incentive
Plan Awards(2) | | | All Other Stock
Awards:
Number of
shares of
stock or units
(#)(3) | | | Grant Date
Fair Value
($/Sh) | | | Grant Date
Fair Value
of Stock
and Option
Awards
($)(3) | | | | | | | | Grant
Date | | | | | | Target
($) | | | Maximum
($) | | | Target
(#) | | | Maximum
(#) | | Charles F. Lowrey | | | AIA | | | | N/A | | | | | | | | 3,500,000 | | | | 5,250,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 104,078 | | | | 171,729 | | | | | | | | 81.43 | | | | 8,475,072 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 34,693 | | | | 81.43 | | | | 2,825,051 | | Kenneth Y. Tanji | | | AIA | | | | N/A | | | | | | | | 1,550,000 | | | | 2,325,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 33,158 | | | | 54,711 | | | | | | | | 81.43 | | | | 2,700,056 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 11,053 | | | | 81.43 | | | | 900,046 | | Robert M. Falzon | | | AIA | | | | N/A | | | | | | | | 2,800,000 | | | | 4,200,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 82,894 | | | | 136,775 | | | | | | | | 81.43 | | | | 6,750,058 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 27,632 | | | | 81.43 | | | | 2,250,074 | | Scott G. Sleyster | | | AIA | | | | N/A | | | | | | | | 2,000,000 | | | | 3,000,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 40,526 | | | | 66,868 | | | | | | | | 81.43 | | | | 3,300,032 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 13,509 | | | | 81.43 | | | | 1,100,038 | | Andrew F. Sullivan | | | AIA | | | | N/A | | | | | | | | 2,000,000 | | | | 3,000,000 | | | | N/A | | | | N/A | | | | | | | | N/A | | | | N/A | | | | | PS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | 40,526 | | | | 66,868 | | | | | | | | 81.43 | | | | 3,300,032 | | | | | | RS | | | | 2/9/21 | | | | | | | | N/A | | | | N/A | | | | | | | | N/A | | | | 13,509 | | | | 81.43 | | | | 1,100,038 | |
| (1) | The amounts reported in theEstimated Future Payouts Under Non-Equity Incentive Plan Awardscolumns represent the potential amounts for annual incentives for the 20182021 performance year. Actual amounts earned by the NEOs are reflected in the Summary Compensation Table. In addition, individual amounts are reported by grant date to represent the value of the book value units awarded to the NEOs under the Omnibus Plan on February 13, 2018, and November 30, 2018, and reflected in the Number of Book Value Units column, based on the book value per share of the company of $88.28 as originally reported as of December 31, 2017, and $95.20 as originally reported as of September 30, 2018, respectively.Table |
| (2) | The amounts reported in theEstimated Future Payouts Under Equity Incentive Plan Awards columns represent performance shares awarded to the NEOs under the Omnibus Plan in 2021. Performance share awards are granted for a three-year performance period with payouts determined at the end of the period based on our ROE performance and performancegrowth in adjusted book value per share as described in the CD&A. |
| (3) | The amounts reported in the All Other Stock Awards: Number of Shares of Stock or Units column represent restricted stock units awarded to the NEOs under the Omnibus Plan in 2018. Performance share and performance unit awards are granted for a three-year performance period with payout determined at2021. RSUs vest in three equal annual installments as described in the end of the period based on our performance against our ROE goals. The ROE goals for the 2018 grant are within a range of 10% and 14%. |
| | | | | | | | 80
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Executive Compensation
| |
(3) | The amounts reported in theAll Other Option Awards column represent the number of stock options granted to each NEO under the Omnibus Plan in 2018. These stock options vest one-third each year on the anniversary of the grant date. These stock options expire 10 years from their respective grant date. The exercise price for the February 13, 2018 and November 30, 2018 grants of stock options is the closing price of our Common Stock on the grant dates of February 13, 2018 ($106.89 per share) and November 30, 2018 ($93.76), respectively.CD&A.
|
| (4) | The amounts in theGrant Date Fair Value column have been calculated using the number of restricted stock units awarded or in the case of performance shares and performance units as the target number of performance shares, and performance unitsin each case multiplied by the closing price of our Common Stock on the grant date of February 13, 2018 ($106.89 per share) and November 30, 2018 ($93.76), respectively.latest year end share price. |
For stock options, the grant date fair values are hypothetical values developed under a binomial option pricing model, which is a complex, mathematical formula to determine the fair value of stock options on the date of grant. The binomial option pricing model is a flexible, lattice-based valuation model that takes into consideration transferability, fixed estimate of volatility, and expected life of the options. As such, the amounts reported in the table are hypothetical values and may not reflect the actual economic value the NEO would realize upon exercise.
We made the following assumptions when calculating the grant date fair value of the stock option grants: exercise price is equal to our share price on the grant date, and for the grants of February 13, 2018, 5.49 year life expected for each option, expected dividend yield is 2.88%, risk-free rate of return of 2.59%, and expected price volatility of 35.39%.
| | | | 56 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 81
|
| | |
| | Executive Compensation | |
|
Outstanding Equity Awards The following table provides information on the NEOs’ outstanding equity awards as of December 31, 2018.2021. The equity awards reported in the Stock Awards columns consist of performance share awards and restricted stock units. Grants of performance unit awards.shares were made for three-year performance cycles with the 2019 grant as the 2019-2021 performance cycle, the 2020 grant as the 2020-2022 performance cycle and the 2021 grant as the 2021-2023 performance cycle. The equity awards reported in the Option Awards columns consist ofnon-qualified stock options. 2018 Outstanding Equity Awards at FiscalYear-End Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards(1) | | | Stock Awards | | | | | | | | | | Name | | Grant Date | | | Number of
Securities
Underlying
Unexercised
Options
(# Exercisable) | | | Number of
Securities
Underlying
Unexercised
Options
(# Unexercisable) | | | Option
Exercise
Price ($) | | | Option
Expiration Date | | | Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or
Rights That Have
Not Vested (#)(2) | | | Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Rights That Have
Not Vested ($)(2) | | | | | | | | | | Charles F. Lowrey | | | 2/13/2018 | | | | 0 | | | | 30,885 | | | | 106.89 | | | | 2/13/2028 | | | | 32,148 | | | | 2,621,669 | | | | | 2/14/2017 | | | | 12,268 | | | | 24,538 | | | | 110.45 | | | | 2/14/2027 | | | | 35,564 | | | | 2,900,244 | | | | | 2/9/2016 | | | | 19,979 | | | | 19,979 | | | | 63.59 | | | | 2/9/2026 | | | | 49,350 | | | | 4,024,493 | | | | | 2/10/2015 | | | | 45,478 | | | | 0 | | | | 78.08 | | | | 2/10/2025 | | | | | | | | | | | | | | 2/11/2014 | | | | 38,962 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | | | | John R. Strangfeld | | | 11/30/2018 | | | | 0 | | | | 81,268 | | | | 93.76 | | | | 11/30/2028 | | | | 84,590 | | | | 6,898,315 | | | | | 2/13/2018 | | | | 0 | | | | 65,020 | | | | 106.89 | | | | 2/13/2028 | | | | 67,682 | | | | 5,519,467 | | | | | 2/14/2017 | | | | 24,537 | | | | 49,074 | | | | 110.45 | | | | 2/14/2027 | | | | 71,126 | | | | 5,800,325 | | | | | 2/9/2016 | | | | 84,122 | | | | 42,061 | | | | 63.59 | | | | 2/9/2026 | | | | 103,896 | | | | 8,472,719 | | | | | 2/10/2015 | | | | 85,902 | | | | 0 | | | | 78.08 | | | | 2/10/2025 | | | | | | | | | | | | | 2/11/2014 | | | | 73,594 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | | | | | | | 2/12/2013 | | | | 247,094 | | | | 0 | | | | 57.00 | | | | 2/12/2023 | | | | | | | | | | | | | | 2/14/2012 | | | | 223,685 | | | | 0 | | | | 59.41 | | | | 2/14/2022 | | | | | | | | | | Kenneth Y. Tanji | | | 2/13/2018 | | | | 0 | | | | 2,357 | | | | 106.89 | | | | 2/13/2028 | | | | 4,910 | | | | 400,411 | | | | | 2/14/2017 | | | | 889 | | | | 1,780 | | | | 110.45 | | | | 2/14/2027 | | | | 5,158 | | | | 420,635 | | | | | 2/9/2016 | | | | 5,888 | | | | 2,945 | | | | 63.59 | | | | 2/9/2026 | | | | 7,274 | | | | 593,195 | | | | | 2/10/2015 | | | | 9,096 | | | | 0 | | | | 78.08 | | | | 2/10/2025 | | | | | | | | | | | | | 2/11/2014 | | | | 5,195 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | | | | | | | 2/12/2013 | | | | 17,442 | | | | 0 | | | | 57.00 | | | | 2/12/2023 | | | | | | | | | | | | | 2/14/2012 | | | | 11,843 | | | | 0 | | | | 59.41 | | | | 2/14/2022 | | | | | | | | | | | | | | 2/8/2011 | | | | 9,600 | | | | 0 | | | | 64.01 | | | | 2/8/2021 | | | | | | | | | | Robert M. Falzon | | | 2/13/2018 | | | | 0 | | | | 26,008 | | | | 106.89 | | | | 2/13/2028 | | | | 27,074 | | | | 2,207,885 | | | | | 2/14/2017 | | | | 9,815 | | | | 19,630 | | | | 110.45 | | | | 2/14/2027 | | | | 28,450 | | | | 2,320,098 | | | | | 2/9/2016 | | | | 33,649 | | | | 16,825 | | | | 63.59 | | | | 2/9/2026 | | | | 41,558 | | | | 3,389,055 | | | | | 2/10/2015 | | | | 20,213 | | | | 0 | | | | 78.08 | | | | 2/10/2025 | | | | | | | | | | | | | | 2/11/2014 | | | | 7,504 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | | | |
| | | | | | | | 82
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Executive Compensation
| |
| | | | | | | Option Awards1 | | | | | | Stock Awards | | | Name | | | Grant Date | | Number of
Securities
Underlying
Unexercised
Options
(# Exercisable) | | Number of
Securities
Underlying
Unexercised
Options
(# Unexercisable) | | Option
Exercise
Price
($) | | Option Expiration Date | | | | Number of
Shares or
Units of
Stock
that Have
Not Vested (#) | | Market
Value of
Shares or
Units of
Stock that
Have Not
Vested ($) | | Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or
Rights that Have
Not Vested (#)2 | | Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Rights that Have
Not Vested ($)2 | | Charles F. Lowrey | | | 2/9/2021 | | | | | | | | | | | | | 34,692 | | | 2,825,051 | | | 171,729 | | | 13,983,893 | | | | | | | | | | | | | | | | | | | | | | | | 2/11/2020 | | | 31,156 | | | 62,313 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 64,933 | | | 7,028,348 | | | | | | | 2/12/2019 | | | 55,500 | | | 27,750 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 66,678 | | | 7,217,227 | | | | | | | | Option Awards(1) | | | Stock Awards | | | 2/13/2018 | | | 30,885 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | | | | | 2/14/2017 | | | | 36,806 | | | | 0 | | | | 110.45 | | | | 2/14/2027 | | | | | | | | | | | | Name | | Grant Date | | | Number of
Securities
Underlying
Unexercised
Options
(# Exercisable) | | | Number of
Securities
Underlying
Unexercised
Options
(# Unexercisable) | | | Option
Exercise
Price ($) | | | Option
Expiration Date | | | Equity Incentive
Plan Awards:
Number of Unearned
Shares, Units or
Rights That Have
Not Vested (#)(2) | | | Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Rights That Have
Not Vested ($)(2) | | | | Mark B. Grier | | | 2/13/2018 | | | | 0 | | | | 52,016 | | | | 106.89 | | | | 2/13/2028 | | | | 54,146 | | | | 4,415,606 | | | Kenneth Y. Tanji | | | 2/9/2021 | | | | | | | | | | | | | 11,053 | | | 900,046 | | | 54,711 | | | 4,455,117 | | | | | 2/14/2017 | | | | 19,629 | | | | 39,260 | | | | 110.45 | | | | 2/14/2027 | | | | 56,900 | | | | 4,640,195 | | | 2/11/2020 | | | 9,760 | | | 19,520 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 20,342 | | | 2,201,818 | | | | | 2/9/2016 | | | | 67,298 | | | | 33,649 | | | | 63.59 | | | | 2/9/2026 | | | | 83,116 | | | | 6,778,110 | | | 2/12/2019 | | | 17,386 | | | 8,693 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 20,888 | | | 2,260,917 | | | | | 2/10/2015 | | | | 70,743 | | | | 0 | | | | 78.08 | | | | 2/10/2025 | | | | | | | 2/13/2018 | | | 2,357 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | | | | 2/11/2014 | | | | 60,607 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | 2/14/2017 | | | 2,669 | | | 0 | | | 110.45 | | | 2/14/2027 | | | | | | | | | | | | | | | 2/12/2013 | | | | 135,660 | | | | 0 | | | | 57.00 | | | | 2/12/2023 | | | | | | | 2/9/2016 | | | 8,883 | | | 0 | | | 63.59 | | | 2/9/2026 | | | | | | | | | | | | | | | | 2/14/2012 | | | | 57,895 | | | | 0 | | | | 59.41 | | | | 2/14/2022 | | | | | | | 2/10/2015 | | | 9,096 | | | 0 | | | 78.08 | | | 2/10/2025 | | | | | | | | | | | | Stephen Pelletier | | | 2/13/2018 | | | | 0 | | | | 30,885 | | | | 106.89 | | | | 2/13/2028 | | | | 32,148 | | | | 2,621,669 | | | | | | | 2/11/2014 | | | | 5,195 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | | | | | | Robert M. Falzon | | | 2/9/2021 | | | | | | | | | | | | | 27,632 | | | 2,250,074 | | | 136,775 | | | 11,137,588 | | | | | 2/11/2020 | | | 24,775 | | | 49,550 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 51,633 | | | 5,588,756 | | | | | 2/12/2019 | | | 44,132 | | | 22,067 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 53,024 | | | 5,739,318 | | | | | 2/13/2018 | | | 26,008 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | | | | 2/14/2017 | | | 29,445 | | | 0 | | | 110.45 | | | 2/14/2027 | | | | | | | | | | | | | | | 2/14/2017 | | | | 11,041 | | | | 22,084 | | | | 110.45 | | | | 2/14/2027 | | | | 32,008 | | | | 2,610,252 | | | 2/9/2016 | | | 50,474 | | | 0 | | | 63.59 | | | 2/9/2026 | | | | | | | | | | | | | | | 2/9/2016 | | | | 0 | | | | 18,928 | | | | 63.59 | | | | 2/9/2026 | | | | 46,754 | | | | 3,812,789 | | | 2/10/2015 | | | 20,213 | | | 0 | | | 78.08 | | | 2/10/2025 | | | | | | | | | | | | | | | | 2/14/2012 | | | | 8,553 | | | | 0 | | | | 59.41 | | | | 2/14/2022 | | | | | | | | 2/11/2014 | | | | 7,504 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | | | | | | Scott G. Sleyster | | | 2/13/2018 | | | | 0 | | | | 9,753 | | | | 106.89 | | | | 2/13/2028 | | | | 20,306 | | | | 1,655,954 | | | 2/9/2021 | | | | | | | | | | | | | 13,509 | | | 1,100,038 | | | 40,526 | | | 3,300,032 | | | | | 2/14/2017 | | | | 3,190 | | | | 6,380 | | | | 110.45 | | | | 2/14/2027 | | | | 18,494 | | | | 1,508,186 | | | 2/11/2020 | | | 14,264 | | | 28,529 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 29,729 | | | 3,217,867 | | | | | 2/9/2016 | | | | 21,872 | | | | 10,936 | | | | 63.59 | | | | 2/9/2026 | | | | 27,014 | | | | 2,202,992 | | | 2/12/2019 | | | 25,410 | | | 12,705 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 30,528 | | | 3,304,351 | | | | | 2/10/2015 | | | | 24,760 | | | | 0 | | | | 78.08 | | | | 2/10/2025 | | | | | | | 2/13/2018 | | | 9,753 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | | | | 2/11/2014 | | | | 8,659 | | | | 0 | | | | 84.53 | | | | 2/11/2024 | | | | | | | 2/14/2017 | | | 9,570 | | | 0 | | | 110.45 | | | 2/14/2027 | | | | | | | | | | | | | | | 2/12/2013 | | | | 23,983 | | | | 0 | | | | 57.00 | | | | 2/12/2023 | | | | | | | 2/9/2016 | | | 32,808 | | | 0 | | | 63.59 | | | 2/9/2026 | | | | | | | | | | | | | | | | 6/12/2012 | | | | 5,935 | | | | 0 | | | | 47.61 | | | | 6/12/2022 | | | | | | | 2/10/2015 | | | 24,760 | | | 0 | | | 78.08 | | | 2/10/2025 | | | | | | | | | | | | | | | 2/11/2014 | | | 8,659 | | | 0 | | | 84.53 | | | 2/11/2024 | | | | | | | | | | | | | | | | 2/12/2013 | | | | 23,983 | | | | 0 | | | | 57.00 | | | | 2/12/2023 | | | | | | | | | | | | Andrew F. Sullivan | | | 2/9/2021 | | | | | | | | | | | | | 13,509 | | | 1,100,038 | | | 40,526 | | | 3,300,032 | | | | | 2/11/2020 | | | 12,387 | | | 24,776 | | | 95.87 | | | 2/11/2030 | | | | | | | | | 25,817 | | | 2,794,432 | | | | | 2/12/2019 | | | 4,681 | | | 2,341 | | | 93.36 | | | 2/12/2029 | | | | | | | | | 11,248 | | | 1,217,484 | | | | | 2/13/2018 | | | 3,251 | | | 0 | | | 106.89 | | | 2/13/2028 | | | | | | | | | | | | | | | 10/2/2017 | | | 1,128 | | | 0 | | | 107.28 | | | 10/2/2027 | | | | | | | | | | | | | | | 2/14/2017 | | | 2,577 | | | 0 | | | 110.45 | | | 2/14/2027 | | | | | | | | | | | | | | | 10/13/2015 | | | 749 | | | 0 | | | 77.15 | | | 10/13/2025 | | | | | | | | | | | | | | | 5/15/2015 | | | 344 | | | 0 | | | 85.46 | | | 5/15/2025 | | | | | | | | | | | | | | | | 2/10/2015 | | | 826 | | | 0 | | | 78.08 | | | 2/10/2025 | | | | | | | | | | | |
| (1) | The options reported in theOption Awards column vest at the rate ofone-third per year on the anniversary of the date of grant. |
| (2) | TheEquity Incentive Plan Awards columns reflect the number of outstanding performance shares and performance units that would be received by each NEO at the maximum payout level for the 2017, 20162021, 2020 and 2015 grants.2019 grants, as well as the number of restricted stock units outstanding. The dollar values reported represent the estimated value of the outstanding performance shares and performance units at the maximum payout level for the 2017, 20162021, 2020 and 20152019 grants and outstanding restricted stock units, based on the closing market price for our Common Stock on the last trading day of thelatest year December 29, 2017 ($114.98 per share).end share price. Performance shares and performance units are subject to a three-year performance period with payout determined at the end of the period based on ourmeasures of Company performance, against our ROE goals.as well as for the 2021 grants, an inclusion and diversity modifier. As discussed in the CD&A, the Committee approved a final earn-out factor of 0.937 for the awards granted on February 12, 2019. |
Grants were made for three-year performance cycles with the 2016 grant as the 2016-2018 performance cycle, the 2017 grant as the 2017-2019 performance cycle, and the 2018 grant as the 2018-2020 performance cycle.
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 57 |
| | | | | | | Executive Compensation | |
|
Option Exercises and Stock Vested The following table provides information on the value realized by each of the NEOs as a result of the exercise of stock options and the vesting of stock awards from January 1, 20182021 through December 31, 2018. 2018 Option Exercises and Stock Vested Table2021.
| | | | Option Awards | | | Stock Awards | | | | | | | | | | | | | | | Option Awards | | | | | | Stock Awards | | Name | | Number of Shares
Acquired on Exercise
(#) | | | Value Realized
On Exercise ($) | | | Number of Shares
Acquired on Vesting (#)(1) | | | Value
Realized
on Vesting (#)(2) | | | Number of Shares
Acquired on Exercise
(#) | | | Value Realized
on Exercise ($) | | | | | Number of Shares
Acquired on Vesting (#)(1) | | | Value
Realized
on Vesting ($)(2) | | | Charles F. Lowrey | | | 0 | | | | 0 | | | | 18,133 | | | | 1,938,236 | | | | 124,398 | | | | 4,293,372 | | | | | | 24,878 | | | | 2,025,816 | | John R. Strangfeld | | | 0 | | | | 0 | | | | 34,249 | | | | 3,660,876 | | | | Kenneth Y. Tanji | | | 0 | | | | 0 | | | | 3,627 | | | | 387,690 | | | | 29,285 | | | | 965,275 | | | | | | 3,800 | | | | 309,434 | | | Robert M. Falzon | | | 0 | | | | 0 | | | | 12,088 | | | | 1,292,086 | | | | — | | | | — | | | | | | 20,952 | | | | 1,706,121 | | Mark B. Grier | | | 0 | | | | 0 | | | | 28,205 | | | | 3,014,832 | | | Stephen Pelletier | | | 32,403 | | | | 1,261,178 | | | | 16,118 | | | | 1,722,853 | | | | Scott G. Sleyster | | | 23,300 | | | | 1,734,461 | | | | 9,872 | | | | 1,055,218 | | | | 22,383 | | | | 1,194,057 | | | | | | 14,144 | | | | 1,151,746 | | | Andrew F. Sullivan | | | | — | | | | — | | | | | | 5,240 | | | | 426,693 | |
| (1) | The amounts in theStock Awards—Number of Shares Acquired on Vesting column represent the payout of shares of our Common Stock for the vesting of the 20152018 performance shares grants and payout of the 2015 performance units as cash.grants. |
| (2) | The amounts in theStock Awards—Value Realized on Vesting column represent the product of the number of performance shares and performance units released and the closing salemarket price of our Common Stock on February 13, 2018, $106.89.9, 2021, $81.43. |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 83
|
| | |
| | Executive Compensation
| |
Pension Benefits The following table provides information on the defined benefit retirement plans in which the NEOs participate, including the present value of accumulated benefits as of December 31, 2018,2021, except as noted, payable for each of the NEOs under each of these plans determined using interest rate and mortality rate assumptions consistent with those used in our consolidated financial statements; namely, the RP 2014PRI-2012 generational mortality table with white collar adjustments and an adjustment to reflect recent Prudential-specific experience and an interest discount rate of 4.30%2.85%. Cash Balance Formula accounts are assumed to grow with interest based on an assumed30-year Treasury Rate, but not less than 4.25%, and PSI Cash Balance Formula accounts are assumed to grow with interest at 5.00% until the commencement of pension benefits. No additional earnings or service after December 31, 2018 are2021 is included in the calculation of the accumulated benefits. 2018 Pension Benefits Table
| | Name | | Plan Name | | Number of Years of
Credited Service
(#) | | | Present Value of
Accumulated Benefit
($) | | | Payments During
Last Fiscal Year
($) | | | Plan Name | | Number of Years of
Credited Service
(#) | | Present Value of
Accumulated Benefit
($) | | | Payments During
Last Fiscal Year
($) | | | Charles F. Lowrey | | Merged Retirement Plan—Cash Balance Formula | | | 17 | | | | $ 2,117,671 | | | | — | | | Merged Retirement Plan—Cash Balance Formula | | | 20 | | | 2,549,963 | | | | — | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 17 | | | | $ 3,897,642 | | |
| $ 16,170
| (3)
| | | John R. Strangfeld(6) | | Merged Retirement Plan—Traditional Benefit Formula | | | 41 | | | | $ 3,327,046 | | | | — | | | | | Supplemental Retirement Plan—Traditional Pension Formula | | | 41 | | | | $88,136,857 | | | | — | | | Supplemental Retirement Plan—Cash Balance Formula | | | 20 | | | | 6,420,585 | | | | 23,597 | (3) | | | | Supplemental Retirement Plan—Cash Balance Formula | | | n/a | (1) | | | $ 37,741 | | | | — | | | | Kenneth Y. Tanji | | Merged Retirement Plan—Cash Balance Formula | | | 29 | (2) | | | $ 1,025,605 | | | | — | | | Merged Retirement Plan—Cash Balance Formula | | | 32 | (2) | | 1,434,654 | | | | — | | | | Merged Retirement Plan—PSI Cash Balance Formula | | | n/a | (2) | | | $ 72,219 | | | | — | | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 29 | (2) | | | $ 703,883 | | |
| $ 2,026
| (3)
| | Merged Retirement Plan—PSI Cash Balance Formula | | | n/a | (2) | | 102,599 | | | | — | | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 32 | (2) | | | 1,467,118 | | | | 3,812 | (3) | | Robert M. Falzon | | Merged Retirement Plan—Cash Balance Formula | | | 35 | (2) | | | $ 1,583,103 | | | | — | | | Merged Retirement Plan—Cash Balance Formula | | | 38 | (2) | | 2,079,065 | | | | — | | | | Merged Retirement Plan—PSI Cash Balance Formula | | | n/a | (2) | | | $ 85,539 | | | | — | | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 35 | (2) | | | $ 2,043,689 | | |
| $ 10,819
| (3)
| | Mark B. Grier | | Merged Retirement Plan—Cash Balance Formula | | | 23 | | | | $ 2,717,908 | | | | — | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 23 | | | | $ 947,529 | | |
| $ 38,848
| (3)
| | Stephen Pelletier | | Merged Retirement Plan—Traditional Benefit Formula | | | 20 | | | | $ 1,518,288 | | | | — | | | | | Merged Retirement Plan—Cash Balance Formula | | | n/a | (1) | | | $ 6,142 | | | | — | | | Merged Retirement Plan—PSI Cash Balance Formula | | | n/a | (2) | | 102,170 | | | | — | | | | Merged Retirement Plan—PSI Cash Balance Formula | | | n/a | (4) | | | $ 118,135 | | | | — | | | | | | Supplemental Retirement Plan—Traditional Pension Formula | | | 20 | | | | $ 967,214 | | |
| $30,786,075
| (5)
| | Supplemental Retirement Plan—Cash Balance Formula | | | 38 | (2) | | | 3,722,755 | | | | 15,613 | (3) | | | | PSI Supplemental Retirement Plan for Executives | | | n/a | (4) | | | $ 533,628 | | | | — | | | | Scott G. Sleyster | | Merged Retirement Plan—Cash Balance Formula | | | 31 | | | | $ 2,891,174 | | | | — | | | Merged Retirement Plan—Cash Balance Formula | | | 34 | | | 3,898,368 | | | | — | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 31 | | | | $ 1,655,903 | | |
| $ 4,178
| (3)
| | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 34 | | | | 2,780,239 | | | | 8,146 | (3) | | Andrew F. Sullivan | | | Merged Retirement Plan—Cash Balance Formula | | | 10 | | | 264,848 | | | | — | | | | | | | Supplemental Retirement Plan—Cash Balance Formula | | | 10 | | | | 998,800 | | | | 3,224 | (3) |
| (1) | This benefit is a result of an allocation of demutualization compensation distributed to all participants in the Merged Retirement Plan in 2002 (“Demutualization Credit”). Ongoing service is not a consideration in determining this benefit for the NEOs. |
| (2) | Mr. Tanji transferred from Prudential to Prudential Securities Incorporated in 1994 and transferred back to Prudential from Prudential Securities Incorporated in 2002. He began accruing pension benefits under the Traditional Pension Formula and, subsequently, the Cash Balance Formula upon his election of this formula in 2001; in accordance with the Merged Retirement Plan Cash Balance Formula, credited service includes service with the Company’s subsidiaries, in particular Prudential Securities Incorporated. As a result of his transfer, ongoing service is not a consideration in determining his benefit under the PSI Cash Balance Formula. |
| | Mr. Falzon transferred to Prudential from Prudential Securities Incorporated in 1998 and began accruing pension benefits under the Traditional Pension Formula and, subsequently, the Cash Balance Formula upon his election of this formula in 2001; in accordance with the Merged Retirement Plan Cash Balance Formula, credited service includes service with the Company’s subsidiaries, in particular Prudential Securities Incorporated. As a result of his transfer, ongoing service is not a consideration in determining his benefit under the PSI Cash Balance Formula. |
| (3) | For Messrs. Lowrey, Tanji, Falzon, Sleyster and Sleyster,Sullivan, this payment was a distribution from the Supplemental Retirement Plan Cash Balance Formula to pay for accrued FICA taxes due in 20172020 on this benefit, and federal, state, and local taxes on the distributed amount. The entire payment was withheld to pay these taxes. |
| | | | 58 | | For Mr. Grier, this payment was a complete distribution of the remaining accruals under the Supplemental Retirement Plan for 2017, less applicable FICA, federal, state, and local taxes withheld on the distributed amount. The benefit accrued during the remainder of 2018 will be paid in early 2019 under the terms of the plan.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
(4) | Mr. Pelletier transferred to Prudential from Prudential Securities Incorporated in 1998 and began accruing pension benefits under the Traditional Pension Formula. As a result, ongoing service is not a consideration in determining his benefit.
|
(5) | For Mr. Pelletier, the terms of the Supplemental Retirement Plan require a participant in active service on the first day of the month on or following his or her 65th birthday to receive his or her benefit on that date. In accordance with these terms, Mr. Pelletier received a distribution of $30,786,075. The Supplemental Retirement Plan benefit accrued during the remainder of 2018 will be paid in early 2019 under the terms of the plan.
|
(6) | Mr. Strangfeld will be paid his benefit in the form of a lump sum under the terms of the Supplemental Retirement Plan on June 1, 2019. The present value shown represents the benefit accrued through his retirement date of November 30, 2018.
|
| | | | | | | | 84
| | |
Executive Compensation | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement |
| | |
| | Executive Compensation
|
|
The Merged Retirement Plan Our wholly owned subsidiary, The Prudential Insurance Company of America, sponsors ourtax-qualified defined benefit retirement plan, The Prudential Merged Retirement Plan (the “Merged Retirement Plan”), which is available to our executive officers, including the NEOs, and other salaried U.S. employees. The Merged Retirement Plan has two formulas under which participants may have their retirement benefits for ongoing service determined: the “Traditional Pension Formula” or the “Cash Balance Formula.” In addition, employees who previously worked for Prudential Securities Incorporated also have retirement benefits for their service with Prudential Securities Incorporated under a third component of the Merged Retirement Plan: the “PSI Cash Balance Formula.” TRADITIONAL PENSION FORMULATraditional Pension Formula
Under the Traditional Pension Formula, employees are fully vested in their accrued benefits. These benefits (which are subject to Internal Revenue Code limits) are determined using the following formula, which is based on Average Eligible Earnings (as defined) and years of Credited Service (as defined): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (1.35% x Average Eligible Earnings up to Covered Compensation + 2.00% x Average Eligible Earnings in
excess of Covered Compensation) | | × | | | | Years of Credited Service up to 25 years | | | | + | | | | (0.75% x Average Eligible Earnings
up to Covered Compensation + 1.00% x Average Eligible Earnings in
excess of Covered Compensation) | | × | | | | Years of Credited Service for the next 13 years | | | | + | | | | 1.00% x Average Eligible Earnings | | | | × | | | | Years of Credited Service in excess of
38 years | | |
For a separation from service in 2018,2021, Average Eligible Earnings are determined by taking the average of earnings (base salary plus annual incentive payment) over the period beginning January 1, 2011,2013, and ending on the date of separation after dropping the lowest two years of earnings in that period. Under the Traditional Pension Formula, the starting point for the averaging period is moved forward two years on January 1 of every even calendar year. “Covered Compensation” for a year is the average of the Social Security wage bases for the 35 years ending in the year the participant will reach Social Security normal retirement age. Benefits are payable as early as age 55 (with a reduction in benefits) as a single life annuity if not married or an actuarially equivalent 50% joint and survivor annuity if married. Generally, a participant’s benefit will be determined as the greater of: the benefit as determined above calculated at the time of separation from service;
| ● | | the benefit as determined above calculated at the time of separation from service; |
the benefit as determined above calculated as of January 1, 2002, plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2002; and
| ● | | the benefit as determined above calculated as of January 1, 2002, plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2002; and |
If the Supplemental Retirement Plan benefit is to be paid in the form of an annuity, the benefit as determined above calculated as of January 1, 2012 (including any adjustment in the benefit on January 1, 2002 as described in the previous bullet), plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2012. (Messrs. Strangfeld and Pelletier each elected to receive their Supplemental Retirement Plan benefit in the form of a lump sum; consequently, this provision does not apply to them.)
| ● | | If the Supplemental Retirement Plan benefit is to be paid in the form of an annuity, the benefit as determined above calculated as of January 1, 2012 (including any adjustment in the benefit on January 1, 2002 as described in the previous bullet), plus all or a portion of the Supplemental Retirement Plan benefit calculated as of January 1, 2012. |
Additional benefits are provided to participants who are eligible to retire upon separation from service. A participant is eligible to retire if he or she separates from service either: (a) after attainment of age 55 (with 10 years of vesting service) or age 65 or (b) due to an involuntary termination (other than for cause or exhausting short-term disability benefits) after attainment of age 50 (with 20 years of continuous service). If a participant is eligible to retire, he or she is eligible for survivor benefits (with no actuarial reduction), a lesser (or no) reduction in benefit for benefit commencement before age 65, and an additional benefit paid to age 65. | | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 85
|
| | |
| | Executive Compensation
| |
The benefits reported in the Pension Benefits Tabletable above are assumed to commence in the form of a 50% joint and survivor annuity on the later of January 1, 20192021 and the date the participant is eligible for an unreduced benefit, i.e., the earlier of (i) the first of the month on or following the later of attainment of age 60 and 30 years of service and (ii) the first of the month on or following attainment of age 65 (“Normal Retirement Date”). CASH BALANCE FORMULAThere are currently no NEOs that have their benefit calculated under the Traditional Pension Formula.
Cash Balance Formula The Cash Balance Formula was added to the Merged Retirement Plan in 2001 for employees hired on or after January 1, 2001, except employees of Prudential Securities Incorporated. At that time, we offered aone-time conversion election for the current Merged Retirement Plan participants with benefits under the Traditional Pension Formula to opt to have their individual retirement benefits determined under the Cash Balance Formula. Participants who made this election to use the Cash Balance Formula are fully vested in their Cash Balance Formula benefit. Otherwise, participants are generally vested in their Cash Balance Formula benefit after three years of service. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 59 |
| | | | | | | Executive Compensation | |
|
Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account that is allocated basic credits equal to 2% to 14% (depending on age and service) of base salary and annual incentive payments. Interest credits are made to the hypothetical account each month using an interest rate set each year based on the average yield on30-year U.S. Treasury securities (constant maturities) for October of the prior year, with a minimum rate of 4.25%. The rate in effect for 20182021 was 4.25%. Active participants on June 30, 2003 received an additional credit equal to his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of January 1, 2002, if any. Active participants on June 30, 2012 received an additional credit of no more than his or her Supplemental Retirement Plan Cash Balance Formula benefit determined as of April 1, 2012, if any. Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single life annuity; 50%, 75%, or 100% joint and survivor annuity; or 50% contingent annuity. Employees who made theone-time conversion election to use the Cash Balance Formula (specifically, Messrs. Tanji, Falzon, Grier and Sleyster) have a frozen “Grandfathered Benefit” determined as the accrued benefit under the Traditional Pension Formula as of January 1, 2002. The value of the Grandfathered Benefit, and early retirement subsidies on this benefit, if applicable, are included in determining the payable benefit. As reported in the Pension Benefits Table, cash balance accounts are assumed to grow with interest until, and benefits will commence on: for Messrs. Strangfeld and Pelletier (whose Cash Balance Formula benefits are due only to the Demutualization Credit), the same date benefits are assumed to commence under the Traditional Pension Formula; and
for Messrs. Lowrey, Tanji, Falzon, Grier and Sleyster,on the participant’s Normal Retirement Date.
Benefits are assumed to commence in a form that is based on a value comparison betweenwith 90% of participants electing a lump sum and 10% electing a 50% joint and survivor annuity. PSI CASH BALANCE FORMULACash Balance Formula The PSI Cash Balance Formula applies only to employees who previously worked for Prudential Securities Incorporated. At this time, all participants are fully vested in their PSI Cash Balance Formula benefit. Messrs. Tanji Falzon and PelletierFalzon are the only NEOs with a benefit under this formula. PSI Cash Balance Formula benefits (which are subject to Internal Revenue Code limits) are computed using a cash balance methodology that provides for credits to be made to a hypothetical account. Prior to January 1, 2004, the hypothetical accounts were allocated basic credits equal to 1.7% to 7% (depending on age and service) of eligible earnings. Since then, interest credits only have been made to the hypothetical account each month using an interest rate set each year, with a minimum rate of 5.00%. The rate in effect for 20182020 was 5.00%. Benefits are payable at any time after separation of service as a lump sum amount (based on the account balance) or an actuarially equivalent single lifesingle-life annuity; 50%, 75%, or 100% joint and survivor annuity; 50% or 100% contingent annuity; or single lifesingle-life annuity with five or 10 years guaranteed. | | | | | | | | 86
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Executive Compensation
| |
As reported in the Pension Benefits Table, PSI Cash Balance accounts are assumed to grow with interest until, and benefits will commence on: for Messrs. Tanji and Falzon,on the participant’s Normal Retirement Date; andDate.
for Mr. Pelletier, the same date benefits are assumed to commence under the Traditional Pension Formula.
Benefits are assumed to commence with 90% of participants electing a lump sum and 10% electing a 50% joint and survivor annuity. The Supplemental Retirement Plan and SERPs The Supplemental Retirement Plan is anon-qualified nonqualified retirement plan designed to complement the Merged Retirement Plan by providing benefits to all participants of the Merged Retirement Plan, including the NEOs, who are prohibited from receiving additional benefits under the Merged Retirement Plan because of Internal Revenue Code limits. Benefits under the Supplemental Retirement Plan are generally payable at the earlier of six months after separation from service and age 65. Under a special rule applicable to the Supplemental Retirement Plan, benefits are required to begin to be paid to a home office participant following attainment of age 65, regardless of whether he or she has separated from service. The Prudential Insurance Supplemental Executive Retirement Plan and the PFI Supplemental Executive Retirement Plan (collectively, the “Prudential SERPs”) provide “Early Retirement Benefits” to certain eligible executives, including the NEOs, subject to the approval of our Board and the Committee. Early Retirement Benefits are designed to recognize the service and contributions of eligible executives who are involuntarily terminated by exempting them from the reduction factor for early retirement between the ages of 55 and 65, a reduction of up to 50%, which would otherwise be applicable under the Traditional Pension Formula and the Grandfathered Benefit under the Cash Balance Formula of the Merged Retirement Plan and the Supplemental Retirement Plan. Benefits under the Prudential SERPs are generally payable at the earlier of six months after separation from service and age 65. No NEO is currently eligible for benefits under the Early Retirement Benefits provision. Upon an involuntary termination of employment, Messrs. Lowrey, Strangfeld, Tanji, Grier, and Pelletierno NEO will not be eligible for benefits under the Early Retirement Benefits provision due to a variety of factors; Messrs. Falzon and Sleyster are potentially eligible for benefits under the Early Retirement Benefits provision. However, were Mr. Falzon or Mr. Sleyster to qualify for Early Retirement Benefits, only the Grandfathered Benefit portion of their benefits would not be subject to reduction.factors. | | | | 60 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Executive Compensation | |
|
In 2008, the NEOs (with the exception of Mr. Lowrey)Messrs. Lowrey and Sullivan) were permitted to make an irrevocable election regarding the form of payment for their pension benefits and each NEO (with the exception of Mr.Messrs. Falzon and Mr. Sleyster) elected to receive his Supplemental Retirement Plan and Prudential SERPs benefits, if any, in a lump sum. The Prudential Securities Incorporated Supplemental Retirement Plan for Executives (“PSI SERP”) was designed to make it more attractive to certain key executives to remain employees of Prudential Securities Incorporated and its subsidiaries. Mr. Pelletier is the only NEO that is accruing benefits under the PSI SERP. Mr. Pelletier’s PSI SERP benefit will be paid as an annuity upon separation from service, irrespective of age. The PSI SERP benefit is determined as a target benefit, less the benefit payable from the PSI Cash Balance Formula and an estimated Social Security retirement benefit. The target benefit is 60% of an employee’s average salary times a ratio of service to 30 years. Mr. Pelletier stopped accruing service creditThere are no NEOs currently eligible for benefits under this plan upon his transfer to Prudential from Prudential Securities Incorporated.the PSI SERP. Notwithstanding the foregoing, benefits reported in the Pension Benefits Table are assumed to commence in the form of payment elected for this benefit, either an annuity or a lump sum, and at the same time as under the Merged Retirement Plan benefit to be consistent with assumptions used in the Company’s financial statements. | | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 87
|
| | |
| | Executive Compensation
| |
Nonqualified Deferred Compensation The following table provides information on the NEOs’ participation in the Prudential Supplemental Employee Savings Plan (the “SESP”) and the Deferred Compensation Plan: 2018 Nonqualified Deferred Compensation Table
| | Name | | Plan | | Executive
Contributions in Last
Fiscal Year ($)(1) | | Registrant
Contributions in Last
Fiscal Year ($)(2) | | Aggregate Earnings in Last
Fiscal Year ($)(3) | | Aggregate
Withdrawals/
Distributions ($) | | Aggregate Balance
at Last Fiscal
Year End ($)(4) | | Plan | | | Executive
Contributions in Last
Fiscal Year ($)(1) | | | Registrant
Contributions in Last
Fiscal Year ($)(2) | | | Aggregate
Earnings in Last
Fiscal Year ($)(3) | | | Aggregate
Withdrawals/
Distributions ($) | | | Aggregate Balance
at Last Fiscal
Year End ($)(4) | | | Charles F. Lowrey | | SESP | | | | $ | 20,792 | | | | $ | 20,792 | | | | $ | 17,721 | | | | | | $ | 552,598 | | | | SESP | | | | 36,400 | | | | 36,400 | | | | 27,056 | | | | | | 846,932 | | | | | Deferred Compensation | | | | $ | — | | | | $ | — | | | | $ | 661,505 | | | $ | — | | | | $ | 13,907,673 | | | | Deferred Compensation | | | | — | | | | — | | | | 529,123 | | | | — | | | | 15,449,798 | | John R. Strangfeld | | SESP | | | | $ | 42,308 | | | | $ | 42,308 | | | | $ | 55,489 | | | | | | $ | 1,689,056 | | | | | | Deferred Compensation | | | | $ | — | | | | $ | — | | | | $ | (1,175,624 | ) | | $ | — | | | | $ | 9,769,223 | | | Kenneth Y. Tanji | | SESP | | | | $ | 6,856 | | | | $ | 6,856 | | | | $ | 3,305 | | | | | | $ | 108,922 | | | | SESP | | | | 14,092 | | | | 14,092 | | | | 6,220 | | | | | | 205,125 | | | | | Deferred Compensation | | | | $ | — | | | | $ | — | | | | $ | 270,843 | | | $ | — | | | | $ | 4,800,789 | | | | Deferred Compensation | | | | — | | | | — | | | | 886,317 | | | | (407,023) | | | | 6,754,159 | | | Robert M. Falzon | | SESP | | | | $ | 20,331 | | | | $ | 20,331 | | | | $ | 8,102 | | | | | | $ | 267,286 | | | | SESP | | | | 28,400 | | | | 28,400 | | | | 15,335 | | | | | | 479,461 | | | | | Deferred Compensation | | | | $ | 466,200 | | | | $ | — | | | | $ | (60,918 | ) | | $ | — | | | | $ | 3,776,710 | | | | Deferred Compensation | | | | 249,500 | | | | — | | | | 1,118,973 | | | | — | | | | 7,408,149 | | Mark B. Grier | | SESP | | | | $ | 36,600 | | | | $ | 36,600 | | | | $ | 39,386 | | | | | | $ | 1,209,401 | | | | | | Deferred Compensation | | | | $ | — | | | | $ | — | | | | $ | — | | | $ | — | | | | $ | — | | | Stephen Pelletier | | SESP | | | | $ | 19,800 | | | | $ | 19,800 | | | | $ | 14,270 | | | | | | $ | 448,670 | | | | | | Deferred Compensation | | | | $ | — | | | | $ | — | | | | $ | (891,408 | ) | | $ | — | | | | $ | 12,488,477 | | | Scott G. Sleyster | | SESP | | | | $ | 10,969 | | | | $ | 10,969 | | | | $ | 13,466 | | | | | | $ | 414,777 | | | | SESP | | | | 16,400 | | | | 16,400 | | | | 18,342 | | | | | | 566,326 | | | | | Deferred Compensation | | | | $ | 470,244 | | | | $ | — | | | | $ | (2,087,364 | ) | | $ | — | | | | $ | 13,528,823 | | | | Deferred Compensation | | | | 127,927 | | | | — | | | | 4,712,454 | | | | — | | | | 20,990,956 | | | Andrew F. Sullivan | | | | SESP | | | | 16,400 | | | | 16,400 | | | | 4,100 | | | | | | 145,188 | | | | | | | Deferred Compensation | | | | 94,500 | | | | — | | | | 126,784 | | | | — | | | | 448,123 | |
| (1) | The amounts reported in the Executive Contributions in Last Fiscal Year column represent elective contributions of a portion of their base salary to the SESP (which amounts are also included in the Salary Column of the Summary Compensation Table) and elective contributions to the Deferred Compensation Plan from the annual Bonus.incentive award (which amounts are included in the Salary and Non-Equity Incentive Plan Columns of the Summary Compensation Table, respectively). |
| (2) | The amounts reported in the Registrant Contributions in Last Fiscal Year column represent the Company’s contributions to each NEO’s SESP account (which amounts are also included in the All Other Compensation column of the Summary Compensation Table). |
| (3) | The amounts reported in the Aggregate Earnings in the Last Fiscal Year column include amounts reported for above-market interest on the SESP in the Change in Pension Value column of the Summary Compensation Table. Specifically, $475$10,452 for Mr. Lowrey, $1,494 for Mr. Strangfeld, $89$2,405 for Mr. Tanji, $210$5,766 for Mr. Falzon, $1,057$7,099 for Mr. Grier, $380Sleyster, and $1,582 for Mr. Pelletier, and $365 for Mr. Sleyster.Sullivan. |
| (4) | The amounts reported in the Aggregate Balance at Last FiscalYear-End Year End column represent balances from the SESP and Deferred Compensation Plan and include various amounts previously reported in the Summary Compensation Table as Salary, BonusNon-Equity Incentive Plan Compensation or All Other Compensation. |
SESP The SESP is anon-qualified profit-sharing nonqualified profit sharing plan designed to provide benefits in excess of amounts permitted to be contributed under the PESP. It allows employees, including the NEOs, to elect to defer from 1% to 4% of their eligible earnings paid after the Code limit is exceeded in the year ($275,000290,000 in 2018)2021) to a hypothetical recordkeepingrecord-keeping account on apre-tax basis through payroll deduction. We match 100% of an employee’s deferrals. Eligible earnings for the NEOs under the SESP are limited to base salary only. Interest is earned on a participant’s account at the same rate as the Fixed Rate Fund under the PESP. This rate is generally set quarterly within a calendar year, and the rate in effect for each quarter of 20182021 was 3.50%. A participant’s account is distributed to the employee six months after the participant’s separation from service. Deferred Compensation Plan The Deferred Compensation Plan is anon-qualified, nonqualified, unfunded plan that provides certain designated executives in the United States, including the NEOs, with the ability to defer taxation on up to 85% of their annual cash incentive awards. Deferrals may be invested in notional funds that generally mirror the PESP fund offerings, including shares of our Common Stock. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 61 |
| | | | | | | | 88
| | |
Executive Compensation | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement |
| | |
| | Executive Compensation
|
|
Post-Employment Compensation Arrangements While we have not entered into employment agreements with our NEOs, they are eligible to receive certain payments and benefits in the event of a termination of employment, including following a change in control of the Company, under the Severance Plan and Change in Control Program. Our CEO does not participate in the Severance Plan. In the case of the NEOs, and in many cases, subject to the approval of our Board, the various payments and benefits are provided under the Severance Plan, the Change in Control Program, the Omnibus Plan and other Company plans and programs, as applicable, are as follows:applicable. | | | | | | | | | | | | | | | | | | | Severance | | Annual
Incentives
| | Stock Options | | Performance
Shares/
Performance
Units
| | Book Value
Units
| | SERP | | Additional
Retirement
Accruals
| | Health/Life | Voluntary Termination; Early or Normal Retirement
| | —
| | Annual Incentive Program
| | Omnibus Plan*
| | Omnibus
Plan*
| | Omnibus Plan*
| | —
| | Merged Retirement Plan and Supplemental Retirement
Plan
| | —
| Involuntary Termination Without Cause
| | Severance Plan
| | Annual
Incentive
Program
| | Omnibus Plan**
| | Omnibus Plan**
| | Omnibus Plan**
| | Prudential SERP
| | Merged Retirement Plan and Supplemental Retirement Plan
| | —
| Separation in Connection with Change in Control1
| | Change in Control Program
| | Change in Control Program
and Annual Incentive Program
| | Change in Control Program and Omnibus Plan
| | Change in Control Program
and Omnibus Plan
| | Change in Control Program and Omnibus Plan
| | Prudential SERP
| | Merged Retirement Plan and Supplemental Retirement Plan
| | Change in Control Program
| Separation
Due to
Disability
| | —
| | Annual Incentive Program
| | Omnibus Plan
| | Omnibus Plan
| | Omnibus
Plan
| | —
| | Merged Retirement Plan and Supplemental Retirement Plan
| | Prudential Welfare Benefits Plan
| Separation Due to Death
| | —
| | Annual Incentive Program
| | Omnibus Plan
| | Omnibus
Plan
| | Omnibus
Plan
| | —
| | Merged Retirement Plan and Supplemental Retirement Plan
| | —
|
See footnotes below.
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 89
|
| | |
| | Executive Compensation
| |
Voluntary Termination;Termination(1) — Early or Normal Retirement Normal RetirementAnnual Incentives.
SEVERANCE
ANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on the current year’s businessCompany and individual performance, payable following the completion of the performance year. STOCK OPTIONS
Stock Options.Omnibus Plan(1): Vested stock options remain exercisable for a period of up to five years after termination; and unvested stock options continue to vest according to the original vesting schedule. PERFORMANCE SHARES/PERFORMANCE UNITS
Performance Shares/Performance Units.Omnibus Plan(1): each grant of performance shares and performance units will be paid out at the end of its respective performance period based on the actual number of shares and performance units earned as determined by the Committee. Performance shares areRestricted Stock Units. Omnibus Plan(1): generally, each grant of restricted stock units vest one-third each year and is paid out annually in shares of Common Stock and performance units are paid in cash.shares.
BOOK VALUE UNITS
Book Value Units.Omnibus Plan(1): each grant of book value units vestsone-third each year and is paid out annually in cash based on the Company’s adjusted book value per share at the end of the fiscal quarter prior to payment. (1) | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment (i) unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination and (ii) all outstanding restricted stock units, performance shares, performance units and book value units are generally forfeited.
|
SERP
ADDITIONAL RETIREMENT ACCRUALS
Additional Retirement Accruals.Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive. Involuntary Termination Without Cause SEVERANCE
Severance.Severance Plan: assuming all eligibility conditions are satisfied, severance payments of up to 18 months of base salary and annual incentive. ANNUAL INCENTIVES
Annual Incentives.Annual Incentive Program: an annual incentive payment based on the current year’s businessCompany and individual performance, payable following the completion of the performance year. STOCK OPTIONS
Stock Options.Omnibus Plan(2): (i) Vested stock options remain exercisable for a period of up to five years after termination date and unvested stock options continue to vest according to the original vesting schedule. Restricted Stock Units. Omnibus Plan(2): generally, each grant of restricted stock units vest one-third each year and is paid out annually in shares. PERFORMANCE SHARES/PERFORMANCE UNITS
Performance Shares/Performance Units.Omnibus Plan(2): each grant of performance shares and performance units will be paid out at the end of its respective performance period based on the actual number of shares and performance units earned as determined by the Committee. Performance shares are paid in shares of Common Stock and performance units are paid in cash. BOOK VALUE UNITS
Book Value Units.Omnibus Plan(2): each grant of book value units vestsone-third each year and is paid out annually in cash based on the Company’s adjusted book value per share at the end of the fiscal quarter prior to payment. (2) | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment (i) unvested stock options are cancelled and vested stock options are exercisable for up to 90 days after termination, and (ii) generally apro-rata portion of restricted stock units, performance shares, performance units and book value units will vest.
|
SERP
SERP.Prudential SERP: Messrs. Falzon and Sleyster are retirement-eligible and may receive an Early Retirement Benefit.Benefit provided to eligible participants. ADDITIONAL RETIREMENT ACCRUALS
Additional Retirement Accruals.Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive. Merged Retirement Plan (Traditional Pension Formula)incentive and Supplemental Retirement Plan (Traditional Pension Formula): additional benefit to Mr. Pelletier based on the amount of severance paid and the period of time over which the severance is based (e.g., 78 weeks).
Merged Retirement Plan (Cash Balance Formula) and Supplemental Retirement Plan (Cash Balance Formula): additional benefit to Messrs. Tanji, Falzon, Grier,Sleyster and SleysterSullivan based on the amount of severance.
Separation in Connection with Change in Control(3) SEVERANCE
Severance.Change in Control Program: (i) alump-sum payment equal to the sum of two times annual base salary and bonusannual incentive (based on the average of the annual incentive payments for the previous three calendar years); and (ii) a payment equal to the present value of the retirement benefits that would have accrued during the period of time on which thelump-sum payment in (i) is based. Annual Incentives. Change in Control Program and Annual Incentive Program: an annual incentive payment based on the target annual incentive award opportunity in the year termination occurs. Stock Options. Change in Control Program and Omnibus Plan: accelerated vesting of stock options, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. Performance Shares/Performance Units. Change in Control Program and Omnibus Plan: payment of outstanding performance shares and performance units at target in shares within 30 days of a change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. For performance shares and performance units granted in 2017 and subsequent years, at the change in control (i) outstanding, | | | | 62 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Executive Compensation | |
|
unconverted performance shares and performance units will become vested at target and settled in shares, and (ii) outstanding performance shares and performance units that were converted to restricted stock units will become vested and settled in shares, only if such outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. Restricted Stock Units. Change in Control Program and Omnibus Plan: payment of restricted stock units in shares, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. Book Value Units. Change in Control Program and Omnibus Plan: payment of outstanding book value units in cash based on the Company’s adjusted book value per share at the end of the fiscal quarter ended on or immediately prior to the change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. SERP. Prudential SERP: Early Retirement Benefit provided to eligible participants. Additional Retirement Accruals. Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive. Health/Life. Change in Control Program: continued health benefits at active employee contribution levels for a period of 18 months, plus a “gross-up” for any expected tax consequences associated with providing these health benefits. Separation Due to Disability or Death Annual Incentives. Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards. Restricted Stock Units. Omnibus Plan: all outstanding restricted stock units are paid out in shares. Stock Options. Omnibus Plan: stock option vesting accelerates with up to three years to exercise. Performance Shares/Performance Units. Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock. Book Value Units. Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company’s adjusted book value per share at the end of the fiscal quarter prior to payment. Additional Retirement Accruals. Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive (paid to spouse in the event of death). In the event of disability, additional credits until pension commencement (assumed to be Normal Retirement Date). Health/Life. Prudential Welfare Benefits Plan: monthly disability payment based on salary plus the greater of the most recently paid annual incentive award or the average of the last three most recently paid annual incentive awards. | (1) | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment, all outstanding restricted stock units are generally forfeited. |
| (2) | Based on approved retirement treatment. However, in the event the participant does not qualify for approved retirement treatment, generally a pro-rata portion of restricted stock units will vest. |
| (3) | Pursuant to the Change in Control Program, before payments may be made, a change in control must have occurred and the designated executive officer’s employment must, within two years following the change in control, either have terminated involuntarily without “cause” or by the eligible executive officer for “good reason.” An eligible executive officer would have good reason to terminate his or her employment in the event of a material reduction in his or her compensation or the terms and conditions of his or her employment were to adversely change (for example, a reduction in job responsibilities, title, or forced relocation). |
ANNUAL INCENTIVES
Change in Control Program and Annual Incentive Program: an annual incentive payment based on the target annual incentive award opportunity in the year termination occurs.
STOCK OPTIONS
Change in Control Program and Omnibus Plan: accelerated vesting of stock options, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.
PERFORMANCE SHARES/PERFORMANCE UNITS
Change in Control Program and Omnibus Plan: payment of outstanding performance shares and performance units at target in cash or shares within 30 days of a change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer. For performance shares and performance units granted in 2017 and subsequent years, at the change in control (i) outstanding, unconverted performance shares and performance units will become vested at target and settled in cash or shares, as applicable, and (ii) outstanding performance shares and performance units that were converted to restricted stock units will become vested and settled in shares, only if such outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.
| | | | | | | | 90
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | Executive Compensation
| |
BOOK VALUE UNITS
Change in Control Program and Omnibus Plan: payment of outstanding book value units in cash based on the Company book value per share at the end of the fiscal quarter ended on or immediately prior to the change in control, only if outstanding awards will not be honored or assumed or substituted with equitable replacement awards made by a successor employer.
SERP
Prudential SERP: Messrs. Falzon and Sleyster are retirement-eligible and may receive an Early Retirement Benefit.
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.
HEALTH/LIFE
Change in Control Program: continued health benefits at active employee contribution levels for a period of 18 months, plus a “gross up” for any expected tax consequences associated with providing these health benefits.
Separation Due to Disability
SEVERANCE
ANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards.
STOCK OPTIONS
Omnibus Plan: stock option vesting accelerates with up to three years to exercise.
PERFORMANCE SHARES/PERFORMANCE UNITS
Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock and cash, respectively.
BOOK VALUE UNITS
Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company book value per share at the end of the fiscal quarter prior to payment.
SERP
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit based on the annual incentive.
Merged Retirement Plan (Cash Balance Formula) and Supplemental Retirement Plan (Cash Balance Formula): Messrs. Lowrey, Tanji, Falzon, Grier, and Sleyster would receive additional credits until pension commencement (assumed to be Normal Retirement Date).
HEALTH/LIFE
Prudential Welfare Benefits Plan: monthly disability payment based on salary plus the greater of the most recently paid annual incentive award or the average of the last three most recently paid annual incentive awards.
Separation Due to Death
SEVERANCE
ANNUAL INCENTIVES
Annual Incentive Program: an annual incentive payment based on an average of the previous three years’ annual incentive awards.
STOCK OPTIONS
Omnibus Plan: stock option vesting accelerates with a minimum of one and up to three years to exercise outstanding options.
PERFORMANCE SHARES/PERFORMANCE UNITS
Omnibus Plan: all outstanding awards of performance shares and performance units are paid at target in shares of our Common Stock and cash, respectively.
BOOK VALUE UNITS
Omnibus Plan: all outstanding awards of book value units are paid out in cash based on the Company book value per share at the end of the fiscal quarter prior to payment.
SERP
ADDITIONAL RETIREMENT ACCRUALS
Merged Retirement Plan and Supplemental Retirement Plan: additional benefit payable to the spouse based on the annual incentive.
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 91
|
| | |
| | Executive Compensation
| |
Potential Payments upon Termination or Change in Control The following table presents, for each of the NEOs, the estimated payments and benefits that would have been payable as of the end of 20182021 in the event of: voluntary termination of employment;
involuntarya termination of employment (voluntary or involuntary without cause;
cause) or a separation due to a changefor another reason (change in control, of the Company;disability, or death). separation due to disability; and
Consistent with SEC requirements, these estimated amounts have been calculated as if the NEO’s employment had been terminated as of December 31, 2018,2021, the last business day of 2018, and using the closing market price of our Common Stock on December 31, 2018 ($81.55 per share).2021. Retirement eligibility differs according to the employment separation event. The following table assumes that benefits are paid in an annuity form and commence on January 1, 2019,2022, unless stated otherwise. The table also assumes Board approval of various payments and Prudential SERP Early Retirement Benefits, as applicable, for all NEOs. The following items have been excluded from the table:
The benefits the NEOs would be entitled to receive under the SESP and the Deferred Compensation Plan (these benefits are disclosed in the Nonqualified Deferred Compensation Table contained in this Proxy Statement).
Additional payments to the NEOs under the PESP, The Prudential Welfare Benefits Plan and The Prudential Retiree Welfare Benefits Plan (plans providing, among other things, life insurance, disability insurance, medical insurance and/or dental insurance), which do not discriminate in scope, terms, or operation in favor of the NEOs, and are generally available to all salaried employees.
The effects of an involuntary termination of employment for cause, which will result in a forfeiture of all outstanding vested and unvested performance shares, performance units, book value units, restricted stock units, and stock options, and for Mr. Pelletier, potential forfeiture of the benefit under the PSI SERP. The NEOs will receive no additional payments in the event of a termination of employment for cause.
The amounts reported in the following table aredisplays hypothetical amounts based on the disclosure of compensation information about the NEOs. Actual payments and benefits will depend on the circumstances and timing of any termination of employment or other triggering event.
Estimated Post-Employment Payments and Benefits
| | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Type of Payment or Benefit | | | | Voluntary
Termination/Early or
Normal Retirement
($) | | | Involuntary
Termination
Without Cause
($) | | | Separation Due to
Change in Control
($) | | | Separation Due to
Disability ($) | | | Separation
Due to Death
($) | | | | | Charles F. Lowrey | | Severance Payment | | | | | | | | | | | | | 13,095,920(1) | | | | | | | | | | | | | | | | Annual Incentive | | | | | 4,100,000(2) | | | | 4,100,0000(2) | | | | 5,000,000 | | | | 4,225,000 | | | | 4,225,000 | | | | | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 3,723,165(4) | | | | 3,723,165(4) | | | | 3,723,165 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 3,723,165(5) | | | | 3,723,165(5) | | | | 3,723,165 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 5,116,665(6) | | | | 5,116,665(6) | | | | 5,116,665 | (6) | | | | | | | Benefits: | | SERP | | | | | | | | | | | | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 40,143(7) | | | | | | | | | | | | | | Addtl. Retire Accurals | | | 475,600 | | | | 475,600 | | | | 580,000 | | | | 3,208,568 | | | | 490,100 | | | | | | | | Total | | | | | 4,575,600 | | | | 4,575,600 | | | | 31,279,058 | | | | 19,996,563 | | | | 17,278,095 | | | | | John R. Strangfeld | | Severance Payment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term Incentive: | | Stock Options(3)
RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 10,224,657(4) | | | | 10,224,657(4) | | | | 10,224,657 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 10,224,657(5) | | | | 10,224,657(5) | | | | 10,224,657 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 10,888,761(6) | | | | 10,888,761(6) | | | | 10,888,761 | (6) | | | | | | | Benefits: | | SERP | | | | | | | | | | | | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | | | | | | | | | | | | | | | Addtl. Retire Accurals | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | - | | | | - | | | | 31,338,075 | | | | 31,338,075 | | | | 31,338,075 | | | | | |
| | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 63 |
| | | | | | | | 92
| | |
Executive Compensation | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement |
| | |
| | Executive Compensation
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Type of Payment or Benefit | | | | Voluntary
Termination/Early or
Normal Retirement
($) | | | Involuntary
Termination
Without Cause
($) | | | Separation Due to
Change in Control
($) | | | Separation Due to
Disability ($) | | | Separation
Due to Death
($) | | | | | Kenneth Y. Tanji | | Severance Payment | | | | | | | | | 2,442,600 | | | | 3,530,628(1) | | | | | | | | | | | | | | | | Annual Incentive | | | | | 1,100,000(2) | | | | 1,100,000(2) | | | | 1,800,000 | | | | 1,028,400 | | | | 1,028,400 | | | | | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 551,033(4) | | | | 551,033(4) | | | | 551,033 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 551,033(5) | | | | 551,033(5) | | | | 551,033 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 702,433(6) | | | | 702,433(6) | | | | 702,433 | (6) | | | | | | | Benefits: | | SERP | | | | | | | | | | | | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 38,088(7) | | | | 1,649,436 | | | | | | | | | | Addtl. Retire Accurals | | | 99,000 | | | | 318,834 | | | | 162,000 | | | | 1,948,399 | | | | 92,556 | | | | | | | | Total | | | | | 1,199,000 | | | | 3,861,434 | | | | 7,335,215 | | | | 6,430,734 | | | | 2,925,455 | | | | | Robert M. Falzon | | Severance Payment | | | | | | | | | 5,960,100 | | | | 9,462,577(1) | | | | | | | | | | | | | | | | Annual Incentive | | | | | 3,070,000(2) | | | | 3,070,000(2) | | | | 4,000,000 | | | | 2,973,400 | | | | 2,973,400 | | | | | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 3,086,504(4) | | | | 3,086,504(4) | | | | 3,086,504 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 3,086,504(5) | | | | 3,086,504(5) | | | | 3,086,504 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 3,934,906(6) | | | | 3,934,906(6) | | | | 3,934,906 | (6) | | | | | | | Benefits: | | SERP | | | | | | | 18,166 | | | | 18,166 | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 27,513(7) | | | | | | | | | | | | | | Addtl. Retire Accurals | | | 326,967 | | | | 961,694 | | | | 425,995 | | | | 2,969,023 | | | | 347,888 | | | | | | | | Total | | | | | 3,396,967 | | | | 10,009,960 | | | | 24,042,165 | | | | 16,050,337 | | | | 13,429,202 | | | | | Mark B. Grier | | Severance Payment | | | | | | | | | 9,705,000 | | | | 15,038,611(1) | | | | | | | | | | | | | | | | Annual Incentive | | | | | 5,200,000(2) | | | | 5,200,000(2) | | | | 5,100,000 | | | | 5,280,000 | | | | 5,280,000 | | | | | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 6,172,927(4) | | | | 6,172,927(4) | | | | 6,172,927 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 6,172,927(4) | | | | 6,172,927(4) | | | | 6,172,927 | (4) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 7,320,727(4) | | | | 7,320,727(4) | | | | 7,320,727 | (4) | | | | | | | Benefits: | | SERP | | | | | | | | | | | | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 39,109(7) | | | | 88,553 | | | | | | | | | | Addtl. Retire Accurals | | | 728,000 | | | | 2,086,700 | | | | 714,000 | | | | 739,200 | | | | 739,200 | | | | | | | | Total | | | | | 5,928,000 | | | | 16,991,700 | | | | 40,558,301 | | | | 25,774,334 | | | | 25,685,781 | | | | | Stephen Pelletier | | Severance Payment | | | | | | | | | 6,347,550 | | | | 17,568,232(1) | | | | | | | | | | | | | | | | Annual Incentive | | | | | 4,100,000(2) | | | | 4,100,000(2) | | | | 4,000,000 | | | | 3,961,700 | | | | 3,961,700 | | | | | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 3,522,471(4) | | | | 3,522,471(4) | | | | 3,522,471 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 3,522,471(5) | | | | 3,522,471(5) | | | | 3,522,471 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 4,971,553(6) | | | | 4,971,553(6) | | | | 4,971,553 | (6) | | | | | | | Benefits: | | SERP | | | | | | | | | | | | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 36,310(7) | | | | | | | | | | | | | | Addtl. Retire Accurals | | | 864,313 | | | | 3,336,720 | | | | 751,531 | | | | 708,335 | | | | 354,168 | | | | | | | | Total | | | | | 4,964,313 | | | | 13,784,270 | | | | 34,372,568 | | | | 16,686,530 | | | | 16,332,363 | | | | | Scott G. Sleyster | | Severance Payment | | | | | | | | | 3,660,000 | | | | 5,725,546(1) | | | | | | | | | | | | | | | | Annual Incentive | | | | | 1,800,000(2) | | | | 1,800,000(2) | | | | 2,500,000 | | | | 1,740,000 | | | | 1,740,000 | | | | | | | | Long-term Incentive: | | Stock Options(3) | | | | | | | | | | | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | | | | | | | | | | | | Performance Shares(4) | | | | | | | | | | | 2,086,538(4) | | | | 2,086,538(4) | | | | 2,086,538 | (4) | | | | | Performance Units(5) | | | | | | | | | | | 2,086,538(5) | | | | 2,086,538(5) | | | | 2,086,538 | (5) | | | Book Value Performance | | Book Value Units(6) | | | | | | | | | | | 2,206,445(6) | | | | 2,206,445(6) | | | | 2,206,445 | (6) | | | | | | | Benefits: | | SERP | | | | | | | 192,232 | | | | 192,232 | | | | | | | | | | | | | | Health/Life | | | | | | | | | | | 34,790(7) | | | | 1,107,268 | | | | | | | | | | Addtl. Retire Accurals | | | 179,830 | | | | 545,312 | | | | 249,685 | | | | 1,806,639 | | | | 191,400 | | | | | | | | Total | | | | | 1,979,830 | | | | 6,197,544 | | | | 15,081,774 | | | | 11,033,428 | | | | 8,310,921 | | | |
Estimated Post-Employment Payments and Benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Type of Payment or Benefit | | | | | Voluntary
Termination/Early
or Normal
Retirement ($) | | | Involuntary
Termination
Without Cause
($) | | | Separation Due to
Change in
Control
($) | | | Separation Due to
Disability
($) | | | Separation
Due to Death
($) | | | | | | | | | | Charles F. Lowrey | | Severance Payment* | | | | | | | | | | | | | | | 12,822,009 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 4,253,000 | (2) | | | 4,253,000 | (2) | | | 3,500,000 | | | | 3,914,700 | | | | 3,914,700 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 22,661,776 | | | | 22,661,776 | | | | 22,661,776 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 3,755,170 | | | | 3,755,170 | | | | 3,755,170 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 5,427,737 | | | | 5,427,737 | | | | 5,427,737 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 41,887 | (6) | | | | | | | | | | | | | | Addtl. Retire Accruals | | | | 561,396 | | | | 561,396 | | | | 462,000 | | | | 1,596,731 | | | | 516,740 | | | | | | | | | | | | | Total | | | | | | | 4,814,396 | | | | 4,814,396 | | | | 48,670,579 | | | | 37,356,114 | | | | 36,276,123 | | | | | | | | | | Kenneth Y. Tanji | | Severance Payment* | | | | | | | | | | | 2,921,600 | | | | 4,594,304 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 1,883,000 | (2) | | | 1,883,000 | (2) | | | 1,550,000 | | | | 1,297,700 | | | | 1,297,700 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 7,159,102 | | | | 7,159,102 | | | | 7,159,102 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 1,196,377 | | | | 1,196,377 | | | | 1,196,377 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 1,574,266 | | | | 1,574,266 | | | | 1,574,266 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 51,194 | (6) | | | 1,533,901 | | | | | | | | | | | Addtl. Retire Accruals | | | | 190,183 | | | | 485,265 | | | | 156,550 | | | | 3,485,645 | | | | 131,068 | | | | | | | | | | | | | Total | | | | | | | 2,073,183 | | | | 5,289,865 | | | | 16,281,792 | | | | 16,246,990 | | | | 11,358,512 | | | | | | | | | | Robert M. Falzon | | Severance Payment* | | | | | | | | | | | 6,132,600 | | | | 9,941,399 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 3,402,000 | (2) | | | 3,402,000 | (2) | | | 2,800,000 | | | | 3,088,400 | | | | 3,088,400 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 17,805,264 | | | | 17,805,264 | | | | 17,805,264 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 2,990,888 | | | | 2,990,888 | | | | 2,990,888 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 4,305,856 | | | | 4,305,856 | | | | 4,305,856 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 35,260 | (6) | | | | | | | | | | | | | | Addtl. Retire Accruals | | | | 413,511 | | | | 1,158,924 | | | | 340,338 | | | | 663,612 | | | | 401,492 | | | | | | | | | | | | | Total | | | | | | | 3,815,511 | | | | 10,693,524 | | | | 38,219,004 | | | | 28,854,019 | | | | 28,591,899 | | | | | | | | | | Scott G. Sleyster | | Severance Payment* | | | | | | | | | | | 3,998,600 | | | | 6,562,763 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | 2,430,000 | (2) | | | 2,430,000(2) | | | | 2,000,000 | | | | 1,965,700 | | | | 1,965,700 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 9,604,243 | | | | 9,604,243 | | | | 9,604,243 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 1,462,214 | | | | 1,462,214 | | | | 1,462,214 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 2,274,531 | | | | 2,274,531 | | | | 2,274,531 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 45,025 | (6) | | | | | | | | | | | | | | Addtl. Retire Accruals | | | | 278,739 | | | | 737,408 | | | | 229,415 | | | | 584,521 | | | | 241,781 | | | | | | | | | | | | | Total | | | | | | | 2,708,739 | | | | 7,166,008 | | | | 22,178,192 | | | | 15,891,210 | | | | 15,548,470 | | | | | | | | | | Andrew F. Sullivan | | Severance Payment* | | | | | | | | | | | 3,550,100 | | | | 5,170,451 | (1) | | | | | | | | | | | | | | | | | | | Annual Incentive | | | | | | | | | | | 2,430,000 | (2) | | | 2,000,000 | | | | 1,666,700 | | | | 1,666,700 | | | | | | | | | | | | Long-term Incentive:** | | | Performance Shares/Units(3) | | | | | | | | | | | | 7,595,958 | | | | 7,595,958 | | | | 7,595,958 | | | | | | | | | | | | | | | Restricted Stock Units(4) | | | | | | | | | | | | 1,462,214 | | | | 1,462,214 | | | | 1,462,214 | | | | | | | Book Value Units(5) | | | | | | | | | | | | 1,320,296 | | | | 1,320,296 | | | | 1,320,296 | | | | | | | | | | | | Benefits: | | | Health/Life | | | | | | | | | | | | 52,515 | (6) | | | 1,953,060 | | | | | | | | | | | Addtl. Retire Accruals | | | | | | | | 466,448 | | | | 156,000 | | | | 5,645,122 | | | | 130,003 | | | | | | | | | | | | | Total | | | | | | | | | | | 6,446,548 | | | | 17,757,434 | | | | 19,643,350 | | | | 12,175,171 | |
(1)1 | Includes severance payments equal to two times annual cash compensation (subject to execution of a non-competition agreement), and a cash payment for the pension impact of additional two years of credited service. |
(2)2 | Includes annual incentive award amount for 20182021 performance. |
(3) | | | | 64 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | For disability and death, accelerated vesting of all stock options with up to three years to exercise.
Executive Compensation | |
|
(4)3 | Includes the value of 2016, 2017, and 20182019, 2020, 2021 target performance shares and units paid based on the closing market price of our Common Stock on December 31, 2017 ($81.55 per share).latest year end share price. |
(5)4 | Includes the value of 2016, 2017, and 2018 target performance2021 restricted stock units paid based on the closing market price of our Common Stock on December 31, 2017 ($81.55 per share).latest year end share price. |
(6)5 | Includes the value of 2016, 2017,2019 and 20182020 book value units paid based on the Company’s latest year end book value per share as of December 31, 2018 ($96.06 per share for awards granted in 2018, $92.01 per share for awards granted prior to 2018).share. |
(7)6 | Reflects the expected contribution subsidy for 18 months and the associated tax gross-up. For this purpose, we have assumed the 20192022 premium and contribution rates continue for the full 18 months. |
| * | Subject to receipt from the executive of a general release of claims and confidentiality and nondisparagement agreements. |
| ** | Subject to receipt from the executive of a general release of claims and agreements relating to confidentiality, nondisparagement, nonsolicitation and, in the case of retirees, noncompetition. |
The following items are excluded from the table above: | ● | | The benefits the NEOs would be entitled to receive under the SESP and the Deferred Compensation Plan (these benefits are disclosed in the Nonqualified Deferred Compensation table contained in this Proxy Statement). |
| ● | | Additional payments to the NEOs under the PESP, The Prudential Welfare Benefits Plan and The Prudential Retiree Welfare Benefits Plan (plans providing, among other things, life insurance, disability insurance, medical insurance and/or dental insurance), which do not discriminate in scope, terms, or operation in favor of the NEOs and are generally available to all salaried employees. |
| ● | | The effects of an involuntary termination of employment for cause, which will result in a forfeiture of all outstanding vested and unvested performance shares, performance units, book value units, restricted stock units, and stock options. The NEOs will receive no additional payments in the event of a termination of employment for cause. |
| | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | |
| | 93
65 |
| | |
| |
| | | General Information About The Meeting |
General Information About The Meeting
Voting Instructions and Information Who Can Vote You are entitled to vote your Common Stock if our records show that you held your shares as of the record date of March 15, 2019.11, 2022. At the close of business on that date, a total of 408,333,715376,425,525 shares of Common Stock were outstanding and entitled to vote. Each share of Common Stock is entitled to one vote at this Annual Meeting. Your voting instructions are confidential and will not be disclosed to persons other than those recording the vote, except if you make a written comment on the proxy card, otherwise communicate your vote to management, as may be required in accordance with the appropriate legal process, or as authorized by you. Voting Your Proxy If your Common Stock is held through a broker, bank or other nominee (held in street name), you will receive instructions from such entity that you must follow in order to have your shares voted. If you want to vote in person, you must obtain a legal proxy from your broker, bank or other nominee, bring it to the meeting, and submit it with your vote. If you hold your shares in your own name as a holder of record with our transfer agent, Computershare, you may instruct the proxies how to vote by following the instructions listed on the Notice of Internet Availability or the proxy card to vote online, or by signing, dating and mailing the proxy card in the postage-paid envelope. Of course, you can always come to the meeting and vote your shares in person.person, if you satisfy the procedures for attendance outlined in “Attending the Annual Meeting” below. Whichever method you select to transmit your instructions, the proxies will vote your shares in accordance with those instructions. Except as discussed below with respect to shares held in certain Company plans, if you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board of Directors: FOR each director nominee, FOR ratification of the appointment of the independent auditor, FOR the advisory vote to approve named executive officer compensation and AGAINST the shareholder proposal regardingto adopt the Rightright to Actact by Written Consent.written consent. Special Voting Instructions for Plan Shares If you are a participant in The Prudential Employee Savings Plan (“PESP”) and your account is invested in the PFI Common Stock Fund, you may instruct the PESP Trustee on how to vote the shares of Common Stock credited to your PESP account and held in the Fund on March 13, 2019.9, 2022. The PESP Trustee, the shareholder of record, will vote these shares in accordance with your instructions or, if you do not provide voting instructions, in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions subject to the terms of the PESP plan document, its trust agreement and applicable law. If you hold shares of Common Stock through your participation in the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants (covering vested shares of Prudential Financial, Inc. Common Stock) under the Prudential Financial, Inc. Omnibus Incentive Plan (collectively, the “Plan”), on March 15, 2019,11, 2022, those shares will be voted by the Plan administrator in accordance with your instructions or, if you do not provide voting instructions, in accordance with the Board of Directors’ recommendation subject to the terms of the Plan and applicable law. Matters to beBe Presented We are not aware of any matters tothat will be presentedacted on at the Annual Meeting other than those described in this Proxy Statement. If any matters not described in this Proxy Statement are properly presented at the meeting, the proxies will use their own judgment to determine how to vote your shares. If the meeting is adjourned or postponed, the proxies can vote your shares at the adjournment or postponement as well. Revoking Your Proxy If you hold your shares in street name, you must follow the instructions of your broker, bank or other nominee to revoke your voting instructions. If you are a holder of record and wish to revoke your proxy instructions, you must deliver later-dated proxy | | | | | | | | 94
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | General Information About The Meeting
| |
instructions, advise the Chief Governance Officer and Corporate Secretary in writing before the proxies vote your shares at the Annual Meeting, or attend the Annual Meeting and vote your shares in person. | | | | 66 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | General Information About The Meeting | |
|
Quorum A quorum is required to transact business at our Annual Meeting. Shareholders of record holding shares of stock constituting 50%a majority of the shares entitled to be cast shall constitute a quorum. If you have returned valid proxy instructions or attend the meeting in person, your shares will be counted for the purpose of determining whether there is a quorum, even if you abstain from voting on some or all matters introduced at the meeting. In addition, brokernon-votes will be treated as present for purposes of determining whether a quorum is present. Voting Requirements You may either vote for, against or abstain on each of the proposals. The affirmative vote of a majority of the votes cast is required to approve each proposal. Brokernon-votes and abstentions will have no impact, as they are not counted as votes cast. Although the advisory vote in Item 3 isnon-binding, non binding, as provided by law, our Board will review the results of the vote and, consistent with our commitment to shareholder engagement, will take the results into account in making a determination concerning our named executive officer compensation. If you hold your shares in street name, and you do not submit voting instructions to your broker, bank or other nominee, your broker, bank or other nominee will not be permitted to vote your shares in their discretion, which would result in “broker non-votes”on proposals relating to the election of directors, the advisory vote to approve named executive officer compensation, orand the shareholder proposal regarding the right to act by written consent, but may still be permitted to vote your shares in their discretion on the ratification of the independent auditor. Any shares represented by “broker non-votes” are not considered votes cast or entitled to vote and therefore will not impact the outcome of such proposals (other than for the ratification of the independent auditor). Election of Directors At the meeting, each nominee must receive the affirmative vote of a majority of the votes cast with respect to his or her election in order to be elected. If an incumbent nominee is not elected by the requisite vote, he or she must tender his or her resignation, and the Board, through a process managed by the Corporate Governance and Business Ethics Committee, will decide whether to accept the resignation. BOARD RECOMMENDATIONS | | | | | The Board of Directors recommends that you vote “FOR” each of the Director Nominees, “FOR” the ratification of the appointment of the Independent Auditor, “FOR” the advisory vote to approve named executive officer compensation and “AGAINST” the shareholder proposal to adopt the right to act by written consent. |
The Board of Directors recommends that you vote“FOR” each of the Director Nominees,“FOR” the
ratification of the appointment of the Independent Auditor,
“FOR” the advisory vote to approve named executive officer compensation and“AGAINST”
the shareholder proposal regarding the Right to Act by Written Consent
Cost of Proxy Solicitation We are providing these proxy materials in connection with the solicitation by the Company’s Board of Directors of proxies to be voted at our Annual Meeting. We will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, we expect that a number of our employees will solicit shareholders personally, electronically and by telephone. None of these employees will receive any additional compensation for doing this. We have retained Georgeson, Inc. to assist in the solicitation of proxies for a fee of $25,000 plus reimbursement of expenses. We will, on request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. Attending the Annual Meeting If you attend the Annual Meeting, you will be asked to present valid, government-issued photo identification, such as a driver’s license. If you are a holder of record, the top half of your proxy card or your Notice of Internet Availability is your admission ticket. If you hold your shares in street name, you will need proof of ownership to be admitted to the meeting. A recent brokerage | | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 95
|
| | |
| | General Information About The Meeting
| |
statement or a letter from your bank or broker are examples of proof of ownership. If you want to vote your shares held in street name in person, you must get a legal proxy in your name from the broker, bank or other nominee that holds your shares, and submit it with your vote. | | | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | 67 |
| | | | | | | General Information About The Meeting | |
|
Attendance at the Annual Meeting is limited to shareholders of Prudential as of the record date. Each shareholder may appoint only one proxy holder or representative to attend the Annual Meeting on his or her behalf. Special Precautions Due to COVID-19: In order to protect the health and safety of our employees and shareholders, we are taking special precautions in connection with the Annual Meeting due to the health impact of COVID-19. These include limiting the Annual Meeting to the items of business on the Notice of Annual Meeting of Shareholders of Prudential Financial, Inc., maintaining appropriate social distance of six feet apart, requiring masks that fully cover mouths and noses to be worn at all times, and providing proof of vaccination. We also encourage shareholders who intend to attend the Annual Meeting to review the relevant guidance from public health authorities. Submission of Shareholder Proposals and Director Nominations Rule 14a-8Proposals and Director Nominations for Inclusion in the Proxy Statement for the 20202023 Annual Meeting In order to submit shareholder proposals for the 20202023 Annual Meeting of Shareholders for inclusion in our Proxy Statement pursuant to SEC Rule14a-8, materials must be received by the Chief Governance Officer and Corporate Secretary at the Company’s principal office in Newark, NJ (see below), no later than the close of business on November 29, 2019.24, 2022. Proposals submitted for inclusion in our Proxy Statement must comply with all of the requirements of SEC Rule 14a-8. As the rules of the SEC make clear, simply submitting a proposal or nomination does not guarantee its inclusion. Proxy Access Director Nominations for Inclusion in the Proxy Statement for the 2023 Annual Meeting We have adopted proxy access, which permits a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding capital stock for at least three years, to submit director nominees for up to 20% of the Board for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in ourBy-laws. Notice of director nominations submitted under these proxy accessBy-law provisions must be received no earlier than December 16, 201911, 2022 and no later than January 15, 2020.10, 2023. However, if the 20202023 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 20202023 Annual Meeting was mailedgiven or public disclosure of the meeting date was made. Proposals submitted for inclusion in our Proxy Statement must comply with all of the requirements of SEC Rule14a-8, and directorDirector nominations submitted pursuant to the proxy access provisions of ourBy-laws must comply with all of the requirements of ourBy-laws, a copy of which may be obtained at no cost from the Chief Governance Officer and Corporate Secretary. As the rules of the SEC and ourBy-laws make clear, simply submitting a proposal or nomination does not guarantee its inclusion.
Other Proposals or Director Nominations for Presentation at the 20202023 Annual Meeting OurBy-laws also establish an advance notice procedure with regard to director nominations and shareholder proposals that are not submitted for inclusion in the Proxy Statement, but that a shareholder instead wishes to present directly at an Annual Meeting. To be properly brought before the 20202023 Annual Meeting, a notice of the nomination or the matter the shareholder wishes to present at the meeting must be delivered to the Chief Governance Officer and Corporate Secretary at the Company’s principal office (see below) not less than 120 or more than 150 days prior to the first anniversary of the date of this year’s Annual Meeting. As a result, any notice given by or on behalf of a shareholder pursuant to these provisions of the Company’sBy-laws (and not pursuant to SEC Rule14a-8) must be received no earlier than December 16, 201911, 2022 and no later than January 15, 2020.10, 2023. However, if the 20202023 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the 20202023 Annual Meeting was mailedgiven or public disclosure of the meeting date was made. All director nominations and shareholder proposals must comply with the requirements of the Company’sBy-laws. The Chairman may refuse to acknowledge or introduce any such matter at the 20202023 Annual Meeting if notice of the matter is not received within the applicable deadlines or does not comply with the Company’sBy-laws. If a shareholder does not meet these deadlines, or does not satisfy the requirements of Rule14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the 20202023 Annual Meeting. All proposals and director nominations should be addressed to: Margaret M. Foran, Chief Governance Officer, Senior Vice President and Corporate Secretary, Prudential Financial, Inc., 751 Broad Street, Newark, NJ 07102. | | | | 68 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | General Information About The Meeting | |
|
Eliminating Duplicative Proxy Materials A single Proxy Statement and Annual Report, along with individual proxy cards, or individual Notices of Internet Availability, will be delivered in one envelope to multiple shareholders having the same last name and address and to individuals with more than one account registered at Computershare with the same address unless contrary instructions have been received from an affected shareholder. | | | | | | | | 96
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
|
| | |
| | General Information About The Meeting
| |
If you would like to enroll in this service or receive individual copies of all documents, now or in the future, please contact Computershare by calling1-800-305-9404 or writing to Computershare at P.O. Box 43033, Providence, RI 02940-3033.50500, Louisville, KY 40233-5000. We will deliver a separate copy of all documents to a shareholder at a shared address to which a single copy of the documents was delivered promptly upon request to the address or telephone number provided above. Delivery of Proxy Materials We want to communicate with you in the way that is most convenient for you. You may choose to receive either a full set of printed materials—which will include an Annual Report, Proxy Statement, and proxy card—or an email with instructions for how to view the materials and vote online. To select a method of delivery during the voting season, registered shareholders may follow the instructions when voting online at www.investorvote.com/prudential. Following the 20192022 Annual Meeting, you may continue to choose your method of delivery of future documents by visiting www.computershare.com/investor. If you own shares indirectly through a broker, bank, or other nominee, please contact your financial institution for additional information regarding delivery options. If you do not choose a method of delivery as outlined above, you may receive aone-page Notice of Internet Availability instructing you how to access the materials and vote online in lieu of printed or electronic materials. As a publicly traded company, Prudential is legally required to make these materials available to all shareholders, and it is not possible to opt out of the mailing. Important Notice Regarding the Availability of Proxy Materials for the 20192022 Annual Meeting of Shareholders to Be Held on May 14, 2019:10, 2022: Our 20192022 Proxy Statement and Annual Report for the year ended December 31, 2018,2021 are available free of charge on our website at www.prudential.com/governance. Annual Report on Form10-K The Company will provide by mail, without charge, a copy of its Annual Report on Form10-K, at your request. Please direct all inquiries to investor.relations@prudential.com or 751 Broad Street, Newark, NJ 07102. Incorporation by Reference To the extent that this Proxy Statement has been or will be specifically incorporated by reference into any other filing of Prudential Financial under the Securities Act of 1933 or the Exchange Act, the sections of this Proxy Statement entitled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC) and “Compensation Committee Report” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing. Shareholder List A list of shareholders entitled to vote at the Annual Meeting will be available for examination by shareholders at the Annual Meeting. Forward-Looking Statements and Website References Certain of the statements included in this Proxy Statement constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on our current expectations and beliefs concerning future developments and their potential effects upon the Company. Our actual results may differ, possibly materially, from expectations or estimates reflected in such forward-looking statements. Certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements can be found in the “Risk Factors” and “Forward-Looking Statements” sections included in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. We do not undertake to update any particular forward-looking statement included in this Proxy Statement. Website references and their hyperlinks have been provided for convenience only. The content on any referenced websites is not incorporated by reference into this Proxy Statement, nor does it constitute a part of this Proxy Statement. | | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | |
| | 97
69 |
| | |
| |
| | | Appendix A Non-GAAP Measures |
APPENDIX A -Non-GAAP Measures
Adjusted operating income (“AOI”) and operating return on average equity arenon-GAAP measures of financial performance. Adjusted book value is anon-GAAP measure of financial position. We use earnings per share based on AOI, operating return on average equity, and adjusted book value as performance measures in our incentive compensation programs. Also, we believe that our use of thesenon-GAAP measures helps investors understand and evaluate the Company’s results of operations and financial position by providing measures that are primarily attributable to our business operations separate from the portion attributable to external and potentially volatile capital and currency market conditions. Adjusted Operating Income Adjusted operating income is a non-GAAP measure used by the Company to evaluate segment performance and to allocate resources. Adjusted operating income excludes “Realized investment gains (losses), net,” as adjusted, and related charges and adjustments. A significant element of realized investment gains and losses are impairments and credit-related and interest rate-related gains and losses. Impairments and losses from sales of credit-impaired securities, the timing of which depends largely on market credit cycles, can vary considerably across periods. The timing of other sales that would result in gains or losses, such as interest rate-related gains or losses, is largely subject to our discretion and influenced by market opportunities as well as our tax and capital profile. Realized investment gains (losses) within certain of our businesses for which such gains (losses) are a principal source of earnings, and those associated with terminating hedges of foreign currency earnings and current period yield adjustments are included in adjusted operating income. Adjusted operating income generally excludes realized investment gains and losses from products that contain embedded derivatives, and from associated derivative portfolios that are part of an asset/liabilityasset-liability management program related to the risk of those products. However, the effectiveness of our hedging program will ultimately be reflected in adjusted operating income over time. Adjusted operating income also excludes gains and losses from changes in value of certain assets and liabilities relating to foreign currency exchange movements that have been economically hedged or considered part of our capital funding strategies for our international subsidiaries, as well as gains and losses on certain investments that are designated as trading. Additionally, adjusted operating income excludes the changes in fair value of equity securities that are recorded in net income beginning on January 1, 2018 as a result of the adoption of ASU2016-01. Adjusted operating income also excludes investment gains and losses on assets supporting experience-rated contractholder liabilities and changes in experience-rated contractholder liabilities due to asset value changes, because these recorded changes in asset and liability values are expected to ultimately accrue to contractholders. In addition,Additionally, adjusted operating income excludes the changes in fair value of equity securities that are recorded in net income. Adjusted operating income excludes market experience updates, reflecting the immediate impacts in current period results from changes in current market conditions on estimates of profitability, which we believe enhances the understanding of underlying performance trends. Adjusted operating income also excludes the results of divestedDivested andrun-offRun-off businesses,Businesses, which are not relevant to our ongoing operations. Earningsoperations and discontinued operations and earnings attributable to noncontrolling interests, each of which is presented as a separate component of net income under GAAP. Additionally, adjusted operating income excludes other items, such as certain components of the consideration for acquisitions, which are recognized as compensation expense over the requisite service periods, changes in the fair value of contingent consideration, and goodwill impairments. Earnings attributable to noncontrolling interests is presented as a separate component of net income under GAAP are alsoand excluded from adjusted operating income. The tax effect associated withpre-tax adjusted operating income is based on applicable Internal Revenue ServiceIRS and foreign tax regulations inclusive of pertinent adjustments. | | | | 70 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | | | | Appendix A | |
|
Reconciliation of GAAP Net Income to After-Tax Adjusted Operating Income (in millions) | | | | | | | | | | | | Year Ended
December 31, | | | | | | | | 2021 | | | 2020 | | | | | Net income attributable to Prudential Financial, Inc. | | $ | 7,724 | | | $ | (374 | ) | | | | Income attributable to noncontrolling interests | | | 70 | | | | 228 | | | | | Net income | | | 7,794 | | | | (146 | ) | | | | Less: Earnings attributable to noncontrolling interests | | | 70 | | | | 228 | | | | | Income attributable to Prudential Financial, Inc. | | | 7,724 | | | | (374 | ) | | | | Less: Equity in earnings of operating joint ventures, net of taxes and earnings attributable to noncontrolling interests | | | 17 | | | | (132 | ) | | | | Income (after-tax) before equity in earnings of operating joint ventures | | | 7,707 | | | | (242 | ) | | | | Less: Reconciling Items: | | | | | | | | | | | | Realized investment gains (losses), net, and related charges and adjustments(1) | | | 1,627 | | | | (4,300) | | | | | Market experience updates | | | 750 | | | | (640) | | | | | Divested and Run-off Businesses: | | | | | | | | | | | | Closed Block Division | | | 140 | | | | (24) | | | | | Other Divested and Run-off Businesses(1) | | | 716 | | | | (450) | | | | | Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests | | | (41) | | | | 90 | | | | | Other adjustments(2) | | | (1,112) | | | | 51 | | | | | Total reconciling items, before income taxes | | | 2,080 | | | | (5,273) | | | | | Less: Income taxes, not applicable to adjusted operating income(1) | | | 145 | | | | (1,118) | | | | | Total reconciling items, after income taxes | | | 1,935 | | | | (4,155) | | | | | After-tax adjusted operating income(1) | | $ | 5,772 | | | $ | 3,913 | |
| (1) | Prior period amounts have been updated to conform to current period presentation. |
| (2) | Represents adjustments not included in the above reconciling items, including a goodwill impairment that resulted in a charge of $837 million after-tax, $1,060 million pre-tax, in fourth quarter of 2021 related to Assurance IQ. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration. |
Reconciliation of GAAP Earnings per Share to After-Tax Adjusted Operating Income Earnings per Share (shares in millions) | | | | | | | | | | | | Year Ended
December 31, | | | | | | | | 2021 | | | 2020 | | | | | Net income attributable to Prudential Financial, Inc. | | $ | 19.51 | | | | ($ 1.00) | | | | | Less: Reconciling Items: | | | | | | | | | | | | Realized investment gains (losses), net, and related charges and adjustments(1) | | | 4.17 | | | | (10.81) | | | | | Market experience updates | | | 1.92 | | | | (1.61) | | | | | Divested and Run-off Businesses: | | | | | | | | | | | | Closed Block Division | | | 0.36 | | | | (0.06) | | | | | Other Divested and Run-off Businesses(1) | | | 1.84 | | | | (1.13) | | | | | Difference in earnings allocated to participating unvested share-based payment awards | | | (0.07 | ) | | | 0.07 | | | | | Other adjustments(2) | | | (2.85 | ) | | | 0.13 | | | | | Total reconciling items, before income taxes | | | 5.37 | | | | (13.41) | | | | | Less: Income taxes, not applicable to adjusted operating income | | | 0.44 | | | | (2.69) | | | | | Total reconciling items, after income taxes | | | 4.93 | | | | (10.72) | | | | | After-tax adjusted operating income(1) | | $ | 14.58 | | | | $ 9.72 | | | | | Weighted average number of outstanding Common shares (diluted) | | | 390.1 | | | | 397.8 | |
| (1) | Prior period amounts have been updated to conform to current period presentation. |
| (2) | Represents adjustments not included in the above reconciling items, including a goodwill impairment that resulted in a charge of $837 million after-tax, $1,060 million pre-tax, in fourth quarter of 2021 related to Assurance IQ. Also includes certain components of consideration for business acquisitions, which are recognized as compensation expense over the requisite service periods, as well as changes in the fair value of the associated contingent consideration. |
| | | 98
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT | | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
71 |
| | | | |
| | Appendix A | |
|
Reconciliation of GAAP Net Income toAfter-Tax Adjusted Operating Income
(in billions)
| | | | | | | | | | | | | | Year Ended
December 31, | | | | | | | | | | 2018 | | | 2017 | | | | | Net income attributable to Prudential Financial, Inc. | | $ | 4.07 | | | $ | 7.86 | | Income attributable to noncontrolling interests | | | 0.01 | | | | 0.11 | | | | Net income | | | 4.08 | | | | 7.97 | | | | Less: Earnings attributable to noncontrolling interests | | | 0.01 | | | | 0.11 | | | | Income attributable to Prudential Financial, Inc. | | | 4.07 | | | | 7.86 | | | | Less: Equity in earnings of operating joint ventures, net of taxes and earnings attributable to noncontrolling interests | | | 0.06 | | | | (0.06 | ) | | | Income(after-tax) before equity in earnings of operating joint ventures | | | 4.01 | | | | 7.92 | | | | Less: Reconciling Items: | | | | | | | | | Realized investment gains (losses), net, and related charges and adjustments | | | 0.30 | | | | (0.06 | ) | Investment gains (losses) on assets supporting experience-rated contractholder liabilities, net | | | (0.86 | ) | | | 0.34 | | Change in experience-rated contractholder liabilities due to asset value changes | | | 0.71 | | | | (0.15 | ) | Divested andRun-off Businesses: | | | | | | | | | Closed Block Division | | | (0.06 | ) | | | 0.04 | | Other Divested andRun-off Businesses | | | (1.54 | ) | | | 0.04 | | Equity in earnings of operating joint ventures and earnings attributable to noncontrolling interests | | | (0.09 | ) | | | 0.03 | | | | Total reconciling items, before income taxes | | | (1.54 | ) | | | 0.24 | | | | Less: Income taxes, not applicable to adjusted operating income | | | (0.53 | ) | | | (3.03 | ) | | | Total reconciling items, after income taxes | | | (1.01 | ) | | | 3.27 | | | | After-tax adjusted operating income | | $ | 5.02 | | | $ | 4.65 | | | |
Reconciliation of GAAP Earnings per Share toAfter-Tax Adjusted Operating Income Earnings per Share
(shares in millions)
| | | | | | | | | | | | | | Year Ended December 31, | | | | | | | | | | 2018 | | | 2017 | | | | | Net income attributable to Prudential Financial, Inc. | | $ | 9.50 | | | $ | 17.86 | | Less: Reconciling Items: | | | | | | | | | Realized investment gains (losses), net, and related charges and adjustments | | | 0.71 | | | | (0.13 | ) | Investment gains (losses) on assets supporting experience-rated contractholder liabilities, net | | | (2.02 | ) | | | 0.77 | | Change in experience-rated contractholder liabilities due to asset value changes | | | 1.67 | | | | (0.35 | ) | Divested andRun-off Businesses: | | | | | | | | | Closed Block Division | | | (0.15 | ) | | | 0.10 | | Other Divested andRun-off Businesses | | | (3.60 | ) | | | 0.09 | | Difference in earnings allocated to participating unvested share-based payment awards | | | 0.03 | | | | (0.09 | ) | | | Total reconciling items, before income taxes | | | (3.36 | ) | | | 0.39 | | Less: Income taxes, not applicable to adjusted operating income | | | (1.17 | ) | | | (6.89 | ) | | | Total reconciling items, after income taxes | | | (2.19 | ) | | | 7.28 | | | | | After-tax adjusted operating income | | $ | 11.69 | | | $ | 10.58 | | | | Weighted average number of outstanding Common shares (diluted) | | | 426.2 | | | | 436.0 | | | |
| | | | | | | | Notice of Annual Meeting of Shareholders and 2019 Proxy Statement
| | |
| | 99
|
| | |
| | Appendix A
| |
Adjusted Book Value Reconciliation of GAAP Book Value to Adjusted Book Value (in millions, except for per share data) | | | | | | | | | | | | | | As of December 31, | | | | | | | | | | 2018 | | | 2017 | | | | GAAP book value (total Prudential Financial, Inc. equity) at end of period(1) | | $ | 48,617 | | | $ | 54,236 | | Less: Accumulated other comprehensive income (AOCI) | | $ | 10,906 | | | $ | 17,074 | | | | GAAP book value excluding AOCI(1) | | $ | 37,711 | | | $ | 37,162 | | Less: Cumulative effect of foreign currency exchange rate remeasurement and changes in certain deferred taxes | | ($ | 2,344 | ) | | ($ | 969 | ) | | | Adjusted book value(1) | | $ | 40,055 | | | $ | 38,131 | | | | Number of diluted shares at end of period(2) | | | 422.2 | | | | 435.7 | | | | GAAP book value per Common share - diluted(1)(2) | | $ | 116.34 | | | $ | 125.63 | | Adjusted book value per Common share - diluted(1)(2)(3) | | $ | 96.06 | | | $ | 88.67 | | | |
| | | | | | | | | | | | Year Ended
December 31, | | | | | | | | 2021 | | | 2020 | | | | | GAAP book value (total Prudential Financial, Inc. equity) at end of period | | $ | 61,876 | | | $ | 67,425 | | | | | Less: Accumulated other comprehensive income (AOCI) | | | 21,324 | | | | 30,738 | | | | | GAAP book value excluding AOCI | | | 40,552 | | | | 36,687 | | | | | Less: Cumulative effect of foreign currency exchange rate remeasurement | | | (1,164) | | | | (1,399) | | | | | Adjusted book value | | $ | 41,716 | | | $ | 38,086 | | | | | Number of diluted shares at end of period | | | 383.7 | | | | 401.8 | | | | | GAAP book value per Common share—diluted | | $ | 161.26 | | | $ | 167.81 | | | | | Adjusted book value per Common share—diluted(1) | | $ | 108.72 | | | $ | 94.79 | |
| (1) | 2017 amounts have been revised resulting from the elimination of Gibraltar Life’sone-month reporting lag.
|
(2) | As of December 31, 2017, exchangeable surplus notes are dilutive when book value per share is greater than $85.00 (equivalent to an additional 5.88 million in diluted shares and an increase of $500 million in equity). As of December 31, 2018, exchangeable surplus notes are dilutive when book value per share is greater than $82.16 (equivalent to an additional 6.09 million in diluted shares and an increase of $500 million in equity).
|
(3) | Includes the cumulative impact of net gains and losses resulting from foreign currency exchange rate remeasurement and associated realized investment gains and losses included in net income (loss) and currency translation adjustments corresponding to realized investment gains and losses. Includes $1,678 million impact reported in net income for 2017 from the remeasurement of deferred tax assets and liabilities originally established through accumulated other comprehensive income, related to enactment of the Tax Cuts and Jobs Act on December 22, 2017. |
Operating Return on Average Equity Operating return on average equity (based on adjusted operating income) is anon-GAAP measure and represents adjusted operating incomeafter-tax divided by average Prudential Financial, Inc. equity excluding accumulated other comprehensive income and adjusted to remove amounts included for foreign currency exchange rate remeasurement and certain deferred taxes.remeasurement. The comparable GAAP measure to operating return on average equity (based on adjusted operating income) is return on average equity (based on net income). Return on average equity (based on net income) represents incomeafter-tax, attributable to consolidated Prudential Financial, Inc., as determined in accordance with U.S. GAAP, divided by average total Prudential Financial, Inc. equity. Return on average equity (based on net income) was 8.2%12.4% and 16.0%(0.6)% for the years ended December 31, 20182021 and December 31, 2017,2020, respectively. | | | | 72 | | NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2022 PROXY STATEMENT |
| | | | |
| 100
| | |
| | Notice of Annual Meeting of Shareholders and 2019 Proxy Pay Equity Statement |
GENDER PAY EQUITY STATEMENT PrudentialsPrudential’s Total Rewards is integral to our employee value proposition. This package includes compensation, as well as benefits and talent programs and resources available to our employees. All roles in our U.S. organization are reviewed against market and benchmarking data. Our compensation structure and benefits package enables Prudential to recruit and promote talent within the context of an individuals background, experience and performance. PRUDENTIAL IS COMMITTED TO PAY EQUITY. THE COMPANYS POLICIES AND PRACTICES ADDRESS PAY DISCRIMINATION THROUGHOUT THE EMPLOYEES CAREER Recruiting Existing Employees Reduce likelihood that U.S. compensation decisions are perpetuating discriminatory pay practices of former employers. Nationally, Prudential removed compensation inquiries from its employment applications; and Stopped considering compensation history when establishing starting pay for new employees, except as required by law. Guided by independent legal counsel, Prudential conducts a review of its U.S. compensation practices to protect against systemic race/ethnicity and gender biased patterns, and takes action as warranted. Employees can raise issues regarding pay equity with the Ethics Office, Human Resources or their manager. These practices go beyond simple compliance with the laws of a limited number of states and cities. Pay discrimination concerns are promptly and thoroughly investigated by trained professionals dedicated to reviewing unlawful discrimination claims. This integrated approach ensures that we proactively review pay equity on an ongoing basis, and that we satisfy our heightened obligations as a federal contractor.
As part of our annual human resources strategy update, our Board reviews the status of our pay practices and the broad range of our diversity and inclusion efforts. All roles in our U.S. organization are reviewed against relevant market data. Our Total Rewards and talent programs enable Prudential to recruit and promote talent within the context of an individual’s background, experience and performance. | | | | | Prudential’s policies and practices address pay equity throughout the employee’s career. | 
| | | |
| Recruiting Took steps to reduce the likelihood that U.S. compensation decisions are perpetuating discriminatory pay practices; Nationally, Prudential removed compensation inquiries from its employment applications; and Stopped considering compensation history when establishing starting pay for new employees, except as required by law. | | | | Existing Employees Guided by independent legal counsel, Prudential conducts a review of its U.S. compensation practices to help protect against systemic race/ethnicity and gender-biased patterns, and takes action as warranted. Employees can raise issues regarding pay equity with the Ethics Office, Human Resources or their manager. |
| | | |
| These Practices go beyond simple compliance with the laws of a limited number of states and cities. | | | | Pay equity is a critical component of our commitment to paying employees fairly, regardless of race or gender. Pay discrimination concerns are promptly and thoroughly investigated by trained professionals dedicated to reviewing unlawful discrimination claims. |
In addition to this integrated approach that encourages a proactive review of pay equity on an ongoing basis, and to satisfy our heightened obligations as a federal contractor, we periodically retain independent external experts to conduct pay equity analyses for our U.S. population. In 2020, salary was evaluated and the results showed, when accounting for relevant factors including job and location, that, on average, women and Asian employees were paid at least 100% of the pay of male and White employees, respectively. Additionally, on average, Black employees were paid at 99.0% and Hispanic employees were paid at 98.3% of the pay of non-Hispanic White employees. In 2022, salary, bonus and equity were evaluated. With respect to salary, the results showed, when accounting for relevant factors including job and location, that, on average, women and Asian employees were paid, at least 100% of the pay of male and White employees, respectively. Additionally, on average, Black employees were paid at 99.3% and Hispanic employees were paid at 99.0% of the pay of non-Hispanic White employees. In 2022, with respect to Total Compensation, accounting for relevant factors including job and location, on average, women were paid, at 99.8% of male employees, Asian employees were paid at least 100%, Black employees were paid at 99.4% and Hispanic employees were paid at 98.9% of non-Hispanic White employees.
PRUDENTIAL
MMMMMMMMMMMM Admission Ticket MMMMMMMMMMMMMMMC0123456789 000004 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext Your vote matters – here’s how to vote! MR A SAMPLE You may vote online or by phone instead of mailing DESIGNATION (IF ANY) this card. ADD 1 Votes submitted electronically must be received by ADD 2 11:59 p.m., May 9, 2022, for Registered Shares and by ADD 3 11:59 p.m., May 4, 2022, for PESP Shares and ADD 4 PSPP Shares. ADD 5 ADD 6 Online MMMMMMMMM Go to www.investorvote.com/prudential — login details are located in the shaded bar below. Vote by telephone ● Call toll-free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE for the call. ● Follow the instructions provided by the recorded message. Save paper, time and money! Registered shareholders Using a black ink pen, mark your votes with an X as shown in this example. (Holders of Record) can sign up for electronic Please do not write outside the designated areas. X delivery of future proxy materials at www.investorvote.com/prudential Proxy/Voting Instruction Form 1234 5678 9012 345 q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals – The Board of Directors recommends a vote FOR the election of each director nominee listed in Proposal 1. 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain + 01—Thomas J. Baltimore, Jr. 05—Wendy Jones 09—George Paz 02—Gilbert F. Casellas 06—Karl J. Krapek 10—Sandra Pianalto 03—Robert M. Falzon 07—Peter R. Lighte 11—Christine A. Poon 04—Martina Hund-Mejean 08—Charles F. Lowrey 12—Douglas A. Scovanner The Board of Directors recommends a vote FOR Proposals 2 – 3. 13—Michael A. Todman For Against Abstain The Board of Directors recommends a vote AGAINST Proposal 4. 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022. For Against Abstain 4. Shareholder proposal to adopt the right to act by 3. Advisory vote to approve named executive officer compensation. written consent. B Non-Voting Proposal – Please select one option or leave blank if you do not want to participate. I would like a free tote bag from Prudential. I prefer Prudential contribute to a tree planting campaign. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears herein. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. C 1234567890 J N T MR A SAMPLE (THIS AREA IS HELPING INCREASE FINANCIAL WELLNESS FOR ALL Americans are facing daunting financial challenges requiring innovative solutionsSET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMMM1 UPX 533507 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE +
ANNUAL MEETING OF SHAREHOLDERS May 10, 2022, 2:00 p.m. 751 Broad Street, Newark, New Jersey 07102 If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification, such as a driver’s license, and collaboration among public, private and nonprofit sectors that reconnect the rewards of workcomply with the abilityspecial precautions we are taking due to build wealth.the impact of COVID-19. These include limiting the Annual Meeting to the items of business on the Notice of Annual Meeting of Shareholders of Prudential cites these statistics in its white paper "Increasing Financial, Security with Workplace Emergency Savings": 63 percentInc., maintaining appropriate social distance of Americans can't afford a $500 emergencysix feet apart, and 31 percentrequiring masks that fully cover mouths and noses to be worn at all times, and providing proof of employees would consider retirement plan loansvaccination. We also encourage shareholders who intend to attend the Annual Meeting to review the relevant guidance from public health authorities. For your safety, all personal belonging or withdrawalseffects including purses are subject to cover those [unexpected] expenses. Prudential, a leaderinspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the national dialogue to improve policies and practices enabling financial stability, mobility and prosperity for all,building. Cell phone use is doubling down on financial wellness. People achieve financial wellness when they adopt behaviors that help them manage day-to-day finances, realize financial goals, and protect against financial risks. 63% of Americans don't have enough savings to meet a $500 emergency* Prudential collaborated with Prosperity Now, a nonprofit organization that works to ensure everyone has a clear path to financial stability, wealth and prosperity, to design a solution to increase emergency savings by using payroll deductions to fund after-tax retirement contributions. Prudential Retirement(R)permitted only in the first floor lobby. The meeting location is now offering an in-plan, after-tax emergency savings feature to plan sponsors as part of their holistic workplace financial wellness package, which is inclusive and accessible to both lowdisabled persons and, high-income earners addressingupon request, we will provide wireless headsets for hearing amplification. This card covers the needstotal number of American workers acrossshares of Prudential Financial, Inc. Common Stock (“Common Stock”) registered in your name (“Registered Shares”) at Prudential’s transfer agent, Computershare, as of March 11, 2022, and may also cover the total number of shares of Prudential Financial, Inc. Common Stock held in The Prudential Employee Savings Plan (“PESP”) on March 9, 2022. Or, this card may cover the total number of shares of Prudential Financial, Inc. Common Stock for the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants covering vested shares of Prudential Financial, Inc. Common Stock registered in your name with Computershare as of the close of business on the record date of March 11, 2022. You only need to vote once. This card enables you to submit your vote on your Registered Shares; to provide voting instructions to the PESP Trustee for your PESP shares; or to submit voting instructions for your international portion of the Prudential Stock Purchase Plan shares. Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 10, 2022. The Proxy Statement and Annual Report to Shareholders are available at www.investorvote.com/prudential. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy/Voting Instruction Form Prudential Financial, Inc. + This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. on May 10, 2022. The undersigned, having received the Notice of Meeting and Proxy Statement dated March 24, 2022, appoints Margaret M. Foran, Ann Kappler and Charles F. Lowrey, each of them as proxies, with full power of substitution, to represent and vote all income brackets.of the undersigned’s shares of Common Stock of Prudential Financial, Inc., at the Annual Meeting of Shareholders to be held at 2:00 p.m., May 10, 2022, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card. If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting. Special Voting Instructions for Plan Shares: If you are a participant in The plan's unique feature enables participantsPrudential Employee Savings Plan (“PESP”), or the international portion of the Prudential Stock Purchase Plan, the Prudential International Stock Purchase Plan, or the international portion of the Associates Grants covering vested shares of Prudential Financial, Inc. Common Stock under the Prudential Financial, Inc. Omnibus Incentive Plan, your shares will be voted by the applicable trustee or administrator in accordance with the instructions indicated on the reverse side or received by internet or telephone. If no instructions are specified, your PESP shares will be voted in the same proportion as the PESP Trustee votes the shares for which it received timely voting instructions, and all other shares will be voted by the plan administrator in accordance with the Board of Directors’ recommendations, in each case, subject to the terms of the applicable plan documents and applicable law. Comments — We value your feedback. Please provide any comments you have in the space below. +
MMMMMMMMMMMM MMMMMMMMM Using a black ink pen, mark your votes with an X as shown in this example. X Please do not write outside the designated areas. Proxy/Voting Instruction Form q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals – The Board of Directors recommends a vote FOR the election of each director nominee listed in Proposal 1. 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain + 01—Thomas J. Baltimore, Jr. 05—Wendy Jones 09—George Paz 02—Gilbert F. Casellas 06—Karl J. Krapek 10—Sandra Pianalto 03—Robert M. Falzon 07—Peter R. Lighte 11—Christine A. Poon 04—Martina Hund-Mejean 08—Charles F. Lowrey 12—Douglas A. Scovanner The Board of Directors recommends a vote FOR Proposals 2 – 3. 13—Michael A. Todman For Against Abstain The Board of Directors recommends a vote AGAINST Proposal 4. 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022. For Against Abstain 4. Shareholder proposal to adopt the right to act by 3. Advisory vote to approve named executive officer compensation. written consent. B Non-Voting Proposal – Please select one option or leave blank if you do not want to participate. I would like a free tote bag from Prudential. I prefer Prudential contribute to a tree planting campaign. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears herein. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMMM1 UPX 533507 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE + 03KAED
ANNUAL MEETING OF SHAREHOLDERS May 10, 2022, 2:00 p.m. 751 Broad Street, Newark, New Jersey 07102 If you plan to attend the annual meeting, please bring this admission ticket with you. This ticket admits the shareholder. All meeting attendees must present valid government-issued photo identification, such as a driver’s license, and comply with the special precautions we are taking due to the impact of COVID-19. These include limiting the Annual Meeting to the items of business on the Notice of Annual Meeting of Shareholders of Prudential Financial, Inc., maintaining appropriate social distance of six feet apart, and requiring masks that fully cover mouths and noses to be worn at all times, and providing proof of vaccination. We also encourage shareholders who intend to attend the Annual Meeting to review the relevant guidance from public health authorities. For your safety, all personal belonging or effects including purses are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy/Voting Instruction Form Prudential Financial, Inc. This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. on May 10, 2022. The undersigned, having received the Notice of Meeting and Proxy Statement dated March 24, 2022, appoints Margaret M. Foran, Ann Kappler and Charles F. Lowrey, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc., at the Annual Meeting of Shareholders to be held at 2:00 p.m., May 10, 2022, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card. If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting. Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 10, 2022. The Proxy Statement and Annual Report to Shareholders are available at www.prudential.com/governance.
Important Notice Regarding the Availability of Proxy Materials for the Prudential Financial, Inc. Shareholder Meeting to be Held on May 10, 2022 Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual shareholders’ meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important! This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access funds with lower withdrawal fees and tax consequences versus pre-tax transactions helping them address emergencies. Eligible employees at Prudential havereview all of the opportunity to accumulate after-tax savingsimportant information contained in the proxy materials before voting. The proxy statement and annual report to shareholders are available at: www.investorvote.com/prudential Easy Online Access — View your proxy materials and vote. Step 1: Go to www.investorvote.com/prudential. Step 2: Click on the icon on the right to view meeting materials. Step 3: Return to the investorvote.com window and follow the instructions on the screen to log in. Step 4: Make your selections as instructed on each screen for your delivery preferences. Step 5: Vote your shares. When you go online, you can also help the environment by consenting to receive electronic delivery of future materials. 2 NOTCOY+03KAFD
Shareholder Meeting Notice & Admission Ticket Prudential Employees Savings Plan (PESP). AtFinancial, Inc.’s Annual Meeting of Shareholders will be held on May 10, 2022, at 751 Broad Street, Newark, New Jersey 07102, at 2:00 p.m. Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations. The Board of Directors recommends that you vote FOR Proposals 1 – 3: 1. Election of Directors: Thomas J. Baltimore, Jr., Gilbert F. Casellas, Robert M. Falzon, Martina Hund-Mejean, Wendy Jones, Karl J. Krapek, Peter R. Lighte, Charles F. Lowrey, George Paz, Sandra Pianalto, Christine A. Poon, Douglas A. Scovanner and Michael A. Todman. 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022. 3. Advisory vote to approve named executive officer compensation. The Board of Directors recommends that you vote AGAINST Proposal 4: 4. Shareholder proposal to adopt the right to act by written consent. PLEASE NOTE – YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must go online or request a crucial timepaper copy of the proxy materials to receive a proxy card. We encourage you to vote your shares before the Annual Meeting. If you are attending the meeting, you will be asked to present your admission ticket and valid government-issued photo identification, such as a driver’s license, and comply with the special precautions we are taking due to the impact of COVID-19. These include limiting the Annual Meeting to the items of business on the Notice of Annual Meeting of Shareholders of Prudential Financial, Inc., maintaining appropriate social distance of six feet apart, and requiring masks that fully cover mouths and noses to be worn at all times, and providing proof of vaccination. We also encourage shareholders who intend to attend the Annual Meeting to review the relevant guidance from public health authorities. For your safety, all personal belonging or effects including purses are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for many, Prudentialhearing amplification. Obtaining a Copy of the Proxy Materials – If you want to receive a paper or e-mail copy of these documents, you must request one. There is working hardno charge to create realisticyou for requesting a copy. Please make your request for a copy as instructed below on or before April 29, 2022, to facilitate timely delivery. Here’s how to order a copy of the proxy materials and accessible financial solutionsselect future delivery preference: Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or e-mail options below. E-mail copies: Current and future e-mail delivery requests must be submitted via the Internet or e-mail following the instructions below. If you request an e-mail copy of the materials, you will receive an e-mail with a link to make people's lives betterview the materials on the Internet. PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials. g Internet – Go to www.investorvote.com/prudential and follow the instructions to log in and order a paper or e-mail copy of the current meeting materials and submit your preference for e-mail or paper delivery of future meeting materials. g Telephone – Call us free of charge at 1-866-641-4276 using a touch-tone phone and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings. g E mail – Send an ever-changing world. We doe-mail to investorvote@computershare.com with “Proxy Materials Prudential” in the subject line. In the e-mail, include your full name and address, plus the number located in the shaded bar on the reverse side of this because we believe that companiesdocument. State in the e-mail whether you want a paper or e-mail copy of the current meeting materials. You can and should do more than generate profits we should help drive progress.* McGrath, Maggie; Forbes.com, "63% of Americans Don't Have Enough Savings to Cover a $500 Emergency," 2016 PRINTED ON RECYCLED PAPER WITH 10% POST-CONSUMER WASTE. Rock Solid(R) Business, Sustainable Future. PAPERS PRODUCED UNDER A SUSTAINABLE FOREST MANAGEMENT PROGRAM. PRINTED USING VEGETABLE-BASED INKS AND RENEWABLE ENERGY.also state your preference for an e-mail or paper copy for future meetings.
| | | | | | |  | | | |  |  | | | | | | 
Dear Shareholder: | | | | | | This package includes your proxy and voting materials. We care about what you think and voting is an important way for you to let us know how we’re doing. | | | | | | To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or contributing to a tree-planting campaign. Since its inception, we have provided nearly 630,000770,000 tote bags to our shareholders. Because of your active participation, we continue to support the work of American Forests to protect and restore America’s forest ecosystems. This year’s tree-planting initiative will continue our work with American Forests. | | | | | | Whether you vote via the internet, phone, or mail, you can indicate your choice of either the bag or a tree-planting contribution. If you elect to receive a bag, you can expect to receive your free gift aroundby the end of June.the summer. | | | | | | Thank you, | | | | | |  
| | | | | | Margaret M. Foran Chief Governance Officer, Senior Vice President and Corporate Secretary Prudential Financial, Inc. |
| | | | |  | | | | Margaret M. Foran | | | | | Chief Governance Officer | | | | | | | Senior Vice President and Corporate Secretary | | | | | | Prudential Financial, Inc. |
002CSN9BE2
| | |  | | Margaret M. Foran | | | Chief Governance Officer | | Senior Vice President and Corporate Secretary | | Prudential Financial, Inc.
| | | 751 Broad Street, Newark NJ 07102-3777 | | | | | | | | March 28, 201924, 2022 |
Dear Shareholder: As a shareholder, you have the right to vote on important matters that affect Prudential Financial. We take the opinions of Prudential’s shareholders very seriously and we hope you will provide your input by casting your vote on the items in the 20192022 Proxy Statement. Enclosed you will find a Notice of Internet Availability (Notice), which provides information on how to view the materials and cast your vote online. If you would prefer to vote by mail, you may request a paper copy of the proxy materials by visiting www.investorvote.com/prudential, calling1-866-641-4276, or by sending an email to investorvote@computershare.com. Additional information regarding the Notice is located on the reverse side of this letter. The SEC has also created an educational website where you can learn more about proxy voting —voting—www.sec.gov/spotlight/proxymatters.shtml. To express our appreciation when you vote, we are once again offering you a choice of receiving a specially designed, environmentally friendly tote bag, or contributing to a tree-planting initiative. Since its inception, we have provided nearly 630,000770,000 tote bags to our shareholders. Because of your active participation, we continue to support the work of American Forests to protect and restore America’s forest ecosystems. This year’s tree-planting initiative will continue our work with American Forests. As always, we thank you for your investment in Prudential. Sincerely, |  | Margaret M. Foran | Chief Governance Officer, | Senior Vice President and Corporate Secretary | Prudential Financial, Inc. |
Margaret M. Foran Chief Governance Officer, Senior Vice President and Corporate Secretary Prudential Financial, Inc. © 2019 2022 Prudential Financial, Inc., and its related entities. All rights reserved.
FAQ —– Internet Availability of Proxy Materials The Securities and Exchange Commission (SEC) has issued rules requiring public companies to: Make proxy materials (such as the Annual Report and Proxy Statement) available on the internet Notify shareholders how and where to access those materials online These rules allow companies to give shareholders more options for reviewing important proxy materials. Information can be made available to shareholders more quickly and conveniently—online documents are easily searchable, enabling shareholders to quickly find the information they need to make informed voting decisions. The SEC also allows companies to send aone-page Notice to holders with instructions on how to access the materials online, rather than sending a full set of materials. Our reasons for choosing the notice-only option are to: Adopt more sustainable practices and be more environmentally responsible—by shrinking our carbon footprint through reductions in ink and paper used in printing and fuel used in shipping Increase shareholder value—by reducing print and mail costs Please refer to the information below to learn more and to find out what your options are as a shareholder to view materials and vote. What is on theone-page Notice? The Notice contains simple instructions on how to: Access and view the proxy materials online Request a free set of printed materials Change delivery preferences for future proxy mailings DOretain the Notice for future reference DO NOTmark your vote on the Notice and return it; the Notice is not a proxy card or ballot If I received only aone-page Notice, how do I vote my shares? To vote your shares, follow the instructions on the Notice to vote online. If you request a paper copy of the proxy materials, you’ll receive a proxy card with voting instructions. You may also vote your shares in person by bringing the Notice with you and attending the meeting. If I received only aone-page Notice, how do I request a full set of printed materials for this meeting or future proxy mailings? To request a free set of printed materials for this meeting or for future mailings, refer to the Notice for detailed instructions on how to request a copy via internet, telephone or email. If I received a full set of materials, may I request only aone-page Notice for future proxy mailings? Our company will make a decision for each meeting whether or not to use the notice-only option, and send notice-only mailings at our discretion. Can I elect to receive my proxy materials electronically? You may elect to receive materials via email for future mailings. You will receive the materials electronically if our company chooses to offer email delivery in the future. To change your delivery preferences, follow the instructions on the Notice. | One of your key privileges as an investor is the right to vote on important matters that affect the company you own shares in. Please vote. Your vote is important to us and our business. |
| | | 002CSN9BE3 | | © Copyright 2017 Computershare Limited. All rights reserved. |
| | | IMPORTANT ANNUAL MEETING INFORMATION | | |
| | | Admission Ticket | | | | | | | | | | | | | | | | Electronic Voting Instructions | | You can vote by Internet or telephone | | Instead of mailing your proxy, you may choose to vote online or by
telephone.
| | Proxies submitted by the Internet or telephone must be received by
11:59 p.m., May 13, 2019, for Registered Shares and by 11:59 p.m.,
May 8, 2019, for PESP Shares and PSPP Shares.
| 
| | Vote by Internet
| | • Go towww.investorvote.com/prudential
| | • Follow the steps outlined on the secured website.
| 
| | Vote by telephone
| | • Call toll free1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There isNO CHARGEto you for the call.
| | • Follow the instructions provided by the recorded message.
|
| | | Proxy/Voting Instruction Form | | 
|
q IF YOU HAVE NOT VOTED VIA THE INTERNETORTELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
| | | | | A | | Proposals — The Board of Directors recommends a voteFOR the election of each director nominee listed in Proposal 1. | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 1. Election of Directors:
| | For | | Against | | Abstain | | | | For | | Against | | Abstain | | | | For | | Against | | Abstain | | + | | | 01 - Thomas J. Baltimore, Jr. | | ☐ | | ☐ | | ☐ | | 06 - Karl J. Krapek | | ☐ | | ☐ | | ☐ | | 11 - Christine A. Poon | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | 02 - Gilbert F. Casellas | | ☐ | | ☐ | | ☐ | | 07 - Peter R. Lighte | | ☐ | | ☐ | | ☐ | | 12 - Douglas A. Scovanner | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | 03 - Robert M. Falzon | | ☐ | | ☐ | | ☐ | | 08 - Charles F. Lowrey | | ☐ | | ☐ | | ☐ | | 13 - Michael A. Todman | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | 04 - Mark B. Grier | | ☐ | | ☐ | | ☐ | | 09 - George Paz | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | | 05 - Martina Hund-Mejean | | ☐ | | ☐ | | ☐ | | 10 - Sandra Pianalto | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends a voteFOR Proposals 2 and 3. | | The Board of Directors recommends a voteAGAINST Proposal 4. | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | For | | Against | | Abstain | | | 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2019.
| | | | ☐ | | ☐ | | ☐ | | | | 4. Shareholder proposal regarding Right to Act by Written Consent.
| | ☐ | | ☐ | | ☐ | | | 3. Advisory vote to approve named executive officer compensation.
| | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | |
| | | | | B | | Non-Voting Proposal — Please select one option or leave blank if you do not want to participate. | | |
| | I would like a free tote bag from Prudential. ☐ I prefer Prudential contribute to a tree planting campaign. ☐ |
| | | | | C | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | | |
| | | | | | | | | | | | | | | | | | | Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | | |
| | | | | | | Date (mm/dd/yyyy) — Please print date below.
| | Signature 1 — Please keep signature within the box.
| | Signature 2 — Please keep signature within the box.
| | |
| | | IMPORTANT ANNUAL MEETING INFORMATION | | |
| | | | | Proxy/Voting Instruction Form
| | | | |
q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
| | | | | A | | Proposals — The Board of Directors recommends a voteFOR the election of each director nominee listed in Proposal 1. | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | 1. Election of Directors:
| | For | | Against | | Abstain | | | | For | | Against | | Abstain | | | | For | | Against | | Abstain | | + | | | 01 - Thomas J. Baltimore, Jr. | | ☐ | | ☐ | | ☐ | | 06 - Karl J. Krapek | | ☐ | | ☐ | | ☐ | | 11 - Christine A. Poon | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | 02 - Gilbert F. Casellas | | ☐ | | ☐ | | ☐ | | 07 - Peter R. Lighte | | ☐ | | ☐ | | ☐ | | 12 - Douglas A. Scovanner | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | 03 - Robert M. Falzon | | ☐ | | ☐ | | ☐ | | 08 - Charles F. Lowrey | | ☐ | | ☐ | | ☐ | | 13 - Michael A. Todman
| | ☐
| | ☐
| | ☐
| | | | | | | | | | | | | | | | | | | 04 - Mark B. Grier
| | ☐
| | ☐
| | ☐
| | 09 - George Paz
| | ☐
| | ☐
| | ☐
| | | | | | | | | | | | | | | | | | | | | | | | | | | 05 - Martina Hund-Mejean | | ☐
| | ☐
| | ☐
| | 10 - Sandra Pianalto | | ☐
| | ☐
| | ☐
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends a voteFOR Proposals 2 and 3. | | The Board of Directors recommends a voteAGAINST Proposal 4. | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | For | | Against | | Abstain | | | 2. Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2019.
| | | | ☐ | | ☐ | | ☐ | | | | 4. Shareholder proposal regarding Right to Act by Written Consent.
| | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | 3. Advisory vote to approve named executive officer compensation.
| | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | |
| | | | | B | | Non-Voting Proposal — Please select one option or leave blank if you do not want to participate. | | |
| | I would like a free tote bag from Prudential. ☐ I prefer Prudential contribute to a tree planting campaign. ☐ |
| | | | | C | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | | |
| | | | | | | | | | | | | | | | | | | Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | | |
| | | | | | | Date (mm/dd/yyyy) — Please print date below.
| | Signature 1 — Please keep signature within the box.
| | Signature 2 — Please keep signature within the box.
| | |
| | | | | | | | | | | | ANNUAL MEETING OF SHAREHOLDERS | | | | May 14, 2019, 2:00 p.m. | | 751 Broad Street, Newark, New Jersey 07102 | | | | | | | |
.
If you plan to attend the annual meeting, please bring proof of ownership with you.Your proof of ownership, such as a recent brokerage statement or letter from your bank or broker, admits the shareholder. All meeting attendees must present valid government-issued photo identification. If you want to vote your shares held in street name in person, you must get a legal proxy in your name from the broker, bank or other nominee that holds your shares. For your safety, all personal belongings or effects including purses are subject to inspection. With the exception of purses and notepads, no personal items such as briefcases or bags, of any type, may be carried into the meeting area. The use of photographic and recording devices is prohibited in the building. Cell phone use is permitted only in the first floor lobby. The meeting location is accessible to disabled persons and, upon request, we will provide wireless headsets for hearing amplification.
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
| | | | | Proxy – Prudential Financial, Inc.
| | | | |
This proxy is solicited on behalf of the Board of Directors of Prudential Financial, Inc. for the Annual Meeting of Shareholders to be held at 2:00 p.m. on May 14, 2019.
The undersigned, having received the Notice of Meeting and Proxy Statement dated March 28, 2019, appoints Margaret M. Foran, Timothy P. Harris and Charles F. Lowrey, each of them as proxies, with full power of substitution, to represent and vote all of the undersigned’s shares of Common Stock of Prudential Financial, Inc., at the Annual Meeting of Shareholders to be held at 2:00 p.m., May 14, 2019, or at any adjournment or postponement, upon all subjects that may properly come before the meeting, including the matters described in the proxy statement, subject to any directions indicated on the reverse side of this card.
If no directions are given, the proxies will vote in accordance with Board of Directors’ recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 14, 2019.
The Proxy Statement and Annual Report to Shareholders are available atwww.prudential.com/governance.
| | | PAPER PRODUCED UNDER A
SUSTAINABLE FOREST
MANAGEMENT PROGRAM.
| |  |
| | | | | + |
IMPORTANT SHAREHOLDER INFORMATION
YOUR VOTE COUNTS!
| | | | | | | | | ANNUAL MEETING OF SHAREHOLDERS
| | | | | | | | May 14, 2019, 2:00 p.m. | | | | | 751 Broad Street, Newark, New Jersey 07102 | | | | | | | | You can vote and obtain proxy materials online. | | | | | | | | VOTING INSTRUCTIONS ARE LOCATED BELOW
|
| | | | | Shareholder Meeting Notice & Admission Ticket | | | |  |
Important Notice Regarding the Availability of Proxy Materials for the
Prudential Financial, Inc. Shareholder Meeting to be Held on May 14, 2019
The proxy materials for the annual meeting are available online. The items to be voted on are listed below. Follow the instructions to view the materials and vote online.Your vote is important.To obtain a paper ore-mail copy of the proxy materials follow the instructions on the reverse side.important to us and our business.
Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations.© Copyright 2017 Computershare Limited. All rights reserved.
The Board of Directors recommends that you voteFOR Proposals 1 – 3.
| 1. | Election of Directors: Thomas J. Baltimore, Jr., Gilbert F. Casellas, Robert M. Falzon, Mark B. Grier, Martina Hund-Mejean, Karl J. Krapek, Peter R. Lighte, Charles F. Lowrey, George Paz, Sandra Pianalto, Christine A. Poon, Douglas A. Scovanner and Michael A. Todman.
|
| 2. | Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2019.
|
| 3. | Advisory vote to approve named executive officer compensation.
|
The Board of Directors recommends that you voteAGAINST Proposal 4:
| 4. | Shareholder proposal regarding Right to Act by Written Consent.
|
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet.
We encourage you to access and review all of the important information contained in the proxy materials before voting.
The proxy statement and annual report to shareholders are available atwww.investorvote.com/prudential.
| | | 
| | Easy Online Access — A Convenient Way to Vote! | | If you have access to the Internet, you can complete the process in a few easy steps:
| | Step 1: Go towww.investorvote.com/prudential
| | Step 2: Click theViewbuttons to see the proxy statement, which contains details of the proposals to be voted on, and the annual report.
| | Step 3: Follow the instructions on the screen to log in.
| | Step 4: Make your selection as instructed on each screen to select delivery preferences.
| | Step 5: Make your voting selections as instructed on the screen and click the vote button to submit your vote. |
PLEASE NOTE — YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares, you must vote online or request a paper copy of the proxy materials to receive a proxy card.
Video Transcript Delivered For: Prudential Financial, Inc. 20192022 Proxy Statement Douglas A. Scovanner, Prudential Financial, Inc. Board Member
Margaret M. Foran, Chief Governance Officer, Senior Vice President, Corporate
Secretary,Robert Falzon, Prudential Financial, Inc.
Margaret ForanVice Chair
A Message from Prudential’s Board of Directors Prudential’s Transformation Prudential knows what it means to be a “rock” in people’s lives…and our Board believes that at Prudential, our rock is our talent. The quality and the speed at which we progressed our Transformation would not have been possible without our incredible talent. Yet, we are not immune to the talent disruptions occurring across economies, and we will need to continually focus on talent and culture in order to differentiate Prudential as a destination for top talent. We are committed to providing employees with opportunities to learn and grow through re-skilling, up-skilling and talent mobility; to delivering flexible work arrangements that take the best of what we did in 2019 with the best of what we learned from the pandemic - the new ways of working, learning and living that can’t, and shouldn’t, be undone; and to continuing work to drive progress on our aspiration of being a diverse and fully inclusive company. The entire Prudential community, including our Board, have a role in helping to achieve that outcome by embracing our differences and recognizing the strength that comes from our company’s diversity. This important work will continue this year and beyond, as we strive for lasting change at work, at home, and in our communities. Measuring Progress in our Transformation In 2021, we made significant progress with our transformation. We consistently delivered solid earnings. We’ve made customer interactions more holistic and customer transactions faster and easier, while also becoming more efficient by reengineering processes and investing in new technology. We exceeded our run-rate savings target for 2021 and are well on track to achieve our targeted $750 million of total cost savings that are part of our transformation efforts. We took significant steps to adjust our business mix to be higher growth and less market sensitive. Through our recent dispositions of our businesses in Korea and Taiwan, and the announced dispositions of our Full Service Retirement and a significant block of our legacy variable annuities, we have over $6 billion of proceeds to thoughtfully redeploy, including to higher growth opportunities. While challenges remain, we headed into 2022 with strong momentum and excitement for the opportunities ahead, and are well positioned to deliver differentiated outcomes for all our stakeholders.
Prudential’s Vision and Strategic Priorities Our vision for Prudential is to be a global leader in expanding access to investing, insurance, and retirement security. We are investing in growth businesses and markets around the world by redeploying our critical resources—talent, technology, capital and operating expenses—to focus on higher growth and less market sensitive businesses, such as investment management and emerging markets. We are committed to finding ways to reach and serve more people and deliver industry-leading customer and client experiences that blend human touch with advanced technology. This is especially important in the moment we’re living in, as societies around the world grapple with financial insecurity, changing demographics and aging populations. We will leverage our strengths and expertise in investing, insurance and retirement to create the next generation of financial solutions that serve the diverse needs of a broader range of customers and clients. Our unique combination of scale and expertise positions us well to be a leader in the convergence between asset management and insurance. At the same time, we are investing in the future through acquisitions, and investments in technology innovation and transformational start-ups. And, we will continue investing in our talent, because it is Prudential’s people that will ultimately fuel the success of our growth strategy and enable us to achieve our Vision.
Video Transcript Delivered For: Prudential Financial, Inc. 2022 Proxy Statement Gilbert Casellas, Prudential Financial, Inc. Corporate Governance and Business Ethics Committee Chairman Gilbert Casellas Hello. I am Margaret Foran, senior vice president,I’m Gilbert Casellas, Prudential board member and chair of the corporate secretarygovernance and chief governance officer at Prudential.business ethics committee. Thank you for tuning in to watch this short video. Joining me is Doug Scovanner, ChairmanThe purpose of Prudential’s Audit Committee.
Doug, thank you very much for taking time to share your insight about Prudential’s Board.
Margaret Foran
Can you tell me a bit about yourself?
Douglas Scovanner
After studying finance in graduatecorporate governance and business school, I joined the Ford Motor Company. Over the following thirty-plus years, I held financial leadership positions at the Coca-Cola Company and Coca-Cola Enterprises, at the Fleming Companies, and finally at Target Corporation. I was Chief Financial Officer of Target for 18 years, as Target Stores grew to be a national retailer. Today, I am the Founder and Managing Member of Comprehensive Financial Strategies, a management consulting firm.
I have been on the Prudential Board since 2013 and serve on several committees. Currently, I Chair the Audit Committee.
Margaret Foran
Can you tell me about the role of the Audit Committee and your role as Chair?
Douglas Scovanner
The primary purpose of the Audit Committeeethics committee is to oversee the Company’s financial reportingcompany’s corporate governance practices, to recommend individuals for election to the board of directors, to oversee the ethics and related internal controls,conflict of interest policies of the company, and to ensure thatoversee Prudential’s strategy and reputation regarding environmental stewardship, sustainability, and corporate social responsibility throughout our global businesses.
In this video, I am going to talk about Prudential’s environmental sustainability initiatives. The Corporate Governance and Business Ethics Committee oversees the Company’s auditor hasenvironmental sustainability initiatives in various ways: Prudential’s Chief Governance Officer and director of Environment and Sustainability meet with the qualifications and independence necessaryCorporate Governance Committee quarterly to perform the role successfully. In addition, the Audit Committee approves the report included indiscuss the Company’s annual proxy statement.sustainability objectives, including climate change. This regular engagement gives the Board insight into the Company’s climate change strategy and environmental stewardship initiatives. As Chair, I also engage directly with our investors. Hearing their feedback about how Prudential is tackling business risks and opportunities addressing environmental issues is important to me and my fellow directors. I share our investors’ feedback with the Board. Many of these views are ultimately reflected in our environmental sustainability practices.
To stay informed of industry trends, all directors receive training addressing climate science, climate change policy, reporting frameworks including the Task Force on Climate-related Financial Disclosures, and Prudential’s General Account’s ESG framework. Our Global Environmental Commitments In November 2021, Prudential announced updates to its Global Environmental Commitment’s operational and investment goals, which we initially disclosed in 2019. My fellow Board member and Prudential’s Vice Chairman, Rob Falzon, created a senior-level Climate Change Steering Council and supporting Task Force to evaluate our climate change strategy and oversee and take ultimate responsibility for the workdevelopment of the Auditnew goals. The policy recommendations from these internal groups are reviewed by the Corporate Governance and Business Ethics Committee.
Margaret ForanTo accelerate the company’s longstanding commitment to mitigate the impacts of climate change, in November 2021, the Task Force announced three significant initiatives:
Can you describe
we committed to reach net zero carbon emissions by 2050; We also set an interim goal to become carbon neutral by 2040. From the Audit Committee’s financial reporting andinvestment side, we enhanced our Responsible Investing Policy, which now includes the restriction of new direct investments in companies that derive 25% or more of their revenues from thermal coal. Prudential’s climate initiatives in 2022 In 2022, Prudential will assess its Scope 3 emissions, including those related internal controls?to the company’s owned assets within its General Account portfolio. Douglas Scovanner
The oversightTo follow our progress on our GHG reduction goals, look for the release of financial reporting and related internal controls is key to our work. As an example, we engage with management continuouslyESG Report in June 2022. These carbon reduction targets reflect our longstanding commitment to provide actionable insights to improve financial practices and reporting.
Margaret Foran
How would you describe Prudential’s Board?
Douglas Scovannertransparency on our environmental actions.
We are collaborative yet direct with each other. We work alongsidepride ourselves in our sustainability leadership and will continue to enhance our polices to meet the senior management team to define Prudential’s mission and actively oversee Prudential’s long-term strategy. If you look at our directors’ profiles, you will see that our skills, perspectives, and experiences are extremely diverse. This is a resultadvances of a deliberate strategy and our belief that a board with diverse views, perspectives, and backgrounds—a board that reflects our company and our customer base—is better equipped to guide Prudential forward.
Margaret Foran
You also sit on the Risk Committee. Can you tell me about the role of the Risk Committee?
Douglas Scovanner
Appreciating the value of risk oversight, we created a separate Risk Committee in 2016. The Committee oversees the governance of significant risks throughout the enterprise. We do this by coordinating the risk oversight functions of each Board committee and ensuring that matters are appropriately elevated to the Board.
Margaret Foran
How has the board changed since you joined?
Douglas Scovanner
Due to our commitment to succession planning and board refreshment, our average director tenure is about seven years. Since I joined five years ago, we have added four directors with
extensive expertise in finance and capital allocation, Asian markets, and global corporate operations.
Closing Douglas Scovannerclimate science.
I hope this gives our investors more insight into Prudential’s strategy and reputation regarding environmental stewardship and sustainability throughout our Board.global businesses. I know I speak for the entire Boardboard when I say that it is a privilege to serve as a director and that we arewe’re committed to achieving long-termworking on behalf of our shareholders to achieve long term performance and value for Prudential’s shareholders. Margaret Foran
Thank you again for your time, Doug.
our company
Video Transcript Delivered For: Prudential Financial, Inc. 20192022 Proxy Statement Thomas J. Baltimore, Prudential Financial, Inc. Lead Independent Director
Theresa Molloy, Vice President,Wendy E. Jones, Prudential Financial, Inc.
Theresa MolloyBoard Member
Wendy E. Jones, Prudential Board Member and Audit Committee Member Hello. I am Theresa Molloy, vice president of corporate governance at Prudential.I’m Wendy Jones, Prudential’s newest board member. Thank you for tuning in to watch this short video. Joining meAfter retiring from eBay Inc. in 2020, I joined the Prudential Board of Directors in January 2021 and I currently sit on the Board’s Audit Committee. At eBay, I was the Senior Vice
President of Global Operations. I was responsible for the company’s customer service, risk, trust and payment operations and the workforce resources function worldwide. It has been a very important time to join the Board, particularly during a pandemic and at a time of transformation. Although the Board was unable to hold in person Board meetings, we maintained the rigor of our pre-pandemic schedule by meeting via videoconference. And then, in our first in-person meeting, we dove right into the alignment of our transformation and other strategic priorities as well as risk management. In the year that I have served on Prudential’s board, I have found my fellow directors are bound by the common commitment to the Company and its stakeholders. All directors are comfortable exchanging their candid views, and challenging our Board colleagues and management when necessary. Prudential’s Audit Committee The purpose of the Audit Committee is Thomas Baltimore, Prudential’s Lead Independent Director.to provide oversight of the Company’s accounting and financial reporting and disclosure processes, the adequacy of the systems of disclosure and internal control established by management, and the audit of the Tom, thank youCompany’s financial statements. The Audit Committee also oversees insurance risk, operational risks, risks related to financial controls, and legal, regulatory and compliance matters, and oversees the overall risk management governance structure and risk management function. I enjoy this Committee very much because so much of my professional experience has prepared me for taking time to share your insight about Prudential’s Board.
Theresa Molloy
Tell me a little about your background.
Thomas Baltimore
I joined Prudential’s Board in May 2008. Professionally, I have spent nearly my entire career in the hospitality industry. Prior to my current role as chairman and CEOwork of Park Hotels & Resorts, I was president and CEO of RLJ Lodging Trust, which Ico-founded with Robert L. Johnson. Prior to RLJ, I was with Hilton Hotels. I started my hospitality career at Marriott.
On a personal note, my wife Hillary and I are very involved in a local DC charity called N Street Village, a wonderful organization that empowers homeless andlow-income women to attain the highest quality of life by offering them a broad spectrum of services in an atmosphere of dignity and respect.
Theresa Molloy
Talk about your role as Lead Independent Director.
Thomas Baltimore
The Lead Independent Director is nominated by our independent peers for a term of one year but can serve up to three.
At this year’s annual meeting, I will start my third and final term.
Our Board gave careful thought to structuring the Lead Independent Director role. Important features include:Committee.
The Lead Independent Director presides over all executive sessions where the chairmanPrudential’s Risk Oversight and CEO is not present. Prudential’s executive sessions are held at the beginning and end of every board meeting.
The Lead Independent Director approves all Board agendas, meeting schedules, and information sent to the Board and;
as the Lead Independent Director, I am available to meet with investors.
Theresa Molloy
What are the qualities that make Prudential’s Board unique?
Thomas BaltimoreFunction
I joinedhave been asked how I would describe Prudential’s Boardrisk oversight. I think it is a great question, particularly because I share many ofsit on the same values thatAudit Committee. Managing and monitoring risks are so important to the company, such as:Board’s oversight of Prudential. The Board regularly reviews the Company’s risk profile, including its approach to sustainability, including climate, and A culturehuman capital management, its operational footprint and investment risk and strategies. The governance structure that we have in place – where the chairs of integrity that cascades throughouteach Board committee sits on the company’s global enterprise;Board’s Risk Committee – allows the Board to more closely coordinate our overall risk function. This type of good governance can offer a commitment to social responsibility, which is evident here in Newark and communities worldwide, and a commitment to creating products that enhance our ability to bring long-term financial security to our existing and prospective customers.
Theresa Molloy
You mentioned culture. How would you describe Prudential’s culture?
Thomas Baltimore
Our culture is onenumber of our best assets. It is a competitive advantage and vitalimportant benefits to the creation and protection of Prudential’s long-term value. We spend a great deal of time discussing culture at our board meetings. In addition, senior leaders and their teams present their business strategies to us throughout the year. This exchange of ideas gives directors insight into how employees throughout the organization are aligned with the business model and our values.organization.
Within this context, I would distill our culture down to our values, our practices and our people.E-Commerce Arena
Theresa Molloy
PrudentialMy e-commerce experience has been lauded for its governance best practices. Describe some of these practicesespecially timely due to the ongoing pandemic, which requires the Company to adopt digital technologies and why they are importanttransactions to shareholders.
Thomas Baltimore
I will start withcontinue our Board structure
| 1. | Our board is diverse in demographics and mindset. In fact, 80% of ournon- executive directors are diverse.
|
| 2. | Our annual Board evaluation is overseen by an independent third party. We take these results seriously and actively incorporate feedback into our processes and report the results in our proxy every year, and
|
| 3. | Our corporate governance and business ethics committee has oversight of our company’s ethical, cultural, political and human rights practices.
|
Next, our shareholder rights provisions
Prudential was the first companybusiness operations seamlessly. My experience at eBay, has enabled me to proactively adopt proxy access
We hold annual election of directors
Our special meeting threshold is 10%,guide and
We do not have a Poison Pill
Theresa Molloy
What is the Board’s view on talent management?
Thomas Baltimore
Talent inform management and succession planning are discussed at every board meeting. In September 2018, we announced a leadership transition that was the resultoffer my expertise in various functions of a rigorous, multi-year succession plan strategy. After much deliberatione-commerce, particularly our Assurance IQ business which matches buyers with products such as life, health and exploration with a prominent search firm of possible external candidates, the Board reached a unanimous and confident decisionauto insurance, enabling them to appoint Charlie Lowrey to the role of Chairman and CEO and to appoint Rob Falzon to the role of Vice Chairman. Rob and Charlie are outstanding executives with a long history of accomplishments at Prudential. Together they will continue to unlock the value in our strategic mix of high-quality businesses to put financial security within reach of our growing customer base.make purchases online or through an Agent.
I hope this video gives our investors perspectivemore insight about our Board. I know I speakme and Prudential’s risk function. Thank you for the entire Board when I say that we are committedopportunity to working on behalf ofshare my background and experience with you. And to all our shareholders, to achieve long-term performance and value for our company. Theresa Molloy– Thankthank you again for your time Tom.
3investment in Prudential.
|
|
Source Candidate Pool from Independent Search Firms Shareholders Independent Directors Our people In-Depth Review by the Committee Consider skills matrics Screen qualifications Consider diversity Review independence and potential conflicts Meet with directors Recommend Selected Candidate for Appointment to our Board Review by full Board Select Director(s) 5 directors since 2015
COMPREHENSIVE STEPS TO ACHIEVE BOARD EFFECTIVENESS The Board is committed to a rigorous self-evaluation process. Through evaluation, directors review the Board's performance, including areas where the Board feels it functions effectively, and importantly, areas where the Board believes it can improve. 1. Process is Initiated Corporate Governance and Business Ethics Committee Chair initiates the annual board evaluation process with the help of an independent third-party consultant and our Capitalize Chief Governance officer. 2. Evaluation The evaluation solicits each director's opinion regarding the Board's effectiveness in monitoring and reviewing topics such as The strategic planning process The annual budget process and financial performance Management compensation, performance and ethics Risk strategy and management Succession planning 3. Feedback Analysis Directors are encouraged to speak to the independent third party with specific feedback on individual directors, committees or the Board in general. The independent third party synthesizes the results and comments and may have oral interviews with directors regarding the full Board or any committee on which the director serves. 4. Presentation of Findings In early 2019, the Corporate Governance and Business Ethics Chair, in conjunction with the third party consultant, presents the findings to each Committee, followed by review of the full Board. 5. Follow up Results requiring additional consideration are addressed at subsequent board and committee meetings and reported back to full Board, where appropriate. The Board followed-up on its 2018 self-evaluation by reviewing materials about the competitive and regulatory environment as well as discussing talent at almost every scheduled Board meeting. For 2019, the Board has asked for more information in the following areas: Strategic Planning Technological Trends and Developments Competitive Environment and Industry and Evolving Markets
