UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
PROXY STATEMENT PURSUANT TO SECTION 14(a) of theSecurities Exchange Act of
OF THE SECURITIES EXCHANGE ACT OF 1934 (Amendment
(Amendment No. )
 | Filed by the Registrant |  | Filed by a Party other than the Registrant |
| Preliminary Proxy Statement | |
| Confidential, | |
| Definitive Proxy Statement | |
| Definitive Additional Materials | |
| Soliciting Material | |
Franklin Resources, Inc.
(Name of Registrant as Specified Inin Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Thanother than the Registrant)
| No fee required. | |
| Fee paid previously with preliminary materials. | |
| Fee computed on table | |
| Back to Contents | |||
2021ProxyStatement
Letter from Our Lead Director and Notice of Virtual Annual MeetingCEO
February 9, 2021, 8:00 a.m. Pacific TimeDecember 27, 2023
www.virtualshareholdermeeting.com/BEN2021
December 28, 2020
DEAR FELLOW STOCKHOLDERS,
The COVID-19 pandemic has profoundly altered our world with far-reaching implications. During this unprecedented period, we are focused on the well-being of our employees, clients, and stockholders. Our ability to produce strong investment results, while maintaining high-quality service and stability for advisors, clients, and investors, remains paramount. We appreciate the trust and confidence you as investors have placed in us.
In recognition of the current pandemic, the 20212024 Annual Meeting of Stockholders of Franklin Resources, Inc. will be held virtually this year, and we cordially invite you to participate on February 9, 20216, 2024, at 8:00 a.m. Pacific Time. Instructions for accessing the virtual meeting platform online are included in the Proxy Statement for this meeting.
Over the past several years, we have made great strides in transforming our business—all in an effort to meet the needs of our shareholders and clients around the world. Today, we are a more diversified company offering extensive investment expertise across asset classes, investment vehicles and geographies to benefit a broader range of clients through various market conditions and cycles.
In 2023, challenging global financial markets and geopolitical uncertainty weighed on investor sentiment. In our fourth fiscal year 2020, we focusedquarter, heightened volatility led to declines across equity and fixed income markets. Consistent with the industry, our effortsassets under management and investmentsflows were impacted by these conditions. We believe markets like these reinforce the value of active management with a focus on risk adjusted returns and a long-term investment horizon. We have been actively engaging with clients to understand their needs and help them navigate the current environment.
One of our strategic priorities has been to increase our scale in key areas that directly supported our multi-year strategic plansegments of the industry reflecting long-term client demand. In this pursuit to drive organic growth, execute on M&A opportunities, and position Franklin Templetonoffer more choice to capitalize on industry change.
Our most significant achievement duringmore clients, we were pleased to announce the year was thepending acquisition of Legg Mason and its specialist investment managers. Bringing together the two organizations establishes Franklin Templeton as onePutnam Investments with $142 billion of the world’s largest independent global investment managers with over $1.46 trillion in assets under management (AUM) as of November 30, 2020, across2023. Our clients will benefit from Putnam’s complementary investment capabilities which have strong long-term track records. In addition, we established a partnership with Power Corporation of Canada and Great-West Lifeco. The Power group of companies are leaders in global insurance, retirement, asset management and wealth management, and this transaction will enable us to further increase our investment in these important segments to better serve each and every client.
We also closed our acquisition of Alcentra, a leading European credit manager, doubling our alternative credit AUM to $75 billion. Firmwide alternative AUM increased to $255 billion from $225 the prior year, an increase of over 13%, making Franklin Templeton one of the broadest rangeslargest managers of high-quality investment teamsalternative assets.
While continuing to invest in long-term growth initiatives, we further strengthened the industry. Our combined footprint significantly deepens Franklin Templeton’s presence in key countries and regions and creates an expansive investment platform that is well-balanced between institutional and retail clients. With this historic acquisition for our company—as well as other key acquisitions in fiscal year 2020, including wealth management firms Athena Capital and Pennsylvania Trust—we are delivering on our overarching goal to broaden our capabilities and expand our client reach.
At the same time, we continued to successfully navigate through the challenges posed by the COVID-19 pandemic. Our long-standing investment in collaborative technology in support of our global footprint enabled us seamlessly to move to 98% of our employees working remotely.
In February 2020, Jenny began her role as President and Chief Executive Officer. The Board recognizes her strong track record and views her appointment as the natural evolution of her previous role as President and Chief Operating Officer. She has drawn upon her significant experience leading and working with all partsfoundation of our business through disciplined expense management and operational efficiencies. Our balance sheet gives us the financial flexibility to make meaningful progress on multiple fronts despitecontinue to grow our business. This year, we returned $870 million to shareholders through dividends and share repurchases, an increase of approximately 13% over the complex challenges that arose thisprior year. In parallel, Greg Johnson became Executive Chairman and Chairman of the Board of Directors. He continues to play an active role within the organization.
During this period of significant change in our world, in our industry and within our own company, we must rely more than ever on the ability of our teams to innovate and collaborate. We believe that championing diversity in its many dimensions, and the inclusion of colleagues with diverse backgrounds, perspectives, and identities, strengthens our critical thinking and enhances innovation and collaboration. Building on Franklin Templeton’s work to foster diversity and inclusion in the workplace, we have expanded our efforts this year with strong support from our Board of Directors and Executive Committee. Among them, we created a Chief Diversity Officer position, reporting directly to the CEO, to lead our work in this important area.
Earlier this year, the directors undertook an assessment of the Board’s composition, including a review of director skills, expertise and tenure. Our Board is pleased to nominate Alex Friedman, John Kim and John Thiel as new director candidates. Each of them would bring valuable experience and insights to the Board, and we encourage you to review the information in the proxy statement about these candidates. At the same time, Peter Barker, Mark Pigott and Laura are not being nominated for re-election this year. The Board and our company are very grateful for their leadership and significant contributions over their years of service. On a personal note, as I conclude my time on the Board, I share that I have been enriched through my service over these 15 years, including as Lead Director.
We encourage you to review the accompanying Proxy Statement and associated materials and to vote your shares before our annual meeting on February 9, 2021. We thank each6, 2024. On behalf of you for your support, and the Board and management look forwardteam, thank you for your continued support and commitment to serving you throughout the upcoming year.our firm.
Sincerely,
  |  | ||
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Independent Lead Director |  |
JENNIFER M. President and |
2024 Proxy Statement i
TableNotice of ContentsAnnual Meeting of Stockholders
 | DATE Wednesday, |  | VIRTUAL MEETING www.virtualshareholdermeeting.com/BEN2024 We encourage you to allow ample time for |  | RECORD DATE Stockholders of record on |
VOTING ITEMS
| Proposals | Record Vote Recommendations | For Further Details | ||||
| 1 | ||||||
DEAR STOCKHOLDER:
The Board of Directors of Franklin Resources, Inc. (the “Company”) invites you to attend our 2021 annual meeting of stockholders (the “Virtual Annual Meeting”) to be held on Tuesday, February 9, 2021 at 8:00 a.m. Pacific Time. The meeting can be accessed by visiting www.virtualshareholdermeeting.com/BEN2021, where you will be able to listen to the meeting live and vote online. We encourage you to allow ample time for online check-in, which will open at 7:45 a.m. Pacific Time. Please note that you will only be able to attend the meeting by means of remote communication. We have chosen to hold a virtual rather than an in-person meeting due to the continuing public health impact of COVID-19. The meeting is held for the following purposes:
| To elect | “FOR”each director nominee | See page 5 | ||||
| To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independentregistered public accounting firm for the fiscal year ending September 30, | “FOR” | See page 65 | ||||
| To approve an amendment and restatement of the Company’s 2002 Universal StockIncentive Plan. | ||||||
| “FOR” | See page 66 |
Stockholders will also transact such other business that may properly be raised at the Annual Meeting or any adjournments or postponements of the Annual Meeting.
We are primarily furnishing proxy materials to our stockholders on the Internet rather than mailing paper copies of the materials to each stockholder. As a result, some of you will receive a Notice of Internet Availability of Proxy Materials and others will receive paper copies of the Proxy Statement and our Annual Report. The Notice of Internet Availability of Proxy Materials contains instructions on how to access the Proxy Statement and the Annual Report over the Internet, instructions on how to vote your shares, as well as instructions on how to request a paper copy of our proxy materials, if you so desire. Electronic delivery is designed to expedite the receipt of materials, significantly lower costs and help to conserve natural resources.
Whether you received the Notice of Internet Availability of Proxy Materials or paper copies of our proxy materials, the Proxy Statement, the proxy card, the Annual Report, and any amendments to the foregoing materials that are required to be furnished to stockholders are available for you to review online at www.proxyvote.comwww.proxyvote.com..
The Company’s Board of Directors has fixed the close of business on December 11, 2020, as the record date for the determination of stockholders entitled to receive notice of, and to vote on, all matters presented at the Virtual Annual Meeting or any adjournments thereof.
Your vote is very important. Even if you think that you will attend the Virtual Annual Meeting, we ask you to please cast your vote in advance. You may vote your shares via the Internet, by telephone, by mail or, except for certain stockholders described on page 3, via the virtual meeting website during the Virtual Annual Meeting.
Attendance at the Virtual Annual Meeting will be limited to stockholders as of the record date. The Virtual Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/BEN2021BEN2024, where you will be able to listen to the meeting live and vote online. We encourage you to allow ample time for online check-in, which will open at 7:45 a.m. Pacific Time. Please note that you will only be able to attend the meeting by means of remote communication.
By order of the Board of Directors,
ALIYA S. GORDON
THOMAS C. MERCHANT
Executive Vice President,
General Counsel and Secretary
December 28, 2020
27, 2023
San Mateo, California
Your vote is important.Please vote via the Internet, by telephone, by mail or via the virtual meeting website during the Virtual Annual Meeting.
2024 Proxy Statement ii
Table of Contents
2024 Proxy Statement iii
Proxy Statement
FRANKLIN RESOURCES, INC.
ONE FRANKLIN PARKWAY
SAN MATEO, CALIFORNIA 94403-1906
December 28, 202027, 2023
This Proxy Statement and the accompanying Notice of Virtual Annual Meeting of Stockholders are furnished in connection with the solicitation by the Board of Directors (the “Board”) of Franklin Resources, Inc., a Delaware corporation (the “Company”), of the accompanying proxy to be voted at the 2021 Virtual2024 Annual Meeting of stockholders (the “Virtual Annual“Annual Meeting”), which will be held on Tuesday,Wednesday, February 9, 20216, 2024 at 8:00 a.m. Pacific Time. The Virtual Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/BEN2021BEN2024, where you will be able to listen to the meeting live and vote online. Please note that you will only be able to access the Virtual Annual Meeting by means of remote communication. We have chosen to hold a virtual rather than an in-person meeting due to the continuing public health impact of COVID-19. We expect that thisThis Proxy Statement and the accompanying proxy card will beare being mailed and/or made available to each stockholder entitled to vote on or about December 28, 2020.27, 2023. References to “us,” “we” or “our” as used throughout this Proxy Statement mean the Company.
All materials filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”) can be obtained through the SEC’s website at www.sec.gov.www.sec.gov.
Important Notice Regarding the Availability of Proxy Materials
Under the rules adopted by the SEC, we are furnishing proxy materials to our stockholders primarily over the Internet. We believe that this process should expedite stockholders’ receipt of proxy materials, lower the costs of our Virtual Annual Meeting and help to conserve natural resources. On or about December 28, 2020,27, 2023, we mailed to each of our stockholders (other than those who previously requested electronic or paper delivery, participants in the Franklin Templeton 401(k) Retirement Plan (the “401(k) Plan”), and holders of shares in excess of certain thresholds), a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review the proxy materials, including this Proxy Statement and our Annual Report, on the Internet and how to access a proxy card to vote on the Internet or by telephone. The Notice of Internet Availability of Proxy Materials also contains instructions on how to receive a paper copy of the proxy materials. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you request one. If you received paper copies of our proxy materials, you may also view these materials at www.proxyvote.com. If you received paper copies of our proxy materials and wish to receive them by electronic delivery in the future, please request electronic delivery on www.proxyvote.com or https://enroll.icsdelivery.com/ben/Default.aspx.Default.aspx.
2024 Proxy Statement 1
Voting Information
WHO CAN VOTE?
Holders of the Company’s common stock, par value $0.10 per share (the “common stock”), at the close of business on December 11, 20202023 (the “Record Date”) are entitled to one vote for each share owned on that date on each matter presented at the Virtual Annual Meeting. As of December 11, 2020,Record Date, the Company had 505,898,149495,526,950 shares of common stock outstanding. If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” of shares held in street name. TheIn that event, the Notice of Internet Availability of this Proxy Statement has been forwarded to you by your broker, bank or other holder of record who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record on how to vote your shares by using the voting instruction form included in the mailing or by following their instructions for voting via the Internet or by telephone.
WHAT MATTERS ARE TO BE CONSIDERED AT THE VIRTUAL ANNUAL MEETING?
At the Virtual Annual Meeting, stockholders will be asked to consider and vote upon the following:
Proposal No. 1: Election of DirectorsDirectors. . The proposal provides for the election of 1011 directors to the Company’s Board to hold office until the next annual meeting of stockholders or until that person’s successor is elected and qualified or until his or her earlier death, resignation, retirement, disqualification or removal.
Proposal No. 2: Ratification of Appointment of AuditorsAuditors. . The proposal provides for the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 20212024 (“fiscal year 2021”2024”).
Proposal No. 3: Approval of an Amendment and Restatement of the Company’s 2002 Universal Stock Incentive Plan (“USIP”). TheThis proposal requests stockholders to approve an amendment and restatement of the USIP, which includes increasingto increase the number of shares of common stock authorized for issuance under the USIP by an additional 2025 million shares.
The Board does not know of any other matter to be brought before the Virtual Annual Meeting. If any other matters properly come before the meeting, the persons named in the form of proxy or their substitutes will vote in accordance with their best judgment on such matters.
HOW MANY VOTES ARE NEEDED TO HOLD THE VIRTUAL ANNUAL MEETING?
In order to take any action at the Virtual Annual Meeting, the holders of a majority in voting power of the Company’s shares issued and outstanding and entitled to vote as of the Record Date must be present at the Virtual Annual Meeting. This is called a quorum.
WHO COUNTS THE VOTES?
The voting results will be tallied by Broadridge Financial Solutions, Inc. and the Inspector of Elections, and reported on a Current Report on Form 8-K filed with the SEC within four business days following the Virtual Annual Meeting.
WHAT IS A PROXY?
A “proxy” allows someone else (the “proxy holder”) to vote your shares on your behalf. The Board is asking you to allow any of the persons named on the proxy card (Gregory E. Johnson, our Executive Chairman and Chairman of the Board; Rupert H. Johnson, Jr., our Vice Chairman; Jennifer M. Johnson, our President and Chief Executive Officer (“CEO”); and Aliya S. Gordon,Thomas C. Merchant, General Counsel, Executive Vice President and Secretary) to vote your shares at the Virtual Annual Meeting.
Franklin Resources 2
HOW DO I VOTE?
Whether you hold shares directly as a stockholder of record or beneficially in street name, you may vote your shares without attending the Virtual Annual Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your bank, broker or other holder of record. You may also vote via the Internet, by telephone, or by mail as outlined in the Notice of Internet Availability of Proxy Materials or on your proxy card.To facilitate timely receipt of your proxy despite any potential postal disruption, due to COVID-19, we encourage you to vote via the Internet or telephone (if such voting methods are available to you) by following the instructions on the accompanying proxy card promptly. Please see the Notice of Internet Availability of Proxy Materials, your proxy card or the information your bank, broker, or other holder of record provided to you for more information on these options. Except for certain stockholders described below, the deadline for voting via the Internet or by telephone is 11:59 p.m. Eastern Time on Monday February 8, 2021.5, 2024.
The persons named as your proxy holders on the proxy card will vote the shares represented by your proxy in accordance with the specifications you make. For stockholders of record that return their proxy card but do not provide instructions
on how to vote, the persons named as your proxy holders on the proxy card will vote the shares represented by the proxy FOR all nominees to the Board of Directors (Proposal No. 1); FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm (the “independent auditors”) for fiscal year 20212024 (Proposal No. 2); and FOR the approval of anthe amendment and restatement of the Company’s 2002 Universal Stock Incentive PlanUSIP (Proposal No. 3). Additionally, unless you specify otherwise on your proxy card, if any other matters come before the Virtual Annual Meeting to be voted on, the persons named as your proxy holders on the proxy card will vote, act and consent on those matters in their discretion. For beneficial holders that return their voting instructions but do not provide instructions on how to vote, your bank, broker or other holder of record will only have the discretion to vote on the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors for fiscal year 20212024 (Proposal No. 2). and will not be able to vote your shares on Proposals No. 1 or 3.
For participants in the 401(k) Plan, your shares will be voted as you specify on your proxy card. If you do not vote, your shares will be voted by the independent fiduciary for and against the proposals in the same proportion as shares for which directions are received by the independent fiduciary, unless the independent fiduciary decides that the law requires that the independent fiduciary vote them differently. (ThisThis means that the way you vote will also affect how the independent fiduciary will vote the shares of participants who do not vote.) If you wish to abstain from voting on any matter, you must indicate that on your proxy card. You cannot vote your 401(k) Plan shares via the virtual meeting website during the Virtual Annual Meeting. To allow sufficient time for your shares to be voted as you instruct, the trustee must receive your vote by no later than 11:59 p.m. Eastern Time on Thursday, February 4, 2021.1, 2024.
CAN I CHANGE OR REVOKE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Whether your vote is submitted via the Internet, by telephone or by mail, you may change or revoke your proxy at any time before it is voted. A proxy, including an Internet or telephone vote, may be changed or revoked by submitting another proxy with a later date at any time prior to the beginning of the Virtual Annual Meeting. You may also revoke your proxy by attending the Virtual Annual Meeting and casting your vote via the virtual meeting website. Participants in the 401(k) Plan may revoke their proxy by no later than 11:59 p.m. Eastern Time on Thursday, February 4, 2021.1, 2024.
CAN I VOTE DURING THE VIRTUAL ANNUAL MEETING?
Yes, except that participants in the 401(k) Plan may not vote their 401(k) Plan shares via the virtual meeting website during the Virtual Annual Meeting. Please see requirements for attending the Virtual Annual Meeting under “How do I Access the Virtual Annual Meeting? Who May Attend the Virtual Annual Meeting?Attend?” below. Although you can vote online during the Virtual Annual Meeting, we encourage you to vote via the Internet, by telephone, or by mail as outlined in the Notice of Internet Availability of Proxy Materials or on your proxy card to ensure that your shares are represented and voted. Participants in the 401(k) Plan must vote by no later than 11:59 p.m. Eastern Time on Thursday, February 4, 2021,1, 2024, and may not vote during the Virtual Annual Meeting.
HOW DO I ACCESS THE VIRTUAL ANNUAL MEETING? WHO MAY ATTEND?
Attendance at the Virtual Annual Meeting is limited to stockholders as of the Record Date. Any stockholder can attend the Virtual Annual Meeting via the virtual meeting website by visiting www.virtualshareholdermeeting.com/BEN2021,BEN2024, where stockholders will be able to listen to the meeting live and may vote during the meeting. The Virtual Annual Meeting starts at 8:00 a.m. Pacific Time. We encourage you to allow ample time for online check-in, which will open at 7:45 a.m. Pacific Time. Please have your 16-digit control number to join the meeting. The control number is included on your proxy card if you are a stockholder of record or included with your voting instruction card and voting instructions you received from your broker, bank or other nominee. Audio or video recording is not permitted at the Virtual Annual Meeting.
2024 Proxy Statement 3
WILL I BE ABLE TO ASK QUESTIONS DURING THE VIRTUAL ANNUAL MEETING?
Stockholders will be able to transmit questions through the virtual meeting website. The Company may answer appropriate questions during the Virtual Annual Meeting or by following up with a stockholder if the stockholder provides contact information when transmitting the question through the virtual meeting website.
HOW CAN I REQUEST TECHNICAL ASSISTANCE DURING THE VIRTUAL ANNUAL MEETING?
If you encounter any difficulties accessing the virtual meeting during the check-in or during the meeting, please call the technical support number that will be posted on the virtual meeting log-in page at www.virtualshareholdermeeting.com/BEN2021.
BEN2024.
HOW ARE VOTES COUNTED?
To be counted as “represented,” a proxy card must have been returned for those shares, the stockholder must have voted the shares via the Internet or by telephone, or the stockholder must be present and vote via the virtual meeting website during the Virtual Annual Meeting. Affirmative and negative votes, abstentions and broker non-votes will be separately tabulated.
WHAT IS A BROKER NON-VOTE?
A “broker non-vote” occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a proposal because the nominee does not have authority to vote on that particular proposal without receiving voting instructions from the beneficial owner. Under New York Stock Exchange (“NYSE”) rules, the ratification of the selection of an independent registered public accounting firm (Proposal No. 2), is considered a “routine” matter, and brokersholders of record holding shares for a beneficial owner generally may vote on behalf of beneficial owners who have not furnished voting instructions, subject to the rules of the NYSE concerning transmission of proxy materials to beneficial owners, and subject to any proxy voting policies and procedures of those brokerage firms. BrokersHolders of record holding shares for a beneficial owner may not vote on the other proposals contained in this Proxy Statement, which are considered “non-routine” proposals, unless they have received voting instructions from the beneficial owner, and to the extent that they have not received voting instructions, brokers report such number ofthose shares as “non-votes.”
WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS?
| The election of directors (Proposal No. 1) requires that a director receive a majority of the votes cast with respect to that director at the | |
| The affirmative vote of the holders of shares of common stock having a majority of the votes present at the | |
| The affirmative vote of the holders of shares of common stock having a majority of the votes present at the |
Shares that are voted online during the Virtual Annual Meeting or by proxy are treated as being present at the Virtual Annual Meeting for purposes of establishing a quorum, and will be included in determining the number of shares represented and voted at the Virtual Annual Meeting with respect to such matter. Broker non-votes will be counted for purposes of determining the presence or absence of a quorum for the transaction of business and otherwise will not have any effect on the proposals above. If the persons present or represented by proxy at the Virtual Annual Meeting constitute the holders of less than a majority of the outstanding shares of common stock as of the record date, the Virtual Annual Meeting may be adjourned to a subsequent date for the purpose of obtaining a quorum.
WHO PAYS FOR THIS PROXY SOLICITATION?
Your proxy is being solicited by the Board on behalf of the Company. The Company pays the cost of soliciting your proxy and reimburses brokerage costs and other fees for forwarding proxy materials to you.
Franklin Resources 4
TableProposal No. 1:
Election of ContentsDirectors
 | ||||
The Board recommends a vote “FOR”the election to the Board of each of the nominees listed below. The voting requirements for this proposal are described in the “Voting Information” section above. | ||||
Nominees
The Corporate Governance Committee of the Board recommended and nominated, and the Board approved, the nominees named below for election as members of the Board. Each nominee, except for Alexander S. Friedman, John Y. Kim and John W. Thiel, wasAll nominees are current directors of the Company who were elected by the Company’s stockholders at the Company’s last annual meeting of stockholders and is standing for re-election. Messrs. Friedman, Kim and Thiel are standing for election to the Board for the first time. Mr. Friedman was identified by an executive officer as a potential nominee, Mr. Kim was identified by a non-executive director as a potential nominee, and Mr. Thiel was identified by an executive director as a potential nominee. All were recommended by the Corporate Governance Committee after it completed its review process, as discussed below under “Information About the Board and its Committees.” Peter K. Barker, Mark C. Pigott and Laura Stein have not been nominated for re-election this year. We have benefitted greatly from their perspectives and expertise and thank them for their leadership and service.stockholders.
Listed below are the names, ages as of December 31, 2020,2023, and principal occupations and membership on public boards for the past five years of each nominee. In addition, we have provided information concerning the particular experience, qualification, attributes and/or skills that the Corporate Governance Committee and the Board considered as relevant to each nominee that led to the conclusion that he or she should serve as a director.
Board Nominee Diversity
| OVERALL GENDER | DIRECTOR TENURE | |
 |
|  |
 |  |
| SECTOR EXPERIENCE | |
 |  |
 | * | Mses. Byerwalter, J. Johnson and King identify as female. Ms. King and Messrs. Kim and Yang identify as ethnically diverse. |
2024 Proxy Statement 5
KEY ATTRIBUTES, EXPERIENCE AND SKILLS
Franklin Resources 6
 | ||||
| MARIANN BYERWALTER | Independent Lead Director | |||
| Age: 63 | Board committees: | |||
| Director since: 2015 | Audit; Corporate Governance | |||
| Career Highlights: | |
• Chairman of the Board of Directors of Pacific Mutual Holding Company • Chairman Emeritus of the Board of Directors of SRI International, • Chairman of JDN Corporate Advisory, LLC, a privately held advisory services firm, since • Director, and, from 2006 to 2013, Chairman of the Board of Directors of Stanford Healthcare, and from January 2016 to July 2016, Interim President and Chief Executive Officer and President of Stanford • From 1996 to 2001, she served as the Chief Financial Officer, Vice President for Business Affairs and Special Assistant to the President of Stanford • Partner and co-founder of • Director, Redwood Trust, Inc. from 1998 to June • Trustee of various investment companies affiliated with Charles Schwab Corporation | |
Key Attributes, Experience and Skills: Ms. Byerwalter’s significant financial expertise provides the Board with valuable perspectives on finance, accounting and investment management matters. From her leadership roles at Stanford University and several financial institutions she has a deep understanding of accounting and strategic planning as well as wide-ranging management expertise. Ms. Byerwalter’s current and prior service on the boards of private and public companies as well as with non-profit organizations including SRI International, Pacific LifeCorp and Pacific Mutual Holding Company, Burlington Capital Group, Stanford Hospital & Clinics, Lucile Packard Children’s Hospital, and the Stanford University Board of Trustees also provides our Board with the benefit of her perspectives on business, corporate governance and citizenship. | |
  | ||||
| ALEXANDER S. FRIEDMAN | Independent | |||
| Age: 53 | Board committees: | |||
| Director since: 2021 | Audit (Chair); Corporate Governance | |||
| Career Highlights: | |
• Co-Founder and Chief Executive Officer of Novata Inc., a public benefit corporation committed to simplifying the process of collecting, analyzing and benchmarking sustainability data • Co-Founded Jackson Hole Economics, a non-profit private economic research firm, in January • Chief Executive Officer of GAM Holding AG, a publicly listed international investment management firm, from September 2014 to November • Global Chief Investment Officer of UBS AG Wealth Management and Wealth Management Americas, Chairman of the UBS Global Investment Committee and Group Managing Director from February 2010 to September • Chief Financial Officer of the Bill & Melinda Gates Foundation from March 2007 to February • Director, Investment Banking at Lazard from June 2001 to March | |
| Key Attributes, Experience and Skills: | |
| Mr. Friedman’s experience as a senior business leader with two decades of experience growing and transforming businesses in the financial services industry, and as the senior financial executive of the world’s largest foundation, | |
2024 Proxy Statement 7
 | |||
| GREGORY E. JOHNSON | |||
| Age: 62 | |||
| Director since: 2007 | |||
| Career Highlights: | |
 | • Executive Chairman since February 2020, • Chairman of the San Francisco Giants, a professional baseball team, since November • Chief Executive Officer of the Company from July 2005 to February • Co-Chief Executive Officer of the Company from January 2004 to July • President of the Company from December 1999 to September • Officer and/or director of certain subsidiaries of the • Director or trustee of certain funds registered as investment companies managed or advised by subsidiaries of the Company |
| Key Attributes, Experience and Skills: | |
| Mr. G. Johnson brings leadership and extensive business and operating experience, as well as significant knowledge of our Company and the global fund management industry, to the Board. Mr. G. Johnson is a Certified Public Accountant and prior to joining the Company, was a senior accountant with Coopers & Lybrand. Over his 30-year tenure with the Company, Mr. G. Johnson has held officer and director positions with various subsidiaries of the Company; hands-on experience that provides him with in-depth knowledge of the Company’s operations. Mr. G. | |
  | |||
| JENNIFER M. JOHNSON | |||
| Age: 59 | |||
| Director | |||
| Career Highlights: | |
• President of the Company since December 2016 and Chief Executive Officer and Director since February • Chief Operating Officer of the Company from February 2017 to February 2020 • Co-President of the Company from October 2015 to December 2016 • Executive Vice President and Chief Operating Officer of the Company from March 2010 to September 2015 • Executive Vice President – Operations and Technology of the Company from December 2005 to March 2010 • Senior Vice President and Chief Information Officer of the Company from May 2003 to December • Officer and/or director of certain subsidiaries of the Company, including certain of the specialist investment managers acquired through the Legg Mason • Director or trustee of certain funds registered as investment companies managed or advised by subsidiaries of the • Director of Thermo Fisher Scientific Inc., a science service company since July 2023 | |
| Key Attributes, Experience and Skills: | |
| Ms. Johnson brings significant experience leading and working with all parts of our business, as well as extensive knowledge of the global investment management industry. Over her 30-year tenure with the Company, Ms. Johnson has | |
Franklin Resources 8
 | |||
| RUPERT H. JOHNSON, JR. | |||
| Age: 83 | |||
| Director since: 1971 | |||
| Career Highlights: | |
 | • Vice Chairman of the Company since December 1999 and director of the Company since • Officer and/or director of certain subsidiaries of the • Officer and/or director or trustee of certain funds registered as investment companies managed or advised by subsidiaries of the Company |
| Key Attributes, Experience and Skills: | |
| Mr. R.H. Johnson, Jr.’s service as Vice Chairman of the Company and as an officer, director or trustee of various subsidiaries of the Company and Franklin Templeton mutual funds since its inception provides the Board with significant knowledge of and insights into the Company and the global fund management industry in which we operate. His fundamental knowledge of the Company gained over 55 years gives him an important perspective on the Company and provides significant leadership, business and operational expertise to the Board. Mr. R. H. Johnson, Jr. has served on various industry boards and committees addressing investment company issues including the Board of Governors of the Investment Company Institute. In his capacity with the Company, he has served as Director of Research and is a portfolio manager for one of its funds. He provides the Board with a unique perspective on critical components of the Company’s business. | |
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| JOHN Y. KIM | Independent | |||
| Age: 63 | Board committees: | |||
| Director since: 2021 | Compensation; Corporate Governance | |||
| Career Highlights: | |
• Founder and Managing Partner of Brewer Lane Ventures LLC, an early stage fintech venture capital firm, since • President of New York Life Insurance Company from 2015 to • Chief Executive Officer and Chief Investment Officer of New York Life Investment Management from 2008 to • President of Prudential Retirement from 2004 to • President of Cigna Investments and Retirement from 2002 to • Chief Executive Officer of Bondbook, a financial technology company, from 2001 to 2002 • Chief Executive Officer and Chief Investment Officer of Aeltus Investment Management, an investment subsidiary of Aetna, from 1994 to • Board of Trustees, Eversource Energy since • Director of FiServ, a global provider of financial services | |
| Key Attributes, Experience and Skills: | |
| Mr. Kim | |
2024 Proxy Statement 9
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| KAREN M. KING | Independent | |||
| Age: 51 | Board committees: | |||
| Director since: 2021 | Audit; Compensation | |||
| Career Highlights: |
• Managing Director and the Chief Legal Officer of Silver Lake, a global investment firm focused on large-scale opportunities in the technology, technology-enabled, and related growth sectors • Formerly held a variety of roles at Silver Lake since 2004 |
| Key Attributes, Experience and Skills: |
| Ms. King’s experience with Silver Lake provides the Board with valuable perspective and experience in the alternative investments area, specifically in the private equity space, as well as strategic matters relating to M&A activity and fundraising transactions. Her management experience at Silver Lake also provides the Board with an additional perspective on regulatory matters, cybersecurity, equity, diversity and inclusion, and environmental, social and corporate governance (ESG) matters. Ms. King’s involvement with Silver Lake’s portfolio companies, including a current member of the board of directors of Relativity and Qualtrics International Inc., and previous service on the boards of Aras and Serena Software, as well as her service on various non-profit boards, including the Duke University Board of Trustees, Chair of the Menlo School Board of Trustees and as former Chair of the American Leadership Forum – Silicon Valley, provides the board with additional perspectives on governance. |
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| ANTHONY J. NOTO | Independent | |||
| Age: 55 | Board committees: | |||
| Director since: 2020 | Audit; Corporate Governance | |||
| Career Highlights: | |
• Chief Executive Officer and a director of • Chief Operations Officer from 2017 until 2018, Chief Operations Officer and Chief Financial Officer from 2016 to 2017, and Chief Financial Officer from 2014 to 2016, of Twitter, Inc., a global social media • Partner, Co-Head, Global Technology, Media and Telecom Investment Banking from 2011 to 2014, and Partner, Investment Banking Division from 2010 to 2011, at Goldman Sachs & • Chief Financial Officer from 2008 to 2010 of the National Football | |
| Key Attributes, Experience and Skills: | |
| As Chief Executive Officer of SoFi, Mr. Noto brings valuable fintech industry experience. He has overseen SoFi’s expansion from a desktop lending business to a broad-based, mobile-first personal financial platform, offering users investment products including stocks, ETFs, cryptocurrency trading, as well as loans and cash management accounts. He also brings valuable leadership, strategic, financial and operations experience, having previously served as Chief Operating Officer and Chief Financial Officer of Twitter, Inc., and as Chief Financial Officer of the National Football League. During his nearly 13 years at Goldman Sachs & Co., Mr. Noto developed a deep understanding of the technology, media and telecommunications | |
Franklin Resources 10
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| JOHN W. THIEL | Independent | |||
| Age: 63 | Board committees: | |||
| Director since: 2021 | Audit; Compensation | |||
| Career Highlights: | |
• Partner and Senior Advisor with MyNextSeason, an executive coaching firm, since • Formerly with Bank of America Merrill Lynch Wealth Management from 1989 to 2018, serving as Vice Chairman of Global Wealth and Investment Management of Bank of America Merrill Lynch from 2017 to • Head of Merrill Lynch Wealth Management from 2011 to • Head of Private Banking and Investment Group at Merrill Lynch Wealth Management from 2005 to • Pacific West Regional Managing Director of Private Banking and Investment Group at Merrill Lynch Wealth Management from 2001 to • Market Executive at Merrill Lynch Wealth Management from 1997 to • District Sales Manager at Merrill Lynch Wealth Management from 1995 to • Financial Advisor at Merrill Lynch Wealth Management from 1989 to | |
| Key Attributes, Experience and Skills: | |
| Mr. Thiel | |
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| SETH H. WAUGH | Independent | |||
| Age: 65 | Board committees: | |||
| Director since: 2015 | Compensation (Chair) | |||
| Career Highlights: | |
 | • Chief Executive Officer of The PGA of America, an American organization of golf professionals, since • Former Managing Director, Partner and current Senior Advisor at Silver Lake • Non-executive chairman of Alex. Brown, a division of Raymond James, since September • Vice Chairman of Florida East Coast Industries, LLC, the parent company of several commercial real estate, transportation and infrastructure companies based in Florida, from 2013 to • From 2000 to 2013, Mr. Waugh served in various roles at Deutsche Bank Americas, including Chief Executive Officer and Chairman of the Board of Directors of Deutsche Bank Securities Inc. • Chief Executive Officer of Quantitative Financial Strategies, a hedge • Served in various capacities at Merrill Lynch over 11 years, including Co-head of Global Debt • Director of Yext, Inc. since 2020 |
| Key Attributes, Experience and Skills: | |
| Mr. Waugh’s significant experience in the financial sector provides the Board with valuable perspectives on capital markets and investment management. Having held various leadership roles at Deutsche Bank and other financial institutions, Mr. Waugh brings strong leadership skills as well as deep knowledge of operational and strategic matters to the Board. His prior service on the boards of the Deutsche Bank Americas Advisory Board, the Deutsche Bank Americas Foundation, The Clearing House, the Financial Services Forum and the Board of Governors of FINRA provides our Board with the benefit of his substantial expertise in financial industry developments and corporate citizenship. | |
2024 Proxy Statement 11
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| GEOFFREY Y. YANG | Independent | |||
| Age: 64 | Board committees: | |||
| Director since: 2011 | Compensation; Corporate Governance (Chair) | |||
| Career Highlights: | |
• Managing Director and Founding Partner of Redpoint Ventures, a private equity and venture capital firm, since • General Partner with Institutional Venture Partners from 1987 to • Director of • Director of • Director of • Director of • Director of TiVo from 1997 to 2009 • A member of the President’s Information Technology Advisory Committee for the United | |
| Key Attributes, Experience and Skills: | |
| Mr. Yang’s experience as a | |
FAMILY RELATIONSHIPSJennifer M. Johnson and Gregory E. Johnson are siblings, and their uncle is Rupert H. Johnson, Jr. Each serves as both a director and an executive officer of the Company.
| Family Relationships | |
| Jennifer M. Johnson and Gregory E. Johnson are siblings, and their uncle is Rupert H. Johnson, Jr. Each serves as both a director and an executive officer of the Company. | |
Franklin Resources 12
General
The Corporate Governance Committee and the Board believe that the nominees have the requisite experience, qualifications, attributes and skills to provide the Company with effective oversight of a global investment management organization. The Corporate Governance Committee and the Board believe that there are general requirements and skills that are required of each director and other skills and experience that should be represented on the Board as a whole but not necessarily by each director. The Board believes that, consistent with these requirements, each nominee displays a high degree of personal and professional integrity, an ability to exercise sound business judgment on a broad range of issues, sufficient experience and background to have an appreciation of the issues facing our Company, a willingness to devote the necessary time to board duties, a commitment to representing the best interests of the Company and its stockholders and dedication to enhancing stockholder value. The Board seeks to assemble a group of directors that, as a whole, represents a mix of experiences and skills that allows appropriate deliberation on all issues that the Board might be likely to consider. The Corporate Governance Committee’s Policy Regarding Nominations and Qualifications of Directors described below outlines the qualities that the Corporate Governance Committee and the Board seek in director nominees.
If elected, each nominee will serve until the next annual meeting of stockholders or until that person’shis or her successor is elected and qualified or until his or her earlier death, resignation, retirement, disqualification or removal.
In accordance with the Company’s Director Independence Standards, described more fully below, and the rules of the NYSE, the Board has affirmatively determined that it is currently composed of a majority of independent directors, and that the following director nominees are independent and do not have a material relationship with the Company: Mariann Byerwalter; Alexander S. Friedman; John Y. Kim; Karen M. King; Anthony J. Noto; John W. Thiel; Seth H. Waugh; and Geoffrey Y. Yang. As part of its determination, the Board considered the transactions and relationships described below under “Compensation Committee Interlocks and Insider Participation” and “Certain Relationships and Related Transactions” and applied our Director Independence Standards as adopted by the Board, which includes categorical standards to assist the Board of Directors in making independence determinations and specifies the types of relationships that are deemed not material and, therefore, not considered each year.
With respect to Mr. Noto, the Board considered that in the ordinary course of the Company’s asset management business, certain Company-sponsored funds and other funds and client accounts managed by Company subsidiaries have purchased, and may in the future purchase, notes or securities issued by securitization trusts formed, sponsored, administered, and/or serviced by one or more subsidiaries of Social Finance,SoFi Technologies, Inc. (collectively, “SoFi”), a company for which Mr. Noto serves as chief executive officer and director. The investments were made on terms generally available to other investors and were determined not to impair Mr. Noto’s independence.
In the ordinary course of their asset management businesses, the Company’s specialist investment managers (“SIMs”) or other subsidiaries may from time to time invest client assets in companies in which certain of our directors may be a director independence.or in which certain affiliates of our directors may be significant stockholders or invest client assets in funds and other investment vehicles managed by entities affiliated with certain of our directors.
2024 Proxy Statement 13
Corporate Governance
The Company regularly monitors regulatory developments and reviews its policies and procedures in the area of corporate governance to respond to such developments. As part of those efforts, we review federal laws affecting corporate governance, as well as corporate governance-related rules adopted by the SEC and the NYSE.
Corporate Governance Guidelines.The Board has adopted Corporate Governance Guidelines, which are posted in the corporate governance section of the Company’s website at www.franklinresources.com(the “Company’s website”). The inclusion of our website address or reference to our website here and elsewhere in this Proxy Statement does not include or incorporate by reference the information on our website into this Proxy Statement. The Corporate Governance Guidelines set forth the practices the Board follows with respect to, among other things, the composition of the Board, director responsibilities, Board committees, director access to officers, employees and independent advisers, director compensation, director orientation and continuing education, management succession and performance evaluation of the Board.
Code of Ethics and Business Conduct.The Board has adopted a Code of Ethics and Business Conduct, which is applicable to all employees, temporary employees, directors and officers of the Company and its subsidiaries and affiliates. The Code of Ethics and Business Conduct is posted in the corporate governance section of the Company’s website. The Company also has a Compliance and Ethics Hotline, where employees can anonymously report a violation of the Code of Ethics and Business Conduct or submit a complaint concerning auditing, accountinganother question or securities law matters.concern. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver of, a provision of the Code of Ethics and Business Conduct for the Company’s principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, by posting such information on the Company’s website.
Director Independence Standards.The Board has made determinations as to the independence of each of our current non-employee directors and concluded that all of our current non-employee directors qualify as independent directors under the NYSE listing standards.
The Board has adopted guidelines for determining whether a director is independent, which are posted inavailable on our corporate website at www.franklinresources.com under the corporate governance section of the Company’s website.“Corporate Governance—FRI Corporate Governance Documents” section. The Board will monitor and review as necessary, but at least once annually, commercial, charitable, family and other relationships that directors have with the Company to determine whether the Company’s directors are independent. For purposes of the Company’s Director Independence Standards, the “Company” refers to Franklin Resources, Inc. and its consolidated subsidiaries.
For a director to be considered independent, the Board must determine affirmatively that the director does not have material relationships with the Company either directly, or as a partner, stockholder or officer of an organization that has a relationship with the Company. Such determination will be made and disclosed pursuant to applicable NYSE or other applicable rules. A material relationship can include, but is not limited to, commercial, industrial, banking, consulting, legal, accounting, charitable and family relationships. The Board has established the following guidelines to assist it in determining whether a director does not have material relationships and thereby qualifies as independent:
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Policy Regarding Multiple Board Memberships.The Board has adopted upon the recommendation of the Corporate Governance Committee, a policy regarding memberships on boards of directors or equivalent governance bodies of unaffiliated publicly traded companies or other entities. If a memberdirector of the BoardCompany also serves as the principal executive officer, such as the chief executive officer or president, of a publicly traded company, it is the policy of the Board that such Board memberdirector shall not accept membership on a board of directors or equivalent governance body of another publicly traded company, without first informing and obtaining the consent of the Company’s Corporate Governance Committee, if such new membership would result in the memberdirector serving contemporaneously on three or more boards of directors or equivalent governance bodies of unaffiliated publicly traded companies, excluding the Company’s Board. If a member of the Boarddirector does not serve as a principal executive officer, such as a chief executive officer or president, of a publicly traded company, it is the policy of the Board that such Board memberdirector shall not accept membership on a board of directors or equivalent governance body of another publicly traded company, without first informing and obtaining the consent of the Company’s Corporate Governance Committee, if such new membership would result in the member serving contemporaneously on four or more boards of directors or equivalent governance bodies of publicly traded companies, excluding the Company’s Board.
Franklin Resources 14
Prohibition Against Hedging Transactions.Pursuant to the Company’s Code of Ethics and Business Conduct, which is applicable to all employees, temporary employees, directors and officers of the Company and its subsidiaries and affiliates, short sales of securities, including “short sales against the box” (i.e., a short sale by the holder of a long position in the same stock) of securities issued by the Company, and securities issued by any closed-end fund sponsored or advised by the Company, are prohibited. This prohibition also applies to effecting economically equivalent transactions, including, but not limited to, purchasing and selling call or put options and swap transactions or other derivatives that would result in a net short exposure to the Company or any closed-end fund sponsored or advised by the Company.
Prohibition Against Pledging.Pursuant to the Company’s Code of Ethics and Business Conduct, unless otherwise previously approved by the Compensation Committee, directors and executive officers are prohibited from directly or indirectly pledging, hypothecating or otherwise encumbering securities issued by the Company as collateral for indebtedness. This prohibition includes, but is not limited to, holding such securities in a margin account that could cause securities issued by the Company to be subject to a margin call or serve as collateral for a margin loan. Securities issued by the Company that were not received as compensation are not subject to the prohibition as long as the holder of such securities remains in compliance with applicable Stock Ownership Guidelines. If any person has subject securities issued by the Company pledged as collateral or held in a margin account when such person becomes a director or executive officer of the Company, the pledge must be released within one year from the date the person became a director or executive officer.
Stock Ownership Guidelines.AsOur Board of Directors has adopted stock ownership guidelines for directors and executive officers. Directors and executive officers are permitted a significantfive-year grace period to reach the applicable ownership interest by directors inlevel established under the Company tends to align the interests of members of the Board with the interests of the Company’s stockholders, all directors on the Boardguidelines. Our Directors are expected to own shares of common stock of the Company with a value of at least 5x the value of their annual cash retainer within five years of their appointment to the Board. Similarly, as a significant ownership interest by certain senior officers in the Company tends to align the interests of members of management of the Company with the Company’s stockholders and to strengthen the link between long-term Company performance and executive compensation, senior officers of the Company are expected to own shares of common stock of the Company with a value equal to a specific multiple of such senior officer’s base salary, as indicated in the table below, by five years from when he or she first assumed the particular senior officer position for which stock ownership is expected:
| Market Value of Shares Owned as a Multiple of Base Salary | ||
| 5X | ||
| 5X | ||
| Vice Chairman | 5X | |
| Chief Executive Officer | 5X | |
| President | 4X | |
| Executive Vice President | 4X | |
| Senior Vice President | 3X | |
| Chief Accounting Officer | 3X | |
Both direct and certain indirect forms of ownership are recognized in achieving these guidelines, including shares owned outright, restricted stock, restricted stock units, 401(k) funds invested in shares of the Company’s common stock, and funds deemed invested in shares of the Company’s common stock under the 2006 Directors Deferred Compensation Plan. Shares of the Company’s common stock held by immediate family members (which includes a director’s or senior officer’s spouse, children and parents) or entities controlled by a director or senior officer may be considered holdings of the director or senior officer for purposes of the guidelines only and not as an admission of beneficial ownership for any other purpose. As of December 31, 2020,21, 2023, all directors and officers were in compliance with these guidelines.
Executive Compensation Clawback Policy
The Company’s general employee compensation clawback practices provide for recovery of compensation amounts (i) in connection with fraud or a breach of securities law by an individual or (ii) when (A) the Company issues a restatement of financial results to correct a material error; (B) the Compensation Committee determines, in good faith, the individual’s fraud or willful misconduct was a significant contributing factor to the need to issue such restatement; and (C) some or all of an award awarded to that individual prior to such restatement and/or shares of the Company’s common stock or mutual fund shares that were awarded and/ or other property earned by the individual prior to such restatement would not have been awarded and/or earned, as applicable, based upon the restated financial results.
In addition, effective for compensation awarded for periods beginning on or after October 1, 2023, the Board adopted an Executive Compensation Clawback Policy (“Clawback Policy”). The Clawback Policy provides for the mandatory recovery of erroneously awarded incentive-based compensation following accounting restatements from persons who served as an executive officer of the Company at any time during the performance period for such incentive-based compensation and who received such compensation during the three fiscal years preceding the date on which the Company is required to prepare an accounting restatement. The compensation to be recovered is the amount in excess of what would have been paid based on the restated results. Recovery will be required on a “no fault” basis, without regard to whether any misconduct occurred and without regard to whether an executive officer was responsible for the erroneous financial statements.
2024 Proxy Statement 15
Information About the Board and its Committees
Board Meetings and Annual Meeting of Stockholders
During fiscal year 2020,2023, the Board held eightsix meetings (not including committee meetings). For fiscal year 2020,2023, the directors attended at least 97%seventy-five percent (75%) of the aggregate of (i) the total number of meetings held byof the Board held during the period he or she served as a director and (ii) the total number of meetings held by all committees of the Boardeach committee on which a directorhe or she served during the period that he or she served.period.
To promote open discussion among the independent directors, the independent directors meet in executive session at least two times per year and generally meet in executive session after regularly scheduled Board meetings. Laura Stein,Mariann Byerwalter, the independent Lead Director, presides at the executive sessions of the independent directors. The Board encourages directors to attend the annual meeting of stockholders. All directors then standing for election attended last year’s annual meeting.
Committee Membership and Meetings
The current standing committees of the Board are the Audit Committee, the Compensation Committee and the Corporate Governance Committee and the Special Awards Committee. The table below provides current membership and meeting information.
| Audit | Compensation | Corporate Governance | Special Awards | |||||||
| Peter K. Barker | — | M | — | — | ||||||
| Mariann Byerwalter | C | — | — | — | ||||||
| Jennifer M. Johnson* | M | |||||||||
| Anthony J. Noto** | M | — | M | — | ||||||
| Mark C. Pigott | — | C | M | — | ||||||
| Laura Stein | M | M | — | — | ||||||
| Seth H. Waugh | — | M | — | — | ||||||
| Geoffrey Y. Yang | M | — | C | — | ||||||
| Fiscal year 2020 Meetings | 7 | 8 | 6 | — | ||||||
M—MemberC—Chair* Ms. Johnson joined the Board on February 11, 2020 and is the sole member of the Special Awards Committee. This committee takes actions by written consent in lieu of meetings.** Mr. Noto joined the Board on February 11, 2020.
| Audit | Compensation | Corporate Governance | |||
| Mariann Byerwalter |  | — | | ||
| Alexander S. Friedman |  | — |  | ||
| John Y. Kim | — | | | ||
| Karen M. King | | | — | ||
| Anthony J. Noto | | — | | ||
| John W. Thiel | | | — | ||
| Seth H. Waugh | — |  | — | ||
| Geoffrey Y. Yang | — | | | ||
| Fiscal year 2023 Meetings | 5 | 6 | 4 |
| - Member | - Chair |
Franklin Resources 16
Below is a description of each standing committee of the Board. The Board has affirmatively determined that each of these standing committees (other than the Special Awards Committee) consists entirely of independent directors pursuant to rules established by the NYSE, rules promulgated under the Securities Exchange Act of 1934, and the Director Independence Standards established by the Board.
See “Director Independence Standards” above. The Board has also determined that each member of the Audit Committee and the Compensation Committee is independent under the criteria established by the NYSE and the SEC for audit committee and compensation committee members, as applicable.
Table of ContentsThe Audit Committee
Members: ALEXANDER S. FRIEDMAN (Chair) MARIANN BYERWALTER KAREN M. KING ANTHONY J. NOTO JOHN W. THIEL The Board has determined that each Audit Committee member is financially literate under the NYSE listing standards and is an audit committee financial expert within the meaning of the rules of the SEC. Number of meetings in fiscal year 2023: 5 | |
Key Responsibilities: • The primary purpose of the Audit Committee is to assist the Board in fulfilling its responsibility to oversee: 1. the performance of the Company’s internal audit function and independent auditor; 2. the Company’s financial reporting, auditing and internal control activities, including the integrity of the Company’s financial statements; 3. the independent auditors’ qualifications and independence; and • the Company’s compliance with legal and regulatory requirements The Audit Committee also prepares the Report of the Audit Committee included in the Company’s annual proxy statement. • The Audit Committee is responsible for the appointment, compensation, retention and oversight of the work of the independent auditors, including approval of all services and fees of the independent auditors. • The Audit Committee is also responsible for reviewing the anti-money laundering policies, procedures and operations of the Company on a periodic basis. • The Audit Committee meets with the Company’s independent auditors and reviews the scope of their audit, the related reports and any recommendations they may make. • The Audit Committee also reviews the annual audited financial statements of the Company. • The Audit Committee assists the Board in reviewing the Company’s enterprise risk assessment and risk management program with respect to key risks, including related to cybersecurity (as described more fully below under “Risk Management and the Board’s Role in Risk Oversight”). The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee operates under a written charter adopted by the Board. The Audit Committee reviews and reassesses the adequacy of its charter annually and recommends any proposed changes to the Board for approval. The Audit Committee Charter is posted in the corporate governance section of the Company’s website. |
2024 Proxy Statement 17
The Compensation Committee
Members: SETH H. WAUGH, (Chair) JOHN Y. KIM KAREN M. KING JOHN W. THIEL GEOFFREY Y. YANG Number of meetings in fiscal year 2023: 6 | Key Responsibilities: • The Compensation Committee oversees the establishment of goals and objectives related to CEO compensation, determines the compensation of the CEO, discharges the responsibilities of the Board relating to compensation of the Company’s executive officers and prepares the Compensation Committee Report regarding executive compensation matters for the Company’s proxy statement. • The Compensation Committee also reviews and discusses with management proposed Compensation Discussion and Analysis disclosure and determines whether to recommend it to the Board for inclusion in the Company’s proxy statement. • The Compensation Committee reviews and approves compensation arrangements between the Company and members of its Board of Directors. The Compensation Committee Charter reflects these various responsibilities, and the Compensation Committee and the Board of Directors annually review the charter and revise it as necessary or appropriate. The Compensation Committee Charter is posted in the corporate governance section of the Company’s website. |
Established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, the Audit Committee currently consists of Mses. Byerwalter (Chair) and Stein and Messrs. Noto and Yang.
The primary purpose of the Audit Committee is to assist the Board in fulfilling its responsibility to oversee: (1) the Company’s financial reporting, auditing and internal control activities, including the integrity of the Company’s financial statements; (2) the Company’s compliance with legal and regulatory requirements; (3) the independent auditors’ qualifications and independence; and (4) the performance of the Company’s internal audit function and independent auditors. The Audit Committee also prepares the report the Audit Committee is required to include in the Company’s annual proxy statement. In addition, the Audit Committee is responsible for the appointment, compensation, retention and oversight of the work of the independent auditors, including approval of all services and fees of the independent auditors. The Audit Committee meets with the Company’s independent auditors and reviews the scope of their audit, the related reports and any recommendations they may make. The Audit Committee also reviews the annual audited financial statements for the Company. In addition, the Audit Committee assists the Board in reviewing policies with respect to the Company’s enterprise risk assessment and risk management, including related to cybersecurity (as described more fully below under “Risk Management and the Board’s Role in Risk Oversight”).
The Audit Committee operates under a written charter adopted by the Board. The Audit Committee reviews and reassesses the adequacy of its charter annually and recommends any proposed changes to the Board for approval. The Audit Committee Charter is posted in the corporate governance section of the Company’s website. The Board has determined that each Audit Committee member is financially literate under the NYSE listing standards and is an audit committee financial expert within the meaning of the rules of the SEC.
The Compensation Committee currently consists of Ms. Stein and Messrs. Barker, Pigott (Chair) and Waugh. The Compensation Committee oversees the establishment of goals and objectives related to CEO compensation, determines the compensation level of the CEO, assists the Board in fulfilling its responsibility relating to the compensation (and related benefits) of the executive officers of the Company, discharges the responsibilities of the Board relating to compensation of the Company’s executive officers and prepares the Compensation Committee Report regarding executive compensation matters for the Company’s proxy statement. The Compensation Committee also reviews and discusses with management proposed Compensation Discussion and Analysis disclosure and determines whether to recommend it to the Board for inclusion in the Company’s proxy statement. In addition, the Compensation Committee reviews and approves compensation arrangements between the Company and members of its Board of Directors. The Compensation Committee may delegate any of its responsibilities to subcommittees as it deems appropriate.
The Compensation Committee generally adheres to the following processes and procedures in connection with the consideration and determination of the compensation of the Company’s executive officers and directors.
Determination of Executive Compensation.The Compensation Committee meets periodically throughout the year to (i) review and approve corporate goals and objectives relevant to the compensation of the executive officers, (ii) evaluate the performance of the executive officers in light of those goals and objectives, and (iii) determine and approve the compensation of the executive officers. For a detailed description regarding the Compensation Committee’s role in setting executive compensation, including the role of executive officersthe Compensation Committee’s Compensation Consultant and the Chief Executive Officer in the process, see “Compensation Discussion and Analysis” below.
Determination of Non-executive Director Compensation.The Compensation Committee meets at least annually to review and make recommendations to the Board on the compensation (including equity-based compensation) of the Company’s non-executive directors. In reviewing and making recommendations on non-executive director compensation, the Compensation Committee considers, among other things, the following policies and principles:
| that the compensation should fairly pay the directors for the work, time commitment and efforts required by directors of an organization of the Company’s size and scope of business activities, including service on Board committees; |
| that a component of the compensation should be designed to align the directors’ interests with the long-term interests of the Company’s stockholders; and | |
| • | that directors’ independence may be compromised or impaired for Board or committee purposes if director compensation exceeds customary levels. |
As a part of its review, the Compensation Committee receives a report offrom its independent consultant on comparable non-executive director compensation practices and levels. No executive officer of the Company is involved in determining or recommending non-executive director compensation levels. For a description regarding the role and scope of assignment of the Compensation Committee’s compensation consultant with respect to executive compensation, see “Compensation Discussion and Analysis” below. See the section of this Proxy Statement titled “Director Fees” below, for a discussion of compensation paid to the Company’s directors during fiscal year 2020.2023. Directors who are executives of the Company do not receive compensation for their Board service.
Incentive Plan Matters. The Compensation Committee also administers, among other plans and awards, the Company’s Amended and Restated Annual Incentive Compensation Plan, the 2002 Universal Stock Incentive Plan, the Amended and Restated 1998 Employee Stock Investment Plan and the Amended and Restated 2017 Equity Incentive Plan.
The Compensation Committee Charter reflects these various responsibilities, We refer to the 2002 Universal Stock Incentive Plan, the Amended and Restated 1998 Employee Stock Investment Plan and the Compensation CommitteeAmended and the Board of Directors annually review the charter and revise itRestated 2017 Equity Incentive Plan collectively as necessary or appropriate. The Compensation Committee Charter is posted in the corporate governance section of the Company’s website.our “equity incentive plans”.
The sole member of the Special Awards Committee is Ms. Johnson. The Special Awards Committee has separate but concurrent authority with the Compensation Committee to make certain limited equity and cash awards to employees of the Corporation and its subsidiaries who are not executive officers subject to Section 16 of the Securities Exchange Act of 1934.Franklin Resources 18
The Corporate Governance Committee
Members: GEOFFREY Y. YANG (Chair) MARIANN BYERWALTER ALEXANDER S. FRIEDMAN JOHN Y. KIM ANTHONY J. NOTO Number of meetings in fiscal year 2023: 4 | Key Responsibilities: • The Corporate Governance Committee has the responsibilities set forth in its charter and provides counsel to the Board of Directors with respect to the organization, function and composition of the Board and its committees and oversees the evaluation of the Board, its committees and individual directors. • The Corporate Governance Committee is also responsible for developing and recommending to the Board corporate governance policies and procedures applicable to the Company. • The Corporate Governance Committee oversees the Company’s political activities and related policies, and reviews and approves our “Political Activities Statement” which is posted in the corporate governance section of the Company’s website. This statement describes the Company’s policies on corporate political activity, independent employee political participation, advocacy and lobbying activity, and compliance and oversight of these activities. • The Corporate Governance Committee is also tasked with identifying and recommending to the Board’s independent directors potential Lead Director candidates from among the independent directors. • The Corporate Governance Committee oversees the Company’s corporate responsibility and sustainability programs related to environmental, social and governance (“ESG”) matters (including reviewing stockholder engagement efforts related to ESG matters). The Corporate Governance Committee Charter is posted in the corporate governance section of the Company’s website. |
The Corporate Governance Committee currently consists of Messrs. Noto, Pigott and Yang (Chair).
The Corporate Governance Committee has the responsibilities set forth in its charter and provides counsel to the Board of Directors with respect to the organization, function and composition of the Board and its committees and oversees the evaluation of the Board, its committees and individual directors. The Corporate Governance Committee is also responsible for developing and recommending to the Board corporate governance policies and procedures applicable to the Company, and reviewing the anti-money laundering policies, procedures and operations of the Company on a periodic basis. The Corporate Governance Committee oversees the Company’s political activities and related policies, and reviews and approves our statement on “Our Political Involvement,” which is posted in the corporate governance section of the Company’s website. This statement describes the Company’s policies on corporate political activity, independent employee political participation, advocacy and lobbying activity, and compliance and oversight of these activities. The Corporate Governance Committee also is tasked with identifying and recommending to the Board’s independent directors potential Lead Director candidates from among the independent directors. The Corporate Governance Committee Charter is posted in the corporate governance section of the Company’s website.
Nomination Process. The Corporate Governance Committee is responsible for identifying and recommending to the Board potential director candidates for nomination and election to the Board at the annual meeting of stockholders. It uses a variety of means as it determines are necessary or appropriate, including recommendations of stockholders, to do so. The Corporate Governance Committee has adopted a policy regarding nominations and qualifications of directors, which has been approved by the Board. Under suchthis policy, the Corporate Governance Committee may solicit recommendations from current and former directors, management or others who may be familiar with qualified candidates and may consider current directors for re-nomination. The Corporate Governance Committee may, in its sole discretion, retain and terminate any search firm (and approve such search firm’s fees and other retention terms) to assist in the identification of candidates.
The Corporate Governance Committee believes there are certain minimum skills and qualifications that each director nominee must possess or satisfy, including:
• high personal and professional integrity and ethical character; | |
• significant achievement in business, finance, government, education, law, technology or other fields important to the operation of the Company; | |
• the ability to exercise sound business judgment on a broad range of issues; | |
• sufficiently broad experience and professional and educational background to have a general appreciation of the major issues facing public companies of a size and scope similar to the Company; | |
• the willingness and ability to devote the necessary time to Board duties, including preparing for and attending meetings of the Board and its committees; and | |
• being prepared to represent the best interests of the Company and its stockholders and committed to enhancing stockholder value. |
The Corporate Governance Committee also believes there are other skills and qualifications that at least one or more directors must possess or satisfy, including:
• experience and knowledge of the industry sector in which the Company operates its business; | |
• a majority of the directors being “independent” directors in accordance with the corporate governance listing standards of the NYSE; | |
• at least three directors meeting the additional independence requirements for members of the Audit Committee of the Board in accordance with the applicable rules of the NYSE and the SEC; | |
• at least three directors who are eligible to serve on the Audit Committee of the Board being “financially literate” or capable of becoming “financially literate” within a reasonable period of time; | |
• at least one director who is eligible to serve on the Audit Committee of the Board being an “audit committee financial expert” in accordance with applicable rules of the SEC; | |
• at least three directors meeting the additional independence requirements for members of the Compensation Committee of the Board in accordance with the applicable rules of the NYSE and the SEC; and | |
• other standards the Board may adopt from time to time. |
2024 Proxy Statement 19
In considering candidates for director nominees, the Corporate Governance Committee generally assembles information regarding a candidate’s background and qualifications, evaluates a candidate’s mix of skills and qualifications and determines the contribution the candidate could be expected to make to the overall functioning of the Board, giving due consideration to the overall Board balance of diversity of perspectives, backgrounds and experiences. The Corporate Governance Committee reviews annually with the Board the composition of the Board as a whole, including whether the Board reflects the appropriate balance of independence, sound judgment, business specialization, technical skills, diversity and other desired qualities.
With respect to current directors, the Corporate Governance Committee considers past attendance at meetings and assesses participation in and contributions to the activities of the Board. The Corporate Governance Committee, in its discretion, may designate one or more of its members to interview any candidate. In addition, the Corporate Governance Committee may seek input from the Company’s management or the Board, who may interview any candidate. The Corporate Governance Committee recommends director nominees to the Board based on its assessment of overall suitability to serve on the Board in accordance with the Company’s policy regarding nominations and qualifications of directors.
Stockholder Recommendation of Director Nominees. The Corporate Governance Committee will consider candidates recommended for nomination to the Board by stockholders of the Company. Stockholders may make such a recommendation by submitting a completed Director Nomination Form, which is posted in the corporate governance section of the Company’s website, not later than the close of business on the 120th day nor earlier than the close of business on the 150th day prior to the first anniversary of the date on which the Company first (i) mailed its notice of annual meeting, proxy statement and proxy or (ii) sent its notice of annual meeting and notice of internet availability of its proxy materials, whichever is earlier, for the immediately preceding year’s annual meeting. Completed Director Nomination Forms shall be sent to: Corporate Governance Committee, Franklin Resources, Inc., c/o Corporate Secretary, One Franklin Parkway, San Mateo, CA 94403-1906. This year our Proxy Statement is dated Wednesday, December 28, 2020;27, 2023; for a recommendation to be properly made for the 20222025 annual meeting, we must receive the notice of recommendation between July 31, 202130, 2024 and August 30, 2021.29, 2024.
The manner in which the Corporate Governance Committee evaluates candidates recommended by stockholders is generally in the same manner as any other candidate. However, theThe Corporate Governance Committee will also seek and consider information concerning any relationship between a stockholder recommending a candidate and the candidate to determine if the candidate can represent the interests of all
of the stockholders. The Corporate Governance Committee will not evaluate a candidate recommended by a stockholder unless the Director Nomination Form provides that the potential candidate has indicated a willingness to serve as a director, to comply with the expectations and requirements for Board service as publicly disclosed by the Company and to provide all of the information necessary to conduct an evaluation.
Franklin Resources 20
Board Leadership Structure
Mr. Gregory E. Johnson has served as Chairman of the Board since June 2013 and Executive Chairman of the Company since February 2020. The Board believes that this structure is appropriate because having a senior executive for both the Company and the Board provides clear leadership for the strategic vision, management and operations of our Company. Our CEO, Ms. Jennifer M. Johnson, serves as a director, but does not have a chair or lead director role on the Board. Ms. Marianne Byerwalter was selected by the independent directors as the Lead Director. The Board believes that its leadership structure strengthens the Board’s ability to focus on key risk, business and strategic issues and helps the Company operate in the long-term interests of stockholders. Ms. Laura Stein, an independent director, was selected by the independent directors as Lead Director. The duties of the Lead Director are set forth in the Lead Director Charter available on the Company’s website and include:
| The duties of the Lead Director are set forth in the Lead Director Charter available on the Company’s website and include: | ||
| • | presiding at the executive sessions of the independent directors and of the non-employee directors of the Board; | |
| • | presiding at meetings of the Board in the absence of the Chairman and Vice Chairman of the Board or upon the request of the Chairman; | |
| • | calling meetings of the independent directors and non-employee directors of the Board, as appropriate; | |
| • | serving as a liaison to facilitate communications between other members of the Board and the Chairman, the Vice Chairman, the CEO and the President, without inhibiting direct communications between and among such persons; | |
| • | advising and consulting with the Chairman on, and approving, Board and committee meeting schedules, including the need for special meetings as appropriate, and Board and committee meeting agenda items, to help ensure that appropriate items are brought forward for Board and committee consideration and appropriate time is apportioned for discussion; | |
| • | advising and consulting with the Chairman on the general scope and type of information to be provided in advance and/or to be presented at Board meetings; | |
| • | in coordination with the Chairman, serving as a liaison to stockholders who request direct communications and consultation with the Board or otherwise delegating such task to an appropriate member of the Board based on the circumstances; | |
| • | consulting with outside counsel and other advisors as he or she deems appropriate in fulfilling the Lead Director role; | |
| • | collaborating with the Compensation Committee on the annual performance evaluation of the CEO; and | |
| • | collaborating with the Corporate Governance Committee on matters related to Board effectiveness and independence including the performance and structure of the Board and its committees, and the performance of individual directors. | |
The Corporate Governance Committee reviews the Board’s leadership structure annually with the Board.
The Board does not have a fixed policy regarding the separation of the offices of the Chairman and CEO. ForCEO and the reasons stated above,Corporate Governance Committee reviews the Board’s leadership structure annually with the Board. The Board believes that the current structure is appropriate because having different senior executives for each of the Company and the Board continues to believe that itsprovides clear leadership for the strategic vision, management and operations of the Company. This structure is appropriate.supported by a strong independent Board led by our Lead Director, which helps to maintain effective oversight of management and the Company’s strategy, risk management and operations. The Board also believes this structure allows for robust and frequent communication between the Board’s independent directors and management, enabling the Board to gain a deeper understanding of the Company and work with management to enhance shareholder value.
Board and Committee Evaluation Process
The Board believes that conducting an annual evaluation process is a critical component of good corporate governance and improves the performance of the Board as a whole and its committees, and individual directors.committees. The independent Chair of the Corporate Governance Committee leads the annual performance evaluation of the Board, each committee, and the individual directors.Board. The independent ChairsChair of each of the committees leadleads the reviewsreview of their respective committees and shares this information with the ChairsLead Director who discusses these results with the Board as part of the Audit and Compensation Committees report their findings to the Corporate GovernanceBoard’s self-evaluation process. Each Committee Chair. Guidelines for director self-evaluation, committee evaluation andholds a candid evaluation of its performance, using established guidelines as a resource, and the Board are given to each independent director to provide structure in soliciting their feedback. Candid, one-on-one discussions are held between each independent director and eachholds a similar evaluation of their respective committee Chairs and the Chair of the Corporate Governance Committee, using the Guidelines provided in advance as the basis for discussion.its performance. The results of the evaluation are discussed in a closed session of the independent directors led by the Lead Director and the independent committee Chairs. A summary of the evaluation results and recommendations for improvement is then reported to the full Board and Company policies and practices are updated as appropriate.
2024 Proxy Statement 21
Risk Management and the Board’s Role in Risk Oversight
Our Company recognizes the importance of effective risk management to the success of our business and our stockholders and has long-standing and highly developed structures in place to manage risk. The Board of Directors has principal responsibility for oversight of the Company’s risk management processes. The Board regularly receives information on risks facing the Company from, and provides oversight to, a variety of management groups, including the enterprise risk management, global compliance, internal audit, finance risk and control, anti-money laundering, cybersecurity, human resources and compensation risk review groups, among others. These groups provide reports either directly to the full Board, or to the Audit Committee, Compensation Committee, or Corporate Governance Committee. Each of these Board committees is comprised solely of independent directors and reports to the full Board at each Board meeting. Regional and separate key risk committees of our management, as well as business and operational risk functions, report to the enterprise-wide management groups which in turn report to the full Board or a committee of the Board. Our internal audit and global compliance groups conduct monitoring and testing of Company-wide policies and procedures and report quarterly to the Audit Committee and Board of Directors, respectively.
The full Board oversees the Company’s business continuity planning, reviewing and approving management’s plans with respect to, among other things, key management succession, disaster planning, crisis management, and prioritization of recovery efforts.
BOARD OF DIRECTORS
| • | The Board regularly receives information on risks facing the Company from, and provides oversight to, a variety of management groups, including the enterprise risk management, global compliance, internal audit, finance risk and control, anti-money laundering, cybersecurity, human resources and compensation risk review groups, among others. |
| • | The full Board oversees the Company’s business continuity planning, reviewing and approving management’s plans with respect to, among other things, key management succession, disaster planning, crisis management, and prioritization of recovery efforts. |
| • | The Board also reviews and approves the Company’s Corporate Liquidity Policy, which addresses how the Company would respond to possible liquidity crises created by temporary market disruptions and/or longer-term financial distress. |
| • | The full Board receives reports of certain risks annually, including with respect to cyber and information security and anti-money laundering and the Company’s related risk-management programs. |
BOARD COMMITTEES
| • | Each of these Board committees reports to the full Board at each Board meeting. |
| • | Each of the Audit, Compensation and Corporate Governance Committees report on identified risk, along with other committee matters, at meetings of the full Board. |
| • | The Board, Audit Committee, Compensation Committee and Corporate Governance Committee review and discuss identified risks with the relevant members of senior management and members of the various groups with responsibility for risk identification and management. These regular communications provide the Board with a practical and in-depth understanding of the risks facing the Company and enable the Board to provide direction to management with respect to its approach to identifying, monitoring and addressing material risks. |
| AUDIT COMMITTEE | COMPENSATION COMMITTEE | CORPORATE GOVERNANCE COMMITTEE | |||||
| • | The Audit Committee receives risk management, cybersecurity and other key risk topic reports regularly from Franklin Templeton’s Chief Risk and Transformation Officer or other senior leaders within the Company. The Audit Committee also receives internal audit reports at least quarterly from the Company’s internal auditor. | • | The Compensation Committee and a management compensation risk review committee review and discuss the Company’s compensation policies and programs to ensure they do not encourage excessive risk-taking. | • | The Corporate Governance Committee reviews and discusses the Company’s Corporate Governance practices, ESG risks and sustainable investing options to ensure they do no present excessive risks to the Company. | ||
| • | The Audit Committee receives anti-money laundering compliance program reports from the designated compliance officer throughout the year. | ||||||
MANAGEMENT
| • | Management provides reports either directly to the full Board, or to the Audit Committee, Compensation Committee or Corporate Governance Committee. |
| • | Regional and separate key risk committees of our management, as well as business and operational risk functions, report to the enterprise-wide management groups which in turn report to the full Board or a committee of the Board. |
| • | Our internal audit and global compliance groups conduct monitoring and testing of Company-wide policies and procedures. |
The Audit Committee receives risk management, cybersecurity and other key risk topic reports at least quarterly from Franklin Templeton’s Chief Risk and Transformation Officer or other senior leaders within the Company. The Audit Committee also receives internal audit reports at least quarterly from the Company’s internal auditor. The Compensation Committee and a management compensation risk review committee review and discuss the Company’s compensation policies and programs to ensure they do not encourage excessive risk-taking. The Corporate Governance Committee receives anti-money laundering compliance program reports from the designated compliance officer throughout the year. Each of the Audit, Compensation, and Corporate Governance Committees report on risk, along with other committee matters, at meetings of the full Board. In addition, the full Board receives reports of certain risks annually, including with respect to cyber and information security and anti-money laundering and the Company’s related risk-management programs.Resources 22
At their meetings, the Board, Audit Committee, Compensation Committee, and Corporate Governance Committee review and discuss identified risks with the relevant members of senior management and members of the various groups with responsibility for risk identification and management. These regular communications provide the Board with a practical and in-depth understanding of the risks facing the Company and enable the Board to provide direction to management with respect to its approach to identifying, monitoring and addressing material risks.
Our Board’s role in risk oversight is well-supported by having as directors an experienced Chairman and CEO, both of whom have extensive knowledge of and experience with the risks that the Company faces. In addition, the Audit, Compensation and Corporate Governance Committees of the Board are composed entirely of independent directors, as described above in “Committee Membership and Meetings,” which the Board believes also enhances risk oversight.
Standard Compensation Arrangements
The compensation arrangements for non-employee directors consist of the board and meeting fees, and annual equity award, below.
Lead Director Retainer. The director designated by the independent directors of the Board as the lead independent director of the Board is entitled to receive an annual lead director cash retainer fee of $25,000 (one-fourth of which is paid quarterly).
Board Member Retainer and Special Meeting Fee. Non-employee directors are entitled to receive an annual Board cash retainer fee of $100,000 (one-fourth of which is paid quarterly), plus $5,000 for each Board meeting attended by such director in excess of the five regularly scheduled Franklin Board meetings per fiscal year.
Board Member Annual Equity Award. Non-employee directors are also entitled to receive an annual equity award for approval on the date of each annual organizational meeting of the Board, valued at $160,000 (rounded up to the nearest whole share).
Committee Chairperson Retainers. The Chairperson of the Audit Committee is entitled to receive an annual cash retainer fee of $25,000 (one-fourth of which is paid quarterly), and the Chairpersons of the Compensation Committee and the Corporate Governance Committee each is entitled to receive an annual cash retainer fee of $15,000 (one-fourth of which is paid quarterly).
Committee Member Retainers. Each member of the Audit Committee (including the Chairperson) is entitled to receive an annual cash retainer fee of $15,000 (one-fourth of which is paid quarterly), and each member of the Compensation Committee and the Corporate Governance Committee (including each committee’s Chairperson) is entitled to receive an annual cash retainer fee of $12,000 (one-fourth of which is paid quarterly).
Special Committee Meeting Fees. Additionally, a $1,500 special committee meeting cash fee is payable to (i) each member of the Audit Committee for each Audit Committee meeting attended by such member in excess of 10 Audit Committee meetings per fiscal year, (ii) each member of the Compensation Committee for each Compensation Committee meeting attended by such member in excess of eight Compensation Committee meetings per fiscal year, and (iii) each member of the Corporate Governance Committee for each Corporate Governance Committee meeting attended by such member in excess of eight Corporate Governance Committee meetings per fiscal year.
Other Board Compensation. In addition, the Company reimburses directors for certain expenses incurred in connection with attending Board and committee meetings as well as other related events, including travel, hotel accommodations, meals and other incidental expenses for the director and his or her spouse accompanying the director in connection with such events.
Deferred Director Fees
The Company and its subsidiaries allow non-employee directors to defer payment of their directors’ fees and stock awards in a manner that is intended to comply with the provisions of Section 409A of the Code, and to treat the deferred amounts as hypothetical investments in common stock of the Company and/or in Company-sponsored mutual funds, as selected by the director. Directors are then credited with the same earnings, gains or losses that they would have incurred if the deferred amounts had been invested in the specific investments, in the specific amounts and for the specific periods as directed by each particular director.
Additionally, directors who defer their directors’ fees and stock awards are credited with notional dividends and other distributions at the same time, in the same form, and in equivalent amounts as dividends and other distributions that are payable from time to time with respect to investments selected by each particular director. On the payout dates elected by a director, the hypothetical investments are valued and the Company or its subsidiary, as applicable, must pay the director or his or her beneficiary a cash amount equal to the value of the hypothetical investments. Payouts may be made in a lump sum or in periodic installments.
The following table provides information on the total compensation earned by the Company’s directors in fiscal year 2020:2023:
FISCAL YEAR 20202023 DIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | Total ($)(4) | |||
| Peter K. Barker | — | 304,500 | 304,500 | |||
| Mariann Byerwalter | 138,500 | 160,000 | 298,500 | |||
| Charles E. Johnson* | 57,500 | — | 57,500 | |||
| Anthony J. Noto* | 68,500 | 160,000 | 228,500 | |||
| Mark C. Pigott | — | 304,000 | 304,000 | |||
| Chutta Ratnathicam* | 76,000 | — | 76,000 | |||
| Laura Stein | 169,000 | 149,000 | 318,000 | |||
| Seth H. Waugh | 119,500 | 160,000 | 279,500 | |||
| Geoffrey Y. Yang | — | 304,000 | 304,000 |
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | Total ($)(4) | |||
| Mariann Byerwalter | 157,000 | 160,000 | 317,000 | |||
| Alexander S. Friedman | 157,000 | 160,000 | 327,859 | |||
| John Y. Kim | — | 289,000 | 289,000 | |||
| Karen King | — | 292,000 | 292,000 | |||
| Anthony J. Noto | 132,000 | 160,000 | 292,000 | |||
| John W. Thiel | 132,000 | 160,000 | 292,000 | |||
| Seth H. Waugh | 132,000 | 160,000 | 292,000 | |||
| Geoffrey Y. Yang | — | 304,000 | 304,000 |
| |
| (1) | Fees include quarterly retainer fees, excess meeting attendance fees and fees for service as a committee chair. Fees are awarded in cash, the payment of which may be deferred pursuant to the 2006 Directors Deferred Compensation Plan (the “Director Deferred Plan”) described |
| (2) | Stock Awards amounts represent the aggregate grant date fair value, determined in accordance with the requirements of Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation - Stock Compensation” (“ASC 718”), associated with (i) an annual stock grant made on February |
| (3) | The following represents the grant date fair value determined in accordance with ASC 718 for all Stock Awards granted in fiscal year |
| Name | Actual Common Stock ($) | Deferred Hypothetical Shares ($) | ||
| Peter K. Barker | 160,000 | 144,500 | ||
| Mariann Byerwalter | 160,000 | — | ||
| Charles E. Johnson | — | — | ||
| Anthony J. Noto | 160,000 | — | ||
| Mark C. Pigott | — | 304,000 | ||
| Chutta Ratnathicam | — | — | ||
| Laura Stein | — | 149,000 | ||
| Seth H. Waugh | — | 160,000 | ||
| Geoffrey Y. Yang | 160,000 | 144,000 |
| Name | Actual Common Stock ($) | Deferred Hypothetical Shares ($) | |||
| Mariann Byerwalter | 160,000 | — | |||
| Alexander S. Friedman | — | 160,000 | |||
| John Y. Kim | — | 289,000 | |||
| Karen King | — | 292,000 | |||
| Anthony J. Noto | 160,000 | — | |||
| John W. Thiel | 160,000 | — | |||
| Seth H. Waugh | — | 160,000 | |||
| Geoffrey Y. Yang | 160,000 | 144,000 |
| (4) | Mr. G. Johnson is the Executive Chairman of the Company and Chairman of the Board and does not receive compensation for his service as a director. Ms. Johnson is the President and CEO of the Company and does not receive compensation for her service as a director. See the “Summary Compensation Table for Fiscal Year |
2024 Proxy Statement 23
Director Fees
Standard Compensation Arrangements
As of ContentsSeptember 30, 2023, the compensation arrangements for non-employee directors consist of the board and meeting fees, and annual equity award, below.
Lead Director Retainer. The director designated by the independent directors of the Board as the lead director of the Board is entitled to receive an annual lead director cash retainer fee of $25,000 (one-fourth of which is paid quarterly).
Director Retainer and Special Meeting Fee. Non-employee directors are entitled to receive an annual Board cash retainer fee of $100,000 (one-fourth of which is paid quarterly), plus $5,000 for each Board meeting attended by such director in excess of the five regularly scheduled Franklin Board meetings per fiscal year.
Director Annual Equity Award. Non-employee directors are also entitled to receive an annual equity award on the date of each annual organizational meeting of the Board, valued at $160,000 (rounded up to the nearest whole share).
Committee Chairperson Retainers. The Chairperson of the Audit Committee is entitled to receive an annual cash retainer fee of $25,000 (one-fourth of which is paid quarterly), and the Chairpersons of the Compensation Committee and the Corporate Governance Committee each is entitled to receive an annual cash retainer fee of $15,000 (one-fourth of which is paid quarterly).
Committee Member Retainers. Each member of the Audit Committee (including the Chairperson) is entitled to receive an annual cash retainer fee of $15,000 (one-fourth of which is paid quarterly), and each member of the Compensation Committee and the Corporate Governance Committee (including each committee’s Chairperson) is entitled to receive an annual cash retainer fee of $12,000 (one-fourth of which is paid quarterly).
Special Committee Meeting Fees. Additionally, a $1,500 special committee meeting cash fee is payable to (i) each member of the Audit Committee for each Audit Committee meeting attended by such member in excess of 10 Audit Committee meetings per fiscal year, (ii) each member of the Compensation Committee for each Compensation Committee meeting attended by such member in excess of eight Compensation Committee meetings per fiscal year, and (iii) each member of the Corporate Governance Committee for each Corporate Governance Committee meeting attended by such member in excess of eight Corporate Governance Committee meetings per fiscal year.
Other Board Compensation. In addition, the Company reimburses directors for certain expenses incurred in connection with attending Board and committee meetings as well as other related events, including travel, hotel accommodations, meals and other incidental expenses for the director and his or her spouse accompanying the director in connection with such events.
Deferred Director Fees
The Company allows non-employee directors to defer payment of their directors’ fees and stock awards in a manner that is intended to comply with the provisions of Section 409A of the Internal Revenue Code (“Code”), and to treat the deferred amounts as hypothetical investments in common stock of the Company and/or in Company-sponsored mutual funds, as selected by the director. Directors are then credited with the same earnings, gains or losses that they would have incurred if the deferred amounts had been invested in the specific investments and for the specific periods as directed by each particular director.
Additionally, directors who defer their directors’ fees and stock awards are credited with notional dividends and other distributions at the same time, in the same form, and in equivalent amounts as dividends and other distributions that are payable from time to time with respect to investments selected by each particular director. On the payout dates elected by a director, the hypothetical investments are valued and the Company must pay the director or his or her beneficiary a cash amount equal to the value of the hypothetical investments. Payouts may be made in a lump sum or in periodic installments.
Franklin Resources 24
| Back to Contents |
Stock Ownership of Certain Beneficial Owners
The following table contains information regarding the beneficial ownership of our common stock as of October 31, 2020December 11, 2023, by the stockholders that our management knows to beneficially own more than five percent of our outstanding common stock as of such date. The percentage of ownership is calculated based on 504,591,594495,526,950 outstanding shares of common stock on October 31, 2020.December 11, 2023.
Except as otherwise noted, each beneficial owner in the following table had sole voting and investment power with respect to such shares.
| Name and Address of Beneficial Owner(1) | Shares Beneficially Owned(2) | Percent of Class | ||
| Charles B. Johnson(3) | 99,918,684 | 19.8% | ||
| Rupert H. Johnson, Jr.(4) | 104,197,775 | 20.7% | ||
| The Vanguard Group(5) | 36,129,484 | 7.2% |
| Name and Address of Beneficial Owner(1) | Shares Beneficially Owned(2) | Percent of Class | ||
| Rupert H. Johnson, Jr.(3) | 104,200,629 | 21.0% | ||
| Charles B. Johnson(4) | 93,194,652 | 18.8% | ||
| State Street Corporation(5) | 37,357,474 | 7.54% | ||
| The Vanguard Group(6) | 34,570,289 | 6.97% | ||
| BlackRock, Inc.(7) | 29,407,084 | 5.93% |
| (1) | The addresses of Messrs. C. B. Johnson and R. H. Johnson, Jr. are: c/o Franklin Resources, Inc., One Franklin Parkway, San Mateo, CA 94403-1906. |
| (2) | The number of shares of Company common stock beneficially owned by each person is determined under rules promulgated by the SEC. |
| (3) | |
| Includes 102,453,045 shares held in a trust for which Mr. R. H. Johnson, Jr. is trustee. Also includes | |
| Includes 89,111,992 shares held in a trust for which Mr. C.B. Johnson is trustee. Also includes 23,009 shares held in the 401(k) Plan, and 4,059,651 shares held in an individual retirement account (an “IRA”). Also includes an aggregate of 5,249,269 shares held by three private charitable foundations for which he is a trustee with shared voting and investment power (Mr. C.B. Johnson disclaims beneficial ownership of such shares). | |
| (5) | Based solely on a Schedule 13G/A of State Street Corporation filed with the SEC on February 6, 2023, reporting shares of Company common stock owned as of December 31, 2022. Includes (i) sole power to vote or direct to vote zero shares, (ii) shared power to vote or direct to vote 35,843,407 shares, (iii) sole power to dispose of or direct the disposition of zero shares, and (iv) shared power to dispose of or direct the disposition of 37,331,169 shares. Principal business office address is State Street Financial Center, One Lincoln Street, Boston, MA 02111. |
| (6) | Based solely on a Schedule 13G/A of The Vanguard Group, Inc. filed with the SEC on February |
2024 Proxy Statement 25
Stock Ownership and Stock-Based Holdings of Directors and Executive Officers
The following table contains information regarding the beneficial ownership of our common stock as of October 31, 2020December 11, 2023 by:
| each director and director nominee; | |
| each executive officer named in the “Summary Compensation Table for Fiscal Year | |
| all current directors, director nominees and executive officers of the Company as a group (including named executive officers). |
The percentage of ownership is calculated based on 504,591,594495,526,950 outstanding shares of common stock on October 31, 2020.December 11, 2023. Except as otherwise noted, each beneficial owner in the following table had sole voting and investment power with respect to such shares.
| Name of Beneficial Owner | Shares Beneficially Owned(1) | Total Company Stock-Based Holdings(2) | Percent of Shares Beneficially Owned(3) | |||
| Directors and Director Nominees: | ||||||
| Peter K. Barker | 35,765 | 67,813 | * | |||
| Mariann Byerwalter(4) | 9,188 | 22,929 | * | |||
| Alexander S. Friedman(5) | — | — | * | |||
| Gregory E. Johnson(6) | 6,116,734 | — | 1.2% | |||
| Jennifer M. Johnson(7) | 5,560,623 | — | 1.1% | |||
| Rupert H. Johnson, Jr.(8) | 104,197,775 | — | 20.7% | |||
| John Y. Kim(9) | — | — | * | |||
| Anthony J. Noto | 6,360 | — | * | |||
| Mark C. Pigott | 3,567 | 74,479 | * | |||
| Laura Stein | 9,141 | 55,155 | * | |||
| John W. Thiel(10) | — | — | * | |||
| Seth H. Waugh | 2,414 | 27,943 | * | |||
| Geoffrey Y. Yang | 33,272 | 68,293 | * | |||
| Named Executive Officers: | ||||||
| Gregory E. Johnson (see above) | ||||||
| Jennifer M. Johnson (see above) | ||||||
| Matthew Nicholls(11) | 73,980 | — | * | |||
| Craig S. Tyle(12) | 94,406 | — | * | |||
| Jed A. Plafker(13) | 121,631 | — | * | |||
| All directors, nominees and executive officers | ||||||
| as a group (19 persons)(14) | 116,662,871 | — | 23.1% |
| Name of Beneficial Owner | Shares Beneficially Owned(1) | Total Company Stock-Based Holdings(2) | Percent of Shares Beneficially Owned(3) | |||||
| Directors and Director Nominees: | ||||||||
| Mariann Byerwalter | 10,494 | (4) | 26,195 | * | ||||
| Alexander S. Friedman | — | 17,278 | * | |||||
| Gregory E. Johnson | 6,629,397 | (5) | 6,629,397 | 1.34 | % | |||
| Jennifer M. Johnson | 7,259,381 | (6) | 7,259,381 | 1.46 | % | |||
| Rupert H. Johnson, Jr. | 104,200,629 | (7) | 104,200,629 | 21.0 | % | |||
| John Y. Kim | — | 31,264 | * | |||||
| Karen M. King | — | 23,754 | * | |||||
| Anthony J. Noto | 22,865 | 22,865 | * | |||||
| John W. Thiel | 16,505 | 16,505 | * | |||||
| Seth H. Waugh | 2,414 | 48,862 | * | |||||
| Geoffrey Y. Yang | 49,777 | 106,261 | * | |||||
| Named Executive Officers: | ||||||||
| Jennifer M. Johnson (see above) | ||||||||
| Matthew Nicholls | 384,668 | (8) | 384,668 | * | ||||
| Gregory E. Johnson (see above) | ||||||||
| Terrence Murphy | 106,224 | (9) | 106,224 | * | ||||
| Adam B. Spector | 620,073 | (10) | 620,073 | * | ||||
| All directors, nominees and executive officers as a group (17 persons) | 119,546,718 | (11) | — | 24.13 | % | |||
| * | Represents less than 1% of the outstanding common stock. |
| (1) | The number of shares of Company common stock beneficially owned by each person is determined under rules promulgated by the SEC. Under these rules, a person is deemed to have “beneficial ownership” of any shares over which that person has or shares voting or investment power, plus any shares that the person may acquire within 60 days. |
| (2) | For non-employee directors, this column combines beneficial ownership of shares of our common stock with deferred director fees held by certain non-employee directors in an account economically equivalent to our common stock (but payable in cash), as of |
| (3) | The percent ownership for each stockholder on |
Franklin Resources 26
| (4) | Shares held by a revocable family trust for which |
| (5) | |
| Mr. G. Johnson is also a named executive officer of the Company. Includes | |
| Ms. Johnson is also a named executive officer of the Company. Includes | |
| See footnote | |
| Includes | |
| Includes | |
Executive Summary
2024 Proxy Statement 27
Compensation Discussion and Analysis
This Compensation DiscussionDiscussion and Analysis (“CD&A”) provides an overview and analysis of our executive compensation program and the Compensation Committee’s philosophydecisions made regarding the compensation of our named executive officers, who are our Chief Executive Officer, our Chief Financial Officer, and objectivesour three other highest paid executive officers in designingfiscal year 2023 (together, our “NEOs”). This CD&A also explains how our executive compensation programs fordesign and decision-making aligns with the Company’s executive officers. In this CD&A, we address theperformance and business objectives, fiscal year 2023 business and operational highlights, fiscal year 2023 compensation determinationsdecisions for our NEOs and the rationale for those determinations relating tosuch decisions. This CD&A should be read together with the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and our other most highly compensated executive officers, whom we refer to collectively as the “named executive officers” or “NEOs.” compensation tables that follow this section.
For the fiscal year ended September 30, 2020,2023, our NEOs were:
 |  |  |  |  | ||||||
JENNIFER M. | JOHNSON President and Chief | |||||||||
GREGORY E. Executive Chairman | MATTHEW Executive Vice | ADAM B. Executive | TERRENCE Executive Vice |
This CD&A is organized into the following six sections, which begin on the page numbers referenced below.
CD&A TABLE OF CONTENTS
| 1. Our Compensation Philosophy | 28 | |
| 6. Other Compensation Matters | 43 |
The
1. Our Compensation Philosophy
Our Compensation Committee believes that executive compensation should be aligned with and supportstrongly linked to our performance – both for our investors and business objectives. The Compensation Committee aimsfor our clients who entrust us to focusmanage their investments and in turn drive our success. We recognize the NEOs on our long-term performance by using awards that generally vest over three years as the Compensation Committee believes such awards are the most effective tool for aligning the executives’ interests with long-term stockholder interests. The portionimportance of our NEOs’ annual compensation linkeddecisions to short-term performance (with investment performance weighted 50%, financial results weighted 30%these constituencies and strategic initiatives weighted 20% for Ms. Johnsonbelieve the design and Mr. G. Johnson)implementation of our executive compensation program reflects this stewardship. Accordingly, we seek to maintain an executive compensation program that is intended to motivate and reward executives to achieve certain objectives and to allow usdesigned to attract and retain talented executives.skilled executives, incentivize executives to deliver returns for our clients and thus maximize our financial performance and the creation of stockholder value, and align executives’ interests with those of our stockholders.
FISCAL YEAR 2020 BUSINESS HIGHLIGHTSWhile fiscal 2020 presented many challenges
We aim to achieve these objectives by granting the economy, our industry, and our business, it was also marked by exciting opportunities for the firm. Overall, we focused our efforts and investments in key areas that directly support the firm’s multi-year strategic plan to drive organic growth, execute on M&A opportunities, and position Franklin Templeton to capitalize on industry change. The most significant initiative was the acquisition of Legg Mason and its specialist investment managers. We successfully closed the transaction on July 31, 2020, two months earlier than initially expected, creating the sixth largest independent asset manager globally with over $1.46 trillion in assets under management at November 30, 2020, across a broad range of specialized investment teams. The combination enhances our strategic positioning and long-term growth potential, while also delivering on our goal of creating a more diversified and balanced organization. Declines in key measures, including operating income and operating margin, are partially a result of the unprecedented impact of the global pandemic and one of the sharpest market corrections in history, which negatively impacted revenue and also resulted in accelerated outflows. Relative investment performance was mixed, with solid performance in U.S. equity and certain U.S. taxable and tax-free funds, contrasting with weaker performance in global macro and value strategies.
Acquiring and retaining talent is an ongoing priority, and this year we worked to enhance our investment and distribution teams. We appointed several strategic hires and promoted top talent to important new roles on our investment and distribution teams.
The Compensation Committee evaluated fiscal year 2020 performance consistent with its philosophy that a significant portionmajority of executive compensation should be variablein the form of “at-risk” compensation, where the value of compensation is dependent on our performance. Our at-risk compensation is typically granted in the form of (i) annual incentive cash bonus awards and tied to the Company’s performance. More than 90% of CEO pay for fiscal year 2020 wasrestricted stock unit (“RSU”) awards granted under our Amended and Restated Annual Incentive Compensation Plan (the “AIP”) that are earned based on certain annual performance subjectobjectives and (ii) performance-based RSU awards that are earned and vest based on achievement of annual and three-year financial performance objectives. The significant equity portion of our at-risk compensation serves to forfeiture.align the interests of our NEOs with those of our stockholders. In addition, the CEOCompensation Committee recognizes that NEOs implement and other NEOs experienced forfeitureseffect long-term initiatives for the Company that often take more than one fiscal year to accomplish and, accordingly, should receive a significant percentage of certain previously grantedtheir compensation in the form of equity that does not immediately vest.
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In making executive compensation decisions, the Compensation Committee exercises structured judgment to evaluate each NEO’s performance awards,in light of financial and non-financial performance objectives that it believes are important to the growth and welfare of the Company and, for long-term value for our stockholders. These performance objectives emphasize the achievement of Company-wide investment and financial performance objectives as further described underwell as strategic initiatives which typically are focused on business unit and individual performance objectives that are specific to each NEO. Below is a summary of the heading “Long-term Incentive and Retention Compensation” below.objectives that the Compensation Committee assesses when making compensation decisions.
| Primary Considerations | |
| Investment Performance | |
The chart below compares the results of our key
| Key Performance Measures (as of and for fiscal years ended September 30)(1) | 2020 | Percentage Change 2020 vs. 2019 | 2019 | |||
| Assets under management ($ billions) | $1,418.9 | 105% | $692.6 | |||
| Operating margin | 18.8% | 25.9% | ||||
| Adjusted operating margin(2) | 38.5% | 42.6% | ||||
| Three-year stockholder return | (17.8%) | (1.55%) | ||||
| Operating income ($ millions) | $1,048.9 | (28%) | $1,466.9 | |||
| Diluted earnings per share(3) | $1.59 | (32%) | $2.35 |
| Adjusted operating margin, adjusted operating | ||
LEADERSHIP TRANSITION AND APPOINTMENT OF NEW CHIEF EXECUTIVE OFFICER AND EXECUTIVE CHAIRMANIn November 2019, the Company announced the appointment of Jennifer M. Johnson as President and CEO, and of former CEO Gregory E. Johnson as Executive Chairman, of the Company. The CEO appointment was approved by the Company’s Board of Directors, and both appointments became effective at the Company’s 2020 Annual Meeting of Stockholders on February 11, 2020.
As President and CEO, Ms. Johnson is responsible for the operation of all aspects of the business, and she sets long-range strategic objectives and drive corporate priorities. As Executive Chairman, Mr. G. Johnson continues in his role as Chairman of the Company’s Board, and plays an active role within the organization, represents the Company with key stakeholders, consults on significant decisions such as merger and acquisition opportunities, and advises on the strategic direction of the firm.
SUMMARY OF OUR COMPENSATION PRACTICESOur pay practices demonstrate our commitment to responsible compensation and governance practices.
STOCKHOLDER ENGAGEMENTAs
The weighting of performance metrics used by the Compensation Committee in past years, we continue todetermining our CEO’s fiscal year 2023 annual incentive award is as depicted below:
Stockholder Engagement on Compensation
We engage with stockholders to provide an opportunity for them to express their views so that we may consider themthose views as we evaluate our governance practices and executive compensation program. We value our stockholders’ interestinterests and feedback and we are committed to maintaining an active dialogue to ensure that we understand the priorities and concerns of our stockholders with respect to best practices for governance matters and executive compensation. In fiscal year 2020,
Our focus on at-risk compensation has been strongly supported by our conversationsstockholders in the past. Consistent with stockholders focused primarily on policies for membership on other boards and compensation program disclosures. For fiscal year 2021, we plan to expand our Board’s opportunities to consider stockholder feedback by increasing our outreach to stockholders to include engagement after the filingvote of our proxy statement for thestockholders at our 2023 annual meeting of stockholders, as well as during the third quarter of the fiscal year.
EVALUATION OF “SAY ON PAY”At our 2020 Annual Meeting, our stockholders had the opportunity to cast a non-binding,we conduct an advisory vote on the compensation of our NEOs (a “say-on-pay proposal”). Approximately 97% every three years. At our 2023 annual meeting of stockholders, approximately 94% of the votes cast were in favor of the Company’s say-on-pay proposal.our executive compensation policies, practices and determinations. The Compensation Committee believes that this vote reflects general stockholderstrong support for our executive compensation program and philosophy andphilosophy. The Compensation Committee intends to continue its practice of linkingto implement executive compensation programs and decisions that it believes are the best interests of our stockholders.
Our Board encourages an open and constructive dialogue with Company performance.
Atshareholders on compensation and other corporate governance matters to ensure alignment on policies and practices. In fiscal year 2023, we contacted our 2017 Annual Meeting, an advisory vote was takentop 15 institutional shareholders, representing approximately 30% of our outstanding shares, and approximately 49% of our outstanding shares held by persons or entities other than Messrs. Charles B. Johnson and Rupert H. Johnson, and held meetings with the four of these shareholders who requested to meet with us. Our outreach to stockholders focused on the frequency with which we ask our stockholders to provide an advisory vote on ourcorporate governance, board composition, executive compensation, program. We proposed that such vote be held everyand ESG matters, including diversity & inclusion initiatives, and the content of our most recently published CSR report. No concerns regarding executive compensation were raised from our engagements.
2024 Proxy Statement 29
2. Compensation Overview
Our executive compensation program consists primarily of three years,elements: (1) base salary, (2) short-term incentive compensation based on company-wide investment and a majority of the votes cast were in favor of that proposal. The next say-on-pay and say-on-frequency votes are expected to be held in 2023.
Executive Compensation Overview
OBJECTIVES OF THE COMPENSATION PROGRAMEach element of compensation paid to our NEOs is designed to support one or more of the Company-wide or business unitfinancial performance objectives described below.and NEO-specific strategic initiatives, and which is paid in a combination of cash and time-based incentive RSU awards, and (3) RSU awards subject to long-term performance-based vesting conditions.
Company-wide ObjectivesIn order to link executive compensation to our performance, the Compensation Committee considers a number of financial and non-financial objectives it believes further the growth and welfare of the Company.
| Compensation Element | Designed To Reward | Relationship To The Objectives | ||
| Base Salary | • Experience, knowledge of the industry, duties and scope of responsibility | • Provides a minimum, fixed level of cash compensation to attract and retain talented executives to the Company who can continue to improve the Company’s overall performance | ||
Annual Incentive Compensation • Incentive cash awards • Incentive RSU awards | • Success in achieving objectives | • Motivates executives to achieve specific financial and non-financial Company-wide, business unit and individual performance objectives • Provides competitive compensation to attract and retain talented executives • Links annual incentive to value creation for stockholders with a mix of cash and equity • Induces retention of key executives with the Company with incentive RSU awards awarded based on annual performance and vesting subject to continued service in order to encourage retention | ||
Long-term Incentive Compensation • Performance RSU awards | • Continued excellence and achievement of objectives over time • Success in long-term growth and development | • Motivates executives to achieve specific Company-wide financial objectives over a three-year performance period • Aligns the executives’ interests with long-term stockholder interests with performance RSU awards earned based on achievement of financial performance objectives • Provides competitive compensation to attract and retain talented executives • Induces retention of key executives with the Company with performance RSU awards subject to performance based vesting conditions over a three-year period |
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Base Salary
The Compensation Committee has placedbelieves that base salaries for our NEOs should be limited to a reasonable base compensation for the day-to-day performance of the NEOs’ job responsibilities and that the majority of their pay should be in at-risk compensation tied to performance. Base salaries are evaluated by the Compensation Committee annually for all NEOs and in general do not change significantly year-to-year unless the NEO is promoted or the Compensation Committee determines that an emphasisadjustment is necessary due to compensation or economic trends in the industry.
Annual Incentive Compensation
Annual incentive compensation in the form of incentive cash awards and incentive RSU awards granted to our NEOs are funded from an award pool (the “Award Pool”) that is established annually under the AIP. The incentive RSU awards are granted under the 2002 Universal Stock Incentive Plan, as amended (the “USIP”), based on prior year performance and vest in equal installments over three years subject to continued service with the Company. The incentive RSU awards are granted shortly following the end of the fiscal year to which the award relates, with the number of RSU awards determined by dividing the dollar value of the equity portion of the award by the closing price of our common stock on the following metrics:date of grant. NEOs receive dividends on unvested incentive RSU awards as and when dividends are paid to stockholders.
Business Unit ObjectivesThe
Targets under the AIP are based on a combination of Company-wide, business unit and individualized performance measures are driven by and reflect the combined performance of our numerous individual business units.objectives. The Compensation Committee recognizes however, that suchthe Company-wide measures may not fully reflect the individual performance and contributions made by our separate business units and their respective leaders. The Compensation Committeeleaders, and therefore believes that individualhas incorporated objectives should also be set forrelating to achievement of strategic initiatives into the executives that are linked to the growth and development of their respective business units. Such goalsAIP. These objectives are specifically tailored to each business unit and include, but are not limited to, a mix of investment performance, sales, financial, customer service, technology and human resources objectives.
The size of the Award Pool is approved by the Compensation Committee seeksand is fixed at a percentage of our pre-bonus net operating income (for fiscal year 2023 not to reward executives who achieveexceed 23%), exclusive of passive income and calculated before non-operating interest, taxes, extraordinary items, and any special items such objectives as they are designed to improve business unit performance and contribute to the performancespecial compensation payouts on account of an acquisition (“PBOI”). The specific size of the Company as a whole.
COMPENSATION PHILOSOPHYTheAward Pool is determined at the start of the fiscal year but may be revised by the Compensation Committee believes that executive compensation should be linked with our performance and significantly aligned withat any point during or after the interests of our stockholders. In addition, executive compensation is designed to allow us to recruit, retain and motivate employees who play a significant role in our current and future success.fiscal year.
The annual incentive compensation ofpaid and granted in November 2023, the NEOs should be understood withinspecific strategic objectives considered by the context of our business. We are a global, full-service investment management organization focused on long-term performance. One ofCompensation Committee for each NEO in fiscal year 2023, and the Compensation Committee’s main goals is to focusdetermination of the executives on our long-term performance. The Compensation Committee believes that long-term awards are an effective toolAward Pool for aligning the executives’ interests with long-term stockholder interests in order to increase overall stockholder value. In addition, the NEOs implement long-term initiatives for the Company that, by definition, take more than one fiscal year to accomplish. To focus our NEOs on2023 are summarized in “4. Fiscal Year 2023 Executive Compensation Decisions” below.
Long-Term Incentive Compensation
Our long-term incentive compensation consists of annual grants of performance and foster retention, we grant our NEOs equityRSU awards that are subject to performance-based vesting and, as described in(“Performance Awards”) under the following paragraph, a portion of any awards earned by our NEOs under our Amended and Restated Annual Incentive Compensation Plan (“AIP”) is paid in the form of restricted stockUSIP that is subject to a three-year service-based vesting schedule. In setting the performance vesting targets for such long-term awards, the Compensation Committee uses performance criteria that it believes are challenging but also achievable. In recent years, equity awards to our NEOs have been granted in the form of restricted stock and restricted stock units rather than options, in part, because the Compensation Committee believes that in the current market, restricted stock is a better motivational tool than options. The Compensation Committee may, however, in its discretion, award stock options to executives in the future. Long-term performance awards typically vest over a three-year period based on the achievement of predetermined Company
specified financial performance goals as described below.
One-half of the Performance Awards granted in fiscal year 2023 will be earned and other specifiedvested based on our Adjusted Operating Margin (as defined below) and one-half of the Performance Awards will be based on our relative total shareholder return over a three-year period (as described below). The Performance Award component that is based on Adjusted Operating Margin is earned based on our fiscal year performance, objectives. with performance vesting occurring in equal increments in each year over a three-year period, while the Performance Award component that is based on relative total shareholder return is earned and vests based on a three-year performance period.
The amount of these Performance Awards granted to each NEO for fiscal year 2023 was determined by the Compensation Committee based on a general target of providing 20-25% of the NEO’s total incentive compensation in the form of Performance Awards, as adjusted to reflect the specific performance of the NEO during the fiscal year.
In the event a performance measure is not achieved at or above a specified threshold level, the portion of an award tied to such performance measure is forfeited. In addition, in order to align further the NEOs’ interests with our stockholders, each NEO is expected to comply with our stock ownership guidelines.
In the asset management industry, executive pay typically is not determined on the basis of formulas and weighted metrics, because the business is highly dependent on the performance of markets, over which our management team has no control. The dynamics of markets and other external factors that impact our business during the course of the year make initial weightings less relevant to what management should focus on during the year to deliver maximum stockholder value. Further, our business is based on investment performance. That performance must be viewed over a long period of time. Even though we do not use formulas, the Compensation Committee uses a rigorous performance assessment framework to set the overall bonus pool and determine individual bonuses. The Committee uses market data and performance metrics to establish pools for incentive awards, and applies its judgment to make compensation decisions for the named executive officers after conducting an in-depth review of performance, evaluating peer group pay and prior years’ actual total direct compensation and assessing qualitative factors relating to strategic priorities, rather than relying solely on formulaic results to calculate annual incentive award payouts. The Committee evaluates the CEO’s recommendations for other executive officers’ pay, taking into account peer group data and the CEO’s views on actual performance against the Company’s plan as well as her views on individual performance. The Committee believes this process is an effective way to assess the quality of the performance and leadership demonstrated by the CEO and other executive officers.
For fiscal year 2020, the Committee eliminated individual maximum bonus allocations, and instead determined that no individual NEO would be eligible to receive a maximum award exceeding 40% of the Key Executive Pool (“KEP”) under the AIP. The Committee’s process for reviewing and determining individual allocations remains unchanged, other than the allocation of maximum bonus awards which is no longer required after the elimination of the performance-based compensation exception under Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).
At the end of the fiscal year, in determining the actual amount to be awarded under the AIP to each eligible NEO, the Compensation Committee has discretion to adjust the award and may use one or more of the Company-wide objectives and weightings for each NEO as described under “Company-wide Objectives for AIP Awards” below. Amounts earned under the AIP are awarded in cash and restricted stock subject to service-based vesting. The actual objectives for each NEO used for compensation determinations for fiscal year 2020 are set forth under “Individual Performance Measures and Achievements” below.
For fiscal year 2020, the size of the AIP award pool for all plan participants did not exceed 30% of pre-bonus net operating income or “PBOI” (as defined under “Determination of Annual Incentive Awards” below).
Company-wide Objectives for AIP Awards
The Compensation Committee believes that the use of a strict formula-based program for annual awards could have inadvertent consequences such as encouraging the NEOs to focus on the achievement of one specific metric to the detriment of other metrics. In addition, tying compensation to a strict formula would not allow for adjustments based on issues beyond the control of the NEOs. The Compensation Committee recognizes that each NEO other than the CEO (each, a “Senior Executive”) may be most able directly to influence the business unit for which he or she is responsible and, as described above, believes it is appropriate to use negative discretion to adjust annual awards under the AIP to take into account the achievement of objectives that are directly tied to the growth and development of each Senior Executive’s business unit. Furthermore, with respect to our overall executive compensation program, the use of discretion provides the Compensation Committee with the flexibility to compensate our NEOs for truly exceptional performance without paying more than is necessary to incent and retain them.
Execution of Our Philosophy
ROLE OF THE COMPENSATION COMMITTEE AND THE DECISION-MAKING PROCESSCompensation decisions for our NEOs are made by the Compensation Committee with input from its independent compensation consultant, other senior members of management, and our CEO (with respect to other NEOs).
As our highest-ranking officer, the CEO is responsible for overseeing our operations and results, implementing our strategic objectives and providing direction and leadership to the Company. The Compensation Committee therefore believes that the CEO’s compensation should normally be higher than the compensation paid to the Senior Executives and that a large percentage of such compensation should be at risk and linked to the achievement of objectives based on our performance with regard to certain significant financial metrics.
While the Compensation Committee believes that our financial performance should be the main driver of CEO pay, it also believes that the CEO’s individual performance with regard to relevant non-financial objectives and achievements during the year should be taken into account. Historically, such non-financial objectives have included customer service, technology and human resource objectives, as well as goals regarding our compliance with laws and regulations and the maintenance of excellence in our corporate governance practices, among other things.
In setting the CEO’s compensation, every year the Compensation Committee reviews (i) our performance (both financial and non-financial), (ii) compensation reports (which we refer to as “tally sheets”) regarding the amounts paid to the CEO in prior years as salary, bonus and other compensation (including a sensitivity analysis regarding the CEO’s vested and unvested equity awards), (iii) relevant compensation benchmarks and practices at peer companies, and (iv) relevant non-financial information, such as data regarding achievements in the areas noted above. Based upon these reviews, the Compensation Committee determines the CEO’s incentive compensation for the current fiscal year. For fiscal year 2020, the Compensation Committee determined the compensation paid to Mr. G. Johnson and to Ms. Johnson, each of whom held the role of CEO during the fiscal year.
With respect to our Senior Executives, we conduct an annual review process in which goals are developed for each business unit with the CEO and the Senior Executive who leads the business unit. Each unit’s goals are specifically tailored because their different business functions are not always easily comparable. The goals and objectives established for each Senior Executive for fiscal year 2020 are set forth in fiscal year 2020 scorecards for each such Senior Executive. See “Individual Performance Measures and Achievements” below for a summary of the key performance objectives established for the NEOs and a summary of their fiscal year 2020 achievements in respect of those objectives. The Compensation Committee then reviews and discusses the evaluations, competitive compensation information, tally sheets and the compensation recommendations for each such Senior Executive that is provided to them by the CEO and our Human Resources Group, as described in “Role of Management” below. Based upon this review, the Compensation Committee assesses the reasonableness of the compensation recommendations and sets each Senior Executive’s incentive compensation.
The following illustrates generally the Compensation Committee’s pay determination process throughout a fiscal year.
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ROLE OF MANAGEMENTThe Compensation Committee works with members of management, including our CEO, to seek input regarding our executive compensation program. Twice a year the CEO evaluates each Senior Executive and his or her respective business unit’s progress in achieving its goals. In addition, the CEO works with senior members of our Human Resources Group to recommend the appropriate award amount for each Senior Executive based upon such performance. As part of this process, the Human Resources Group conducts and reviews an analysis of competitive compensation by peer companies (listed below under “Peer Group Companies”), compares previous year-over-year performance and compensation paid to the executive, considers internal pay equity issues and reviews third-party executive compensation surveys related generally to the financial services industry and specifically to the asset management industry. In addition, the Human Resources Group prepares tally sheets which include cash, equity and other compensation paid to each Senior Executive in prior periods as well as an analysis of the total projected wealth accumulation for such executive over the next five years. Upon completion of this review process, management presents the performance evaluations to the Compensation Committee and the CEO makes a recommendation regarding the appropriate level of incentive compensation in relation to the objectives achieved.
The Company’s management has engaged McLagan, a financial services industry compensation consultant to provide information on peer company compensation and pay trends. McLagan’s proprietary surveys and market data are used to analyze the competitiveness of the Company’s executive compensation program and to understand compensation forecasts and trends in the industry. The annual market data assessment of peer executive officers is created with McLagan’s guidance and provided to the Compensation Committee.
In addition, the Compensation Committee considers the recommendation of our Human Resources Group as to the appropriate size of the award pool. In preparing its recommendation, senior members of our Human Resources Group meet periodically with our CEO to discuss competitive compensation, retention, funding requirements and other significant compensation issues. In addition, the CEO meets with the CFO to review the quarterly financial performance of the Company over the most recent quarters and the last two years, and in particular focuses on the Company’s year-over-year results with regard to the Company-wide performance measures set forth under the heading “Company-wide Objectives for AIP Awards” above. The recommendation is reviewed and endorsed by the CEO prior to its presentation to the Compensation Committee.
PEER GROUP COMPANIESThe Company’s Human Resources Group, in conjunction with McLagan, compares the NEOs’ compensation to the compensation of executive officers performing similar functions among a peer group of other investment management companies. This comparison takes into account our performance relative to these peer companies, the executives’ comparative roles, responsibilities for the performance of such companies, and the market size and composition data for such peer companies. The Human Resources Group also reviews compensation data from a survey of management and administration positions in investment management organizations published by McLagan. McLagan is engaged by the Company to provide this additional peer compensation information because of the complexity of identifying a reasonable and appropriate competitor group, particularly given the differences in size and business mix between us and certain of our publicly traded peer group companies. Except as modified as a result of mergers and acquisitions, the peer group companies reviewed this year were the same as the last 10 years. For fiscal year 2020, our peer companies were:
The Compensation Committee reviews such public and privately held companies’ compensation for comparison purposes, but this review is only one of several factors that are considered by the Compensation Committee in setting compensation. Our fiscal year ends on September 30th, whereas that of all but two of the peer group companies ends on December 31st, such that any meaningful compensation comparison must rely on available data covering time periods that do not correspond exactly and during which more beneficial or more adverse economic conditions affecting compensation may have prevailed. The Compensation Committee used 2019 peer market data received from McLagan to compare NEO total compensation (comprised of base pay, bonuses and equity compensation) against the total compensation for executives in similar positions at the peer group companies. The Compensation Committee’s decision on the level of compensation awarded reflected our performance for fiscal year 2020 versus our peer group companies, as well as consideration of our operating margin, expense management and execution of our strategic initiatives, among other items. Although relative ranking information is considered by the Compensation Committee in evaluating compensation for our NEOs, the Compensation Committee does not target a specific percentile ranking for any component of, or the aggregate total of, NEO compensation.
ROLE OF COMPENSATION CONSULTANTThe Compensation Committee has the sole authority to retain and terminate any compensation consulting firm directly assisting it in the evaluation of director or executive compensation. The Compensation Committee also has the sole authority to approve fees and other retention terms for its consultant.
The Compensation Committee has directly retained Exequity LLP (“Exequity”) as its compensation consultant to provide objective analyses of, and counsel on, our executive compensation program and practices. Exequity’s role is set by the Compensation Committee. Throughout the year, Exequity is asked to review and comment objectively on management proposals and presentations to the Compensation Committee covering all elements of compensation paid to the NEOs. Exequity also provides counsel on general market trends and technical developments, and input on the amount and structure of pay for the non-employee directors of the Board. Under the terms of its engagement, Exequity is required to obtain the prior written approval of the Compensation Committee before Exequity or any of its affiliates performs any non-executive compensation related services for the Company or its subsidiaries. Exequity is required to report to the Compensation Committee any such services and fees annually and upon the reasonable request of the Compensation Committee. There were no such services during fiscal year 2020.
The Compensation Committee recognizes that it is essential to receive objective advice from compensation consultants. The Compensation Committee selects its compensation consultant only after taking into consideration all factors relevantperformance-based vesting targets that it believes are sufficient to the consultant’s independence including the following:
During fiscal year 2020, the Company paid Exequity $33,280motivate NEOs by being challenging, but achievable. The specific performance-based vesting conditions applicable to awards granted in consulting fees directly related to services performed for theNovember 2023 and those completing their vesting in November 2023 are summarized in “4. Fiscal Year 2023 Executive Compensation Committee.
ComponentsDecisions — Types of Compensation Program and Fiscal 2020 — Long-term Incentive Compensation” below.
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Compensation Mix for Our NEOs
The compensation program forfollowing chart shows the NEOs consists primarilybreakdown of base salary and incentive compensation comprisedthe types of a combination of cash and equity, based upon the achievement of business unit and Company-wide objectives as described below.
Each element of compensation is designed to reward the achievement of different objectives as summarized below:
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2020 CEO AND OTHER NAMED EXECUTIVE OFFICER PAY MIXThe following charts show the various components of the compensation paid or granted to our CEO and Senior Executives in respect ofNEOs for fiscal year 2020. They illustrate2023, which illustrates the Compensation Committee’s emphasis on at-risk, equity-based and performance-based components of our executive compensation program.
COMPENSATION MIXCEO
3. Fiscal Year 2023 Performance Overview
Business Highlights
We continued to focus on key areas that directly support the firm’s multi-year strategic plan to drive organic growth including executing on M&A opportunities that position us to capitalize on industry change. In addition, we continued to invest in opportunities that will support our strategy, including augmentation of our alternative investment strategies and Average Senior Executive PayESG offerings.
Base Salary
The Compensation Committee believes that base salaries for our NEOs should be limited to a reasonable base compensation for the day-to-day performance of their job responsibilities, and that the majority of their pay should be in variable compensation tied to performance. Base salaries are evaluated by the Compensation Committee annually for all NEOs and in general remain static unless the individual is promoted, or the Compensation Committee determines that an adjustment is necessary due to compensation or economic trends in the industry.
Effective April 13, 2020, the base salary of each NEO was reduced by 20%, in connection with the Company’s expense management efforts. For fiscal year 2021, beginning October 1, 2020, base salaries were restored to prior fiscal year 2020 amounts.
Incentive CompensationThe Compensation Committee encourages NEOs to enhance our2023 performance by linkingin light of its philosophy that a significant portion of theirexecutive compensation should be at-risk and tied to the achievementCompany’s performance.
The chart below compares the results of business unit, Company-wide and individual objectives. NEO incentive compensation is awarded under our AIP with the amount of such compensation determined based onkey financial performance measures for the most recently completedcurrent fiscal year and made in the form of cash and equity, with the equity portion granted under our 2002 Universal Stock Incentive Plan (“USIP”) and subject to a three-year service-based vesting schedule. NEOs receive dividends on unvested service-based awards, as and when dividends are paid to stockholders. Additional long-term incentive compensation is awarded to our NEOs in the form of performance-based equity also granted under our USIP. From time to time, we also grant retention awards designed to attract, retain and reward the performance of our NEOs.against last fiscal year:
INDIVIDUAL PERFORMANCE MEASURES AND ACHIEVEMENTSEach year, the Compensation Committee reviews the performance objectives established for the NEOs, as outlined in their respective fiscal year scorecards. Key performance objectives established for our NEOs to determine fiscal year 2020 short-term incentive compensation and a summary of their fiscal year 2020 achievements are set forth below.
| Key Financial Performance Measures (as of and for fiscal years ended September 30) | 2023 | 2022 | Percentage Change 2023 vs. 2022 | |||||||||
| Assets Under Management ($ billions) | $ | 1,374.2 | $ | 1,297.4 | 5.9% | |||||||
| Adjusted Operating Revenue ($ millions)(1) | $ | 6,104.1 | $ | 6,473.7 | (5.7%) | |||||||
| Adjusted Operating Income ($ millions)(1) | $ | 1,823.8 | $ | 2,323.5 | (21.5%) | |||||||
| Adjusted Net Income ($ millions)(1) | $ | 1,332.2 | $ | 1,855.6 | (28.2%) | |||||||
| Adjusted Earnings Per Share(1) | $ | 2.60 | $ | 3.63 | (28.4%) | |||||||
| Adjusted Operating Margin(1) | 29.9 | % | 35.9 | % | ||||||||
| Three-Year Stockholder Return | 11.2 | % | (5.2 | )% | ||||||||
The objectives for the awards for our CEO were weighted as follows:
 |
|
| |
In addition, Ms. Johnson:
| |
See discussion of supplemental non-GAAP financial measures |
Franklin Resources 32
Fiscal Year 2023 Investment Management Performance
We are committed to delivering strong investment performance for our clients, offering a broad range of strategies and drawing on our diverse experiences and perspectives gained through our long history in the investment management business. We know that success demands smart and effective business innovation, solutions and technologies, and we remain focused on investment excellence, innovating to meet evolving client goals, and building strong partnerships by delivering superior client service. We continue to focus on the long-term investment performance of our investment products and on providing high quality service to our clients.
A key driver of our overall success is the long-term investment performance of our investment products. A measure of the performance of these products is the percentage of AUM exceeding peer group medians and benchmarks. We compare the relative performance of our mutual funds against peers, and of our strategy composites against benchmarks.
The performance of our mutual fund products against peer group medians and of our strategy composites against benchmarks is presented in the table below. Past performance is no guarantee of future results.
| Peer Group Comparison(1) % of Mutual Fund AUM in Top Two Peer Group Quartiles | Benchmark Comparison(2) % of Strategy Composite AUM Exceeding Benchmark | |||||||||||||||||||||||||||||||
| as of September 30, 2023 | 1-Year | 3-Year | 5-Year | 10-Year | 1-Year | 3-Year | 5-Year | 10-Year | ||||||||||||||||||||||||
| Fixed Income | 46% | 39% | 37% | 67% | 80% | 47% | 46% | 90% | ||||||||||||||||||||||||
| Equity | 61% | 39% | 51% | 56% | 45% | 38% | 38% | 31% | ||||||||||||||||||||||||
| Total AUM(3) | 48% | 49% | 54% | 52% | 61% | 48% | 47% | 61% | ||||||||||||||||||||||||
 | ||
| Mutual fund performance | ||
| (2) | Strategy composite performance measures the percent of composite AUM beating its benchmark. The benchmark comparisons are | |
| (3) | Total mutual fund AUM includes performance of the Company’s | |
 | |
 | |
 | |
| 2023. |
DETERMINATION OF ANNUAL INCENTIVE AWARDSThe size of the AIP award pool is set by the
2024 Proxy Statement 33
4. Fiscal Year 2023 Executive Compensation Committee as a percentage of our pre-bonus net operating income (not to exceed 30% in fiscal year 2020), exclusive of passive incomeDecisions
Fiscal Year 2023 Base Salary and calculated before non-operating interest, taxes, extraordinary items, and any special items such as special compensation payouts on account of a merger (“PBOI”). The final amount of PBOI that funds the award pool is approved by the Compensation Committee after consultation with certain members of management (as described under “Execution of Our Philosophy—Role of Management” above).Annual Incentive Awards
During the first quarter of fiscal year 2020, the Compensation Committee determined that no individual NEO would be eligible to receive a maximum award exceeding 40% of the KEP under the AIP. The maximum award that each NEO is eligible to receive, however, is not an expectation of the actual bonus that will be paid to him or her, but a cap on the range ($0 to the maximum amount) that an individual may be paid. Historically, the Compensation Committee has exercised negative discretion to pay significantly less than the maximum amount available to an NEO under the award pool based on its evaluation of the achievement of business unit, Company-wide and individual performance measures for the NEO, as described above. Under the terms of Mr. Nicholls’ offer letter, he was eligible to earn a guaranteed annual incentive award of $2.6 million for fiscal year 2020.
Awards from the AIP consist of a combination of cash and restricted stock, with the cash portion paid following the end of our fiscal year to reward an executive for achievement of shorter-term objectives during the fiscal year to which the performance relates. The equity portion is granted under the USIP shortly following the end of the fiscal year to which the performance relates, with the number of shares of restricted stock determined by dividing the dollar value of the equity portion of the award by the closing price of our common stock on the date of grant.
The restricted stock grants are subject to service-based vesting as described in more detail below. Awards are generally structured as follows:
AIP/KEP AWARD POOL BREAKDOWN
In November 2020,2023, based on the Compensation Committee’s evaluation of the strategic initiative achievements summarized below and the performance and achievements described under “—Individual Performance Measures and Achievements”objectives discussed above, the Compensation Committee approved KEPthe base salary and annual incentive awards in the following aggregate amounts: $5.75 million to Ms. Johnson; $4.325 million to Mr. G. Johnson; $3.0 million to Mr. Nicholls; $1.225 million to Mr. Tyle; and $2.0 million to Mr. Plafker. All awards were paid (cash) or granted (restricted stock) in fiscal year 2021. Although Strategic Initiatives objectives for the CEO are weighted 20% generally, the particular strategic importanceamounts below.
| Annual Incentive Award | ||||||||||||||||||||||||||||
| Name | Base Salary | Total Incentive Award | Incentive Cash Component | Incentive Deferred Component | Long-Term Incentive Award | Total Annual Compensation | % change in Total Compensation vs. 2022 | |||||||||||||||||||||
| Jennifer M. Johnson | $ | 750,000 | $ | 11,050,000 | $ | 3,650,000 | $ | 7,400,000 | $ | 3,250,000 | $ | 15,050,000 | -1.3% | |||||||||||||||
| Matthew Nicholls | $ | 600,000 | $ | 5,700,000 | $ | 3,000,000 | $ | 2,700,000 | $ | 3,000,000 | $ | 9,300,000 | -0.5% | |||||||||||||||
| Gregory E. Johnson | $ | 600,000 | $ | 1,900,000 | $ | 1,100,000 | $ | 800,000 | $ | 500,000 | $ | 3,000,000 | -3.2% | |||||||||||||||
| Terrence Murphy(1)(2) | $ | 500,000 | $ | 18,151,806 | $ | 11,798,674 | $ | 6,353,132 | — | $ | 18,651,806 | — | ||||||||||||||||
| Adam B. Spector(3) | $ | 525,000 | $ | 5,185,000 | $ | 3,547,500 | $ | 1,637,500 | $ | 1,200,000 | $ | 6,910,000 | -34.0% | |||||||||||||||
| (1) | A portion of Mr. Murphy’s annual compensation was paid in connection with his role as chief executive officer of the Company’s ClearBridge Investments SIM. |
| (2) | Mr. Murphy was not an NEO for 2022. |
| (3) | A portion of Mr. Spector’s incentive compensation was paid in connection with his role as managing partner of the Company’s Brandywine Global SIM. The change in total compensation for Mr. Spector was primarily attributable to a change in his compensation from the Company’s Brandywine Global SIM. |
Determination of the Legg Mason acquisition in fiscal year 2020, positioning the CompanyAward Pool for future growth, was recognized by the Committee in determining Ms. Johnson’s compensation. Aggregate compensation for Ms. Johnson and Mr. G. Johnson was down by $500 thousand, compared to fiscal year 2019 (and was down by $2.24 million, not including the one-time transaction cash payments awarded in fiscal year 2020 in recognition of completion of the Legg Mason acquisition, discussed below).Bonus Award Values – Actual Payout Amounts* Name FY2020
(as dollar amount) FY2019
(as dollar amount) YoY Dollar
Amount Change
(as a percentage) Jennifer M. Johnson $ 5,750,000 $ 5,200,000 11% Gregory E. Johnson $ 4,325,000 $ 6,000,000 (28%) Matthew Nicholls $ 3,000,000 $ 2,600,000 15% Craig S. Tyle $ 1,225,000 $ 1,300,000 (6%) Jed A. Plafker $ 2,000,000 $ 2,500,000 (20%)
| Bonus Award Values – Actual Payout Amounts* | ||||||||
| Name | FY2020 (as dollar amount) | FY2019 (as dollar amount) | YoY Dollar Amount Change (as a percentage) | |||||
| Jennifer M. Johnson | $ | 5,750,000 | $ | 5,200,000 | 11% | |||
| Gregory E. Johnson | $ | 4,325,000 | $ | 6,000,000 | (28%) | |||
| Matthew Nicholls | $ | 3,000,000 | $ | 2,600,000 | 15% | |||
| Craig S. Tyle | $ | 1,225,000 | $ | 1,300,000 | (6%) | |||
| Jed A. Plafker | $ | 2,000,000 | $ | 2,500,000 | (20%) | |||
Fiscal Year 2023
In fiscal year 2020, the Compensation Committee also awarded one-time transaction related cash payments to each of the NEOs in recognition of their extraordinary efforts in negotiating and executing the important strategic acquisition of Legg Mason and related transactions, and success in holding execution costs lower than initially forecasted, all of which was accomplished without any reduction to their other duties and responsibilities to the Company and while guiding the Company through the COVID-19 pandemic. The Committee considered the published viewpoints and voting policies of the Company’s unaffiliated significant stockholders relating to transaction compensation and special payments, as well as information provided by its compensation consultant, Exequity, regarding market practice. The Compensation Committee approved one-time transaction payments in the following amounts: $1.0 million to Ms. Johnson; $0.75 million to Mr. G. Johnson; $1.0 million to Mr. Nicholls; $0.3 million to Mr. Tyle; and $0.5 million to Mr. Plafker.
Long-term Incentive and Retention CompensationEquity awards are designed to reward an executive for continued excellence, aid in retention, and provide incentives based on the attainment of long-term performance objectives.
The stock component of Key Executive Incentive Plan awardsAward Pool, for which all NEOs were eligible for fiscal year 2019 performance2023, was granted undercapped at 1.5% of PBOI for the USIP to each eligible NEO in November 2019. The numberfiscal year. During the first quarter of shares of restricted stock granted to each NEO was determined based on the NEO’s fiscal year 2019 performance as described under the section titled “Individual Performance Measures” in the Proxy Statement for fiscal year 2019.
The restricted stock awards described above vest in substantially equal installments over three years, subject to the executive’s continued employment on each vesting date. Because the restricted stock awards are subject to vesting over a three-year period, they help to focus an executive on further long-term growth and development and aid in retention.
To further emphasize the importance of long-term performance, the Compensation Committee awarded a portion of NEO compensation as performance-based restricted stock unit awards (the “2019 Performance Awards”) that vest over a three-year period based on the achievement of specified performance goals, as further described below. In the event a performance goal is not achieved at or above a specified threshold level, the portion of an award tied to such performance goal is forfeited.
The 2019 Performance Awards were granted in November 2019 to all NEOs except for Mr. Nicholls. Mr. Nicholls’ performance award was granted on May 1, 2019 (the “New-Hire Performance Award”) as part of his new-hire compensation package, with a grant date target award amount of $0.375 million. To align incentives among the NEOs,2023, the Compensation Committee determined that no individual participant would be eligible to receive or expected to receive an award exceeding 40% of the total Award Pool. Mr. Nicholls’ New-HireMurphy did not participate in the Award Pool for fiscal year 2023 because he received a portion of his annual incentive awards in cash from the Company’s SIM, ClearBridge Investments.
For fiscal year 2023, the breakdown of the cash and equity components of the annual incentive award for each NEO as set forth in the following table:
Franklin Resources 34
Fiscal Year 2023 Performance Award should haveAwards
The NEOs were also issued Performance Awards for fiscal year 2023. The table below sets forth the samespecific vesting criteria asthresholds for these Performance Awards.
| 2023 Performance Awards | ||||||||
| % of Award Eligible to Vest | Performance Period | Performance Level(1) | % Vesting(2) | |||||
| 2023 Adjusted Operating Margin Performance Award (50% of 2023 Performance Awards) | 34% | Fiscal Year | Adj. Operating Margin ≥ 90% of Plan | 100% | ||||
| 2024 | Adj. Operating Margin ≥ 80% and < 90% of Plan | 50% | ||||||
| Adj. Operating Margin < 80% of Plan | 0% | |||||||
| 33% | Fiscal Year | Adj. Operating Margin ≥ 90% of Plan | 100% | |||||
| 2025 | Adj. Operating Margin ≥ 80% and < 90% of Plan | 50% | ||||||
| Adj. Operating margin < 80% of Plan | 0% | |||||||
| 33% | Fiscal Year | Adj. Operating Margin ≥ 90% of Plan | 100% | |||||
| 2026 | Adj. Operating Margin ≥ 80% and < 90% of Plan | 50% | ||||||
| Adj. Operating Margin< 80% of Plan | 0% | |||||||
| 2023 Relative TSR Performance Award (50% of 2023 Performance Awards) | 100% | Fiscal Years | ≥ 75th percentile | 150% | ||||
| 2024 - 2026 | ≥ 50th to 75th percentile | 100 to 149% | ||||||
| ≥ 25th to 50th percentile | 50 to 99% | |||||||
| 0 to 25th percentile | 0 to 49% | |||||||
| (1) | The Adjusted Operating Margin for Plan is 29.2% for each of the three years. For Relative TSR performance, the percentiles refer to the Compensation Peer Group listed below. |
| (2) | For amounts falling between specified performance level thresholds, the percentage vested will be a linear interpolation between the applicable vesting percentages. |
The Compensation Committee approved Performance Awards in 2023 with the most recent performance awards that had been granted to our other NEOs (other than Mr. Plafker) in November 2018. The New-Hire Performance Award vestsfollowing grant date target award amounts:
| 2023 Performance Awards | ||||||||||||
| Name | Total Target Award Amount | Adjusted Operating Margin Target | Relative TSR Target | |||||||||
| Jennifer M. Johnson | $ | 3,250,000 | 1,625,000 | 1,625,000 | ||||||||
| Matthew Nicholls | $ | 3,000,000 | 1,500,000 | 1,500,000 | ||||||||
| Gregory E. Johnson | $ | 500,000 | 250,000 | 250,000 | ||||||||
| Terrence Murphy(1) | — | — | — | |||||||||
| Adam B. Spector | $ | 1,200,000 | 600,000 | 600,000 | ||||||||
| (1) | Mr. Murphy did not receive Performance Awards in 2023. |
Upon granting of the award, the targeted amounts are converted into restricted share units of the Company’s common stock based on the share price on the grant date.
Payout of Performance Awards Granted in Fiscal Years 2020-2022
While the Committee does not consider these amounts to be compensation for fiscal year 2023, Ms. Johnson, Mr. G. Johnson, Mr. Nicholls and Mr. Spector had 100,246, 37,096, 49,484 and 13,584 performance restricted share units vested for performance in fiscal year 2023, respectively, and 74,516, 37,258, 18,629 and 0 performance restricted share units that did not vest and were forfeited because the performance objectives related to those units were not achieved. Vesting of the Performance Awards for the 2020-2022 performance period was based upon the achievement ofof: (i) the Company’s adjusted operating margin as a percentage of the average operating margin for certain peer companies (“Relative Adjusted Margin”), and (ii) our total shareholder return
2024 Proxy Statement 35
ranking, defined as our total return to stockholders, as reported by Bloomberg or FactSet Research Systems (or their respective successors), relative to the respective total return to stockholders of certain peer companies over a three-year period (“Relative TSR”), with 50% of the value of the award contingent on the achievement of Relative Margin (the “New-Hire Relative Margin Award”) and 50% contingent on the achievement of Relative TSR (the “New-Hire Relative TSR Award”).
The 2019 Performance Awards for NEOs other than Mr. Nicholls vest based on the achievement of: (i) the Company’s adjusted operating margin as a percentage of the average operating margin for certain peer companies (“Relative Adjusted Margin”), and (ii) Relative TSR. For purposes of the Relative Adjusted Margin awards, “adjusted operating margin” means (a) operating income divided by (b) total revenues for the performance period, in each case as reported in the consolidated financial statements filed with the SEC (or if such financial statements are not available at the time of determination as otherwise disclosed in a press release), which amount is adjusted to exclude material onetime, non-recurring expenses including, but not limited to, M&A, severance, or other restructuring charges as reported in the relevant financial statements.
For purposes of the 2019
Performance Awards that are based on Adjusted Operating Margin are earned based on our annual performance and the New-Hireperformance vest in equal installments in each year over a three-year period, while Performance Award, peer companies included the following public investment management firms: Affiliated Managers Group Inc., AllianceBernstein L.P., BlackRock, Inc., Eaton Vance Corp., Federated Hermes Inc., Invesco Ltd., Janus Henderson Group, Legg Mason, Inc. and T. Rowe Price Group. Legg Mason, Inc. will be removed from theAwards that are based on Relative TSR peer group asare earned based on our performance over a result of its acquisition bythree-year period and vest in one installment shortly following the Company on July 31, 2020.Compensation Committee’s determination that the performance condition has been achieved.
Based on
Individual Accomplishments
In addition to Company-wide investment and financial performance and achievements,objectives described above, the Compensation Committee approvedevaluates certain strategic initiatives that are specific to each NEO in making executive compensation decisions for fiscal year 2023. Below is a summary of the 2019 Performance Awardsindividual accomplishments for each NEO in fiscal year 2023 that were considered by the Compensation Committee in making its compensation decisions.
Franklin Resources 36
 | JENNIFER M. JOHNSON President and Chief Executive Officer |  |
INTRODUCTION As we look back over our fiscal year ended September 30, 2023, challenging global financial markets and geopolitical uncertainty weighed on investor sentiment and resulted in downward pressures on our financial results, consistent with the industry. Yet, against this backdrop and amid ongoing industry-wide change, we continue to manage our global business with a focus on areas of organic growth, expense discipline and strategic transactions. INVESTMENT PERFORMANCE • Strategy composite investment performance AUM resulted in 61%, 48%, 47% and 61% outperforming their peers on a 1-, 3-, 5-, and 10-year basis.1 Compared to the prior year, strategy composite 1-year performance improved significantly, while the 5- and 10-year performance lagged. • Mutual fund investment performance AUM resulted in 48%, 49%, 54% and 52% outperforming their peers on a 1-, 3-, 5-, and 10-year basis.2 Compared to the prior year, mutual fund performance improved in the 3-and 5-year periods and lagged in the 1- and 10-year periods. The 1-year decline is primarily due to the peer categorization of one of our largest funds managed for yield. • The Company also saw strong investment performance in private market strategies offered by our alternative specialist investment managers, including Benefit Street Partners, Clarion Partners and Lexington Partners. FINANCIAL RESULTS • Ending AUM was $1.37 trillion, an increase of 5.9% from the prior year primarily due to market appreciation and the acquisition of Alcentra, partially offset by long-term net outflows. Average AUM decreased by 4.7% to $1.40 trillion.3 • We benefitted from diversifying our business across asset classes, vehicles, and geographies. Long-term net outflows were $21.3 billion and improved by 23.4% from the prior year net outflows of $27.8 billion. ° Long-term net inflows in several key areas including Alternatives, Multi-Asset, ETFs, Canvas® (our custom indexing platform), and the high-net-worth channel. Our largest alternative managers, Benefit Street Partners, Clarion Partners, and Lexington Partners together generated nearly $11 billion of net flows. Multi-asset net flows increased by 66% to $7.8 billion from $4.7 billion in 2022. ° Significant improvement in long-term net outflows in our non-US regions, which turned positive in the second half of the fiscal year. Long-term flows were positive in APAC region in the fiscal year. • Adjusted operating revenues were $6.1 billion, a 5.7% decrease from the prior year. Adjusted performance fees were $382.8 million compared to $513.6 million in the prior year. Despite market challenges, we benefited from a stable adjusted effective fee rate4 over the year of 39.5 bps compared to 38.9 bps in the prior year, primarily due to the full year impact of our acquisition of Lexington and Alcentra. • Adjusted operating expenses were $4.3 billion, an increase of 3% from the prior year. Both adjusted operating revenues and adjusted operating expenses include a full year of Lexington Partners and eleven months of Alcentra. Excluding performance fee-related compensation and the full year impact of Lexington and Alcentra, adjusted operating expenses were down slightly from the prior year, reflecting the firm’s focus on expense discipline and operational efficiencies. • Adjusted operating income was $1.8 billion for the year, a decrease of 21.5% from the prior year primarily due to market impact on our average AUM, and to a lesser degree net outflows. • We strengthened the foundation of our business through disciplined expense management and operational efficiencies. This year, we outsourced the non-US portion of our global transfer agency (“TA”) function, simplifying our business while reducing future capital expenditures. This initiative follows the previously announced outsourcing of our US TA function, fund administration, and certain other technology functions. • Over the course of the year, we returned $870 million to shareholders, an increase of approximately 13% over the prior year, consisting of $614 million in dividends and $256 million in share repurchases. Ending at September 30, 2023, our balance sheet had cash and investments of $6.95 billion after funding the aforementioned dividends and share repurchases, the acquisition of Alcentra and other acquisition-related payments. |
2024 Proxy Statement 37
STRATEGIC INITIATIVES • In fiscal year 2023, made progress on executing our long-term plan to diversify and increase our alternative asset strategies, which continue to be a source of strong investor demand: ° On November 1, 2022, closed our acquisition of Alcentra, a leading European alternative credit manager, doubling our alternative credit AUM to $78.5 billion at the time of close. With $255 billion in AUM, Franklin Templeton is one of the largest alternative managers. ° Alternatives by Franklin Templeton: In 2022, launched a dedicated specialist sales force to further implement the Company’s priority of making alternatives products available to individuals in the wealth management channel in the US. Since launching in 2022 through July 2023, Lexington Partners raised $18.2 billion in secondary private equity and we anticipate approximately 20% to come from the wealth management channel. • One of our strategic priorities has been to increase our scale in key segments of the industry that reflect long-term investor demand. Originated the acquisition of Putnam Investments (“Putnam”) from Great-West Lifeco (“Great-West”). With $142 billion6 in AUM, Putnam adds complementary capabilities across key asset classes with strong long-term track records and will enhance our presence in the insurance and retirement sectors. Specifically, Putnam increases Franklin Templeton’s defined contribution AUM to over $100 billion. The transaction enables us to further increase our investment in retirement and insurance to better serve each and every client in these important segments. • Led and established strategic relationship with The Power group of companies, leaders in the global insurance, retirement, asset management and wealth management sectors. Great-West will make an initial incremental asset allocation of $25 billion to our specialist investment managers within 12 months of closing and become a long-term shareholder in Franklin Resources. The agreement furthers our goal of growing insurance client assets and expands the existing relationship between Franklin Templeton and the Power group of companies with additional allocations expected to be received over the next several years. • Continued to diversify investment vehicles by expanding Separately Management Accounts (SMAs) and Exchange Traded Funds (ETFs) offerings, including launching SMA and ETF variations of our top flag ship products as well as actively management fixed income ETFs to meet client demand. ETFs generated net inflows of $3.9 billion. • Strengthened our ability to offer solutions across investment teams and public and private markets to our clients. Also grew our personalized portfolio solutions through our custom indexing platform (Canvas), which has achieved net inflows each quarter since the platform launched in September 2019 and AUM has more than doubled to $4.8 billion since the acquisition closed. • Progressed on implementing GOE®, our Goals Optimization Engine platform, across a broad array of distribution channels globally. We continue to focus on activating distribution across a variety of channels, such as RIAs, advisor platforms as well as non-traditional firms, including robo-advisors, brokerage/model marketplaces, digital banks, and payment companies. • Recognized as industry leader and Franklin Templeton brand ambassador highlighted in Forbes’ “World’s 100 Most Powerful Women” and “50 Over 50” lists in 2022, Barron’s list of the “100 Most Influential Women in US Finance” for four consecutive years and to Pensions & Investments’ inaugural class of “Influential Women in Institutional Investing” in 2023, as well as Franklin Templeton’s inclusion in P&I’s “Best Places to Work in Money Management”. • Championed Diversity, Equity and Inclusion (DE&I) efforts within the company and our industry. Continued to execute global DE&I strategy to diversify talent at all levels of our firm through expanding recruitment sourcing channels and expanded office of DEI to include regional head of EMEA, among others. Serves on a variety of boards, including the NYSE Board Advisory Council’s diversity initiative, Catalyst board of directors and the CEO Champions for Change initiative. • Announced key senior leadership changes to optimize operating model, including Terrence Murphy assuming the role of EVP and Head of Public Markets on October 1, 2022 and made strategic leadership appointments in Global Distribution in non-US regions, including EMEA and Canada. 1. Strategy composite performance is sourced from Morningstar and measures the percentage of ranked fund AUM in the top two quartiles of their peer groups. Strategy composite AUM measured for the 1-, 3-, 5- and 10-year periods represents 50%, 50%, 49%, and 46%, respectively of the firm’s total AUM as of September 30, 2023. 2. Mutual fund/ETF performance is sourced from Morningstar and measures the percentage of ranked fund AUM in the top two quartiles of their peer groups. Mutual Fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 35%, 35%, 35%, and 33%, respectively of the firm’s total AUM as of September 30, 2023. 3. Excludes approximately $13 billion of AUM in our China joint venture. 4. The adjusted effective fee rate is annualized adjusted investment management fees, excluding performance fees, divided by average AUM for the period. 5. Includes our direct investments in CIPS of $1.0 billion, approximately $300 million of employee-owned and other third-party investments made through partnerships, and approximately $380 million of investments that are subject to long-term repurchase agreements and other financing arrangements. 6. Putnam AUM estimated as of November 30, 2023, and excludes PanAgora AUM, which is not a party to the transaction. 7. Franklin Resources, Inc. will issue 33.3 million shares with 25.9 million shares subject to a five-year lock-up and the remaining shares subject to a 180-day lock-up. |
Franklin Resources 38
 | GREGORY E. JOHNSON Executive Chairman and |
• Provided overall leadership for the Franklin Resources Board and set ethical tone for the Board and the company. • Assumed managing role as Chairman of the Franklin and Templeton fund boards. • Represented the company to shareholders, key clients and government officials, working in partnership with the CEO. • Partnered with the CEO and CFO on the exploration and development of capital market strategies. • Represented Franklin’s investment on the board of Zand Bank in Dubai. • Served as Chairman of the Luxemburg-based SICAV line of funds. Presided over the Board meetings; with investment professionals and the management company, presented on key topics, including performance, organizational, and regulatory matters pertaining to the funds. • Continued to engage with industry leaders, regulators, and policy makers via being an active member of the Board of Governors and Executive Committee of the Investment Company Institute, the national association of U.S. investment companies, as well as its international division, ICI Global. |
 | MATTHEW NICHOLLS Executive Vice President, Chief Financial Officer and Chief Operating Officer, responsible for the firm’s global finance and accounting functions, acquisitions, strategic planning, corporate taxation, risk management, investor relations, corporate real estate, communications, technology, operations, and human resources. |
• Continued focus on expense management keeping overall costs in line with original budget for the year while providing competitive compensation for key talent. • Implemented a transformation project to modernize the finance function, procurement, and vendor management; successfully completed implementation of three major financial systems. • In partnership with CEO, led negotiations and process of key acquisitions: ° Doubled Franklin Templeton’s alternative credit capabilities with the closing of Alcentra, which added $35B of AUM and globalized Benefit Street Partners. ° Established strategic partnership with Power Corporation of Canada, Great-West Lifeco (includes an initial commitment of $25B of AUM from Great-West Lifeco), and Empower, strengthening our presence in the insurance and retirement channels, respectively. ° Oversaw process, structured transaction, and key retention arrangements of the Putnam acquisition; Led integration project management team for key workstreams including Investments, Distribution, and Corporate Functions. • Exceeded FY2023 projections for adjusted operating revenue, adjusted net income, and adjusted EPS. • Managed the firm’s balance sheet to maintain financial flexibility. At fiscal year-end, cash and investments totaled $6.9 billion1 after funding acquisitions and returning $870 million to shareholders through dividends and share repurchases. • Reduced debt by $300M and replaced existing $800M credit facilities ($500M 364-day revolving credit facility and $300M term loan) with an $800M five-year revolving credit facility using a syndicate of nine major banks. Transaction reduced leverage, increased the duration of our additional liquidity, improved ratings profile, and increased net interest income. • Increased risk management resources across the firm focused on enterprise, investment, cyber security, and supplier risk management. • Expanded investor outreach by continuing to execute investor relations program focused on communicating our differentiated business model, growth strategies (organic and M&A), and financial objectives to the investor community. • Optimized global real estate strategy and executed on opportunities to consolidate and monetize excess office space, including consolidation of multiple offices (including SIMs) in New York city. 1. Includes our direct investments in CIPS of $1.0 billion, approximately $300 million of employee-owned and other third-party investments made through partnerships, and approximately $380 million of investments that are subject to long-term repurchase agreements and other financing arrangements. |
2024 Proxy Statement 39
 | TERRENCE MURPHY Executive Vice President, Head of Public Markets, responsible for setting investment strategy and driving organizational growth for the Franklin Templeton Public Markets business. Chief Executive Officer at ClearBridge Investments, responsible for the overall management of the firm, including infrastructure, legal and compliance, business strategy, and sales and client service. |
• Oversaw continued evolution of Public Market Investments leadership to include Royce, FT Investment Solutions, Global ETF & Passive Investments, Franklin Income Investors, Franklin Fixed Income, Templeton Global Macro, and Martin Currie in addition to the FT Equity investment management teams. • Developed framework for integration for Putnam Equity, Putnam Fixed Income, Putnam Global Asset Allocation, Brandywine Global and K2 investment teams. • Led continued improvement of relative strategy composites AUM investment performance outperforming benchmarks over the course of the year. • Managed leadership transitions for multiple investment teams globally with the goal of improved performance and client outcomes. • Drove efforts to focus our investment strategy offerings to refocus on core investment competencies. • Completed restructuring plan and future business state for FT Investment Solutions to streamline business and improve collaboration of FT Investment teams for portfolio modeling capabilities to meet our client’s goals to and continue on our over 20% growth in AUM this year. • Restructured ETF business to include dedicated sales professionals resulting in over a 40% growth in AUM. • Enhanced FT Investment team collaboration of Chief Investment Officers, Risk Managers, Director of Research, and Client Portfolio Managers. • Spearheaded continued evolution of compensation plans across investment teams to align with client outcomes. • Nurtured a culture of diversity and inclusion with the goal of increasing ratios of females and ethnically diverse Investment professionals and senior management. • Continued evolution of incorporating Sustainability factors into the research process to uncover investment opportunities and mitigate risk. |
 | ADAM B. SPECTOR Executive Vice President and Head of Global Distribution, responsible for global retail and institutional distribution, including marketing and product strategy. Managing Partner of Brandywine Global, responsible for the overall management of the firm, including infrastructure, legal and compliance, business strategy, and sales and client service. |
• Evolved sales strategy and client model empowering our clients to unlock the broad range of specialized capabilities and delivery mechanisms offered by Franklin Templeton resulting in: ° Generated fiscal year long-term inflows of over $255 billion and, despite the volatile market environment, improving net flow trends compared to the prior year ° Made good progress on executing non-US regional distribution strategy, generating net flows. ° Successfully executed on US alternatives wealth management strategy increasing alternative assets under management. ° Drove ETF gross and net flows to all-time highs increasing assets under management by > 40%. ° Extended the reach of Canvas®, a leading Custom Indexing solution platform, driving partner firm, net flow, and AUM growth. ° Implemented a framework for strategic partners, securing partnerships with key clients seeking affiliation with a select number of asset managers. • Devised plan to transition Brandywine Global from a fully integrated business model to focusing on investment excellence and specialist sales model. • Continued to demonstrate fiscal responsibility by allocating resources to areas of greatest client impact, while readying our distribution strategy and organization to successfully integrate Putnam. • Reiterated our dedication to DE&I efforts, focusing on increased representation of women and people of color in distribution globally and specifically in senior management and sales positions. |
Franklin Resources 40
5. Our Compensation Decision-Making Process
Compensation decisions are made by our Compensation Committee, considering input from its independent compensation consultant Exequity LLP (“Exequity”), our human resources group, our CEO (with respect to the compensation of other NEOs), and our stockholders.
Role of CEO and Human Resources Group
The Compensation Committee works with members of management, including our CEO, to seek input regarding our executive compensation. Twice a year the CEO evaluates each other NEO and his or her respective business unit’s progress in achieving its goals. In addition, the CEO works with our human resources group to determine the appropriate award amount to recommend for each such NEO based upon such performance. As part of this process, the human resources group conducts and reviews an analysis of competitive compensation by peer companies (those listed below under “Compensation Peer Group”), compares previous year-over-year performance and compensation paid to the USIPNEO, which is compiled into tally sheets reflecting amounts paid in prior years (including a sensitivity analysis with respect to prior equity awards) and analysis of the upcoming realizable compensation to be paid, considers internal pay equity issues and reviews third-party executive compensation surveys related generally to the financial services industry and specifically to the asset management industry. Upon completion of this review process, management presents performance evaluations to the Compensation Committee and the CEO, and the CEO makes a recommendation to the Compensation Committee regarding the appropriate level of incentive compensation to be award to each other NEO.
The Company’s management has engaged McLagan Data & Analytics, an Aon plc company (“McLagan”), a financial services industry compensation consultant, to provide information on peer company compensation and pay trends. The Compensation Committee uses McLagan’s proprietary surveys and market data to analyze the competitiveness of the Company’s executive compensation program and to understand compensation forecasts and trends in the industry.
Role of Exequity
The Compensation Committee is empowered with the following grant date target award amounts: $2.0 millionsole authority to retain and terminate any compensation consulting firm directly assisting it in the evaluation of director or executive compensation. The Compensation Committee also has the sole authority to approve fees and other retention terms for Ms. Johnson; $3.0 millionits consultant.
The Compensation Committee recognizes that it is essential to receive objective advice from compensation consultants and has selected Exequity, and expects to continue to select any compensation consultants, on the basis of all factors relevant to the consultant’s independence including:
| • | the provision of other services to the Company by the consultant’s firm; |
| • | the aggregate fees paid by the Company and fees as a percentage of the total revenue of the consultant’s firm; |
| • | the policies and procedures of the consultant’s firm designed to prevent conflicts of interest; |
| • | any business or personal relationships between the consultant, the consultant’s firm and any Compensation Committee member or executive officer of the Company; and |
| • | whether the consultant holds shares of the Company’s stock. |
Exequity’s role is managed by the Compensation Committee. Throughout the year, the Compensation Committee may ask Exequity to review and comment objectively on management proposals and presentations to the Compensation Committee covering all elements of compensation paid to the NEOs. Exequity also counsels on general market trends and technical developments and the amount and structure of pay for Mr. G. Johnson; $0.35 million for Mr. Tyle; and $1.25 million for Mr. Plafker. For eachthe non-employee directors of the NEOs receiving a 2019 Performance Award, 50%Board. Under the terms of its engagement, Exequity is required to obtain the prior written approval of the valueCompensation Committee before Exequity or any of its affiliates performs any non-executive compensation related services for the Company or its subsidiaries. Exequity is required to report to the Compensation Committee any such services and fees annually and upon the reasonable request of the awardCompensation Committee. There were no such services during fiscal year 2023.
During fiscal year 2023, the Company paid Exequity $8,000.00 in consulting fees directly related to services performed for the Compensation Committee.
2024 Proxy Statement 41
Compensation Timeline
The following illustrates the indicative timeline by which the Compensation Committee determines pay.
Compensation Peer Group
For fiscal year 2023, the compensation peer group approved by the Compensation Committee is contingent on the achievement of Relative Adjusted Margin (the “2019 Relative Adjusted Margin Award”) and 50% is contingent on the Company’s Relative TSR (the “2019 Relative TSR Award”).following:
Subject to the achievement (in whole or in part) of the specified performance levels shown in the table below, the 2019 Relative Adjusted Margin Awards are scheduled to vest in three substantially equal installments following the end of fiscal years 2020, 2021 and 2022, respectively, the New-Hire Relative Margin Award is scheduled to vest in three substantially equal installments following the end of fiscal years 2019, 2020 and 2021, respectively, the 2019 Relative TSR Awards are scheduled to vest following the
| AllianceBernstein Holding L.P. |
| BlackRock, Inc. |
| BNY Mellon Investment Management |
| Federated Hermes, Inc. |
| Goldman Sachs Asset Management L.P. |
| Invesco Ltd. |
| Janus Henderson Group plc |
| J.P. Morgan Asset Management |
| MFS Investment Management |
| Morgan Stanley Investment Management |
| State Street Global Advisors |
| T. Rowe Price Group, Inc. |
| The Vanguard Group, Inc. |
end
Franklin Resources 42
6. Other Compensation Matters
Summary of a three-year performance period covering fiscal years 2020 through 2022,Compensation Practices
Our executive compensation program reflects our commitment to responsible financial and risk management and is exemplified by the New-Hire Relative TSR Award is scheduled to vest following the end of a three-year performance period covering fiscal years 2019 through 2021, subject in each case to the applicable NEO’s continued employment through the date on which the Compensation Committee certifies that the applicable performance measure has been achieved.policies and practices:
As set forth in the table below, the first installment of the 2019 Relative Adjusted Margin Awards vested at 100%, based on achieving Adjusted Relative Margin of 100%. The second installment of the New-Hire Relative Margin Award vested at 50%, based on achieving Relative Margin of 80.4%.
| 2019 Performance Awards and New-Hire Performance Award | ||||||||
| % of Award Eligible to Vest | Performance Period | Performance Level | % Vesting | |||||
| 2019 Relative Adjusted Margin Award | 34% | Fiscal Year 2020 | Relative Adj. Margin ≥ 100% | 100% | ||||
| Relative Adj. Margin ≥ 75% and < 100% | 50% | |||||||
| Relative Adj. Margin < 75% | 0% | |||||||
| 33% | Fiscal Year 2021 | Relative Adj. Margin ≥ 100% | 100% | |||||
| Relative Adj. Margin ≥ 75% and < 100% | 50% | |||||||
| Relative Adj. Margin < 75% | 0% | |||||||
| 33% | Fiscal Year 2022 | Relative Adj. Margin ≥ 100% | 100% | |||||
| Relative Adj. Margin ≥ 75% and < 100% | 50% | |||||||
| Relative Adj. Margin < 75% | 0% | |||||||
| 2019 Relative TSR Award | 100% | Fiscal Years 2020 - 2022 | Top Quartile | 150% | ||||
| 2nd Quartile | 100% | |||||||
| 3rd Quartile | 50% | |||||||
| 4th Quartile | 0% | |||||||
| New-Hire Relative Margin Award | 34% | Fiscal Year 2019 | Relative Margin ≥ 100% | 100% | ||||
| Relative Margin ≥ 75% and < 100% | 50% | |||||||
| Relative Margin < 75% | 0% | |||||||
| 33% | Fiscal Year 2020 | Relative Margin ≥ 100% | 100% | |||||
| Relative Margin ≥ 75% and < 100% | 50% | |||||||
| Relative Margin < 75% | 0% | |||||||
| 33% | Fiscal Year 2021 | Relative Margin ≥ 100% | 100% | |||||
| Relative Margin ≥ 75% and < 100% | 50% | |||||||
| Relative Margin < 75% | 0% | |||||||
| New-Hire Relative TSR Award | 100% | Fiscal Years 2019 - 2021 | Top Quartile | 150% | ||||
| 2nd Quartile | 100% | |||||||
| 3rd Quartile | 50% | |||||||
| 4th Quartile | 0% | |||||||
Performance Awards – Prior YearsIn previous years, 50% of the long-term performance-based equity awards granted to our NEOs generally were based on the achievement of Investment Performance (assets under management, or AUM, in Top 2 Quartiles), with the remaining 50% based on the Company’s Relative TSR.
Vesting of the Investment Performance awards granted in November 2017 (the “2017 Performance Awards”) was based on the achievement of the average investment performance for all assets under management (i.e., investment funds and separate accounts) that are ranked by independent third-party rating agencies (“Investment Performance”) during the three-year performance period ending in fiscal year 2020. To be eligible to vest, the 2017 Investment Performance awards required at least (a) 50% of AUM in the top 2 quartiles to vest at 50% of target levels, (b) 70% of AUM in the top 2 quartiles to vest at 100% of target levels, and (c) 75% of AUM in the top 2 quartiles to vest at 125% of target levels.
As of September 30, 2020, the Company’s three-year Investment Performance resulted in 37.7% of AUM in the top two quartiles. Therefore, no portion of the Investment Performance restricted stock unit awards granted in November 2017 and scheduled to vest on December 18, 2020 (“2017 IP Shares”) vested.
The Relative TSR restricted stock unit awards granted in November 2017 (“2017 TSR Shares”) provide that 25%, 100% or 125% of the award will be eligible to vest if the Company’s three-year TSR ranking was in the third quartile, second quartile or top quartile, respectively. As of September 30, 2020, the
| What We Don’t Do | |||
 Align pay with performance: a significant portion of total compensation for all NEOs is performance-based Grant long-term awards based on meaningful performance measures Maintain clawback policies Require significant stock ownership Limit perquisites Retain an independent consultant to the Compensation Committee Regularly review incentive compensation plans and compensation practices Engage with stockholders regarding compensation practices |  Provide excessive severance benefits Enter into change in control agreements with NEOs Provide excise tax gross-ups Reprice underwater stock options Permit hedging of Company stock Allow pledging of Company stock received as compensation Offer executive-specific retirement plans Pay dividends or dividend equivalents to NEOs on unvested performance shares |
Company’s three-year Relative TSR ranking was in the bottom quartile of the peer group. Therefore, no portion of the 2017 TSR Shares scheduled to vest on December 18, 2020 vested.
The table and graph below compare the amounts of reported fiscal year 2018 total compensation for the incumbent NEOs (as reported for fiscal year 2018 in the “Summary Compensation Table for Fiscal Year 2020” below) and the fiscal year 2017 total compensation realized for fiscal year 2017, after adjusting the reported amounts for forfeitures of the 2017 Performance Awards.
| 2017 Performance Awards | FY2018 Total Compensation | |||||||||||
| (A) | (B) | (C) | (D) | (E) | (F) | |||||||
| Name | Grant Date Fair Value of 2017 Performance Awards ($)(a) | Percentage Vesting of 2017 Performance Awards Based on Actual Performance (%)(b) | Value of | FY2018 Total Compensation (As Reported) ($)(d) | FY2018 Total Compensation (Adjusted to Reflect Forfeitures of 2017 Performance Awards) ($)(e) | Percentage Difference Between Reported and “Realized” FY2018 Total Compensation (%)(f) | ||||||
| Jennifer M. Johnson | 2,370,000 | 0% | 2,370,000 | 7,718,262 | 5,348,262 | (31%) | ||||||
| Gregory E. Johnson | 2,370,000 | 0% | 2,370,000 | 9,467,461 | 7,097,461 | (25%) | ||||||
| Craig S. Tyle | 237,000 | 0% | 237,000 | 2,058,174 | 1,821,174 | (12%) | ||||||
| Jed A. Plafker | 925,100 | 50% | 462,550 | 3,757,570 | 3,295,020 | (12%) | ||||||
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* Please refer to the discussion above under the heading “Long-term Incentive and Retention Compensation – Performance Awards – Prior Years,” including the table (and associated footnotes) following such discussion for more detail regarding the figures in the graph above.
Restricted Stock Unit Retention AwardsIn February 2020, the Committee approved the issuance of time-based restricted stock unit awards for two executive officers, including Mr. Plafker, in connection with the Company’s employee retention efforts during fiscal year 2020. Mr. Plafker received restricted stock units with a value of $153,293 on the date of grant, 50% of which vest on each of December 1, 2020 and December 1, 2021.
Benefits and Perquisites
As a general practice, we do not provide material personal benefits and provide only limited perquisites to the NEOs that are not provided to other employees. All executive officers are eligible to receive medical, life and disability insurance coverage, participate in the Company’s 401(k) plan and receive other corporate benefits available to most of the Company’s employees, consistent with the terms of the applicable plans and policies. In addition, certain of our NEOs may use the Company’s aircraft for personal reasons.
Termination/Change in Control Matters
Our NEOs are employed on an “at will” basis. The CompanyWe do not have a severance policy as a general rule and do not enter into change of control agreements. However, from time to time we may provideconsider severance on a case-by-case basis as approved by the Compensation Committee in its discretion.special situations. Except as needed in special circumstances such as during periods of transition, or when we hire new executive officers, we generally do not have any commitments to provide our NEOs with post-employment termination benefits.
As part of Mr. Nicholls’ compensation package awarded in 2019, we determined it was necessary to provide him with severance protections for a two-year period. Pursuant to his offer letter, if Mr. Nicholls is terminated by the Company without “cause” during the first two years of his employment, subject to his timely execution and non-revocation of a release of claims, he will be entitled to receive a lump sum payment equal to the pro rata amounts of (1) his annual base salary and guaranteed annual bonus opportunity of $2.6 million for fiscal years 2019 and 2020, and (2) the unvested portion of his New-Hire RSA, in each case, to the extent unpaid as of the termination date. After the second anniversary of his date of hire, Mr. Nicholls is not entitled to any severance benefits under his offer letter.
We have not entered into any agreement with any NEO that provides for additional payments or benefits solely on account of a change in control of the Company. Our only change in control provisions are foundincluded in existing compensation plans andthat apply to all participants in those plans.
Tax Considerations
Stock Ownership Policy
For taxableThe Company believes that a significant ownership interest by certain senior officers tends to align the interests of members of management of the Company with the Company’s stockholders and strengthens the link between long-term Company performance and executive compensation. The following senior officers of the Company are expected to own shares of common stock of the
2024 Proxy Statement 43
Company with a value equal to a specific multiple of such senior officer’s base salary, as indicated in the table below, by five years from when he or she first assumed the particular senior officer position for which stock ownership is expected:
| Title | Market Value of Shares Owned as a Multiple of Base Salary | |
| Executive Chairman | 5X | |
| Vice Chairman | 5X | |
| Chief Executive Officer | 5X | |
| President | 4X | |
| Executive Vice President | 4X | |
| Senior Vice President | 3X | |
| Chief Accounting Officer | 3X |
Both direct and certain indirect forms of ownership are recognized in achieving these guidelines, including shares owned outright, restricted stock, restricted stock units, 401(k) funds invested in shares of the Company’s common stock, and funds deemed invested in shares of the Company’s common stock under a deferred compensation plan. Shares of the Company’s common stock held by immediate family members (which includes an executive officer’s spouse, children and parents) or entities controlled by an executive officer may be considered holdings of the executive officer for purposes of the guidelines only and not as an admission of beneficial ownership for any other purpose. As of December 21, 2023, all officers were in compliance with these guidelines.
Clawback Practices
The Company’s general employee compensation clawback practices provide for recovery of compensation amounts (i) in connection with fraud or a breach of securities law by an executive officer or (ii) when (A) the Company issues a restatement of financial results to correct a material error; (B) the Compensation Committee determines, in good faith, that a Participant’s fraud or willful misconduct was a significant contributing factor to the need to issue such restatement; and (C) some or all of an award awarded to that executive officer prior to January 1, 2018, Section 162(m)such restatement and/or shares of the Code (“Section 162(m)”) generally limitedCompany’s common stock or mutual fund shares that were awarded and/ or other property earned by the Participant prior to $1 millionsuch restatement would not have been awarded and/or earned, as applicable, based upon the amount that a publicly traded corporation, such as the Company, could deduct from its federal tax returnrestated financial results.
In addition, effective for compensation paid in any single tax year to its chief executive officer and certain other named executive officers (“covered employees”). In previous years, Section 162(m) provided that compensation which qualified as “performance-based” was excluded from the $1 million per covered employee limit if, among other requirements, the compensation was payable only upon attainment of pre-established, objective performance goals under a plan approved by our stockholders.
The Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, made significant revisions to Section 162(m). Effectiveawarded for taxable yearsperiods beginning on or after JanuaryOctober 1, 2018, it repealed2023, the performance-based exception, revisedBoard adopted an Executive Compensation Clawback Policy (“Clawback Policy”). The Clawback Policy provides for the definitionmandatory recovery of covered employees to include any individualerroneously awarded incentive-based compensation following accounting restatements from persons who served as the chiefan executive officer or chief financial officerof the Company at any time during the taxable year,performance period for such incentive-based compensation and provides that oncewho received such compensation during the three fiscal years preceding the date on which the Company is required to prepare an individualaccounting restatement. The compensation to be recovered is considered a covered employee for any taxable year beginning after December 31, 2016, he or she will be considered a covered employee for all future years, including following any termination of employment. As a result, compensation paid to covered employeesthe amount in excess of $1 million generallywhat would have been paid based on the restated results. Recovery will be nondeductible, regardless ofrequired on a “no fault” basis, without regard to whether it is performance-based. any misconduct occurred and without regard to whether an executive officer was responsible for the erroneous financial statements.
Prohibition Against Certain Hedging Transactions
Pursuant to rules under the Tax CutsCompany’s Code of Ethics and Jobs Act, the deduction limitation described above will not apply to compensation arrangements in place pursuant to a written binding contract that was in effect on November 2, 2017, if itBusiness Conduct, which is not materially modified after that date. To the extent applicable to our existing contractsall employees, temporary employees, directors and awards, the Compensation Committee may avail itself of the “grandfathering” provisions of the rules.
In designing our executive compensation program, the Compensation Committee considers a variety of factors. In making its executive compensation decisions, the Compensation Committee believes, however, that it is important to retain maximum flexibility in designing compensation programs that are in the best interestsofficers of the Company and its stockholders even though some compensation maysubsidiaries and affiliates, short sales of securities, including “short sales against the box” (i.e., a short sale by the holder of a long position in the same stock) of securities issued by the Company, and securities issued by any closed-end fund sponsored or advised by the Company, are prohibited. This prohibition also applies to effecting economically equivalent transactions, including, but not be deductible.
We do not provide any executive officer, including any NEO, with any excise tax “gross-up”limited to, purchasing and selling call or put options and swap transactions or other reimbursement payment forderivatives that would result in a net short exposure to the Company or any tax liability that heclosed-end fund sponsored or she might owe as a resultadvised by the Company.
Prohibition Against Pledging
Pursuant to the Company’s Code of Ethics and Business Conduct, unless otherwise previously approved by the application of Sections 280G or 4999 of the Code. Sections 280GCompensation Committee, directors and 4999 of the Code provide that executive officers certain highly-compensated employees and service providers who hold significant equity interests mayare prohibited from directly or indirectly pledging, hypothecating or otherwise encumbering securities issued to them by the Company as collateral for indebtedness. This prohibition includes, but is not limited to, holding such securities in a margin account that could cause securities issued by the Company to be subject to an excise tax if they receive paymentsa margin call or benefits in connection withserve as collateral for a change in control that exceed certain prescribed limits, and that the Company, or a successor, may forfeit a deduction on the amounts subject to this additional tax. Section 409A of the Code also imposes additional significant taxes and penalties on the individual if an executive officer, director or other service provider is entitled to “deferred compensation” that does not comply with the requirements of Section 409A of the Code. We have structured deferred compensation in a manner intended to comply with or be exempt from Section 409A of the Code, and the regulations and other guidance promulgated thereunder.
Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under themargin loan. Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate filings made by us under those statutes, the following report shall not be deemed to be “soliciting material,” or to be incorporated by reference into any prior filings or future filings madeissued by the Company under those statutes.that were not received as compensation are not subject to the prohibition as long as the holder of such securities remains in compliance with applicable Stock Ownership Guidelines. If any person has subject securities issued by the Company pledged as collateral or held in a margin account when such person becomes a director or executive officer of the Company, the pledge must be released within one year from the date the person became a director or executive officer.
Franklin Resources 44
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. Based on this review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.2023.
Respectfully Submitted:
Compensation CommitteeMark C. Pigott (Chair)Peter K. BarkerLaura Stein*
COMPENSATION COMMITTEE
John Y. Kim
Karen M. King
John W. Thiel
Seth H. Waugh (Chair)
* Ms. Stein was appointed as a member of the Compensation Committee effective February 11, 2020.Geoffrey Y. Yang
2024 Proxy Statement 45
Executive Compensation
Summary Compensation Table for Fiscal Year 20202023
The following table provides compensation information for the NEOs for the fiscal years ended September 30, 2020, 20192023, 2022 and 2018.2021.
| Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||
| Jennifer M. Johnson President and Chief Executive Officer | 2020 | 630,000 | 1,000,000 | 4,135,000 | 3,025,000 | 24,782 | 8,814,782 | |||||||
| 2019 | 602,308 | — | 4,640,000 | 2,750,000 | 21,174 | 8,013,482 | ||||||||
| 2018 | 600,000 | — | 4,220,000 | 2,850,000 | 48,262 | 7,718,262 | ||||||||
| Matthew Nicholls(6) Executive Vice President and Chief Financial Officer | 2020 | 479,365 | 1,000,000 | 1,150,000 | 1,650,000 | 251,055 | 4,530,420 | |||||||
| 2019 | 214,038 | 1,450,000 | 1,903,233 | — | 93,643 | 3,660,914 | ||||||||
| Gregory E. Johnson Executive Chairman and Chairman of the Board | 2020 | 613,664 | 750,000 | 5,377,500 | 2,312,500 | 99,146 | 9,152,810 | |||||||
| 2019 | 783,133 | — | 6,398,500 | 3,150,000 | 118,710 | 10,450,343 | ||||||||
| 2018 | 780,132 | — | 5,320,000 | 3,250,000 | 117,329 | 9,467,461 | ||||||||
| Craig S. Tyle Executive Vice President and General Counsel | 2020 | 479,365 | 300,000 | 794,875 | 762,500 | 25,752 | 2,362,492 | |||||||
| 2019 | 527,019 | — | 878,250 | 800,000 | 21,423 | 2,226,692 | ||||||||
| 2018 | 525,000 | — | 699,500 | 812,500 | 21,174 | 2,058,174 | ||||||||
| Jed A. Plafker Executive Vice President | 2020 | 475,615 | 500,000 | 2,306,418 | 1,150,000 | 17,733 | 4,449,766 | |||||||
| 2019 | 501,923 | — | 2,100,000 | 1,400,000 | 15,405 | 4,017,328 | ||||||||
| 2018 | 492,308 | — | 1,850,100 | 1,400,000 | 15,162 | 3,757,570 |
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | |||||||
| Jennifer M. Johnson President and Chief Executive Officer | 2023 | 750,000 | — | 11,082,400 | 3,650,000 | 211,827 | 15,694,227 | |||||||
| 2022 | 752,885 | — | 11,158,859 | 3,650,000 | 173,255 | 15,734,998 | ||||||||
| 2021 | 752,885 | — | 5,380,031 | 3,650,000 | 79,245 | 9,862,161 | ||||||||
| Matthew Nicholls Executive Vice President, Chief Financial Officer and Chief Operating Officer | 2023 | 600,000 | — | 5,939,544 | 3,000,000 | 103,437 | 9,642,982 | |||||||
| 2022 | 591,924 | — | 5,221,849 | 3,025,000 | 177,307 | 9,016,080 | ||||||||
| 2021 | 527,019 | — | 2,013,774 | 2,887,500 | 204,736 | 5,633,029 | ||||||||
| Gregory E. Johnson Executive Chairman and Chairman of the Board | 2023 | 600,000 | — | 1,385,777 | 1,100,000 | 134,230 | 3,220,008 | |||||||
| 2022 | 602,308 | — | 1,676,263 | 1,150,000 | 219,882 | 3,648,453 | ||||||||
| 2021 | 602,308 | — | 3,340,023 | 1,150,000 | 182,122 | 5,274,453 | ||||||||
| Terrence Murphy(4) Executive Vice President | 2023 | 509,615 | 11,798,674 | 933,771 | 2,801,250 | 41,744 | 16,085,054 | |||||||
| Adam B. Spector(5) Executive Vice President | 2023 | 525,000 | — | 3,035,824 | 3,547,500 | 68,067 | 7,176,392 | |||||||
| 2022 | 527,020 | — | 2,891,215 | 4,988,415 | 31,988 | 8,438,638 | ||||||||
| 2021 | 527,019 | 678,500 | — | 6,900,000 | 29,419 | 8,134,988 |
| Stock award values represent the aggregate grant date fair value for all grants made during each fiscal year in accordance with the requirements of ASC 718 in the specified year for grants made in such | |
| Represents the cash portion of awards earned under the AIP for |
| For each of the NEOs, amounts include (a) matching contributions made by the Company under its tax-qualified defined contribution 401(k) plan in fiscal year | |
| Our investment offerings may be provided to NEOs without charging management or performance fees consistent with the terms offered to other employees who meet the applicable requirements. As of September 30, 2023, Ms. J. Johnson had investments of $1,009,082 in these funds, Mr. Nicholls had investments of $392,165 in these funds, Mr. G. Johnson | |
| Amounts for Ms. J. Johnson and Mr. G. Johnson include $164,848 and $114,318, respectively, for personal use of the Company’s aircraft in fiscal year |
Franklin Resources 46
| The Conklin rates also do not include depreciation or any tax benefit reductions due to personal use. The personal use amount includes all nautical miles flown for positioning flights necessary to undertake a personal flight and to return the aircraft to its next scheduled location. In addition, from time to time, family and guests of an NEO may accompany the NEO on business travel on Company aircraft. For those flights, we allocate incremental costs of the total catering costs incurred on the flights, which are included in the reported amounts above. | |
| Amount for Mr. Nicholls includes | |
| (4) | Mr. |
| (5) | A portion of Mr. Spector’s incentive compensation was paid in connection with his role as managing partner of the Company’s Brandywine Global SIM. |
Grants of Plan-Based Awards for Fiscal Year 20202023
The following table presents information regarding grants of plan-based awards to the NEOs during the fiscal year ended September 30, 2020.2023.
| Plan | Grant Date | Date of Compensation Committee Action | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(6) | |||||||||||||||
| Name | Target ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||
| Jennifer M. Johnson | AIP | (2) | — | 3,025,000 | |||||||||||||||||
| KEIP | (3) | 11/1/2019 | 87,344 | 2,450,000 | |||||||||||||||||
| USIP | (4) | 11/1/2019 | 35,651 | 71,302 | 89,128 | 1,685,000 | |||||||||||||||
| Matthew Nicholls | AIP | (2) | 1,650,000 | ||||||||||||||||||
| KEIP | (3) | 11/1/2019 | 40,999 | 1,150,000 | |||||||||||||||||
| Gregory E. Johnson | AIP | (2) | — | 2,312,500 | |||||||||||||||||
| KEIP | (3) | 11/1/2019 | 101,605 | 2,850,000 | |||||||||||||||||
| USIP | (4) | 11/1/2019 | 53,476 | 106,952 | 133,690 | 2,527,500 | |||||||||||||||
| Craig S. Tyle | AIP | (2) | — | 762,500 | |||||||||||||||||
| KEIP | (3) | 11/1/2019 | 17,826 | 500,000 | |||||||||||||||||
| USIP | (4) | 11/1/2019 | 6,239 | 12,478 | 15,597 | 294,875 | |||||||||||||||
| Jed A. Plafker | AIP | (2) | — | 1,150,000 | |||||||||||||||||
| KEIP | (3) | 11/1/2019 | 39,216 | 1,100,000 | |||||||||||||||||
| USIP | (4) | 11/1/2019 | 22,282 | 44,564 | 55,705 | 1,053,125 | |||||||||||||||
| USIP | (5) | 2/10/2020 | 2/10/2020 | 5,988 | 153,293 | ||||||||||||||||
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of | Grant Date Fair Value of Stock and Option | |||||||||||||
| Name | Grant Date | Target ($) | Threshold (#) | Target (#) | Maximum (#) | Stock or Units (#) | Awards ($)(6) | |||||||||
| Jennifer M. Johnson | — | 3,650,000 | (2) | — | — | — | — | — | ||||||||
| 11/3/2022 | (3) | — | — | — | — | 338,984 | 7,600,021 | |||||||||
| 11/3/2022 | (5) | — | 72,480 | 144,960 | 181,200 | — | 3,482,378 | |||||||||
| Matthew Nicholls | — | 3,000,000 | (2) | — | — | — | — | — | ||||||||
| 11/3/2022 | (3) | — | — | — | — | 121,544 | 2,725,016 | |||||||||
| 11/3/2022 | (5) | — | 66,905 | 133,810 | — | 167,263 | 3,214,528 | |||||||||
| Gregory E. Johnson | — | 1,100,000 | (2) | — | — | — | — | — | ||||||||
| 11/3/2022 | (3) | — | — | — | — | 37,913 | 850,009 | |||||||||
| 11/3/2022 | (5) | — | 11,151 | 22,302 | 27,878 | — | 535,768 | |||||||||
| Terrence J. Murphy | — | 2,801,250 | (2) | — | — | — | — | — | ||||||||
| 11/3/2022 | (4) | — | — | — | — | 41,649 | 933,771 | |||||||||
| — | — | — | — | — | — | — | ||||||||||
| Adam B. Spector | — | 3,547,500 | (2) | — | — | — | — | — | ||||||||
| 11/3/2022 | (3) | — | — | — | — | 78,056 | 1,750,016 | |||||||||
| 11/3/2022 | (5) | — | 26,762 | 53,524 | 66,905 | — | 1,285,809 | |||||||||
| (1) | Incentive awards |
| (2) | Amounts represent the cash bonuses awarded to each named executive officer for fiscal year |
| (3) | Represents the equity portion of awards |
| (4) | LTA awards granted are subject to service – based vesting; one-fourth of the award vested on August 31, 2023, and the remaining three fourths of the award will vest in three substantially equal installments on August 31, 2024, August 31, 2025 and end on August 31, 2026 in each case, subject to the NEO’s continuous employment with |
2024 Proxy Statement 47
| (5) | Amounts represent performance-based long-term incentive awards under the USIP granted on November |
| (6) | Determined pursuant to ASC 718. For equity awards that are subject to market conditions related to total shareholder return, the grant date fair market value reported is based upon the probable outcome of such conditions using a Monte Carlo valuation method. |
Please refer to the “Compensation Discussion and Analysis” above for an explanation of salary and bonus in proportion to total compensation and see amounts disclosed in the “Summary Compensation Table for Fiscal Year 2020” and “Grants of Plan-Based Awards for Fiscal Year 2020” table.
| Please refer to the “Compensation Discussion and Analysis” above for an explanation of the relative proportion of salary and bonus to total compensation and see amounts disclosed in the “Summary Compensation Table for Fiscal Year 2023”. | |
Franklin Resources 48
Outstanding Equity Awards at 20202023 Fiscal Year-End
The following table presents information concerning the number and value of outstanding stock awards held by the NEOs as of September 30, 2020. As of September 30, 2020, none of the NEOs had any stock options outstanding.2023.
| Stock Awards | ||||||||
| Name | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | ||||
| Jennifer M. Johnson | 85,916 | 1,748,391 | 247,343 | 5,033,430 | ||||
| Matthew Nicholls | 56,709 | 1,154,028 | 11,936 | 242,898 | ||||
| Gregory E. Johnson | 99,766 | 2,030,238 | 337,777 | 6,873,762 | ||||
| Craig S. Tyle | 17,448 | 355,067 | 36,715 | 747,150 | ||||
| Jed A. Plafker | 40,921 | 832,742 | 93,364 | 1,899,957 | ||||
| Stock Awards | ||||||||
| Name | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | ||||
| Jennifer M. Johnson | 299,203 | 7,354,410 | 408,747 | 10,047,001 | ||||
| Matthew Nicholls | 105,162 | 2,584,882 | 277,195 | 6,813,453 | ||||
| Gregory E. Johnson | 33,203 | 816,130 | 111,340 | 2,736,737 | ||||
| Terrence J Murphy | 31,236 | 767,781 | — | — | ||||
| Adam B. Spector | 69,291 | 1,703,173 | 97,216 | 2,389,569 | ||||
| (1) | Consists of shares of restricted stock that are scheduled to vest as follows: |
| Name | Total Unvested Shares | Vesting Date | |||
| Jennifer M. Johnson | Vests on 8/31/ | ||||
| Vests in equal parts on 8/31/ | |||||
| Matthew Nicholls | |||||
| Vest on 8/31/2024 | |||||
| 81,029 | Vests in equal parts on 8/31/ | ||||
| Gregory E. Johnson | Vest on 8/31/ | ||||
| Vests in equal parts on 8/31/ | |||||
| Vests in equal parts on 8/31/ | |||||
| Adam B. Spector | Vests on 8/31/ | ||||
| Vests in equal parts on 8/31/ |
| (2) | Calculated by multiplying unvested shares by | ||||
| (3) | Reflects performance-based restricted stock units or restricted stock awards that vest as follows: | ||||
| Name | Total Unvested Shares | Vesting Dates Subject to Achievement of Performance Criteria | |||||||
| Jennifer M. Johnson | 12/1/ | ||||||||
| 12/ | |||||||||
| 12/1/ | |||||||||
| Matthew Nicholls | 12/1/ | ||||||||
| 12/1/ | |||||||||
| 12/1/ | |||||||||
| Gregory E. Johnson | 12/1/ | ||||||||
| 12/ | |||||||||
| 12/1/ | |||||||||
| Adam B. Spector | |||||||||
| 12/1/ | |||||||||
| 12/ | |||||||||
| 12/1/ | |||||||||
| (4) | |||||||||
| Reflects performance shares that may be earned and vested at the end of the applicable performance period based on results. Please refer to the “Compensation Discussion and Analysis” above and in prior years for an explanation of the structure |
2024 Proxy Statement 49
Option Exercises and Stock Vested for Fiscal Year 20202023
The following table presents information regarding stock awards that vested for the NEOs during the fiscal year ended September 30, 2020.2023. There were no stock options outstanding or exercised during fiscal year 2020.2023.
| Stock Awards | ||||
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||
| Jennifer M. Johnson | 82,071 | 1,798,232 | ||
| Matthew Nicholls | 30,193 | 742,127 | ||
| Gregory E. Johnson | 106,796 | 2,364,324 | ||
| Craig S. Tyle | 17,011 | 370,475 | ||
| Jed A. Plafker | 61,390 | 1,499,212 | ||
| Stock Awards | |||
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | |
| Jennifer M. Johnson | 287,473 | 7,717,344 | |
| Matthew Nicholls | 105,789 | 2,838,943 | |
| Gregory E. Johnson | 95,424 | 2,574,066 | |
| Terrence J. Murphy | 10,413 | 278,444 | |
| Adam B. Spector | 113,831 | 3,211,095 | |
| (1) | The value of each stock award is calculated by multiplying the closing price of the Company’s common stock on the NYSE on the date of vesting by the number of shares that vested on such date. |
Non-Qualified Deferred Compensation
The Franklin Templeton, Inc. Deferred Compensation Fund Plan
The Franklin Templeton, Inc. Deferred Compensation fund plan was effective November 16, 2021. Under the terms of the plan, participants are entitled to elect up to $500,000 in annual salary and certain bonuses and commissions on a pre-tax basis. Amounts deferred under the plan are deemed invested in “phantom” shares of historic Franklin Templeton a sponsored mutual funds (“Franklin Funds”) or specified Index Funds currently offered in the Franklin Templeton 401(k) Plan. Earnings are accrued as they would be if investing directly in the Franklin and/or Index Funds and include market appreciation and dividends. Amounts deferred under our Deferred Compensation Fund Plan, including any earnings on those contributions, are fully vested at all times and are not subject to forfeiture. Participants must elect, at the time they decide to defer compensation, whether: (1) to take an in service distribution or distribution upon termination; (2) to receive their future distributions from the plan in (a) a single lump sum or (b) five equal annual installments (available only if the total account balance is greater than $17,500); and (3) to have the distributions begin immediately after termination or one year from the date of termination. Participants will receive distributions in cash, except for in-service elections, which distributions may be made, in Franklin Templeton’s sole discretion, in shares of Franklin funds, Index funds or cash. In addition, Franklin Templeton will distribute account balances to participants in connection with a change of control if the plan and all substantially similar agreements are terminated with respect to the participants affected by the change of control. For purposes of our Deferred Compensation Fund Plan, a “change in control event” will occur upon a change in (1) ownership within the meaning of §1.409A-3(i)(5) (v) of regulations promulgated by the U.S. Department of the Treasury, (2) effective control within the meaning of §1.409A-3(i)(5)(vi) of the regulations, or (3) ownership of assets within the meaning of §1.409A-3(i)(5)(vii) of the regulations.
The Legg Mason, Inc. Deferred Compensation Fund Plan, a legacy deferred compensation plan acquired by Franklin Templeton on August 1, 2020, in connection with its acquisition of Legg Mason, Inc., is a non-qualified deferred compensation plan. As of January 1, 2021 deferrals were no longer accepted into the plan. This plan was available only to a select group of employees based on responsibilities and compensation levels. Under the terms of the plan, participants were entitled to elect up to $500,000 in annual salary and certain bonuses and commissions on a pre-tax basis. Amounts deferred under the plan are deemed invested in “phantom” shares of historic Legg Mason sponsored mutual funds (“Legg Mason Funds”). Earnings are accrued as they would be if investing directly in the Legg Mason Funds and include market appreciation and dividends. Amounts deferred under our Deferred Compensation Fund Plan, including any earnings on those contributions, are fully vested at all times and are not subject to forfeiture. Participants must elect, at the time they decide to defer compensation, whether: (1) to take an in service distribution or distribution upon termination; (2) to receive their future distributions from the plan in (a) a single lump sum or (b) three equal annual installments (available only if the total account balance is greater than $17,500); and (3) to have the distributions begin immediately after termination or one year from the date of termination. Participants will receive distributions in cash, except for in-service elections, which distributions may be made, in Franklin Templeton’s sole discretion, in shares of Legg Mason Funds or cash. In addition, Franklin Templeton will distribute account balances to participants in connection with a change of control if the plan and all substantially similar agreements are terminated with respect to the participants affected by the change of control. For purposes of
Franklin Resources 50
Tableour Deferred Compensation Fund Plan, a “change in control event” will occur upon a change in (1) ownership within the meaning of Contents§1.409A-3(i)(5) (v) of regulations promulgated by the U.S. Department of the Treasury, (2) effective control within the meaning of §1.409A-3(i)(5)(vi) of the regulations, or (3) ownership of assets within the meaning of §1.409A-3(i)(5)(vii) of the regulations. The following table provides information about non-qualified deferred compensation plan transactions and balances during fiscal year 2023 by the following named executive officer:
| Name | Plan | Beginning Balance at Beginning of FY | Executive Contributions in Last FY | Aggregate Earnings in Last FY(1) | Aggregate Balance at Last FYE(2) | |||||
| Jennifer M. Johnson | Franklin Templeton Deferred Compensation Fund Plan | — | 500,000 | 18,597 | 518,597 | |||||
| Adam B. Spector | Franklin Templeton Deferred Compensation Fund Plan | 182,413 | 262,500 | 13,355 | 458,269 | |||||
| Legg Mason Deferred Compensation Fund Plan | 351,458 | — | 14,627 | 366,085 |
| (1) | Aggregate earnings are calculated by subtracting the value of the named executive officer’s account balances at October 1, 2022 and the executive and the Company contributions made during fiscal year 2023 from the value of the officer’s account balances at September 30, 2023. |
| (2) | Aggregate balance under the Deferred Compensation Fund Plan is calculated by multiplying the deferred fund share account balance by the closing net asset value of the applicable Franklin Templeton proprietary funds on September 29, 2023. Distributions from the Deferred Compensation Fund Plan are made in either cash or shares of Franklin Templeton proprietary funds. |
Potential Payments Upon Termination or Change in Control
Except as needed in special circumstances, such as during periods of transition or when we hire new executive officers, we generally do not provide our NEOs with agreements providing for severance benefits after their employment with us has ended or in connection with a change in control. As described in the “Compensation Discussion and Analysis” above, in connection with the appointment of Mr. Nicholls, our Chief Financial Officer (“CFO”), we entered into an agreement providing him with certain termination benefits.
If Mr. Nicholls is terminated by the Company without “cause” during the first two years of his employment, subject to his timely execution and non-revocation of a release of claims, he will be entitled to receive certain severance benefits, as described under “Compensation Discussion and Analysis—Termination/Change in Control Matters” above. These severance protections expire after the second anniversary of his date of hire. For purposes of Mr. Nicholls’ offer letter, “cause” generally is defined as his (a) failure or refusal to comply with his material obligations as CFO or Company policies; (b) commission of a material act of misappropriation, misrepresentation, breach of fiduciary duty, fraud or other willful misconduct or gross negligence with regard to the Company or its assets, customers or employees; (c) violation of any law or regulation; (d) conviction of, or nolo contendere plea with regard to, a felony crime (other than a traffic violation) or any other crime involving alcohol, drugs, or moral turpitude; and (e) commission of any act of harassment in violation of any applicable law or Company policy.
As described under “Compensation Discussion and Analysis” above, the NEOs have typically received incentive awards payable in the form of cash under the Company’s AIP and the KEIP (through the end of fiscal year 2019), and grants of restricted stock and restricted stock units under the USIP.units. In addition, the NEOs have typically received performance-based long-term incentive awards that are granted under the USIP.awards. Except as set forth below or as otherwise determined by the Compensation Committee, unvested awards granted to an NEO under such plans are forfeited upon voluntary or involuntary termination of an NEO’s employment with us.
AMENDED AND RESTATED ANNUAL INCENTIVE COMPENSATION PLAN
Amended and Restated Annual Incentive Compensation Plan
Currently, the AIP generally provides that a participant must be employed on the payment date of cash and grant date of equity awards to receive any amounts awarded under the AIP unless expressly set forth in the participant’s award agreement. In the event the employment of a participant who received a performance award under the AIP terminates for any reason, the Compensation Committee or management, as applicable, may, in its discretion, determine to pay athe participant a prorated award under the plan based upon performance for the time served during the relevant performance period, the full amount of any award that would have been paid had the participant remained employed through the entire performance period or any other amount. Certain equity award agreements evidencing restricted stock or restricted stock unit awards granted as part of an incentive award under the AIP provide that if a participant dies or terminates employment with us due to disability, the unvested portion of the equity award will become fully vested as of the date of death or termination due to disability.
The AIP does not expressly provide for any change in control payments.
2014 KEY EXECUTIVE INCENTIVE COMPENSATION PLAN
Key Executive Incentive Compensation Plan
Until the end of fiscal year 2019, the Company made certain long-term incentive and retention awards to executive officers under the 2014 Key Executive Incentive Compensation Plan (the “KEIP”),KEIP, a sub-plan under the AIP. Consequently, the provisions described above regarding the AIP apply to grants previously made under the KEIP. In addition, the KEIP includes separate terms regarding termination payments which remain applicable for awards outstanding under the KEIP. The termination provisions are summarized below.
2024 Proxy Statement 51
If the employment of a participant in the KEIP terminates prior to the end of the applicable performancemeasurement period due to death, disability or retirement, such participant is generally entitled to receive payment of any award under the plan with respect to the fiscal year of such termination. In addition, if a participant terminates employment with the Company prior to the end of the applicable performancemeasurement period for any reason other than death, disability or retirement, any award under the plan with respect to the fiscal year of such termination generally will be reduced proportionately based on the date of termination. To be eligible to receive a payment upon retirement from the Company, the participant must retire after reaching age 55 and have at least 10 years of service with the Company. In all events, the Compensation Committee, in its sole discretion, may eliminate or reduce any such awards under the KEIP, including if a participant terminates employment as described above.
The KEIP does not expressly provide for any change in control payments.
Long-term performance-based and other incentive awards are granted to all eligible employees, including our NEOs, under the USIP. The award agreements for NEOs generally provide that if an NEO’s employment with the Company terminates for any reason prior to the applicable vesting date, the NEO will forfeit the unvested portion of the award. However, as described above, certain equity award agreements evidencing restricted stock or restricted stock unit awards granted as part of an incentive award under the AIP provide that if a participant dies or terminates employment with us due to disability, the unvested portion of the equity award will become fully vested as of the date of death or termination due to disability. Certain other equity award agreements provide that vesting may be accelerated 2002
Universal Stock Incentive PlanUNIVERSAL STOCK INCENTIVE PLAN(asas determined by an executive officer, in his or her sole discretion, in accordance with Company policies),policies, in whole or in part, if a participant dies or terminates employment with us due to disability.
The USIP provides that in the event of the proposed dissolution or liquidation of the Company or of a merger or corporate combination (a “change in control transaction”) in which the successor corporation does not agree to assume outstanding awards or substitute equivalent awards, the Compensation Committee will make a determination as to the equitable treatment of outstanding awards under the USIP and must notify participants of such treatment no later than 10 days prior to the closing of such proposed change in control transaction. Outstanding option awards, to the extent not previously exercised, and other stock-based awards (restricted stock and RSUs) that are not assumed or substituted in any change in control transaction will terminate immediately prior to the consummation of such proposed change in control transaction.
A proposal to amend the USIP is included in this Proxy Statement as Proposal No. 3.
Compensation Committee Policy & Practice
COMPENSATION COMMITTEE POLICY & PRACTICE
Notwithstanding the discussion above, pursuant to the terms of the KEIP and the AIP,applicable plans, the Compensation Committee, in its sole discretion, generally may eliminate or reduce any unvested awards otherwise payable to a participant following termination of employment. In addition, the Compensation Committee has the authority to pay the full award amount to a participant whose award would have otherwise been reduced or forfeited following termination of employment or a change in control. The Compensation Committee also has the discretion under the USIP to determine the terms, conditions, performance criteria, restrictions, and other provisions of awards made under the USIP.awards.
As a general policy matter, the Compensation Committee has limited the payment of unvested awards under the KEIP, the AIP and the USIP following a participant’s termination of employment. We expect the Compensation Committee would act similarly upon a change in control transaction. The treatment of unvested awards, if any, held by the NEOs upon their termination of employment or upon a change in control transaction would be determined on a case-by-case basis by the Compensation Committee.
ESTIMATED POTENTIAL PAYMENTS UPON TERMINATION
Estimated Potential Payments Upon Termination
Because of the Compensation Committee’s general policy of limiting payments to the NEOs following termination of employment and its authority to reduce or increase the payments otherwise available under awards, the amounts payable to the NEOs following termination of employment are not determinable. The following table sets forth information regarding payments to each of our NEOs in the event of a termination of employment on September 30, 2020.2023. The amounts in the table below are based on the closing price of the Company’s common stock on the NYSE on September 30, 2020,2023, the last trading day of our fiscal year 2020,2023, as well as the assumptions set forth in the footnotes to the table.
Franklin Resources ESTIMATED POTENTIAL PAYMENTS UPON A CHANGE IN CONTROL
52None of the
Estimated Potential Payments Upon a Change in Control
There are no agreements with NEOs has agreements that provide for payments upon a change in control of the Company. Under the USIP, however, the Compensation Committee has the discretion to make a determination as to the equitable treatment of awards upon a change in control transaction (as defined above). The Compensation Committee may, in its discretion, make a determination as to the treatment of cash awards, under the KEIP and the AIP and awards of restricted stock and restricted stock units under the USIP in connection with a change in control transaction. The following table sets forth an estimate of the potential payments that could have been payable to our NEOs under the USIP, the KEIP and the AIP upon a change in control transaction of the Company assuming such a transaction occurred on September 30, 2020.2023. The amounts in the table below reflect a range of estimated potential payments based on the NEO’s compensation and service levels as of September 30, 2020,2023, and if applicable, based on the closing price of
the Company’s common stock on the NYSE on September 30, 2020,2023, the last trading day of fiscal year 2020,2023, as well as the assumptions set forth in the footnotes to the table.
| Estimated Potential Payments Upon Termination | |||||||||||||||
| Name | Disability ($) | Retirement(2) ($) | Involuntary Termination other than for Cause(3) ($) | Other Voluntary Termination(4) ($) | Change in Control(5) ($) | ||||||||||
| Jennifer M. Johnson | 0 – | 0 – | 0 – | 0 – | |||||||||||
| Matthew Nicholls | 0 – | 0 – | 0 – | 0 – 12,398,335 | |||||||||||
| Gregory E. Johnson | 0 – | 0 – | 0 – | 0 – | |||||||||||
| 0 – | 0 – | 0 – | 0 – | ||||||||||||
| 0 – | 0 – | 0 – | 0 – | ||||||||||||
| (1) | Amounts included in this column range from a minimum to a maximum payment, as determined in the discretion of the Compensation Committee. The minimum reflects the value of unvested AIP and/or KEIP equity awards held by the NEO as of September |
| (2) | For all NEOs, amounts included in this column range from $0 to a maximum payment, as determined in the discretion of the Compensation Committee. The illustrative maximum reflects the value of the cash portion of the incentive award under the |
| (3) | For purposes of this table only, |
| (4) | For purposes of this table, an “Other Voluntary Termination” means a resignation of employment other than due to death, disability or retirement. Amounts included in this column range from $0 to a maximum payment, based on the assumptions set forth in footnote 2 above. The Compensation Committee has discretion to determine the amount, if any, to be paid and the actual payment approved by the Compensation Committee potentially could exceed the amount set forth in this table. |
| (5) | Amounts included in this column range from $0 to a maximum payment, as determined in the discretion of the Compensation Committee. The illustrative maximum reflects the value of the cash portion of the incentive award under the AIP |
2024 Proxy Statement 53
Pay Ratio
As requiredOur CEO pay ratio is calculated in accordance with Item 402(u) of Regulation S-K and provides a reasonable estimate of the ratio of our CEO’s annual total compensation to the median of the annual total compensation of all employees of Franklin Templeton, other than the CEO.
Ms. Johnson had annual total compensation of $15,676,792 as reflected in the fiscal year 2023 Summary Compensation Table. Our median employee’s annual total compensation was $138,378. The resulting ratio of our CEO’s annual total compensation to the annual total compensation of our median employee for fiscal year 2023 was approximately 113 to 1.
To establish the median of the annual total compensation of all of our employees, and to determine the annual total compensation of Franklin Templeton’s “median employee,” we used the methodology, assumptions and estimates described below.
We identified the median employee by Section 953(b)reviewing the last full fiscal year annualized salary (or wages plus overtime, as applicable) and actual annual bonus paid to all employees of Franklin Templeton and its subsidiaries worldwide, excluding our CEO, who were employed on August 31, 2023. We included employees working on a full-time, part-time, or interim basis. In order to facilitate an assessment of all employee compensation in U.S. dollars, we applied to the compensation paid to our non-U.S. employees a local currency-to-U.S. dollar exchange rate equal to the month end rate as of August 31, 2023. Once we identified the median employee, we calculated annual total compensation for that employee using the same methodology we use for our NEOs as shown in the Summary Compensation Table.
Our CEO pay ratio is disclosed to comply with rules adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u)is not intended as a measure of Regulation S-K, we are providing thecomparison with any other company.
Pay Versus Performance
The following table provides information aboutregarding the relationship between executive “compensation actually paid” (as defined by SEC rules) to our principal executive officer (“PEO”) and average compensation paid to our other NEOs (“Non-PEO NEOs”) and certain aspects of our financial performance for each of the annual total compensation oflast three completed fiscal years. In determining the “compensation actually paid” to our median employee and the annual total compensation of the CEO. In fiscal year 2020, the Company had two different CEOs, each serving during a portion of the fiscal year as described above. For purposes of calculating the pay ratio, we usedNEOs, SEC rules require us to include various adjustments to amounts that have been reported in the “Total” column of our Summary Compensation Table for fiscaleach applicable year, 2020and therefore reported amounts differ from those required in the Summary Compensation Table. Fair value amounts below are computed in a manner consistent with the fair value methodology used to account for Mr. G Johnson and Ms. Johnson, prorated those amountsshare-based payments in our financial statements under generally accepted accounting principles. For any awards that are subject to performance conditions, the change in fair value is calculated based on time servedupon the probable outcome of such conditions as CEO during fiscal year 2020, and added those amounts together.
For fiscal year 2020, the annual total compensation of our median employee (other than our CEOs) was $57,919, and the annual total compensation of our CEO was $8,937,954, calculated as described above. Based on this information, the ratio of the annual total compensationlast day of our CEO to the annual total compensationapplicable year. The changes in fair value in the tables below compare the fair value at the end of our median employee (other than our CEO) was approximately 154 to 1. The pay ratio is a reasonable estimatethe applicable year with the prior year-end fair value. Total shareholder return has been calculated in a manner consistent with Item 402(u) of Regulation S-K and may not be comparable to the pay ratio reported by other companies because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions.
We are a full-service global organization and maintain market competitive pay practices in the jurisdictions in which we operate. As of August 31, 2020, we identified a new median employee. For purposes of identifying our median employee, we used our global employee population, excluding approximately 1,000 employees that have not completed their first full fiscal year with the Company following the acquisitions of AdvisorEngine, Athena Capital, Broadstone Real Estate, Pennsylvania Trust Co. and Legg Mason. We then examined total compensation, our consistently applied compensation measure, for all in-scope employees. Total compensation reflects base salary or hourly wage rate, overtime, annual incentive awards, commission payments, and equity granted for fiscal year 2020.
Compensation figures were calculated using internal human resources records with all foreign currencies converted to U.S. dollars. We did not exclude any employees in locations outside the United States, did not make any cost-of living adjustments, and did not annualize compensation for any employees.
After identifying the median employee, we calculated fiscal year 2020 annual total compensation for such employee in accordance with the requirements of Item 402(c)(2)(x)402(v) of Regulation S-K.
Adjusted Operating Revenue
| Average Summary | Average | Value of Initial Fixed $100 | ||||||||||||||
| Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Compensation Table Total for Non-PEO NEOs(1) | Compensation Actually Paid to Non-PEO NEOs(2) | Total Shareholder Return(3) | Peer Group Total Shareholder Return(4) | Net Income (in millions)(5) | Adjusted Operating Revenue (in millions)(6) | ||||||||
| 2023 | $15,676,792 | $18,785,484 | $9,006,801 | $9,909,104 | $137.31 | $150.62 | $ 882.8 | $6,104.1 | ||||||||
| 2022 | $15,734,999 | $10,146,060 | $6,350,429 | $4,469,278 | $114.74 | $121.70 | $1,291.9 | $6,473.7 | ||||||||
| 2021 | $ 9,862,161 | $13,230,952 | $5,619,550 | $7,520,899 | $151.77 | $168.68 | $1,831.2 | $6,317.2 | ||||||||
| (1) | Reflects compensation amounts reported in the Summary Compensation Table for Ms. Johnson, who served as PEO for the years shown. Reflects average compensation amounts reported in the Summary Compensation Table for the following non-PEO NEOs for the fiscal years noted below: | |
| • | 2023 - Messrs. G. Johnson, Murphy, Nicholls and Spector | |
| • | 2022 - Messrs. G. Johnson, Nicholls, Plafker and Spector | |
| • | 2021 - Messrs. G. Johnson, Nicholls, Plafker and Spector | |
| (2) | The adjustments to the summary compensation table totals to arrive to compensation actually paid in 2023, 2022, and 2021 are outlined below. Dollar amounts reflect “compensation actually paid” for our PEO and average “compensation actually paid” for our non-PEO NEOs for each of the 2023, 2022, and 2021 fiscal years. No awards were modified in fiscal year 2023. These valuations assume a September 30, 2023 share price of $24.58, which was the closing price on September 29, 2023, and average vest share price of $26.96, which is the average price for all shares vested in fiscal year 2023. | |
| (3) | Represents the cumulative total shareholder return (TSR) of the Company for the periods ending on September 30, 2023, 2022, and 2021, respectively, based on an initial fixed investment of $100 in Franklin Resources, Inc. common stock on September 30, 2020. For 2023, represents the three-year TSR, for 2022, represents the two-year TSR and for 2021 represents the one-year TSR. |
| (4) | Our peer group total stockholder return is calculated with respect to the S&P U.S. BMI Asset Management & Custody Bank Index, which is the same peer group used for our total shareholder return graph based on an initial fixed investment of $100 in the respective peer’s common stock on September 30, 2020. For 2023, represents the three-year TSR, for 2022, represents the two-year TSR and for 2021 represents the one-year TSR. |
| (5) | Reflects “Net Income” in the Company’s Consolidated Income Statements included in the Company’s Annual Reports on Form 10-K for each of the fiscal years ended September 30, 2023, 2022, and 2021, respectively. |
| (6) | See discussion of supplemental non-GAAP financial measures in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023. |
Franklin Resources 54
PEO Summary Compensation Table Total Compensation to Compensation Actually Paid Reconciliation
| Year | Year End Fair Value of Equity Awards Granted in the Year | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | Total Equity Award Adjustments | ||||||||||||||||||||||
| 2023 | $ | 9,290,226 | $ | 187,096 | $ | 3,021,486 | $ | 941,091 | $ | (100,824) | $ | 852,016 | $ | 14,191,092 | |||||||||||||||
| 2022 | $ | 5,081,744 | $ | (1,630,192) | $ | 1,908,689 | $ | (193,850) | $ | (166,175) | $ | 569,703 | $ | 5,569,920 | |||||||||||||||
| 2021 | $ | 6,890,190 | $ | 176,415 | $ | 1,463,823 | $ | 611,055 | $ | (699,345) | $ | 306,685 | $ | 8,748,822 | |||||||||||||||
Average Non-PEO NEO Summary Compensation Table Total Compensation to Compensation Actually Paid Reconciliation
| Year | Year End Fair Value of Equity Awards Granted in the Year | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | Total Equity Award Adjustments | ||||||||||||||||||||||
| 2023 | $ | 2,515,460 | $ | 46,616 | $ | 598,876 | $ | 357,770 | $ | (18,905) | $ | 226,216 | $ | 3,726,032 | |||||||||||||||
| 2022 | $ | 1,529,579 | $ | (644,757) | $ | 373,088 | $ | (113,981) | $ | (132,898) | $ | 204,414 | $ | 1,215,446 | |||||||||||||||
| 2021 | $ | 2,176,246 | $ | 478,719 | $ | 565,729 | $ | 577,418 | $ | (302,483) | $ | 177,925 | $ | 3,673,555 | |||||||||||||||
| See “Summary Compensation Table for Fiscal Year 2023” for Equity Award Valuation Assumptions. | |
| (3) | Represents the cumulative total shareholder return (TSR) of the Company for the periods ending on September 30, 2023, 2022, and 2021, respectively, based on an initial fixed investment of $100 in Franklin Resources, Inc. common stock on September 30, 2020. For 2023, represents the three-year TSR, for 2022, represents the two-year TSR and for 2021 represents the one-year TSR. |
| (4) | Our peer group total stockholder return is calculated with respect to the S&P U.S. BMI Asset Management & Custody Bank Index, which is the same peer group used for our total shareholder return graph based on an initial fixed investment of $100 in the respective peer’s common stock on September 30, 2020. For 2023, represents the three-year TSR, for 2022, represents the two-year TSR and for 2021 represents the one-year TSR. |
| (5) | Reflects “Net Income” in the Company’s Consolidated Income Statements included in the Company’s Annual Reports on Form 10-K for each of the fiscal years ended September 30, 2023, 2022, and 2021, respectively. |
| (6) | See discussion of supplemental non-GAAP financial measures in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023. |
Relationship between Compensation Actually Paid and Performance Measures Disclosed in the Pay Versus Performance Table
The charts below illustrate the correlation between NEO compensation actually paid as defined by Item 402(v) of Regulation SK and (i) total stockholder return, (ii) net income, and (iii) Adjusted Operating Revenue for fiscal years 2023, 2022, and 2021. The charts below also provide a comparison between Franklin Resources, Inc. total shareholder return against the total shareholder return of our peer group. These charts reflect “compensation actually paid” for our PEO and average “compensation actually paid” for our non-PEO NEOs for each of the 2023, 2022, and 2021 fiscal years as defined by SEC rules. In determining the “compensation actually paid” to our NEOs, we are required by SEC rules to include various adjustments to amounts that have been reported in the Summary Compensation Table for the applicable fiscal year, as the SEC’s valuation methods for this section differ from those required in the Summary Compensation Table. These amounts do not reflect the year-end executive pay decisions made by the Compensation Committee. For information regarding the decisions made by our Compensation Committee in regard to our NEO’s compensation for each fiscal year, please see the Compensation Discussion and Analysis sections of the proxy statements reporting pay for the fiscal years covered in the table above, including the discussion beginning on page 28 of this Proxy Statement.
2024 Proxy Statement 55
Key Performance Measures
The following are the key financial performance measures that we use to link “compensation actually paid” (as defined by SEC rules) to our NEOs for 2023 to our performance. We believe Adjusted Operating Revenue is the most significant financial performance measure in determining the compensation of our NEOs. Performance outcomes for each measure are generally assessed in the context of external market conditions, and may be considered relative to industry performance or over variable time horizons. These measures are not ranked.
| • | Adjusted Operating Revenue(1) | |
| • | Adjusted Earnings per Share(1) | |
| • | Adjusted Operating Income(1) | |
| • | Investment Performance(2) | |
| • | Adjusted Effective Fee Rate(3) |
| (1) | See discussion of supplemental non-GAAP financial measures in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023. |
| (2) | We assess investment performance based in part on percentage of AUM above 3-year and 5-year peer median and benchmark performance. Benchmark comparisons are based on each strategy’s composite returns (composites may include retail SMA and mutual fund assets managed as part of the same strategy) as compared to a market index that has been selected to be generally consistent with the investment objectives of the account. |
| (3) | The adjusted effective fee rate is annualized adjusted investment management fees, excluding performance fees, divided by average AUM for the period. |
Franklin Resources 56
Compensation Risk Assessment
The Compensation Committee evaluates the Company’s compensation policies and programs to ensure they do not encourage excessive risk-taking. The management compensation risk review committee (“CRRC”) undertook an assessment of existing compensation programs and practices to ensure that imprudent risk-taking is not encouraged and that appropriate risk mitigation features are in place. Based on this assessment, the CRRC concluded that the Company’s compensation arrangements are structured in a way that does not create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee reviewed the results of this assessment and agreed with the CRRC’s conclusion.
Compensation Committee Interlocks and Insider Participation
During fiscal year 2020,2023, the following directors served as members of the Compensation Committee: Ms. Stein,King and Messrs. Barker, PigottKim, Thiel, Yang and Waugh (Chair) and Waugh.. No member of the Compensation Committee was an officer or employee of the Company or any of its subsidiaries during fiscal year 2020,2023 and no member of the Compensation Committee was formerly an officer of the Company or any of its subsidiaries or was a party to any disclosable related party transaction involving the Company. During fiscal year 2020,2023, none of the executive officers of the Company served on the board of directors or on the compensation committee of any other entity that has or had executive officers serving as a member of the Board of Directors or Compensation Committee of the Company.
Equity Compensation Plan Information
Please refer to theThe following table in this Proxy Statement under Proposal No. 3 forsets forth certain information as of September 30, 2020,2023, with respect to the shares of the Company’s common stock that may be issued under the Company’s existing compensationequity incentive plans that have been approved by stockholders and plans that have not been approved by stockholders.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | ||||
| Equity compensation plans approved by stockholders(1) | 7,612,306 | (2) | N/A | (3) | 14,961,320 | (4) | |
| Equity compensation plans not approved by stockholders(5) | 608,702 | (6) | N/A | (7) | 14,681,242 | ||
| Total | 8,221,008 | N/A | 29,642,562 |
| Consists of the USIP and the Company’s 1998 Employee Stock Investment Plan, as amended and restated (the “ESIP”). Equity securities granted under the USIP may include awards in connection with the Company’s Amended and Restated Annual Incentive Compensation Plan and the Company’s 2014 Key Executive Incentive Compensation Plan. | |
| (2) | Represents restricted stock unit awards under the USIP that may be settled in shares of the Company’s common stock. Excludes options to purchase shares of the Company’s common stock accruing under the ESIP. Under the ESIP, each eligible employee is granted a separate option to purchase up to 6,000 shares of common stock for each accrual period, which for fiscal year 2023 occurred on January 31, June 30 and July 31 at a purchase price per share equal to 85% of the fair market value of the common stock on the enrollment date or the exercise date, whichever is lower. |
| (3) | Does not take into account restricted stock unit awards under the USIP. |
| (4) | As of September 30, 2023, 2,739,816 shares of common stock were available for future issuance under the ESIP and 12,221,504 shares of common stock were available for future issuance under the USIP. |
| (5) | Consists of the Amended and Restated Franklin Resources, Inc. |
2024 Proxy Statement 57
Report of the Audit Committee
Membership and Role of the Audit Committee
The Audit Committee of the Board of Directors of Franklin Resources, Inc. currently consists of Mses. Byerwalter (Chair) and Stein,King, and Messrs. Friedman (Chair), Noto and Yang.Thiel. Each of the members of the Audit Committee is independent as defined under the NYSE listing standards and applicable law. The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management or the Company’s independent registered public accounting firm. The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its responsibility to oversee (i) the Company’s financial reporting, auditing and internal control activities, including the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditors’ qualifications and independence, and (iv) the performance of the Company’s internal audit function and independent auditors. The Audit Committee’s function is more fully described in the Committee’s written charter, which is posted in the corporate governance section of the Company’s website.
Review of the Company’s Audited Financial Statements for the Fiscal Year Ended September 30, 20202023
The Audit Committee has reviewed and discussed the audited financial statements of the Company for the fiscal year ended September 30, 20202023 with the Company’s management.
The Audit Committee has discussed with PricewaterhouseCoopers LLP (“PwC”), the Company’s independent registered public accounting firm, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC.
The Audit Committee has also received the written disclosures and the letter from PwC required by the applicable Public Company Accounting Oversight Board requirements for independent accountant communications with audit committees concerning auditor independence and has discussed the independence of PwC with that firm.
Based on the Audit Committee’s review and discussions noted above, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 20202023 for filing with the SEC.
Respectfully Submitted by the Members of the Audit Committee*:Committee:
Mariann Byerwalter
Alexander S. Friedman (Chair)
Karen M. King
Anthony J. NotoLaura SteinGeoffrey Y. Yang
John W. Thiel
*Mr. Chutta Ratnathicam served as a member and Chair of the Audit Committee until February 11, 2020. Ms. Byerwalter became Audit Committee Chair effective February 11, 2020. Mr. Noto joined the Audit Committee on February 11, 2020.
Franklin Resources 58
Fees Paid to Independent Registered Public Accounting Firm
The Audit Committee of the Board, with the ratification of the stockholders, engaged PwC to perform an annual audit of the Company’s consolidated financial statements for fiscal year 2020.2023.
The following table sets forth the approximate aggregate fees billed or expected to be billed to the Company by PwC for fiscal years 20202023 and 20192022 for the audit of the Company’s annual consolidated financial statements and for other services rendered by PwC.
| Fiscal Year | ||||||
| 2020 | 2019 | |||||
| (in thousands) | ||||||
| Audit Fees(a)(e) | $ | 8,432 | $ | 7,772 | ||
| Audit-Related Fees(b)(e) | $ | 4,150 | $ | 4,027 | ||
| Tax Fees(c)(e) | $ | 1,424 | $ | 367 | ||
| All Other Fees(d) | $ | 175 | $ | 161 | ||
| TOTAL FEES | $ | 14,181 | $ | 12,327 | ||
| Fiscal Year | ||||||||
| 2023 | 2022 | |||||||
| (in thousands) | ||||||||
| Audit Fees(a)(e) | $ | 13,766 | $ | 13,291 | ||||
| Audit-Related Fees(b)(e) | $ | 6,018 | $ | 5,675 | ||||
| Tax Fees(c)(e) | $ | 4,697 | $ | 3,732 | ||||
| All Other Fees(d) | $ | 429 | $ | 654 | ||||
| TOTAL FEES | $ | 24,910 | $ | 23,352 | ||||
| (a) | The |
| (b) | Audit-Related Fees consist of assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements. Such services relate primarily to internal control examinations pursuant to AT-C Section 320 - Reporting on an Examination of Controls at a Service Organization Relevant to User Entities’ Internal Control |
| (c) | Tax Fees consist of tax return preparation, tax compliance, tax advice and tax planning services. For fiscal year |
| (d) | Other Fees for both years include approximately |
| (e) | The fees also consist of payment for services provided to our consolidated investment products, which include mutual and other investment funds, limited partnerships and similar structures, substantially all of which are sponsored by the Company and its consolidated subsidiaries. The amounts for these services are approximately |
Note: For fiscal years 20202023 and 2019,2022, none of the services described under Audit-Related Fees, Tax Fees, and All Other Fees were approved by the Audit Committee pursuant to the pre-approval waiver requirements under 17 CFR 210.2-01(c)(7)(i)(C).requirements.
2024 Proxy Statement 59
Pre-approval Process and Policy
The audit and non-audit services provided to the Company and its subsidiaries by PwC, the independent auditors, during fiscal years 20202023 and 2019,2022, were pre-approvedapproved by the Audit Committee. The Audit Committee has adopted policies and procedures for pre-approving all audit and non-audit services provided by PwC. The Audit Committee Pre-Approval Policy describes the permitted audit, audit-related, tax and other services that the independent auditors may perform, and which services require specific pre-approval of the Audit Committee. The Audit Committee may grant general pre-approval for any services by the independent auditors other than those that require specific pre-approval and those services that are prohibited by the SEC or Public Company Accounting Oversight Board rules. The Audit Committee reviews the Pre-Approval Policy annually and revises it as the Audit Committee deems appropriate. Services granted general pre-approval have annual fee limits.
Any requests for audit, audit-related, tax and other services must initially be submitted to the Company’s CFO.CFO or CAO. Any requests preliminarily approved by the CFO or CAO are then submitted to the Audit Committee for approval in the case of services requiring specific pre-approval or reported to the Audit Committee periodically in the case of services generally pre-approved. Normally, specific pre-approval is considered at regularly-scheduled meetings. However, the authority to grant specific pre-approval between meetings up to a designated approval amount, which amount for fiscal year 20202023 was $50,000$150,000 (the “Chair Approval Amount”), has been delegated to the Chair of the Audit Committee. The decision of the Chair to grant specific pre-approval of a service is presented to the Audit Committee at its scheduled meetings. If the estimated fees for proposed services exceed the Chair Approval Amount, specific pre-approval by the entire Audit Committee is required.
Franklin Resources 60
Certain Relationships and Related Transactions
TableCompensation of Contentsthe Vice-Chairman.
For fiscal year 2020,2023, Rupert H. Johnson, Jr., Vice Chairman and a director of the Company, who, among other family relationships, is the uncle of Gregory E. Johnson, Executive Chairman and Chairman of the Board, and Jennifer M. Johnson, President and CEO and a director of the Company, received a base salary of $180,000. Mr. R. H. Johnson, Jr. did not receive a cash bonus in fiscal year 2020.2023. Mr. R. H. Johnson, Jr. is entitled to receive medical, life and disability insurance coverage and other benefits available generally to employees of the Company and/or its subsidiaries.
Share Repurchases.Under a stock repurchase program authorized by the Board, the Company can repurchase shares of its common stock from time to time on the open market and in private transactions in accordance with applicable securities laws. Pursuant to this stock repurchase program, the Company may repurchase shares of the Company’s common stock from, among others, certain directors, executive officers and greater than five percent (5%) beneficial owners of the Company’s common stock, and certain members of the immediate family of the foregoing persons. During fiscal year 2020, the Company repurchased 400,000 shares of common stock from Mr. R. H. Johnson, Jr. for the aggregate consideration of $10,505,000. The price per share paid by the Company for repurchases is generally the average of the high and low price of the Company’s common stock on the NYSE on the repurchase date.
In order to pay taxes due in connection with the vesting of employee and executive officer restricted stock and restricted stock unit awards under the USIP, the Company uses a net stock issuance method, equivalent to a stock repurchase program, to pay such taxes. For shares repurchased in connection with the payment of taxes on the vesting of shares, the repurchase price is the closing price on the NYSE on the date of the transaction. During fiscal year 2020, the Company repurchased shares of common stock from the executive officers listed below for the aggregate consideration shown.
| Name and Title | Number of Shares Repurchased | Aggregate Consideration ($) | ||
| Matthew Nicholls, | 8,195 | 225,281 | ||
| Executive Vice President and Chief Financial Officer | ||||
| Jed A. Plafker, | 15,913 | 437,448 | ||
| Executive Vice President | ||||
| Alok Sethi, | 1,132 | 31,119 | ||
| SEC Executive Officer | ||||
| Gwen L. Shaneyfelt, | 3,224 | 88,628 | ||
| Chief Accounting Officer | ||||
| Craig S. Tyle, | 943 | 25,923 | ||
| Executive Vice President and General Counsel |
Management and Use of AC Travel Aircraft.AIn June 2008, a wholly-owned subsidiary of the CompanyFranklin entered into an amended and restated aircraft management agreement effective as of June 1, 2008, with third-party AC Travel, LLC (“AC Travel”) to manage the operations of a Gulfstream III aircraft (the “G-III”) and a Gulfstream G550 aircraft (the “G550,” and together with the G-III, the “Aircraft”), both of which are owned by AC Travel. AC Travel is an entity owned and controlled by Charles B. Johnson (beneficial owner of more than five percent of Franklin’s common stock and an executive consultant employed by Templeton Investment Counsel, LLC, a wholly-owned subsidiary of Franklin). Mr. C. B. Johnson is also the Company) father of Gregory E. Johnson Executive Chairman of the Company and Chairman of the Board, and Jennifer M. Johnson President(directors and CEOexecutive officers of the Company and a director of the Company,Franklin), and brother of Rupert H. Johnson Jr., Vice Chairman (director and a directorexecutive officer of the Company, to manage the operations of a Gulfstream III aircraft (the “G-III”) and a Gulfstream G550 aircraft (the “G550”), both of which are owned by AC Travel. We refer to the G-III and the G550 as the “Aircraft.” Under the management agreement, the subsidiary: (a) provides consulting and management services for the operation of the Aircraft; (b) provides flight crew personnel to operate the Aircraft; (c) arranges for maintenance of the Aircraft; and (d) arranges for insurance and hangars for Aircraft storage and also provides other administrative services.Franklin). The management agreement has automatic one-year renewals, subject to cancellation by either party. OurThe subsidiary receives a monthly management fee of $10,000 for the G550 and $3,000 for the G-III for administrative services. Costs to operate the aircraft,Out-of-pocket costs, including the cost of flight crew salaries and benefits, incurred under the agreement for services provided, either directly or through third parties, are either reimbursed by, or passed through to and paid directly by, AC Travel.
Office Lease.In October 2009, the Board approved a three-year fixed term extension of a lease of approximately 5,495 square feet of office space owned by the CompanyEffective in San Mateo, California withJuly 2019, Tano Capital, LLC (“Tano”), a company owned by the family of former Franklin director Charles E. Johnson (who passed away in September 2021), and the Company, amended the terms of Tano’s lease for office space on the Company’s San Mateo campus, at a directormonthly rental fee of $12,870, as approved by the Audit Committee of the Company until February 11, 2020,Board. Charles E. Johnson was the son of Charles B. Johnson (beneficial owner of more than five percent of Franklin’s common stock and an executive consultant employed by Templeton Investment Counsel, LLC, a wholly-owned subsidiary of Franklin), the nephew of Rupert H. Johnson, Jr. (director and executive officer of Franklin), and the brother of Gregory E. Johnson and Jennifer M. Johnson (directors and nephewexecutive officers of Rupert H. Johnson, Jr.Franklin). In November 2012, Tano andAugust 2022, a six-month lease extension with a 3% increase in monthly rent was approved by the Company entered into an amendment extending the original lease for a fixed five-year term and reducing the office space leased by Tano on the San Mateo campus from 5,495 square feet to 4,125 square feet. The lease amendment also granted Tano the option to increase the sizeChair of the office spaceCorporate Governance Committee with an extension term to 5,495 square feet, which Tano exercised effective April 16, 2014. In October 2017,March 6, 2023. On January 23, 2023, the lease wasparties further amended to provide for a one-month extension ofextended the lease until November 30, 2017, pursuant to all other existing terms. In November 2017, Tano and the Company amended the lease terms again to extend the lease on a monthly basis terminating no later than November 30, 2019. The monthly payments under the November 2017 lease extension were $16,485.December 31, 2023.
In June 2019, the Audit Committee of the Board approved a sixth amendment to the lease, which became effective on July 1, 2019, and is for a three-year lease term, subject to the Company’s right to terminate on 30 days’ notice. Tano leases approximately 2,754 square feet of office space owned by the Company in San Mateo, California, at a monthly rate of $12,870. The aggregate amount of all periodic payments due under the lease during fiscal year 2020 was $154,440.
Private Equity Fund Investment.On July 6, 2011, Franklin Templeton Capital Holdings Private Limited, a subsidiary of the Company,Franklin, entered into an agreement to make a $25 million-dollar investment commitment to Tano India Private Equity Fund II (“Tano Fund”). Tano Mauritius Investments, which is the investment manager and a Class B and Class C shareholder of the Tano Fund, is a direct subsidiary of Tano Capital, LLC, which is ownedas approved by Charles E. Johnson.the Audit Committee of the Board. During fiscal year 2020, $2,470,800Fiscal Year 2023 (as of September 30, 2023), no capital was returned by the Tano Fund to the Company. The Company, made noand the Company did not make any payments to the Tano Fund duringFund.
General. From time to time, our directors, executive officers and employees, members of their immediate families and companies, affiliates of companies or investment vehicles managed by companies that employ or are associated with our directors may have investments in various investment vehicles or accounts sponsored or managed by our SIMs or other subsidiaries or utilize our products or services in the fiscal year.ordinary course of business on substantially the same terms as those prevailing at the time for comparable products or services provided to unaffiliated third parties.
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Related Person Transaction Policy
Related Person Transaction Policy.The Board of Directors has adopted a Related Person Transaction Policy (“Related Person Transaction Policy”) to address the reporting, review, approval and ratification of related person transactions. Related persons include the Company’s executive officers, directors and director nominees, holders of more than five percent (5%) of a class of the Company’s voting securities, and immediate family members of the foregoing persons. For purposes of the Related Person Transaction Policy, and as used in this summary of the Related Person Transaction Policy, the “Company” refers to Franklin Resources, Inc. or its subsidiaries. A “related person transaction” means a transaction or series of transactions in which the Company is a participant and a related person has or will have a direct or indirect material interest under Item 404 of SEC Regulation S-K. Examples include sales, purchases and transfers of real or personal property, use of property and equipment by lease or otherwise, services received or furnished and borrowings and lendings, including guarantees. Transactions with executive officers and directors for the purposes of conducting the business of the Company, compensation of non-employee directors approved by the Board and employee compensation arrangements approved by the Compensation Committee (or under authority delegated by such committee) are not considered related person transactions. All related person transactions are required to be reported to the AuditCorporate Governance Committee. However, the AuditThe Corporate Governance Committee has the authority to determinepre-approve the following categories of related person transactions, that are immaterial and not required to be disclosed and thatwhich, upon such pre-approval, need not be reported to, reviewed by, and/or approved or ratified by the Audit Committee. Pursuant to the Related Person Transaction Policy, the following related person transactions need not be reported to, reviewed by, and/or approved or ratified by the AuditCorporate Governance Committee:
| The establishment or maintenance of a trading, investment management, trust, custody or other account by a related person with the Company, provided the terms of such account are generally the same as or similar to accounts offered by the Company in the ordinary course of business to persons who are not related persons. | |
| • | Accounts invested in shares of one or more Company-sponsored investment companies or other Company-sponsored pooled or collective investment vehicles (“FT Funds”) that are established and/ or maintained by a related person in accordance with the terms set forth in the applicable FT Fund prospectus or other disclosure documents. |
Audit
Corporate Governance Committee Review and Approval. Every quarter the AuditThe Corporate Governance Committee reviews related person transactions. Such transactions involving an aggregate amount that will, or reasonably may be expected to, exceed $120,000 require the approval or ratification of the Audit Committee. In connection with approving or ratifying a related person transaction which is not otherwise covered by a pre-approval category adopted by the AuditCorporate Governance Committee, as described below, the AuditCorporate Governance Committee will consider the relevant facts and circumstances of the transaction and any of the following factors that are relevant:
| The position or relationship of the related person at or with the Company; | |
| • | The approximate dollar value of the amount involved in the transaction; |
| • | The materiality of the transaction to the related person, including the approximate dollar value of the related person’s interest in the transaction; |
| • | Information regarding the potential counterparties to the transaction; |
| • | Whether the Company is a party to the transaction and, if not, the nature of the Company’s participation in the transaction; |
| • | The business purpose for and reasonableness of the transaction; |
| • | Whether the related person transaction is comparable to a transaction that could be available on an arm’s-length basis or is on the terms that are generally similar to those prevailing at the time for third parties; |
| • | Whether the transaction is in the ordinary course of the Company’s business; |
| • | The effect of the transaction on the Company’s business and operations; |
| • | Whether the transaction includes any potential reputational risk issues that may arise as a result of or in connection with the transaction; |
| • | The impact of the transaction on a director’s independence, if applicable; and |
| • | Any other relevant information regarding the transaction. |
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In addition, the AuditCorporate Governance Committee has the authority to pre-approve certain categories of related person transactions, which transactions must still be reported to the AuditCorporate Governance Committee at least annually. The AuditCorporate Governance Committee has determined that the following categories of transactions are pre-approved, with reporting to the Committee as specified below:
| Gross-ups and perquisites and other personal benefits to a related person from the use of Company owned or provided assets not integrally and directly related to the performance of such person’s duties to the Company, including but not limited to personal use of Company-owned or provided aircraft and property, that, in the aggregate, are less than $250,000 in any fiscal year, with at least quarterly reporting to the Corporate Governance Committee for amounts within this category above $10,000 in any fiscal year. | |
| • | Company purchases of shares of its common stock to pay taxes due by employees in connection with the vesting of employee and executive officer restricted stock and restricted stock unit awards under the USIP, with at least annual reporting to the |
| • | Investments by an FT Fund or other Company-managed client account in any investment products, securities or other financial instruments issued, sponsored, administered and/or serviced by any entity for which a related person’s interest in such other entity arises from the related person’s position as an executive officer, employee, general partner, 10% or more limited partner, and/or 10% or more equity holder, provided that such investments are made in the ordinary course of business and on terms that are generally similar to those prevailing at the time for unaffiliated third-party investors in such investment products, securities or other financial instruments. Amounts invested |
The AuditCorporate Governance Committee may delegate its authority to review, approve or ratify specified related person transactions to one or more members of the AuditCorporate Governance Committee between scheduled committee meetings. Any determination made pursuant to this delegated authority must be presented to the full AuditCorporate Governance Committee at a subsequent meeting.
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Section 16(a) Beneficial Ownership Reporting Compliance
Delinquent Section 16(a) Reports
Section 16(a) of Contentsthe Securities Exchange Act of 1934, as amended, requires officers, directors and persons who beneficially own more than 10% of the Company’s common stock to file reports of ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. The reporting officers, directors and 10% stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of copies of such reports received or written representations from such executive officers, directors and 10% stockholders, the Company believes that all Section 16(a) filing requirements applicable to its directors, executive officers and 10% stockholders were complied with during fiscal years 2022 and 2023 with the following exceptions. For Gregory E. Johnson, a late Form 5A for fiscal year ended September 30, 2022, was filed to report the gift of shares, and a late Form 5 for the fiscal year ended September 30, 2023, was filed to report the additional gift of shares. Each of these filings was to report the inadvertent omission of gifted shares.
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Proposal No. 2:
Ratification of the Appointment of Independent Registered Public Accounting Firm
The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the Company’s consolidated financial statements for the fiscal year ending September 30, 20212024 and to audit the Company’s internal control over financial reporting as of September 30, 2021.2024. Though not required, stockholders are being asked to ratify the Audit Committee’s selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm as a matter of good corporate governance. During and for the fiscal year ended September 30, 2020,2023, PricewaterhouseCoopers LLP audited and rendered opinions on the financial statements of the Company and certain of its subsidiaries and many of the open-end and closed-end investment companies managed and advised by the Company’s subsidiaries. PricewaterhouseCoopers LLP also rendered an opinion on the Company’s internal control over financial reporting as of September 30, 2020.2023. In addition, PricewaterhouseCoopers LLP provides the Company with tax consulting and compliance services, accounting and financial reporting advice on transactions and regulatory filings and certain other consulting services not prohibited by applicable auditor independence requirements. See “Fees Paid to Independent Registered Public Accounting Firm” above. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Virtual Annual Meeting and will have the opportunity to make a statement if they desire to do so. It is also expected that they will be available to respond to appropriate questions.
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Proposal No. 3:
Approval of an Amendment and Restatement of the Company’s 2002 Universal Stock Incentive Plan
The Company’s stockholders are being asked to approve an amendment and restatement of the Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (the “USIP”) to among other things, increase the number of shares of common stock available for delivery by 2025 million shares, and include individual consultants as eligible to participate inwhich amendment was approved by the USIP.Board of Directors on December 12, 2023. Stockholders last approved an increase in the number of shares available under the plan in March 2011.February 2021.
On December 15, 2020, the Board of Directors approved an amendment and restatement of the plan, which last had been amended in 2017. The changes to the existing plan principally:
The following summary describes the material features of the USIP as proposed to be amended and restated but is not intended to be complete and is qualified in its entirety by reference to the plan, a copy of which is attached as Appendix A. Capitalized terms not otherwise defined are used as set forth in the plan.
Purpose
The USIP is intended to (i) attract and retain persons eligible to participate in the USIP; (ii) motivate participants, by means of appropriate incentives, to achieve long-range performance goals; (iii) provide incentive compensation opportunities that are competitive with those of other similar companies; and (iv) further align participants’ interests with those of the Company’s other stockholders through compensation that is based on the Company’s common stock.
Administration
The USIP may be administered by the Board or a committee or committees established by the Board with powers and authority as determined by the Board in its discretion. The Compensation Committee determines and approves the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards and stock-based awards to individuals eligible to participate in the USIP (as described under “Eligibility to Participate” below). Subject to the provisions of the USIP, the Compensation Committee has the authority and discretion to (among other things): (a) select from eligible individuals those who receive awards
under the USIP; (b) determine the time or times awards under the USIP will be made; (c) determine the types of awards under the USIP; (d) determine the number of shares covered by awards under the USIP; (e) establish the terms, conditions, performance criteria, restrictions and other provisions of awards under the USIP; (f) cancel or suspend awards under the USIP; and (g) determine that any award under the USIP will be settled through cash payments, the delivery of shares of common stock, the granting of replacement awards or a combination thereof. The Special Awards Committee is also vested with the authority to make certain limited awards under the USIP to employees of the Company and its subsidiaries who are not executive officers subject to Section 16 of the Securities Exchange Act of 1934 (references to the Compensation Committee include the Special Awards Committee to the extent that the Special Awards Committee exercises authority under the USIP). See “Information About the Board and its Committees” elsewhere in this Proxy Statement for a description of the Compensation Committee and the Special Awards Committee. Furthermore, the Compensation Committee may delegate its authority and duties under the USIP to the Company’s Chief Executive Officer and/or to other executive officers of the Company under such conditions and subject to such limitations as the Compensation Committee may establish and as limited by and subject to applicable law or the applicable rules of a stock exchange.
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Shares Authorized
If this proposal is approved, the maximum aggregate number of shares of common stock available for delivery under the USIP will increase by twenty five million (20,000,000)(25,000,000), from one hundred twenty million (120,000,000) shares to one hundred forty million (140,000,000) shares to one hundred sixty-five million (165,000,000) shares of common stock, subject to certain provisions of the USIP including regarding adjustment as described in the USIP and summarized under “Changes in Capitalization” below (the “Share Reserve”). As of December 1, 2020,2023, approximately 2,899,5125,299,572 shares remained available for future delivery under the USIP. As of December 1, 2020,2023, under the USIP there were: no shares of common stock subject to outstanding options; an aggregate of 12,605,46713,557,789 shares of restricted stock or underlying restricted stock unit awards outstanding but not yet vested, based on the passage of time; and 908,1051,544,335 shares underlying restricted stock unit awards outstanding but not yet vested, based on the achievement of predetermined performance goals (assuming delivery at maximum level). Shares deliverable under the USIP may be authorized, but unissued shares, or reacquired shares.
Any shares covered by an award under the USIP that are not delivered because the award is forfeited or canceled, or the shares are not delivered because the award is settled in cash will not be deemed to have been delivered for purposes of determining the maximum number of shares available for delivery under the USIP. However, all shares covered by the portion of any stock appreciation right that is exercised (whether or not shares are actually issued to the holder upon exercise of the right) are considered issued pursuant to the USIP. If shares of common stock are surrendered or withheld as payment of either the exercise price of an option and/or withholding taxes in respect of such option, such shares will not be returned to the USIP and will not be available for future awards under the USIP.
The Compensation Committee may grant awards under the USIP to a person who becomes a participant of the USIP by reason of the acquisition of another entity, in substitution for awards previously granted by such entity to such person. The terms and conditions of the substitute awards may vary from the terms and conditions that would otherwise be required by the USIP solely to the extent the Compensation Committee deems necessary. Any such substitute awards shall not reduce the Share Reserve; provided, however, that such treatment is permitted by applicable law and the listing requirements of the New York Stock Exchange or other exchange or securities market on which the Company’s common stock is listed.
Eligibility and Participation
Under the terms of the USIP, any executive, employee, director (including any non-employee director) and, if this proposal is approved individual consultant, of the Company or any of its subsidiaries is eligible to participate. The basis for participation in the plan is selection for participation by the Compensation Committee in its discretion. As of November 30, 2020,2023, approximately 11,3169,196 employees (including eight executives), seveneight non-executive directors and no consultants were eligible to participate in the USIP.
Types of Awards
Stock Options and Stock Appreciation Rights. A stock option is the right to purchase a specified number of shares of common stock in the future at a specified exercise price in accordance with the terms and conditions specified in the applicable award agreement and the USIP. An option may be either an incentive stock option or an option that
is not intended to qualify as an incentive stock option (see “Certain Significant Federal Income Tax Consequences” below). The Compensation Committee will, with regard to each stock option, determine and set forth in the applicable award agreement: (a) the number of shares subject to the option, (b) the manner and time of the option’s exercise and vesting, (c) the exercise price per share of stock subject to the option, and (d) the methods by which the exercise price may be paid. A stock appreciation right is a grant of rights to receive, in cash or common stock (as determined by the Compensation Committee), value equal to (or otherwise based on) the excess of: (1) the Fair Market Value (as defined in the USIP) of a specified number of shares of common stock at the time of exercise, over (2) a base appreciation amount established by the Compensation Committee. The exercise price for a stock option and the base appreciation amount of a stock appreciation right is determined by the Compensation Committee but may not be less than 100% of the Fair Market Value per share of the common stock on the date the award is granted (or 110%, in the case of an incentive stock option granted to any employee who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company).
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Restricted Stock Awards, Restricted Stock Unit Awards, Stock Awards and Stock-Based Awards. A restricted stock award is a grant of shares of common stock, and a restricted stock unit award is a grant of a right to receive shares of common stock or cash (as determined by the Compensation Committee) in the future that, in each case, are subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to continued service of the holder or achievement of performance or other objectives, as determined by the Compensation Committee. A stock award is a grant of shares of common stock that is not subject to forfeiture or other restrictions. A stock-based award is an award that is valued or based on the Fair Market Value of shares of common stock, other than the foregoing awards. The terms and conditions of each such award are determined by the Compensation Committee and set forth in the applicable award agreement.
Dividends or Dividend Equivalents. An award under the USIP may provide the holder with the right to receive dividend or dividend equivalent payments with respect to common stock subject to the award, whether or not the common stock subject to the award is earned, vested, or acquired. Dividend equivalents may be either paid currently or credited to an account for the holder and may be settled in cash or common stock as determined by the Compensation Committee, in each case subject to such conditions, restrictions and contingencies as the Compensation Committee shall establish.
Term of Awards
The term of all awards are determined by the Compensation Committee and set forth in the applicable award agreement, provided that the term of any award may not be for more than 10 years (or five years in the case of an incentive stock option granted to any participant who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company), subject to earlier termination in connection with a termination of the holder’s service with the Company and its subsidiaries or other forfeiture events.
Forfeiture Events
The Compensation Committee may specify in an award agreement that a participant’s rights, payments and benefits with respect to an award are subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain events, which may include, for example, termination of a participant’s service with the Company or any of its subsidiaries for “cause” (as defined in the award agreement), a participant’s violation of applicable laws or policies of the Company or any of its subsidiaries, a participant’s breach of restrictive covenants, or other conduct detrimental to the business or reputation of the Company.
Transferability
Unless specifically provided by the Compensation Committee in an award agreement, a participant’s rights under the USIP may not be assigned, transferred, pledged or otherwise disposed of, except by will or the laws of descent and distribution. An award agreement (other than with respect to an incentive stock option) may permit the award to be transferred to family members, family trusts, family controlled entities, charitable organizations, and/or pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the participant.
Minimum Vesting
No options or stock appreciation rights granted under the USIP may vest prior to the first anniversary of the applicable date of grant, except for options or stock appreciation rights that vest as a result of a participant’s death or Disability or the occurrence of a Transaction (each as defined in the USIP).
Individual Limits
Under the USIP, (a) the maximum number of shares with respect to which options and stock appreciation rights may be granted to an individual participant during a calendar year is 1.2 million shares, (b) the maximum number of shares with respect to which restricted stock, restricted stock unit, stock-based and stock awards may be granted to an individual participant during a calendar year is 3 million shares (regardless of when such shares are deliverable to the participant), and (c) the maximum number of shares subject to awards that may be granted to any non-employee member of the Board during the fiscal year, taken together with any cash fees paid to such non-employee member of the Board during the fiscal year, shall not exceed $1 million in total value (calculating the value of any stock-based award based on the grant date fair value of such award for financial reporting purposes), in each case, subject to adjustment as described under “Changes in Capitalization” below.
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Performance Based Compensation
When establishing performance goals applicable to any restricted stock, restricted stock unit, stock award or stock-based award under the USIP, the Compensation Committee may use one or more business criteria, including, without limitation, (a) annual revenue, (b) budget comparisons, (c) controllable profits, (d) Company earnings per share, (e) expense management, (f) improvements in capital structure, (g) net income, (h) net or gross sales, (i) operating income (pre- or post-tax), (j) profit margins, (k) operating or gross margin, (l) profitability of an identifiable business unit or product, (m) return on investments, (n) return on sales, (o) return on stockholders’ equity, (p) total return to stockholders, (q) assets under management, (r) investment management performance, (s) mutual and other investment fund performance, (t) institutional account performance, (u) high net worth and other separate account performance, (v) cash flow, operating cash flow, or cash flow or operating cash flow per share (before or after dividends), (w) price of the shares or any other publicly traded securities of the Company, (x) reduction in costs, (y) return on capital, including return on total capital or return on invested capital, (z) improvement in or attainment of expense levels or working capital levels, and (aa) performance of the Company relative to a peer group of companies and/or relevant indexes on any of the foregoing measures.
These performance goals may be applicable to the Company and/or any of its individual business units and may differ from participant to participant. In addition, these performance measures may be calculated in accordance with generally accepted accounting principles but excluding the effect (whether positive or negative) of any change in accounting standards and any extraordinary, unusual or nonrecurring item, as determined by the Compensation Committee, occurring after the establishment of the performance goals and may be otherwise adjusted as determined by the Compensation Committee.
Changes in Capitalization; Corporate Transactions
In the event of any change with respect to the outstanding shares of common stock resulting from a stock split, reverse stock split, stock dividend, extraordinary cash dividend, merger or corporate combination, combination or reclassification of the shares of common stock or any other similar transaction, the Compensation Committee may proportionately adjust any of the following, subject to any required action by the stockholders of the Company: (a) the number and/or kind of securities covered by each outstanding award, (b) the price per share covered by each such outstanding award, (c) the number and/or kind of securities which have been authorized for issuance under the USIP but as to which no awards have yet been granted or which have been returned to the USIP upon cancellation or expiration of an award, (d) the maximum number of options, stock appreciation rights, restricted stock awards, restricted stock unit awards, stock awards and stock-based awards which may be granted to any participant in any one-calendar-year period, (e) any other value determinations applicable to the USIP and/or outstanding awards, and (f) any other terms of an award that are affected by the event. Any adjustments, determinations or interpretations made by the Compensation Committee shall be final, binding and conclusive.
In the event of the proposed dissolution or liquidation of the Company or a merger or corporate combination in which the successor corporation does not agree to assume awards under the USIP or substitute equivalent awards, the Compensation Committee will make a determination (subject to the requirements of the USIP, as described under “Amendment and Termination” below) as to the equitable treatment of outstanding awards under the USIP.
Amendment and Termination
The USIP has no pre-determined termination date. The Board may at any time amend or terminate the USIP. However, no such amendment or termination may materially and adversely affect the rights of any holder of an award previously granted under the USIP without written consent of the holder. In addition, no such amendment or termination will be made without the approval of the Company’s stockholders to the extent such approval is required by applicable corporate, securities or tax laws, the requirements of any applicable stock exchange or if the amendment would lessen the stockholder approval requirements described in this paragraph or under “Stockholder Approval Required for Repricings” below. Notwithstanding that, the Board may, however, amend the USIP in such manner as it deems necessary to cause an award to comply with the requirements of the Code or any other applicable law, to avoid adverse tax consequences, or for changes in new accounting standards.
Stockholder Approval Required for Repricings
Reducing the exercise price of an option or the base appreciation amount of a stock appreciation right, or cancelling an underwater option or stock appreciation right in exchange for an equity award with a lower exercise price, purchase price, or base appreciation amount (as applicable), may not be done under the USIP without stockholder approval.
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Certain Significant Federal Income Tax Consequences
The following discussion briefly describes certain significant U.S. federal income tax consequences of the USIP for participants and certain tax effects to the Company. The statements in the following paragraphs concerning certain significant U.S. federal income tax consequences of benefits under the USIP are based on the Code, and judicial and administrative interpretations, as of the date of this Proxy Statement, which are subject to change at any time (possibly with retroactive effect). No attempt has been made to discuss any potential foreign, state or local tax consequences. The U.S. tax law is technical and complex, and the discussion below represents only a general summary. The tax treatment of a participant in the USIP may vary depending on his or her particular situation and may, therefore, be subject to special rules not discussed below. Accordingly, participants in the USIP should consult with their own tax advisors regarding the particular tax consequences (including state and local taxes) to them. Nothing in this Proposal No. 3 guarantees any particular tax treatment.
Incentive Stock Options. Incentive stock options (“ISOs”) granted under the USIP are intended to meet the definitional requirements of Section 422(b) of the Code for “incentive stock options.” An employee who receives an ISO does not recognize any taxable income upon the grant of such ISO. Similarly, the exercise of an ISO generally does not give rise to federal income tax to the employee, provided that (i) the federal “alternative minimum tax,” which depends on the employee’s particular tax situation, does not apply and (ii) the employee is employed by the Company or its subsidiaries from the date of the grant of the ISO until three months prior to the exercise thereof, except where such employment terminates by reason of disability (where the three month period is extended to one year) or death (where this requirement does not apply). If any employee exercises an ISO after the requisite periods referred to in clause (ii) above, the ISO will be treated as an NSO (as defined below) and will be subject to the rules set forth below under the caption “Non-Qualified Stock Options and Stock Appreciation Rights.” Further, if after exercising an ISO, an employee disposes of the common stock so acquired more than two years from the date of grant and more than one year from the date of transfer of the common stock pursuant to the exercise of such ISO (the “applicable holding period”), the employee will generally recognize capital gain or loss equal to the difference, if any, between the amount received for the shares and the exercise price.
If, however, any employee does not hold the shares so acquired for the applicable holding period, thereby making a “disqualifying disposition,” the employee would recognize ordinary income equal to the excess of the fair market value of the shares at the time the ISO was exercised over the exercise price and the balance, if any, would generally be
treated as capital gain. If the disqualifying disposition is a sale or exchange that would permit a loss to be recognized under the Code (were a loss in fact to be realized), and the sales proceeds are less than the fair market value of the shares on the date of exercise, the employee’s ordinary income would be limited to the gain (if any) realized on the sale. If the exercise price exceeds the amount realized upon the disqualifying disposition, the difference would be a capital loss.
The Company will not be allowed a federal income tax deduction upon the grant or exercise of an ISO or the disposition, after the applicable holding period, of the common stock acquired upon exercise of an ISO. However, in the event of a disqualifying disposition, the Company generally will be entitled to a deduction in an amount equal to the ordinary income included by the employee, provided that such amount constitutes an ordinary and necessary business expense to the Company and is reasonable.
Non-Qualified Stock Options and Stock Appreciation Rights. Non-qualified stock options (“NSO”) granted under the USIP are options that do not qualify as ISOs. An individual who receives an NSO or Stock Appreciation Right (“stock appreciation right”) will not recognize any taxable income upon the grant of such NSO or stock appreciation right. However, the individual generally will recognize ordinary income upon exercise of an NSO in an amount equal to the excess of the fair market value of the shares of common stock underlying such NSO at the time of exercise over the aggregate exercise price of such shares subject to the NSO. Similarly, upon the receipt of cash or shares pursuant to the exercise of a stock appreciation right, the individual generally will recognize ordinary income in an amount equal to the sum of the cash and the fair market value of the shares received upon such exercise.
Individuals will recognize gain upon the disposition of any shares received upon exercise of an NSO or stock appreciation right equal to the excess of (i) the amount realized on such disposition over (ii) the ordinary income recognized with respect to such shares under the principles set forth above, plus, in the case of an NSO, the exercise price previously paid for such shares. That gain will be taxable as long- or short-term capital gain depending on whether the shares were held for more than one year.
A federal income tax deduction generally will be allowed to the Company in an amount equal to the ordinary income included by the individual with respect to the exercise of his or her NSO or stock appreciation right, provided that such amount constitutes an ordinary and necessary business expense to the Company and is reasonable.
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Restricted Stock and Stock Awards. Restricted stock awards granted by the Company fall within the Code’s guidelines for awards that are restricted as to transferability and subject to a substantial risk of forfeiture. Absent a written election under Section 83(b) of the Code filed with the Internal Revenue Service within 30 days after the date of transfer of such shares pursuant to the restricted stock award (a “Section 83(b) election”), an individual will recognize ordinary income at the earlier of the time at which (i) the shares become transferable or (ii) the restrictions that impose a substantial risk of forfeiture of such shares lapse, in an amount equal to the excess of the fair market value (on such date) of such shares over the price paid for the award, if any. With respect to stock awards, an individual will recognize ordinary income upon receipt.
An individual will recognize ordinary income as of the date the common stock is transferred to the individual (and for restricted stock awards, only if a Section 83(b) election is properly made), in an amount equal to the excess of the fair market value of the common stock as of that date over the amount paid for such stock, if any.
The Company generally will be allowed a deduction for federal income tax purposes in an amount equal to the ordinary income recognized by the individual, provided that such amount constitutes an ordinary and necessary business expense and is reasonable.
Individuals will recognize gain upon the disposition of any shares received equal to the excess of (i) the amount realized on such disposition over (ii) the sum of the amount paid, if any, for such shares plus the ordinary income recognized with respect to such shares under the principles set forth above. That gain will be taxable as long- or short-term capital gain depending on whether the shares were held for more than one year.
Restricted Stock Unit and Stock-Based Awards. Recipients of restricted stock unit and stock-based awards generally should not recognize taxable income until such awards are settled into cash or shares of common stock (as applicable). Upon settlement, the individual will normally recognize ordinary income equal to the amount of cash and fair market value of the shares, if any, received upon such conversion. The Company generally will be allowed a deduction for federal income tax purposes in an amount equal to the ordinary income recognized by the recipient, provided that such amount constitutes an ordinary and necessary business expense and is reasonable.
Individuals will recognize gain upon the disposition of any shares received upon conversion of the restricted stock unit or stock-based awards equal to the excess of (i) the amount
realized on such disposition over (ii) the ordinary income recognized with respect to such shares under the principles set forth above. That gain will be taxable as long- or short-term capital gain depending on whether the shares were held for more than one year.
Section 409A. Section 409A of the Code imposes certain requirements on nonqualified deferred compensation arrangements. These include requirements with respect to an individual’s election to defer compensation and the individual’s selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that distributions may be made only on specified dates or on or following the occurrence of certain events (e.g., the individual’s separation from service or the individual’s death). Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form after the compensation has been deferred. For certain officers and other individuals, Section 409A requires that such individual’s distributions of non-qualified deferred compensation in connection with a separation from service commence no earlier than six months after such individual’s separation from service.
Awards granted under the USIP with a deferral feature will generally be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award will recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as possible interest-like charges and penalties. Certain states have enacted laws similar to Section 409A, which impose additional taxes, interest and penalties on non-qualified deferred compensation arrangements.
Section 280G. Under certain circumstances, accelerated vesting, exercise or payment of awards under the USIP in connection with a “change in control” of the Company might be deemed an “excess parachute payment” for purposes of the golden parachute payment provisions of Code Section 280G. To the extent it is so considered, the participant holding the award would be subject to an excise tax equal to 20% of the amount of the excess parachute payment, and the Company would be denied a tax deduction for the excess parachute payment.
2024 Proxy Statement 71
New Plan Benefits
Because grants under the USIP are subject to the discretion of the Compensation Committee, it is not possible to determine the benefits that will be received by executive officers, other employees and directors if the amendment and restatement to the USIP is approved by the stockholders.
However, it is anticipated that, among others, all of our current executive officers, including our named executive officers, and our non-employee directors will receive awards under the USIP.
Other Information
The closing price of a share of common stock on December 11, 20202023 was $24.33$25.49 per share. If stockholders do not approve this Proposal, the requested increase in the number of authorized shares available for delivery under the USIP and certain other changes cannot be implemented, and the Company will consider its alternatives.
As noted below under “Equity Compensation Plan Information,” in connection with the Company’s acquisition of Legg Mason, the Company assumed and amended and restated the Legg Mason, Inc. 2017 Equity Incentive Plan. As of December 1, 2020, approximately 14,784,566 shares remained available for future issuance under the EIP (as defined below). However, awards under the EIP may not be granted by the Company to individuals who were employed by the Company or entities that were its subsidiaries immediately prior to the closing of the acquisition on July 31, 2020.
The table below shows the number of shares of common stock underlying outstanding restricted stock unit awards as of December 1, 2020,2023 that have been granted to certain individuals or groups of individuals under the USIP since its inception in October 2002. There were no stock options or other rights outstanding to acquire shares under the USIP.
| Name and Position or Group | Shares Underlying | |
| Jennifer M. Johnson, | ||
| Matthew Nicholls, Executive Vice President and Chief Financial Officer | 747,735 | |
| Gregory E. Johnson, | ||
| All Current Executive Officers as a Group(2) | ||
| All Current Directors Who Are Not Executive Officers as a Group | 0 | |
| Each Nominee for Election as Director | ||
| Mariann Byerwalter | 0 | |
| Alexander S. Friedman | 0 | |
| Gregory E. Johnson | (See above) | |
| Jennifer M. Johnson | (See above) | |
| Rupert H. Johnson, Jr. | 0 | |
| John Y. Kim | 0 | |
| Karen M. King | 0 | |
| Anthony J. Noto | 0 | |
| John W. Thiel | 0 | |
| Seth H. Waugh | 0 | |
| Geoffrey Y. Yang | 0 | |
| Each Associate of Any of Such Directors, Executive Officers or Nominees: | 0 | |
| Each Other Person Who Received or is to Receive 5% of Such Options or Rights | 0 | |
| All current Employees, including Current Officers who are not Executive Officers, as a Group |
| (1) | Outstanding restricted stock unit awards as of December 1, |
| (2) | Includes shares underlying outstanding awards, if any, listed separately for Ms. Johnson and Messrs. G. Johnson, Nicholls, |
Equity Compensation Plan Information
The following table sets forth certain information as of September 30, 2020, with respect to the shares of the Company’s common stock that may be issued under the Company’s existing compensation plans that have been approved by stockholders and plans that have not been approved by stockholders.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | ||||||
| Equity compensation plans approved by stockholders1 | 3,203,442 | 2 | N/A | 3 | 15,895,743 | 4 | |||
| Equity compensation plans not approved by stockholders5 | 0 | 6 | N/A | 7 | 23,049,473 | ||||
| Total | 3,203,442 | N/A | 38,945,216 |
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Amended and Restated Franklin Resources Inc. 2017 Equity Incentive Plan72
The following summary describes material features of the Amended and Restated Franklin Resources, Inc. 2017 Equity Incentive Plan (the “EIP”) but is not intended to be complete and is qualified in its entirety by reference to the EIP, a copy of which is filed as Exhibit 99.1 to the Registration Statement on Form S-8 filed with the SEC by the Company on October 6, 2020. Capitalized terms not otherwise defined are used as set forth in the EIP.
Purpose
The EIP was originally adopted as the Legg Mason, Inc. 2017 Equity Incentive Plan, and was amended and restated and assumed by the Company in connection with the closing of the Company’s acquisition of Legg Mason on July 31, 2020 (the “Closing”). The purpose of the EIP is to provide motivation to key employees of the Company and its subsidiaries to put forth maximum efforts toward the continued growth, profitability, and success of the Company and its subsidiaries by providing incentives to such key employees through the ownership and performance of the equity interests in the Company.
Administration
The Compensation Committee of the Company’s Board of Directors (or such other committee designated by the Board) administers the EIP. The Committee has the authority to interpret the EIP, designate key employees who are eligible for awards pursuant to the EIP, determine the form of an award under the EIP, grant waivers of EIP terms and conditions, accelerate the vesting, exercise or payment of an award and take any and all other actions it deems necessary for the proper operation and administration of the EIP.
All determinations of the Committee will be made by a majority of its members, and its determinations will be final, binding and conclusive on all interested persons, including the Company and each participant. All actions required of the Committee under the EIP will be made in the Committee’s sole discretion, not in a fiduciary capacity and need not be uniformly applied to other persons, including similarly situated persons.
The Committee may delegate its authority and duties under the EIP to the Chief Executive Officer or to other senior officers of the Company under such conditions and subject to such limitations as the Committee may establish; provided, however, that only the Committee may grant awards to participants who are subject at the time of grant to Section 16 of the Exchange Act or whose compensation is to be determined by the Committee pursuant to the Committee’s charter or other governing document approved by the Board.
Shares Authorized
The EIP covers 23,049,473 shares of Common Stock, and the maximum number of shares of Common Stock available for awards granted under the EIP to any one individual during any calendar year is 2,375,297, in each case, as may be adjusted pursuant to the terms of the EIP. As of December 1, 2020, approximately 14,784,566 shares remained available for future issuance under the EIP.
Shares of Common Stock delivered under the EIP may be authorized and unissued shares of Common Stock or treasury shares. For purposes of determining the remaining shares of Common Stock available for grant under the EIP, to the extent that an award under the EIP expires or is canceled, forfeited, settled in cash, or otherwise terminated without delivery to the participant of the full number of shares of Common Stock to which the award related, the undelivered shares of Common Stock will again be available for grant. Shares of Common Stock tendered by a participant or withheld by the Company in payment of any exercise price or to fund any tax withholding obligation will also again be available for grant. Only shares of Common Stock delivered upon exercise of a stock appreciation right will be counted against the EIP limit and any shares covered by a stock appreciation right in excess of the number of shares of Common Stock delivered upon exercise of such stock appreciation right will again be available for grant under the EIP.
Eligibility and Participation
Any officer of the Company or any of its subsidiaries and any other employee of the Company or any of its subsidiaries so designated by the Committee is eligible to participate in the EIP; provided, however, that no individual who provided services to the Company or any of its subsidiaries prior to the Closing is eligible to participate in the EIP.
Types of Awards
Stock Options and Stock Appreciation Rights. Stock options granted under the EIP are not intended to qualify as an incentive stock options. The Committee will, with regard to each stock option, determine and set forth in the applicable award agreement: (a) the number of shares subject to the option, (b) the manner and time of the option’s exercise and vesting, (c) the exercise price per share of stock subject to the option, and (d) the methods by which the exercise price may be paid. A stock appreciation right may be granted in tandem with all or a portion of a related stock option or may be granted separately. The exercise price for a stock option or stock appreciation right is determined by the Committee but may not be less than the Fair Market Value per share of the Common Stock on the date the award is granted. A tandem stock appreciation right shall be exercisable to the extent, and only to the extent, that the related stock option is exercisable, and the exercise price of such a stock appreciation right shall be the option price under the related stock option.
Generally, unless otherwise specifically determined by the Committee, a stock appreciation right may vest only while a recipient is employed by the Company or any of its subsidiaries or rendering services to the Company or any of its subsidiaries, and all vesting will cease upon a recipient’s termination for any reason. If a stock appreciation right is exercisable in installments, such installments or portions that become exercisable will remain exercisable until the stock appreciation right expires, is canceled or otherwise terminates.
Stock Awards. Awards may be granted in the form of stock awards, which may consist of grants of Common Stock, restricted shares of Common Stock or restricted stock units. The terms and conditions of each such award are determined by the Committee and set forth in the applicable award agreement.
Performance Units and Performance Shares. Awards may be granted in the form of performance units or performance shares. Performance units are units valued by reference to designated criteria established by the Committee, other than Common Stock. Performance shares refer to shares of Common Stock or Units which are expressed in terms of Common Stock.
Other Incentive Awards. Subject to applicable law, the Committee may provide for the grant of other incentive awards, which are awards that are not otherwise specified under the terms of the EIP, including awards that are payable in whole or in part in cash and whose value is not related to Common Stock. Such awards will be subject to terms and conditions that are determined by the Committee and set forth in the applicable award agreement.
Dividends or Dividend Equivalents. No dividends or dividend equivalents will be paid or accrue with respect to stock options or stock appreciation awards. Awards granted under the EIP other than stock options and stock appreciation awards may, to the extent permitted under Section 409A of the Code, include an entitlement to receive dividend equivalents, subject to such terms, conditions, restrictions, and/or limitations, if any, as the Committee may establish. Dividends equivalents will be paid to the recipient at the time and in the manner specified by the Committee in the applicable award agreement. Dividends equivalents may, at the Committee’s discretion, accrue interest, be reinvested into additional shares of Common Stock or, in the case of dividends or dividend equivalents credited in connection with performance shares, be credited as additional performance shares.
Termination of Employment
If a recipient’s employment with the Company or any of its subsidiaries terminates for a reason other than death, disability, retirement, or any approved reason, all unexercised, unearned, and/or unpaid awards under the EIP will be canceled or forfeited, as the case may be, unless the Committee provides otherwise. The Committee has the authority to promulgate rules and regulations to (i) determine what events constitute disability, retirement, or termination for an approved reason for purposes of the EIP, and (ii) determine the treatment of a recipient under the EIP in the event of death, disability, retirement, or termination for an approved reason.
Term of Awards
The term of all awards are determined by the Committee and set forth in the applicable award agreement, subject to earlier termination in connection with a termination of the holder’s service with the Company and its subsidiaries or other forfeiture events.
Transferability
Stock options, stock appreciation awards, performance shares or other derivative securities (as defined in the rules and regulations promulgated under Section 16 of the Exchange Act) awarded under the EIP may not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution; provided, however, that the Committee may, subject to such terms and conditions as the Committee will specify, permit the transfer of an award to a recipient’s family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members.
Claw Back Provision
All awards are subject to the terms of the Company’s claw back, recoupment, forfeiture and repayment policies as in effect from time to time. By accepting an award, a recipient agrees promptly to repay or return to the Company the gross amount received in payment or settlement of any award to the extent that the Committee requires such repayment in accordance with the terms and provisions of the applicable policy, as construed and applied by the Committee.
Noncompetition Provision
Unless otherwise specified in the respective award agreement or notice, all awards are expressly made subject to the following noncompetition provisions: a recipient will forfeit all unexercised, unearned, and/or unpaid awards, including, but not by way of limitation, awards earned but not yet paid, the right to all dividends and dividend equivalents, and all interest, if any, accrued on the foregoing if, (i) in the opinion of the Committee, the recipient, without the written consent of the Company, engages directly or indirectly in any manner or capacity as principal, agent, partner, officer, director, employee, or otherwise, in any business or activity competitive with the business conducted by the Company or any of its subsidiaries; or (ii) the recipient performs any act or engages in any activity which in the opinion of the Chief Executive Officer of the Company is inimical to the best interests of the Company. In addition, the Committee may, in its discretion, condition the grant, exercise, payment or deferral of any award granted under the EIP, or the right to any dividends and dividend equivalents, on a recipient’s compliance with the terms of the noncompetition provision contained in the EIP and any other terms specified by the Committee in the award agreement or notice, and cause the recipient to forfeit any payment which is deferred or to grant to the Company the right to obtain equitable relief if the recipient fails to comply with the terms thereof.
Changes in Capitalization; Corporate Transactions
In the event of a merger, consolidation, stock rights offering, liquidation, or similar event affecting the Company or any of its affiliates (each, a “Corporate Event”) or a stock dividend, stock split, reverse stock split, separation, spinoff, disaffiliation, reorganization, extraordinary dividend of cash or other property, share combination, or recapitalization or similar event affecting the capital structure of the Company, in each case, that occurs after the date of grant of any award, the Committee or the Board is required to make such equitable and appropriate substitutions or adjustments to (i) the aggregate number of shares of Common Stock reserved for issuance and delivery under the EIP, (ii) the various maximum limitations set forth in the EIP upon certain types of awards and upon the grants to individuals of certain types of awards, (iii) the number of shares of Common Stock subject to outstanding awards, and (iv) the exercise price of outstanding awards as it deems appropriate.
In addition, in the case of Corporate Events, the Committee may also take any of the following actions, without limitation, with respect to outstanding awards under the EIP:
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Additional Information
In connection with any disaffiliation, separation, spinoff, or other similar event, the Committee or the Board may also arrange for the assumption of awards, or replacement of awards with new awards based on securities or other property (including, without limitation, other securities of the Company and securities of entities other than the Company), by the affected affiliate or business division or by the entity that controls such affiliate or business division following such event (as well as any corresponding adjustments to awards that remain based upon Company securities). Such replacement with new awards may include revision of award terms reflective of circumstances associated with the disaffiliation, separation, spinoff or other similar event. In addition, if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or an affiliate, business division or other operational unit of, or the manner in which any of the foregoing conducts its business, or other events or circumstances render the performance goals applicable to an award to be unsuitable, the Committee may modify such performance goals or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable.
Amendment and Termination
The Committee may at any time unilaterally amend any unexercised, unearned, or unpaid award, including, but not by way of limitation, awards earned but not yet paid, to the extent it deems appropriate; provided, however, that any such amendment which, in the opinion of the Committee, is adverse to a recipient will require the recipient’s consent (unless such amendment is necessary or advisable, in the opinion of the Committee, to conform to or maintain compliance with any and all applicable statutes, regulations and rules). Notwithstanding, the Committee may not accelerate the payment or settlement of any award that constitutes a deferral of compensation for purposes of Section 409A of the Code, except to the extent such acceleration would not result in the recipient incurring interest or additional tax under Section 409A of the Code.
The Board or the Committee may suspend or terminate the EIP at any time. In addition, the Board or the Committee may, from time to time, amend the EIP in any manner. To the extent required by applicable law or the rules of the New York Stock Exchange or the rules of any other exchange on which the Common Stock is listed, amendments to the EIP will not be effective unless they are approved by the Company’s stockholders.
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Stockholder Proposals and Nominations of Directors at
20222025 Annual Meeting
Proposals to be Considered for Inclusion in the Company’s Proxy Materials (Rule 14a-8)
PROPOSALS TO BE CONSIDERED FOR INCLUSION IN THE COMPANY’S PROXY MATERIALS (RULE 14A-8)
If a stockholder wishes to present any proposal for inclusion in the proxy materials to be distributed by us in connection with our 20222025 annual meeting, the proposal must be received by the Secretary of the Company not earlier than the close of business on or beforeJuly 30, 2024, and not later than the close of business on August 30, 2021.29, 2024. The proposal must also meet the other requirements of the rules of the SEC relating to stockholder proposals.
DIRECTOR NOMINATIONS FOR INCLUSION IN THE COMPANY’S PROXY MATERIALS (PROXY ACCESS)
Director Nominations for Inclusion in the Company’s Proxy Materials (Proxy Access)
A stockholder (or a group of up to 20 stockholders) who has owned at least 3% of our shares continuously for at least three years and has complied with the other requirements and procedures in our Amended and Restated Bylaws (“Bylaws”) may nominate and include in the Company’s proxy materials director nominees constituting the greater of two directors or 20% of our Board. Notice of a proxy access nomination for consideration at our 20222024 annual meeting must be received in accordance with the procedures and timing set forth in our Bylaws, as generally described under “General Procedures and Timing for Proposals and Nominations Under our Bylaws” below.
GENERAL PROCEDURES AND TIMING FOR PROPOSALS AND NOMINATIONS UNDER OUR BYLAWS
General Procedures and Timing for Proposals and Nominations Under our Bylaws
Our Bylaws contain an advance notice of stockholder business and nominations requirement (Section 2.3 of the Bylaws), which generally prescribes the procedures that a stockholder of the Company must follow if the stockholder intends, at an annual or special meeting of stockholders, to nominate a person for election to the Company’s Board of Directors or to propose other business to be considered by stockholders. These procedures include, among other things, that the stockholder give timely notice to the Secretary of the Company of the nomination or other proposed business, that the notice contain specified information, and that the stockholder comply with certain other requirements. If a stockholder’s nomination or proposal is not in compliance with the procedures set forth in our Bylaws, the Company may disregard such nomination or proposal.
Generally, in the case of an annual meeting of stockholders, a stockholder’s notice in order to be timely must be delivered in writing to the Secretary of the Company, at its principal executive office, not later than the close of business on the 120th day nor earlier than the close of business on the 150th day prior to the first anniversary of the date on which the Company first (i) mailed its notice of annual meeting, proxy statement and proxy or (ii) sent its notice of annual meeting and notice of internet availability of its proxy materials, whichever is earlier, for the immediately preceding year’s annual meeting. As specified in our Bylaws, different notice deadlines apply in the case of a special meeting, or when the date of an annual meeting is more than 30 days before or after the first anniversary of the prior year’s meeting.
Accordingly, assuming that the Company’s 20222025 annual meeting of stockholders is held within 30 days of the anniversary of the Company’s 20212024 annual meeting of stockholders, the stockholder must deliver a notice of such nomination or proposal to the Company’s Secretary not earlier than the close of business on July 30, 2024, and not later than the close of business on August 30, 2021, and not earlier than the close of business on July 31, 2021,29, 2024, and comply with the requirements of our Bylaws. If a stockholder submits a proposal outside of Rule 14a-8 for the Company’s 20222025 annual meeting of stockholders and such proposal is not delivered within the time frame specified in our Bylaws, the Company’s proxy may confer discretionary authority on persons being appointed as proxies on behalf of the Company to vote on such proposal.
2024 Proxy Statement ADDITIONAL REQUIREMENTS
73
Additional Requirements
Under our Bylaws, any notice of proposed business must include a description of the business and the reasons for bringing the proposed business to the meeting, any material interest of the stockholder in the business and certain other information about the stockholder. Any notice of a nomination or a proxy access nomination must provide information about the stockholder and the nominee, as well as the written consent of the proposed nominee to being named in the proxy statement and to serve as a director if elected.
A copy of the Company’s Bylaws specifying the advance notice requirements for proposing business or nominations, and for proposing proxy access nominations, has been filed with the SEC, and is available on the SEC’s website.
ADDRESS TO SUBMIT PROPOSALS AND NOMINATIONS
Address to Submit Proposals and Nominations
In each case, proxy proposals, proxy access nominations and nominations for director nominees and/or an item of business to be introduced at an annual meeting of stockholders must be submitted in writing to the Secretary of the Company, One Franklin Parkway, San Mateo, California 94403-1906.
Contact the Board of Directors
Stockholders and others may contact the Board, the non-management directors, the independent directors or any other individual director by sending a written communication appropriately addressed to:
Board of Directors
Franklin Resources, Inc.
c/o Secretary of the Company
One Franklin Parkway
San Mateo, CA 94403-1906
You may specify whether you would prefer to direct your communication to the full Board of Directors, only the non-management directors or any other particular individual director. Stockholders making such communications are encouraged to state that they are stockholders and provide the exact name in which their shares are held and the number of shares held.
In addition, the Company has established separate procedures for its employees to submit concerns on an anonymous and confidential basis regarding questionable accounting, internal accounting controls or auditing matters and possible violations of the Company’s Code of Ethics and Business Conduct, securities laws or other laws, which procedures are available on the Company’s Intranet.
Non-employees may submit any complaint regarding accounting, internal accounting controls or auditing matters directly to the Audit Committee of the Board of the Directors by sending a written communication appropriately addressed to:
Audit Committee
Franklin Resources, Inc.
One Franklin Parkway
San Mateo, CA 94403-1906
Electronic Access to Proxy Materials and
Virtual Annual Meeting
Whether you received the Notice of Internet Availability of Proxy Materials or paper copies of proxy materials, the Company’s proxy materials, including this Proxy Statement and our Annual Report, are available for you to review online. To request a paper copy of proxy materials, please call 1-800-579-1639, or you may request a paper copy by email at sendmaterial@proxyvote.com, or by logging onto www.proxyvote.com.
For instructions to access the Virtual Annual Meeting site, please visit www.virtualshareholdermeetings.com/BEN2021,www.virtualshareholdermeeting.com/BEN2024, and have available your 16-digit control number from your proxy card in order to access the meeting.
Franklin Resources 74
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials (or proxy materials in the case of stockholders who receive paper copies of proxy materials), addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
A number of banks and brokers with account holders who are beneficial holders of the Company’s common stock will be householding the Company’s Notice of Internet Availability of Proxy Materials (or proxy materials in the case of stockholders who receive paper copies of proxy materials). If you have received notice from your bank or broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate Notice of Internet Availability of Proxy Materials (or proxy material, if applicable), please notify your bank or broker, or contact Investor Relations, Franklin Resources, Inc., One Franklin Parkway, San Mateo, CA 94403-1906, Telephone (650) 312-4091. The Company undertakes, upon oral or written request, to deliver promptly a separate copy of the Company’s Notice of Internet Availability of Proxy Materials (or proxy materials, if applicable) to a stockholder at a shared address to which a single copy of the document was delivered. Stockholders
who currently receive multiple copies of the Notice of Internet Availability of Proxy Materials (or proxy materials, if applicable) at their address and would like to request householding of their communications should contact their bank or broker or Investor Relations at the contact address and telephone number provided above.
Other Matters
The Company’s Annual Report for fiscal year 20202023 is available for viewing under the “Stockholder Services” tab in the “Investor Relations” section of the Company’s website at www.franklinresources.com. Please read it carefully. The financial statements and the Annual Report do not, however, legally form any part of this proxy soliciting material.
To the extent that this Proxy Statement is incorporated by reference into any of our other filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the sections of this Proxy Statement titled “Compensation Committee Report,” and “Audit Committee Report” (to the extent permitted by the rules of the SEC) will not be deemed incorporated, unless specifically provided otherwise in such filing.
All descriptions of benefits plans and agreements contained in this Proxy Statement are summaries and are qualified in their entirety by reference to the actual plans or agreements, copies of which are filed as exhibits to our Annual Report on Form 10-K
The Company filed an annual report on Form 10-K for fiscalthe year ended September 30, 2020 with2023.
For those stockholders who receive the SEC. Stockholders may obtain a copy, without charge, by visitingNotice of Internet Availability of Proxy Materials, this Proxy Statement and the 2023 Annual Report are also available at the Company’s website at www.franklinresources.com under “Investor Relations.”
The Company will provide In addition, a copy of the fiscal year 2020 annual report on Form 10-K, including2023 Annual Report will be provided without charge upon the financial statements and financial schedules, upon written request of any stockholder to the Company’s Secretary at the Company’s principal executive offices, Franklin Resources, Inc., One Franklin Parkway, San Mateo, CA 94403-1906. Additionally, we
Our Board of Directors is not aware of any other matters to come before the Annual Meeting. If any other matters should come before the Meeting, the persons named in the enclosed proxy will provide copies of the exhibitsact thereon according to the annual report on Form 10-K upon payment of a reasonable fee (which will be limited to our reasonable expenses in furnishing such exhibits).their best judgment.
By order of the Board of Directors,
Aliya S. Gordon
THOMAS C. MERCHANT
Executive Vice President,
General Counsel and Secretary
December 28, 202027, 2023
2024 Proxy Statement 75
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Franklin Resources, Inc.
2002 Universal Stock Incentive Plan
As Amended and Restated
[effective February 9, 2021] (effective ____________, 202_)
| 1. | General | |
| 1.1. | Purpose. The Franklin Resources, Inc. 2002 Universal Stock Incentive Plan (the “2002 Stock Plan”) has been established by Franklin Resources, Inc., a Delaware corporation (the “Company”) to (i) attract and retain persons eligible to participate in the 2002 Stock Plan; (ii) motivate Participants, by means of appropriate incentives, to achieve long-range performance goals; (iii) provide incentive compensation opportunities that are competitive with those of other similar companies; and (iv) further align Participants’ interests with those of the Company’s other stockholders through compensation that is based on the Company’s common stock; and thereby promote the long-term financial interest of the Company and the Subsidiaries. |
| 1.2. | Participation. Subject to the terms and conditions of the 2002 Stock Plan, a Committee shall determine and designate, from time to time, from among the Participants, those persons who will be granted one or more Awards under the 2002 Stock Plan. In the discretion of a Committee, a Participant may be granted any Award permitted under the provisions of the 2002 Stock Plan, and more than one Award may be granted to a Participant. Awards may be granted as alternatives to or replacement of awards outstanding under the 2002 Stock Plan, or any other plan or arrangement of the Company or a Subsidiary (including a plan or arrangement of a business or entity, all or a portion of which is acquired by the Company or a Subsidiary). Designation of a Participant in any year shall not require a Committee to designate such person to receive an Award in any other year or, once designated, to receive the same type or amount of an Award as granted to such person in any other year. |
| 1.3. | Operation, Administration, and Definitions. The operation and administration of the 2002 Stock Plan, including the Awards made under the 2002 Stock Plan, shall be subject to the provisions of Section 4. Capitalized terms in the 2002 Stock Plan shall be defined as set forth in the 2002 Stock Plan (including the definition provisions of Section 9 of the 2002 Stock Plan). |
| 1.4. | Stock Subject to 2002 Stock Plan; Share Counting. Subject to the provisions of this Section 1.4, Section 6.1 and Section 11.1 of the 2002 Stock Plan, the maximum aggregate number of Shares which may be delivered pursuant to Awards, including, without limitation, the number of Shares that may be granted pursuant to Options (including Incentive Stock Options) and SARs, is | |
| (a) | Except as set forth in Section 1.4(b) and (c), to the extent any Shares covered by an Award are not delivered to a Participant or beneficiary because the Award is forfeited or canceled, or the Shares are not delivered because the Award is settled in cash, such Shares shall not be deemed to have been delivered for purposes of determining the maximum number of Shares available for delivery pursuant to Awards granted under the 2002 Stock Plan. |
| (b) | All Shares covered by the portion of a SAR that is exercised (whether or not Shares are actually issued to the Participant upon exercise of the SAR) shall be considered issued pursuant to the 2002 Stock Plan. |
| (c) | If Shares are surrendered or withheld as payment of either the exercise price of an Option granted hereunder and/or withholding taxes in respect of such an Option (including, without limitation, by attestation), such Shares shall not be returned to the 2002 Stock Plan and shall not be available for future awards under the 2002 Stock Plan. |
| (d) | Subject to adjustment under Section 6.1 and after giving effect to the 2013 stock split, (i) the maximum number of shares that may be granted to any one individual Participant pursuant to Section 2 (relating to Options and SARs) shall be 1,200,000 Shares during any one-calendar-year period and (ii) the maximum number of Shares that may be granted to any one individual Participant subject to Section 3 (relating to Restricted Stock Awards, Restricted Stock Unit Awards, Stock Awards and Stock-Based Awards) shall be 3,000,000 Shares during any one-calendar-year period (regardless of when such Shares are deliverable). |
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| (e) | Subject to adjustment under Section 6.1, the maximum number of Shares subject to Awards granted during a single fiscal year of the Company to any non-employee member of the Board, taken together with any cash fees paid to such non-employee member of the Board during the fiscal year, shall not, in each case, exceed $1,000,000 in total value (calculating the value of any stock-based Award based on the grant date fair value of such Award for financial reporting purposes). |
| 2. | Options and SARs | ||
| 2.1. | Options. |
| (a) | An Option is a grant of a right to purchase Shares at an exercise price established by the Compensation Committee, subject to Section 2.3. Options granted under this Section 2 may be either Incentive Stock Options (“ISO”) or Nonstatutory Stock Options (“NSO”), as determined in the discretion of the Compensation Committee. |
| (b) | Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be automatically treated as Nonstatutory Stock Options. For purposes of this paragraph 2.1(b), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the underlying Shares shall be determined as of the original date on which the Option is granted. In the event that the Code or the regulations promulgated thereunder are amended after the date the 2002 Stock Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment. |
| (c) | The term of each Option shall be the term stated in the Award Agreement; provided, however, that in the case of any Incentive Stock Option, the term shall be no more than ten (10) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement. However, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement. |
| (d) | The date of grant of an Option shall, for all purposes, be the date on which the Compensation Committee makes the determination granting such Option, or such other future date as is determined by the Compensation Committee. Notice of the determination shall be given to each Participant to whom an Option is so granted within a reasonable time after the date of such grant. | ||
| 2.2. | Stock Appreciation Rights. A Stock Appreciation Right (“SAR”) is a grant of rights to receive, in cash or Stock (as determined by the Compensation Committee), value equal to (or otherwise based on) the excess of: (a) the Fair Market Value of a specified number of Shares at the time of exercise; over (b) a base appreciation amount established by the Compensation Committee, subject to Section 2.3. | ||
| 2.3. | Exercise Price. The exercise price or base appreciation amount (as applicable) of each Option and SAR shall be established by the Compensation Committee or shall be determined by a method established by the Compensation Committee at the time the Option or SAR is granted; provided, |
| (a) | In the case of an ISO, |
| (i) | granted to an employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant; |
| (ii) | granted to any other employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. |
| (b) | In the case of a NSO, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. | |||
| (c) | In the case of a SAR, the base appreciation amount shall be no less than 100% of the Fair Market Value per Share on the date of grant. | |||
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| 2.4. | Time and Manner of Exercise. Options and SARs shall be exercisable in accordance with such terms and conditions and during such periods as may be established by a Committee; subject to the following terms regarding Options and SARs: |
| (a) | Termination of Service. In the event of termination of an Optionee’s Service, such Optionee may, but only within ninety (90) days after the date of such termination (unless such other period is set out by a Committee in the Award Agreement, which period shall control, but in no event later than the expiration date of the term of such Option as set forth in the Award Agreement), exercise the Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. | |||
| (b) | Disability of Optionee. Notwithstanding the provisions of paragraph 2.4(a) above, in the event of termination of an Optionee’s Service as a result of Optionee’s Disability, Optionee (or Optionee’s legal representative) may, but only within six (6) months from the date of such termination (unless such other period is set out by a Committee in the Award Agreement, which period shall control, but in no event later than the expiration date of the term of such Option as set forth in the Award Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee (or Optionee’s legal representative) does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. | |||
| (c) | Death of Optionee. Notwithstanding the provisions of paragraph 2.4(a) above, in the event of the death of an Optionee, the Option may be exercised, at any time within twelve (12) months following the date of death (unless such other period is set out by a Committee in the Award Agreement, which period shall control, but in no event later than the expiration date of the term of such Option as set forth in the Award Agreement), by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death. To the extent that Optionee was not entitled to exercise the Option at the date of death, or if the Optionee’s estate or person who acquired the right to exercise the Option by bequest or inheritance does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. | |||
| (d) | Minimum Vesting Requirement. No Option or SAR shall become vested or exercisable prior to the first anniversary of its date of grant; provided, however, that such minimum vesting requirement shall not apply to Options or SARs that vest as a result of a Participant’s death or Disability, or the occurrence of a Transaction. | |||
| 2.5. | Payment of Exercise Price. Payment of the exercise price of an Option shall be subject to the following: |
| (a) | The full exercise price for Shares purchased upon the exercise of any Option shall be paid at the time of such exercise (except that, in the case of an exercise arrangement approved by a Committee and described in paragraph 2.5(b), payment may be made as soon as practicable after the exercise). | |||
| (b) | The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by | |||
| a Committee (and, in the case of an Incentive Stock Option, shall be determined at the time of grant) and may, in the discretion of a Committee, consist entirely of (i) cash, (ii) check, (iii) delivery of authorization for the Company to retain from the total number of Shares as to which the Option is exercised that number of Shares having a Fair Market Value on the date of exercise equal to the exercise price for the total number of Shares as to which the Option is exercised, (iv) delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price, (v) irrevocably authorizing a third party to sell Shares (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise, (vi) any combination of the foregoing methods of payment, or (vii) such other consideration and method of payment for the issuance of Shares to the extent permitted under Applicable Laws. | |||
| 2.6. | Settlement of Award. Shares delivered pursuant to the exercise of an Option or SAR shall be subject to such conditions, restrictions and contingencies as a Committee may establish in the applicable Award Agreement at the time of grant. Settlement of SARs may be made in Shares (valued at their Fair Market Value at the time of exercise), in cash, or in a combination thereof, as determined in the discretion of a Committee. A Committee, in its discretion, may impose such conditions, restrictions and contingencies with respect to Shares acquired pursuant to the exercise of an Option or a SAR as such Committee determines to be desirable. |
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| 3. | Other Stock Awards or Stock-based Awards | ||
| 3.1. | Restrictions on Stock Awards. Each Restricted Stock Award, Restricted Stock Unit Award, Stock Award and Stock-Based Award shall be subject to the following: |
| (a) | Any such Awards shall be subject to such conditions, restrictions and contingencies as a Committee shall determine and set forth in the applicable Award Agreement or otherwise. | ||
| (b) | A Committee may designate whether any such Awards being granted to any Participant shall be subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of certain performance goals, which may be tied to one or more business criteria, including, without limitation: (a) annual revenue, (b) budget comparisons, (c) controllable profits, (d) Company earnings per share, (e) expense management, (f) improvements in capital structure, (g) net income, (h) net or gross sales, (i) operating income (pre- or post-tax), (j) profit margins, (k) operating or gross margin, (l) profitability of an identifiable business unit or product, (m) return on investments, (n) return on sales, (o) return on stockholders’ equity, (p) total return to stockholders, (q) assets under management, (r) investment management performance, (s) mutual and other investment fund performance, (t) institutional account performance, (u) high net worth and other separate account performance, (v) cash flow, operating cash flow, or cash flow or operating cash flow per share (before or after dividends), (w) price of the Shares or any other publicly traded securities of the Company, (x) reduction in costs, (y) return on capital, including return on total capital or return on invested capital, (z) improvement in or attainment of expense levels or working capital levels, and (aa) performance of the Company relative to a peer group of companies and/or relevant indexes on any of the foregoing measures. The performance goals may be applicable to the Company and/ or any of its individual business units and may differ from Participant to Participant. In addition, the performance goals may be calculated in accordance with generally accepted accounting principles, but excluding the effect (whether positive or negative) of any change in accounting standards and any extraordinary, unusual or nonrecurring item, as determined by the Compensation Committee, occurring after the establishment of the performance goals and may be otherwise adjusted as determined by the Compensation Committee. | ||
| 3.2. | Restricted Stock |
| (a) | Subject to the applicable Award Agreement, a Participant shall have all rights of a stockholder with respect to the Shares granted to the Participant under a Restricted Stock Award, including the right to vote the Shares and receive all dividends and other distributions paid or made with respect thereto, unless a Committee determines otherwise at the time the Restricted Stock Award is granted. |
| (b) | If a Participant makes an election pursuant to Section 83(b) of the Code with respect to a Restricted Stock Award, the Participant shall promptly provide the Company with a copy of the properly filed election. A Committee may provide in an Award Agreement that the Restricted Stock Award is conditioned upon the Participant’s making or refraining from making an election with respect to the Award under Section 83(b) of the Code. |
| 4. | Operation and Administration | ||
| 4.1. | Effective Date. The 2002 Stock Plan became effective as of October 10, 2002 (the “Effective Date”). The 2002 Stock Plan shall be unlimited in duration and, in the event of the 2002 Stock Plan termination, shall remain in effect as long as any Awards under it are outstanding; provided, however, that to the extent required by the Code, no ISO may be granted under the 2002 Stock Plan after December 15, 2030. | ||
| 4.2. | Term of Awards. Subject to the limitations of Section 2.1(c), the term of each Award under the 2002 Stock Plan shall be the term stated in the applicable Award Agreement, provided, that the term shall be no more than ten (10) years from the date of grant thereof. Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Participant has elected to defer the receipt of the Shares or cash issuable pursuant to the Award. | ||
| 4.3. | General Restrictions. Delivery of Shares or other amounts under the 2002 Stock Plan shall be subject to the following: |
| (a) | Notwithstanding any other provision of the 2002 Stock Plan, the Company shall have no liability to deliver any Shares under the 2002 Stock Plan or make any other distribution of benefits under the 2002 Stock Plan unless such delivery or distribution would comply with all Applicable Laws (including, without limitation, the requirements of the Securities Act), and the applicable requirements of any securities exchange or similar entity. |
| (b) | Shares issued under the 2002 Stock Plan may be certificated or, to the extent not prohibited by Applicable Law or the applicable rules of any stock exchange, non-certificated. |
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| 4.4. | Tax Withholding. All distributions under the 2002 Stock Plan are subject to withholding of all applicable taxes, and a Committee may condition the delivery of any Shares or other benefits under the 2002 Stock Plan on satisfaction of the applicable withholding obligations. A Committee, in its discretion, and subject to such requirements as such Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through (i) cash payment by the Participant, (ii) the surrender of Shares which the Participant already owns (which have been held by the Participant and vested for at least six (6) months or such other period as established from time to time by the Committee in order to avoid an adverse accounting treatment under applicable accounting standards), or (iii) the surrender of Shares to which the Participant is otherwise entitled under the 2002 Stock Plan, provided, however, that only the number of Shares sufficient to satisfy the Company’s minimum statutorily required tax withholding obligations shall be surrendered to the Company. A Committee has full discretion to allow a Participant to satisfy, in whole or in part, any additional income, employment and/or other applicable taxes payable by the Participant with respect to an Award by electing to have the Company withhold from the Shares otherwise deliverable to, or that would otherwise be retained by, the Participant upon the grant, exercise, vesting or settlement of the Award, as applicable, Shares having an aggregate Fair Market Value that is greater than the applicable minimum required statutory withholding obligation (but such withholding may in no event be in excess of the maximum statutory withholding amount in the Participant’s relevant tax jurisdictions). | ||
| 4.5. | Use of Shares. Subject to the overall limitation on the number of Shares that may be delivered under the 2002 Stock Plan, a Committee may use available Shares as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including the plans and arrangements of the Company or a Subsidiary assumed in business combinations. | ||
| 4.6. | Dividends and Dividend Equivalents. An Award (including without limitation an Option or SAR Award) may provide the Participant with the right to receive dividend payments or dividend equivalent payments with respect to Stock subject to the Award (both before and after the Stock subject to the Award is |
| earned, vested, or acquired), which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or Stock as determined by a Committee. Any such settlements, and any such crediting of dividends or dividend equivalents or reinvestment in Shares, may be subject to such conditions, restrictions and contingencies as a Committee shall establish, including the reinvestment of such credited amounts in Stock equivalents. | |||
| 4.7. | Payments. Awards may be settled through cash payments, the delivery of Shares, the granting of replacement Awards (subject to Section 5.2(e)), or combination thereof as a Committee shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as a Committee shall determine. A Committee may permit or require the deferral of any Award payment, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred Stock equivalents. Each Subsidiary shall be liable for payment of cash due under the 2002 Stock Plan with respect to any Participant to the extent that such benefits are attributable to the services rendered for that Subsidiary by the Participant. Any disputes relating to liability of a Subsidiary for cash payments shall be resolved by a Committee. | ||
| 4.8. | Non-alienation of Awards. Unless specifically provided by a Committee in the Award Agreement, Awards under the 2002 Stock Plan may not be sold, assigned, conveyed, hypothecated, encumbered, anticipated, or otherwise disposed of, and are nontransferable except as designated by the Participant by will or by the laws of descent and distribution; provided, that an Award Agreement shall not provide that an Award is transferable during the lifetime of the Participant, except to the extent that such Award Agreement permits transfers made to family members, to family trusts, to family controlled entities, to charitable organizations, and/or pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Participant. Any attempt to sell, assign, convey, hypothecate, encumber, anticipate, transfer, or otherwise dispose of any Award under the 2002 Stock Plan in violation of this Section 4.8 shall be void, and no Shares or cash subject to any Award shall, prior to receipt thereof by a Participant, be in any manner subject to the debts, contracts, liabilities, engagements, or torts of such Participant. | ||
| 4.9. | Agreement With Company. An Award under the 2002 Stock Plan shall be subject to such terms and conditions, not inconsistent with the 2002 Stock Plan, as a Committee shall, in its sole discretion, prescribe. The terms and conditions of any Award to any Participant shall be reflected in an Award Agreement, a copy of which shall be provided to the Participant, and a Committee may, but need not require that the Participant shall sign a copy of such Award Agreement. | ||
| 4.10. | Gender and Number. Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular. |
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| 4.11. | Limitation of Implied Rights. |
| (a) | Neither a Participant nor any other person shall, by reason of participation in the 2002 Stock Plan, acquire any right in or title to any assets, funds or property of the Company or any Parent or Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Parent or Subsidiary, in their sole discretion, may set aside in anticipation of a liability under the 2002 Stock Plan. A Participant shall have only a contractual right to the Stock or amounts, if any, payable under the 2002 Stock Plan, unsecured by any assets of the Company or any Parent or Subsidiary, and nothing contained in the 2002 Stock Plan shall constitute a guarantee that the assets of the Company or any Parent or Subsidiary shall be sufficient to pay any benefits to any person. |
| (b) | The 2002 Stock Plan does not constitute a contract of employment, and selection as a Participant will not give any Participant the right to be retained in the employ of the Company or any Subsidiary, nor any right or claim to any benefit under the 2002 Stock Plan, unless such right or claim has specifically accrued under the terms of the 2002 Stock Plan. Except as otherwise provided in the 2002 Stock Plan, no Award under the 2002 Stock Plan shall confer upon the holder thereof any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights. | ||
| 4.12. | Annual Incentive Plan. Any Equity Award, other than a Mutual Fund Unit Award, (each as defined in the Annual Incentive Plan) that is granted in accordance |
| with the Annual Incentive Plan shall, in accordance with Section 5.1(b) of the Annual Incentive Plan (or any successor provision), be subject to the 2002 Stock Plan and the applicable Award Agreement. | |||
| 5. | Committees |
| 5.1. | |||
Committees. The authority to control and manage the operation and administration of the 2002 Stock Plan shall be vested in the Board or a committee or committees established by the Board with such powers and authority as shall be determined by the Board in its discretion (the Board or each such committee, as applicable, a “Committee”). In addition to any other Committee established by the Board, the Compensation Committee of the Board (the “Compensation Committee”) shall be considered a Committee hereunder and shall be comprised, unless otherwise determined by the Board, solely of members who satisfy the requirements for (i) an “independent director” under rules adopted by the New York Stock Exchange or other principal exchange on which the Shares are then listed and (ii) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act. Notwithstanding the foregoing, the mere fact that a Committee member may fail to qualify under any of the foregoing requirements shall not invalidate any Award made by a Committee which Award is otherwise validly made under the 2002 Stock Plan. Neither the Company nor any member of the Board or Committee shall be liable for any action or determination made in good faith by the Board or a Committee with respect to the 2002 Stock Plan or any Award thereunder. | |||
| 5.2. | Powers of Committee. Each Committee’s administration of the 2002 Stock Plan shall be subject to the authority granted to such Committee by the Board and the following: |
| (a) | Subject to the provisions of the 2002 Stock Plan, a Committee will have the authority and discretion to select from among the Participants those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and (subject to Section 7) to cancel or suspend Awards. |
| (b) | To the extent that a Committee determines that the restrictions imposed by the 2002 Stock Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States, such Committee will have the authority and discretion to modify those restrictions as such Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States. |
| (c) | A Committee may grant Awards to Participants who are subject to the tax laws of nations other than the United States, which Awards may have terms and conditions as determined by the Committee as necessary to comply with applicable foreign laws. A Committee may take any action which it deems advisable to obtain approval of such Awards by the appropriate foreign government entity; provided, however, that no such Awards may be granted under this 2002 Stock Plan and no action may be taken which would result in a violation of the Exchange Act, the Code or any other Applicable Law. |
| (d) | In controlling and managing the operation and administration of the 2002 Stock Plan, a Committee shall take action in a manner that conforms to the articles and by-laws of the Company, and Applicable Law. |
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| (e) | Notwithstanding anything in the 2002 Stock Plan to the contrary, (i) the reduction of the exercise price of any Option awarded under the 2002 Stock Plan and the base appreciation amount of any SAR awarded under the 2002 Stock Plan shall be subject to stockholder approval and (ii) canceling an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock Award, other Award or cash payment shall be subject to stockholder approval. |
| (f) | Notwithstanding the authority granted to any other Committee, the Compensation Committee will have the sole authority and discretion to interpret the 2002 Stock Plan, to establish, amend, and rescind any rules and regulations relating to the 2002 Stock Plan, and to make all other determinations that may be necessary |
| or advisable for the administration of the 2002 Stock Plan. The Compensation Committee may correct any defect or supply any omission or reconcile any inconsistency in the 2002 Stock Plan in the manner and to the extent the Compensation Committee deems necessary or advisable. Any decision of the Compensation Committee in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned (including, without limitation, Participants and their beneficiaries or successors). | |||
| 5.3. | Delegation by Compensation Committee or a Committee. The Compensation Committee may delegate its authority and duties under the 2002 Stock Plan to the Chief Executive Officer and/or to other executive officers of the Company under such conditions and/or subject to such limitations as the Compensation Committee may establish and as limited by and subject to Applicable Law or the applicable rules of a stock exchange. Except to the extent prohibited by Applicable Law or the applicable rules of a stock exchange, a Committee may allocate in writing all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its ministerial duties to any person or persons selected by it; provided, however, that any such allocation or delegation may be revoked by a Committee at any time. In no event shall any such allocation or delegation of authority be permitted for the grant of Awards to any member of the Board or to any Participant who is subject to Section 16 under the Exchange Act. In the event that a Committee’s authority is delegated to Board members, officers or employees in accordance with the foregoing, all provisions of the 2002 Stock Plan relating to a Committee shall be interpreted in a manner consistent with the foregoing by treating any such reference as a reference to such Board members, officers or employees for such purpose. Any action undertaken in accordance with a Committee’s delegation of authority hereunder shall have the same force and effect as if such action was undertaken directly by a Committee and shall be deemed for all purposes of the 2002 Stock Plan to have been taken by a Committee. | ||
| 5.4. | Information to be Furnished to Committee. The records of the Company and its Subsidiaries as to a Participant’s employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants must furnish a Committee such evidence, data or information as such Committee considers desirable to carry out the terms of the 2002 Stock Plan in order to be entitled to benefits under the 2002 Stock Plan. |
| 6. | Adjustments Upon Changes in Capitalization or Corporate Transaction | ||
| 6.1. | Changes in Capitalization. In the event of any change with respect to the outstanding shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, extraordinary cash dividend, merger or corporate combination, combination or reclassification of the Common Stock or any transaction similar to the foregoing, the Compensation Committee shall make such substitution or adjustment, if any, as it deems to be equitable in order to prevent the enlargement or diminution of the benefits or potential benefits intended to be made available under the 2002 Stock Plan, subject to any required action by the stockholders of the Company, as to (a) the number and/or kind of securities covered by each outstanding Award, (b) the price per share covered by each such outstanding Award, (c) the number and/or kind of securities which have been authorized for issuance under the 2002 Stock Plan but as to which no Awards have yet been granted or which have been returned to the 2002 Stock Plan upon cancellation or expiration of an Award, (d) the maximum number of Options, SARs, Restricted Stock Awards, Restricted Stock Unit Awards, Stock Awards and Stock-Based Awards which may be granted to any Participant in any one-calendar-year period, (e) any other value determinations applicable to the 2002 Stock Plan and/or outstanding Awards, and (f) any other terms of an Award that are affected by the event; provided, that, for the avoidance of doubt, in the case of the occurrence of any of the foregoing events that is an “equity restructuring” (within the meaning of applicable stock-based compensation accounting guidelines), the Compensation Committee shall make an equitable adjustment to outstanding Awards to reflect such event. | ||
| 6.2. | Transaction. In the event of the proposed dissolution or liquidation of the Company or of a merger or corporate combination (a |
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Tableequivalent Award, the Compensation Committee shall make a determination (subject to Section 7) as to the equitable treatment of Contentsoutstanding Awards under the 2002 Stock Plan and shall notify Participants of such treatment no later than ten (10) days prior to such proposed Transaction. To the extent it has not been previously exercised, an Award that is not assumed will terminate immediately prior to the consummation of such proposed Transaction.
| 7. | Amendment and Termination |
The Board may, at any time, amend or terminate the 2002 Stock Plan; provided, that no amendment or termination (i) may materially and adversely affect the rights of any Participant or beneficiary under any Award granted under the 2002 Stock Plan prior to the date such amendment is adopted by the Board or such termination occurs unless written consent of the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary) is obtained, and (ii) shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws, the requirements of any applicable stock exchange, or if such amendment would lessen the stockholder approval requirements of Section 5.2(e) or this Section 7; provided, that, anything to the contrary notwithstanding, the Board may amend the 2002 Stock Plan in such manner as it deems necessary to cause an Award to comply with the requirements of the Code or any other Applicable Law, to avoid adverse tax consequences, or for changes in new accounting standards. Notwithstanding anything herein to the contrary, modifications or adjustments pursuant to Sections 6.1 or 6.2 or that may cause an Incentive Stock Option to become a Nonstatutory Stock Option shall in no event be deemed to have an adverse effect on any Award.
| 8. | Forfeiture Events |
A Committee may specify in an Award Agreement that a Participant’s rights, payments and benefits with respect to an Award are subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of the Award. Such events may include, without limitation, termination of a Participant’s Service for Cause (as such term or like term is defined in the Award Agreement), a Participant’s violation of applicable laws, regulations or policies of the Company or any of its subsidiaries, breach of noncompetition, non-solicitation, confidentiality or other restrictive covenants that may apply to the Participant or other conduct by the Participant that is detrimental to the business or reputation of the Company, as determined by a Committee in its sole and absolute discretion.
| 9. | Defined Terms | |
In addition to the other definitions contained herein, the following definitions shall apply:
| (a) | “Annual Incentive | |
| (b) | “Applicable Law” means the corporate, securities and tax laws (including, without limitation, the Delaware corporate law, the Exchange Act, the Securities Act and the Code) applicable to the establishment and administration of employee stock incentive plans and the grant of awards thereunder. | |
| (c) | “Award” means any award or benefit granted under the 2002 Stock Plan, including, without limitation, the grant of Options, SARs, Restricted Stock Awards, Restricted Stock Unit Awards, Stock Awards and Stock-Based Awards. | |
| (d) | “Award Agreement” means a written agreement between the Company and a holder of an Award, executed by the Company, evidencing the terms and conditions of the Award. | |
| (e) | “Board” means the Board of Directors of the Company. | |
| (f) | “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provisions of the Code. | |
| (g) | “Common Stock” means the common stock, par value, $.10 per share, of the Company. | |
| (h) | “Continuous Status as an Employee” as used in certain Award Agreements means the absence of any interruption or termination of the employment relationship by the Company or any Subsidiary. Continuous Status as an Employee shall not be considered interrupted in the case of: (i) sick leave, military leave or any other leave of absence approved by the Board, provided, that, solely for purposes of Incentive Stock Options, such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (ii) in the case of transfers between locations of the Company or between the Company, its Subsidiaries or its successor. |
2024 Proxy Statement A-8
| (i) | “Controller” means the entity that decides how and why Personal Data are processed. | ||
| (j) | “Disability” means that a Participant ceases to be an employee on account of disability as a result of which the Participant is determined to be disabled by the determining authority under the long-term or total permanent disability policy, or government social security or other similar benefit program, of the country or location in which Participant is employed and in the absence of such determining authority, as determined by the Committee in accordance with the policies of the Company. | ||
| (k) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. | ||
| (l) | “Fair Market Value” means the value of a share of Stock granted pursuant to the 2002 Stock Plan as of any date determined as follows: |
| (i) | If there should be a public market for the Stock on such date, the closing price of such share of Stock as reported on such date on the composite tape of the principal national securities exchange on which such share is listed or admitted to trading, or if such share is not listed or admitted to trading on any national securities exchange, the arithmetic mean of the per share closing bid price and the per share closing asked price on such date as quoted on the National Association of Securities Dealers Automated Quotation System (or such market in which such prices are regularly quoted) (“NASDAQ”), or if no sale of such share shall have been reported on the composite tape of any national securities exchange or quoted on the NASDAQ on such date, then the immediately preceding date on which sales of such shares has been so reported or quoted shall be used; and |
| (ii) | If there should not be a public market for the Stock on such date, then the Fair Market Value of the Stock shall be determined in good faith by the Board (or a committee thereof); provided, that for purposes of setting the exercise price of Options or the base appreciation amount of SARs, Fair Market Value shall be determined in a manner consistent with Section 409A of the Code and the regulations thereunder, unless such Award is not subject to U.S. tax law. | ||
| (m) | “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. | ||
| (n) | “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option. | ||
| (o) | “Option” means a stock option granted pursuant to Section 2 of the 2002 Stock Plan. | ||
| (p) | “Optionee” means a Participant who receives an Option. | ||
| (q) | “Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code. | ||
| (r) | “Participant” means any executive, employee, director or individual consultant of the Company or any of its Subsidiaries. An Award may be granted to an employee, in connection with hiring, retention or otherwise, prior to the date the employee first performs services for the Company or its Subsidiaries; provided, that such Awards shall not become vested prior to the date the employee first performs such services. The term “Participant” also includes any non-employee director of the Company or its Subsidiaries. | ||
| (s) | “Personal Data” means any information relating to an identified or identifiable natural person (a “data subject”). | ||
| (t) | “Process,” “processing” or “processed” means anything that is done with Personal Data, including collecting, storing, accessing, using, editing, disclosing, or deleting those data. | ||
| (u) | “Restricted Stock Award” means a grant of Shares subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives, as determined by a Committee. | ||
| (v) | “Restricted Stock Unit Award” means a grant of a right to receive Shares or cash in the future, with such right to future delivery subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives, as determined by a Committee. | ||
| (w) | “Securities Act” means the Securities Act of 1933, as amended, and any successor thereto. |
Franklin Resources A-9
| (x) | “Service” means a Participant’s employment with the Company or any Subsidiary or a Participant’s service as a non-employee director or individual consultant with the Company or any Subsidiary, as applicable. |
| (y) | “Share” means a share of the Common Stock, as adjusted in accordance with Section 6 of the 2002 Stock Plan. | ||
| (z) | “Stock” means shares of Common Stock of the Company. |
| (aa) | “Stock Award” means a grant of Shares that are not subject to forfeiture or other restrictions. |
| (bb) | “Stock-Based Award” means an Award that is valued, in whole or in part, by reference to, or is otherwise based on the Fair Market Value of, Shares, that is not a Restricted Stock Award, Restricted Stock Unit Award, or Stock Award. |
| (cc) | “Subsidiary” or “Subsidiaries” means any company during any period in which it is a “subsidiary corporation” (as that term is defined in Code section 424(f)) with respect to the Company. |
| 10. | Section 409A | ||
The 2002 Stock Plan is intended to comply with the requirements of Section 409A of the Code or an exemption or exclusion therefrom and, with respect to amounts that are subject to Section 409A of the Code, it is intended that the 2002 Stock Plan be administered in all respects in accordance with Section 409A of the Code. Each payment under any Award shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may a Participant, directly or indirectly, designate the calendar year of any payment to be made under any Award, but only to the extent such payment is considered “nonqualified deferred compensation” within the meaning of Section 409A of the Code. Notwithstanding any provision of the 2002 Stock Plan or any Award Agreement to the contrary, in the event that a Participant is a “specified employee” within the meaning of Section 409A of the Code (as determined in accordance with the methodology established by the Company), amounts that constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code that would otherwise be payable on account of a separation from service within the meaning of Section 409A of the Code and during the six-month period immediately following a Participant’s “separation from service” within the meaning of Section 409A of the Code (“Separation from Service”) shall instead be paid or provided on the first business day after the date that is six months following the Participant’s Separation from Service. If the Participant dies following the Separation from Service and prior to the payment of any amounts delayed on account of Section 409A of the Code, such amounts shall be paid to the personal representative of the Participant’s estate within thirty (30) days after the date of the Participant’s death. The Company shall use commercially reasonable efforts to implement the provisions of this Section 10 in good faith; provided, that neither the Company, the Committee nor any of the Company’s employees, directors or representatives shall have any liability to any Participant with respect to this Section 10.
| General Provisions |
| 11.1. | Substitute Awards in Corporate Transactions. Nothing contained in the 2002 Stock Plan shall be construed to limit the right of a Committee to grant Awards under the 2002 Stock Plan in connection with the acquisition, whether by purchase, merger, consolidation or other corporate transaction, of the business or assets of any corporation or other entity. Without limiting the foregoing, a Committee may grant Awards under the 2002 Stock Plan to an employee, director or individual independent contractor of another corporation who becomes a Participant by reason of any such corporate transaction in substitution for awards previously granted by such corporation or entity to such person. The terms and conditions of the substitute Awards may vary from the terms and conditions that would otherwise be required by the 2002 Stock Plan solely to the extent a Committee deems necessary for such purpose. Any such substitute awards shall not reduce the Share Reserve or count toward the limits in Section 1.4(d); provided, however, that such treatment is permitted by applicable law and the listing requirements of the New York Stock Exchange or other exchange or securities market on which the Stock is listed. | ||
| Other Compensation and Benefit Plans. The adoption of the 2002 Stock Plan shall not affect any other share incentive or other compensation plans in effect for the Company or any Subsidiary, nor shall the 2002 Stock Plan preclude the Company from establishing any other forms of share incentive or other compensation or benefit program for employees of the Company or any Subsidiary. The amount of any compensation deemed to be received by a Participant pursuant to an Award shall not constitute includable compensation for purposes of determining the amount of benefits to which a Participant is entitled under any other compensation or benefit plan or program of the Company or a Subsidiary, including, without limitation, under any pension or severance benefits plan, except to the extent specifically provided by the terms of any such plan. |
2024 Proxy Statement A-10
| Governing Law. The 2002 Stock Plan shall be governed by, and all claims, disagreements, or disputes arising under or in connection with the 2002 Stock Plan shall be resolved in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules, to the extent not preempted by the federal laws of the United States of America. | ||
| No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the 2002 Stock Plan or any Award, and a Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional shares of Stock or whether such fractional shares or any rights thereto shall be canceled, terminated or otherwise eliminated. | ||
| No Guarantees Regarding Tax Treatment. Neither the Company nor a Committee make any guarantees to any person regarding the tax treatment of Awards or payments made under the 2002 Stock Plan. Neither the Company nor a Committee has any obligation to take any action to prevent the assessment of any tax on any person with respect to any Award under Section 409A of the Code, Section 4999 of the Code or otherwise and neither the Company nor a Committee shall have any liability to a person with respect thereto. | ||
| Data Protection. In connection with implementing, administering and managing the 2002 Stock Plan, the Company is the Controller with respect to processing Personal Data. Information concerning the Company’s employee privacy practices and notices can be obtained through the Company Global Privacy Office. Participants are responsible for: (i) providing the Company with accurate and up to date Personal Data; and (ii) updating those Personal Data in the event of any material changes. |
| 12. | Plan History |
The 2002 Stock Plan became effective as of October 10, 2002. The 2002 Stock Plan was originally approved by the stockholders of the Company on January 30, 2003. The Board approved an amendment and restatement of the 2002 Stock Plan on December 16, 2004 to (a) include additional Performance Goals and (b) amend Section 6.1 to increase the scope of adjustments that may be made as a result of changes in capitalization of the Company, which amendment and restatement was approved by the stockholders of the Company on January 25, 2005. The Board approved a further amendment and restatement of the 2002 Stock Plan on December 18, 2009 to (a) revise the Performance Goals such that they conform to the Performance Goals under the Franklin Resources, Inc. 2004 Key Executive Incentive Compensation Plan and (b) make certain administrative updates, which amendment and restatement became effective upon its approval by the stockholders of the Company on March 16, 2010. The Board approved a further amendment and restatement of the 2002 Stock Plan on December 16, 2010 to increase the number of authorized Shares subject to the 2002 Stock Plan by ten million (10,000,000) Shares, for a total maximum aggregate of forty million (40,000,000) Shares, which amendment and restatement became effective upon its approval of the stockholders of the Company on March 15, 2011. The Board approved a further amendment and restatement of the 2002 Stock Plan on October 22, 2012 to permit additional committees of the Board to exercise certain authority under the Plan, which amendment and restatement was not subject to the approval of the stockholders of the Company. The Board approved a further amendment and restatement of the 2002 Stock Plan on December 15, 2015, to provide for a minimum vesting schedule for Options and SARs and clarify that cancellation of an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares requires shareholder approval, which amendment and restatement was not subject to the approval of the stockholders of the Company. The Board approved a further amendment and restatement of the 2002 Stock Plan on June 14, 2017 to limit the total value of awards to non-employee members of the Board of Directors in any fiscal year and provide that the Committee may permit a Participant to elect to withhold up to the maximum statutorily required amount for applicable tax withholding upon the vesting, exercise or settlement of Awards and to make other immaterial administrative changes, which amendment and restatement was not subject to the approval of the stockholders of the Company. The Board approved a further amendment and restatement of the 2002 Stock Plan on December 15, 2020 (a) to increase the number of authorized Shares subject to the 2002 Stock Plan by twenty million (20,000,000) Shares, for a total maximum aggregate of one hundred and forty million (140,000,000) Shares (after giving effect to the 2013 stock split) and (b) make certain other changes and administrative updates, which amendment and restatement became effective upon its approval of the stockholders of the Company on February 9, 2021. The Board approved a further amendment and restatement of the 2002 Stock Plan on December 12, 2023 to increase the number of authorized Shares subject to the 2002 Stock Plan by twenty-five million (25,000,000) Shares, for a total maximum aggregate of one hundred and sixty-five million (165,000,000) Shares, effective upon its approval by the stockholders of the Company on February 6, 2024.
Franklin Resources A-11
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SAN MATEO, CA 94403-1906
 | SCAN TO VIEW MATERIALS & VOTE |  |
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m., Eastern Time on February 8, 2021.5, 2024. Franklin Templeton 401(k) Retirement Plan participants must vote by 11:59 p.m., Eastern Time on February 4, 2021.1, 2024. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/BEN2021BEN2024
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m., Eastern Time on February 8, 2021.5, 2024. Franklin Templeton 401(k) Retirement Plan participants must vote by 11:59 p.m., Eastern Time on February 4, 2021.1, 2024. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING VIA THE INTERNET OR BY TELEPHONE.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
| V25615-Z86240-P99714 | KEEP THIS PORTION FOR YOUR RECORDS | |||
| DETACH AND RETURN THIS PORTION ONLY | ||||
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| The Board of Directors recommends a vote FOR all of the nominees listed. | ||||||||||
| 1. | To elect 11 directors to the Board to hold office until the next annual meeting of stockholders or until that person’s successor is elected and qualified or until his or her earlier death, resignation, retirement, disqualification or removal. | |||||||||
Nominees: | For | Against | Abstain | |||||||
1a. | ☐ | ☐ | ||||||||
1b. | ||||||||||
| Alexander S. Friedman | ☐ | ☐ | ☐ | |||||||
| 1c. | Gregory E. Johnson | ☐ | ☐ | ☐ | ||||||
| 1d. | Jennifer M. Johnson | ☐ | ☐ | ☐ | ||||||
| 1e. | Rupert H. Johnson, Jr. | ☐ | ☐ | ☐ | ||||||
| 1f. | John Y. Kim | ☐ | ☐ | ☐ | ||||||
| Karen M. King | ☐ | ☐ | ☐ | |||||||
| Anthony J. Noto | ☐ | ☐ | ☐ | |||||||
| 1i. | John W. Thiel | ☐ | ☐ | ☐ | ||||||
| For | Against | Abstain | |||||||||
| 1j. | Seth H. Waugh | ☐ | ☐ | ☐ | |||||||
| 1k. | Geoffrey Y. Yang | ☐ | ☐ | ☐ | |||||||
| The Board of Directors recommends a vote FOR Proposals 2 and 3. | For | Against | |||||||||||||
| 2. | To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2024. | ☐ | ☐ | ☐ | |||||||||||
| |||||||||||||||
| 3. | To approve an amendment and restatement of the | ☐ | ☐ | ☐ | |||||||||||
| 4. | To transact such other business | ||||||||||||||
|
NOTE: Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
Important Notice Regarding the Availability of Proxy Materials for the Virtual Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
FRANKLIN RESOURCES, INC. This proxy card/voting instruction form is solicited on behalf of the Board of Directors. With this proxy, the stockholder signing on the reverse side appoints Gregory E. Johnson, Jennifer M. Johnson, Rupert H. Johnson, Jr., and Thomas C. Merchant (the “proxy holders”), or any one of them, as the stockholder’s proxies with full power of substitution. The stockholder appoints the proxy holders collectively and as individuals, to vote all of the stockholder’s shares of Franklin Resources, Inc. (the “Company”) common stock at the Annual Meeting of Stockholders, and at any and all adjournments or postponements of the meeting, on the matters set forth on the reverse side of this card. This proxy card also provides voting instructions for Franklin Templeton 401(k) Retirement Plan participants. The Annual Meeting of Stockholders will be held on Tuesday, February 6, 2024, at 8:00 a.m., Pacific Time, via live webcast at www.virtualshareholdermeeting.com/BEN2024. The Board of Directors has solicited this proxy and it will be voted as specified on this proxy card on the proposals proposed by the Company listed on the reverse side. If you do not mark any votes or abstentions, this proxy will be voted FOR all nominees to the Board of Directors, FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2024 and FOR the approval of an amendment and restatement of the Company’s 2002 Universal Stock Incentive Plan. If any other matters come before the meeting to be voted on, the proxy holders named in this proxy will vote, act and consent on those matters in their discretion. To change your address, please call the Company’s transfer agent, Computershare, at (866) 229-6632 (U.S. holders) or (201) 680-6578 (Non-U.S. holders). Continued on the reverse side. Must be signed and dated on the reverse side. Please complete, sign and date this proxy on the reverse side and return it promptly in the accompanying envelope. |
FRANKLIN RESOURCES, INC.
This proxy card/voting instruction form is solicited on behalf of the Board of Directors.
With this proxy, the stockholder signing on the reverse side appoints Gregory E. Johnson, Rupert H. Johnson, Jr., Jennifer M. Johnson, and Aliya S. Gordon (the "proxy holders"), or any one of them, as the stockholder's proxies with full power of substitution. The stockholder appoints the proxy holders collectively and as individuals, to vote all of the stockholder's shares of Franklin Resources, Inc. (the "Company") common stock at the Virtual Annual Meeting of Stockholders, and at any and all adjournments or postponements of the meeting, on the matters set forth on the reverse side of this card. This proxy card also provides voting instructions for Franklin Templeton 401(k) Retirement Plan participants. The Virtual Annual Meeting of Stockholders will be held on Tuesday, February 9, 2021, at 8:00 a.m., Pacific Time, via live webcast at www.virtualshareholdermeeting.com/BEN2021.
The Board of Directors has solicited this proxy and it will be voted as specified on this proxy card on the proposals proposed by the Company listed on the reverse side. If you do not mark any votes or abstentions, this proxy will be voted FOR all nominees to the Board of Directors, FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2021, and FOR approval of an amendment and restatement of the Franklin Resources, Inc. 2002 Universal Stock Incentive Plan. If any other matters come before the meeting to be voted on, the proxy holders named in this proxy will vote, act and consent on those matters in their discretion.
To change your address, please call the Company's transfer agent, Computershare, at (866) 229-6632 (U.S. holders) or (201) 680-6578 (Non-U.S. holders).
Continued on the reverse side. Must be signed and dated on the reverse side.Please complete, sign and date this proxy on the reverse side and return it promptly in the accompanying envelope.