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Learn More | ||||
2018 Annual Report* | 2017 Corporate Responsibility Report* | |||
https://investorrelations.discover.com/ investor-relations/financials/annual-reports/default.aspx | https://www.discover.com/company/ corporate-responsibility/cr-report_2017.pdf | |||
* The information in the Annual Report and Corporate Responsibility Report is not incorporated by reference into, and does not form part of, this proxy statement. |
March 25, 2019 Dear Fellow Shareholder, I cordially invite you to attend Discover Financial Services’ 2019 Annual Meeting of Shareholders to be held at 9:00 a.m., local time, May 16, 2019, at our corporate headquarters located at 2500 Lake Cook Road, Riverwoods, Illinois 60015. All shareholders of record of our outstanding shares of common stock at the close of business on March 18, 2019 will be entitled to vote at the Annual Meeting. Your vote is important! Whether or not you plan to attend the Annual Meeting, please read the enclosed proxy statement and vote as soon as possible via the Internet, by telephone or, if you receive a paper Proxy Card or voting instruction form in the mail, by mailing the completed Proxy Card or voting instruction form. Using the Internet or telephone voting systems or mailing your completed Proxy Card will not prevent you from voting in person at the meeting if you are a shareholder of record and wish to do so. Important information about the matters to be acted upon at the meeting is included in the notice of meeting and proxy statement. Our 2018 Annual Report contains information about our Company and its financial performance. I am very much looking forward to our 2019 Annual Meeting of Shareholders. Very truly yours, | |
Lawrence A. Weinbach Independent Chairman | |
This proxy statement is dated March 25, 2019 and is first being sent or made available to shareholders on or about April 3, 2019. |
Notice of 2019 Annual Meeting of Shareholders |
Date and Time May 16, 2019 9:00 a.m., local time | Place Discover Financial Services 2500 Lake Cook Road Riverwoods, IL 60015 | Record Date You are entitled to notice of and to vote at the meeting and at any adjournment or postponement of the meeting if you were a shareholder of record as of the close of business on March 18, 2019. | ||
Items of Business | Board Recommendation | |||
1 | To elect 11 members of the Board of Directors named in the Proxy Statement as nominees, each for a term of one year. | FOR each director nominee | ||
2 | To conduct an advisory, non-binding vote to approve named executive officer compensation. | FOR | ||
3 | To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2019. | FOR | ||
4 | To amend the Company's Amended and Restated Certificate of Incorporation to eliminate supermajority voting requirements. | FOR | ||
5 | To amend the Company's Amended and Restated Certificate of Incorporation to grant shareholders the right to call special meetings. | FOR | ||
6 | To consider an advisory vote on one shareholder proposal, if properly presented. | AGAINST | ||
To transact any other business as may properly come before the meeting or any adjournment or postponement of the meeting. | ||||
It is important that your shares be represented and voted at the Annual Meeting. You can vote your shares by completing and returning your Proxy Card or by voting on the Internet or by telephone. The only voting securities of the Company are shares of our common stock, $0.01 par value per share (the "Common Stock"), of which there were 326,237,525 shares outstanding as of the Record Date (excluding treasury stock). See the Questions and Answers About the Annual Meeting and Voting section beginning on page 60 for more details. |
Advance Voting Methods | ||||
Internet Go www.investorvote.com/dfs | Webcast A live audio webcast of our Annual Meeting will be available through our investor relations page of our internet site, www.discover.com, starting at 9:00 a.m., local time, on May 16, 2019. Information included on our website, other than our Proxy Statement and form of proxy, is not a part of our proxy solicitation materials. | |||
Telephone Call toll free 1-800-652-VOTE (8683) within the USA, territories & Canada | ||||
Mail Follow the instructions on your proxy card |
PROPOSAL 1 Election of Directors Our Board recommends a vote FOR each director nominee | See Page 8 › |
Committees | |||||||
Name | Age | Director Since | AC | C&LD | N&G | ROC | Other Public Company Boards |
JEFFREY S. ARONIN Independent Chairman and CEO of Paragon Pharmaceutical Capital, LLC and Paragon Biosciences, LLC | 51 | 2007 | ¢ | • None | |||
MARY K. BUSH Independent Chairman of Bush International, LLC | 70 | 2007 | ¢ | ¢ | • Bloom Energy • ManTech International Corporation • Marriott International, Inc. • T. Rowe Price Group, Inc. | ||
GREGORY C. CASE Independent CEO of Aon plc | 56 | 2007 | ● | • Aon plc | |||
CANDACE H. DUNCAN Independent Former Managing Partner KPMG LLP, Washington D.C. Metropolitan Area | 65 | 2014 | ¢ | ¢ | • FTD Companies, Inc. • Teleflex Inc. | ||
JOSEPH F. EAZOR Independent CEO of Rackspace | 56 | 2016 | ¢ | • None | |||
CYNTHIA A. GLASSMAN Independent Former Under Secretary for Economic Affairs U.S. Department of Commerce | 71 | 2009 | ● | • Navigant Consulting, Inc. | |||
ROGER C. HOCHSCHILD CEO and President, Discover Financial Services | 54 | 2018 | • Principal Financial Group | ||||
THOMAS G. MAHERAS Independent Managing Partner Tegean Capital Management, LLC | 56 | 2008 | ¢ | • None | |||
MICHAEL H. MOSKOW Independent Retired President and CEO Federal Reserve Bank of Chicago | 81 | 2007 | ● | • Commonwealth Edison Company | |||
MARK A. THIERER Independent Managing Partner, AssetBlue Investment Group | 59 | 2013 | ¢ | • None | |||
LAWRENCE A. WEINBACH Independent Chairman Chairman, Great Western Products Holdings, LLC Managing Director, Yankee Hill Capital Management, LLC | 79 | 2007 | ¢ | ● | • None |
AC | Audit Committee | ● | Chairperson of the Committee |
C&LD | Compensation and Leadership Development Committee | ¢ | Member of the Committee |
N&G | Nominating and Governance Committee | ||
ROC | Risk Oversight Committee |
All Director nominees exhibit: | As a group, our Director nominees have the following characteristics, skills, and experience: | ||||||
• Broad and relevant spectrum of experience and expertise • A reputation for integrity • Experience in positions with a high degree of responsibility • Commitment to represent the interests of shareholders | |||||||
CEO or CFO | Public Board | Financial Services Industry | Technology | Finance, Accounting and Financial Reporting | Government/ Regulatory | ||
Risk Management | Corporate Governance | International | Marketing | Strategy and Business Development | Compensation and Succession Planning |
Board Independence ü All directors are independent except CEO; Board committees are 100% independent ü Non-Executive Board Chairman is independent ü Executive sessions of directors held at all in-person Board meetings | Board Performance ü All directors attended more than 75% of the Board and their committee meetings ü Diverse Board with mix of skills, tenure and age; 27% of our directors are women ü Annual Board, committee and director performance evaluations ü Director education and access to experts |
Best Practices ü Risk aware culture overseen by a separate Risk Oversight Committee ü Significant shareholder ownership requirements for Executives and Board ü Longstanding commitment to sustainability | Shareholder Rights ü Annual election of directors with majority voting standard ü Shareholders have proxy access with market standard conditions for director nominations ü In response to shareholders' vote at the 2018 Annual Meeting, Board is recommending that shareholders eliminate supermajority voting requirements ü Board is recommending that shareholders approve the right of shareholders to call special meetings |
PROPOSAL 2 Advisory Vote to Approve Named Executive Officer Compensation Our Board recommends a vote FOR this Proposal | See Page 22 › |
Achieved profit target with higher revenues offsetting higher credit losses | Based on net income of $2,742 million, the Company achieved profit before taxes and reserves (“PBTR”) of $4,020 million(1) | |
Continued strong card loan and sales growth while maintaining a disciplined approach to credit | The Company achieved year-over-year loan growth of 7% and card sales growth of 8% while progressing new underwriting capabilities | |
Accelerated volume growth in Payment Services, led by PULSE | Payment Services transaction dollar volume grew 15% year-over-year | |
Strong return on equity and significant capital deployment | The Company achieved return on equity of 25% for the full year while increasing quarterly dividend by 14% to $0.40 per share of Common Stock and repurchased approximately 28 million shares |
Pay for Performance Our compensation should reflect Company, business segment, and individual performance. | Balanced Compensation Structure We seek to deliver a mix of fixed and variable compensation that is aligned with shareholder interests and the long-term interests of the Company and that appropriately balances risk and reward. | Market-Competitive Pay Opportunity Our compensation should be competitive relative to our peers in order to attract, motivate and retain a talented executive team. |
(At Risk) | ||||
Element | Base Salary | Short-Term Cash Incentive | Long-Term Equity Incentive | |
Highlights | Fixed compensation based on scope of responsibility, impact on the organization, expertise, experience, and individual performance. | Annual cash bonus opportunity based on Company financial performance, primarily PBTR, and other performance factors, risk and individual performance. | Annual stock award opportunity based on financial performance, other performance factors, risk and individual performance. The award is granted using a mix of PSUs and RSUs. | |
2018 CEO Target Pay Mix | 14.9% | 21.5% | RSUs 19.1% | PSUs 44.5% |
(1) | Profit before taxes and reserves ("PBTR") is a non-GAAP financial measure which should be viewed in addition to, not as a substitute for, the Company's reported results. PBTR is derived by adding the increase in the allowance for loan losses of $423 million and income tax expense of $855 million to net income of $2,742 million. The Compensation and Leadership Development Committee believes that PBTR is a better measure of the core operating performance of the business that increases focus on factors the Company's incentive-eligible employees are most able to directly impact and influence and controls for variability in significant macroeconomic impacts. |
We Do | We Do Not |
ü Pay for performance ü Align compensation with the shareholder interests ü Have oversight by an independent Compensation & Leadership Development Committee ü Apply share ownership guidelines to NEOs ü Apply share retention requirements to NEOs ü Apply incentive award limits to NEOs ü Clawback incentive compensation under certain circumstances ü Regularly evaluate risk performance in incentive compensation design and decisions for our NEOs ü Provide a balanced change in control with a double trigger and no excise tax gross-ups ü Include non-competition and non-solicitation provisions in our long-term incentive awards ü Limit perquisites | û Have employment contracts for our named executive officers (the “NEOs”) û Provide special benefit plans to our executives not generally available to other employees û Directors and NEOs are prohibited from hedging or pledging Company securities û Have single trigger severance arrangements or provide excise tax gross-ups |
PROPOSAL 3 Ratify the Appointment of Deloitte & Touche LLP as Independent Auditors for 2019 Our Board recommends a vote FOR this Proposal | See Page 49 › | |
PROPOSAL 4 Amend the Company's Amended and Restated Certificate of Incorporation to Eliminate Supermajority Voting Requirements Our Board recommends a vote FOR this Proposal | See Page 52 › | |
PROPOSAL 5 Amend the Company's Amended and Restated Certificate of Incorporation to Grant Shareholders the Right to Call Special Meetings Our Board recommends a vote FOR this Proposal | See Page 53 › |
PROPOSAL 6 Advisory Vote on One Shareholder Proposal, if Properly Presented Our Board recommends a vote AGAINST this Proposal | See Page 56 › |
PROPOSAL 1 Election of Directors The Board of Directors recommends that you vote “FOR” the election of each director nominee. Proxies solicited by our Board will be voted “FOR” the election of each nominee unless otherwise instructed. The Board believes strong corporate governance is critical to achieving the Company’s long-term goals and maintaining the trust and confidence of investors, employees, customers, regulatory agencies, and other stakeholders. The Board oversees the Company’s business and directs its management. The non-employee directors of the Board are not involved in day-to-day operations. Instead, the Board meets periodically with management to review the Company’s Annual Operating Plan (the “Annual Plan”), multi-year strategic plan and performance against such plans, risks, and business strategies. Directors also consult with management about the Company’s performance outside of formal meetings, which include opportunities for directors to have in-depth conversations with management about particular areas of the business. All of the director nominees set forth below are standing for election at the Annual Meeting. Director nominees stand for election at each annual meeting of shareholders. Each director holds office until his or her successor has been duly elected and qualified or the director’s earlier resignation, death or removal. In August 2018, Director David W. Nelms informed the Company that he intended to retire as the Company's Chairman and CEO, and the Board elected the Company's then-President and Chief Operating Officer Roger C. Hochschild as a Director. Subsequently, in October 2018, Mr. Hochschild succeeded Mr. Nelms as the Company's CEO, and effective December 31, 2018, Mr. Nelms retired from the Board. As a result of Mr. Nelms' retirement, the Board elected Director Lawrence A. Weinbach to serve as the Board's Independent Chairman. The nominees below are current directors of the Company, and each such nominee has indicated that he or she will serve if elected. We do not anticipate that any nominee will be unable or unwilling to stand for election, but if that happens, your proxy will be voted for another person nominated by the Board. The Board may also choose to reduce the number of directors to be elected, as permitted by our Bylaws. The experience, qualifications, attributes and skills of each of the Company’s director nominees are set forth below. The Board believes that an effective board consists of a diverse group of individuals who bring a variety of complementary skills and experiences. The Nominating and Governance Committee and the Board consider the skills and experiences of the directors in the broader context of the Board’s overall composition, with a view toward constituting a board that has the best skill set and experience to oversee the Company’s business. As indicated below, our directors have a combined wealth of leadership experience derived from extensive service guiding large, complex organizations as executive leaders or board members, and in government. They collectively have substantive knowledge and skills applicable to our business, including in the areas of regulation, public accounting and financial reporting, finance, risk management, business development, technology, marketing, operations, strategic planning, management development and succession, compensation, corporate governance, public policy, international matters, banking, and financial services. The Nominating and Governance Committee regularly reviews the composition of the Board and its assessment of the Board’s performance in light of our evolving business requirements to maintain a Board with the appropriate mix of skills and experiences needed for the broad set of challenges that the Company confronts. Annually, the Lead Director (now Independent Chairman) conducts individual interviews with each director that include topics such as Board and committee performance and effectiveness, leadership of the Board and committees, and the performance of individual directors. The Lead Director (now Independent Chairman) then reports the results of these interviews to the full Board during its self-evaluation. The full Board evaluates such results and also conducts an evaluation of the Lead Director (now Independent Chairman) and Chair of the Nominating and Governance Committee. In addition, each committee annually conducts a self-evaluation. | |
Jeffrey S. Aronin Independent Biography Mr. Aronin has been chairman and chief executive officer of Paragon Pharmaceutical Capital, LLC, a global pharmaceutical development company, since 2010. He is also chairman and chief executive officer of Paragon Biosciences, LLC, an affiliated global healthcare development and biopharmaceutical investment firm. From 2010 to 2017, Mr. Aronin was also chairman and chief executive officer of Marathon Pharmaceuticals, a research-based prescription biopharmaceutical company. From 2000 to 2009, Mr. Aronin was president and chief executive officer of Ovation Pharmaceuticals Inc., a biopharmaceutical company he founded in 2000. In addition Mr. Aronin has experience as a chief executive officer leading several global biopharmaceutical companies. His skills include strategy and business development, finance and brand marketing. He brings valuable leadership experience and knowledge in the operations and day-to-day management of a global corporation in a regulated industry. Mr. Aronin also has experience in the structuring and execution of strategic corporate transactions, including mergers and acquisitions. | ||
AGE: 51 DIRECTOR SINCE: 2007 OTHER CURRENT PUBLIC COMPANY BOARDS: None COMMITTEES: Compensation and Leadership Development |
Mary K. Bush Independent Biography Ms. Bush has served as the chairman of Bush International, LLC, a financial and business strategy advisory firm, since 1991. She advises U.S. companies and foreign governments on international financial markets, banking, and economic matters. Ms. Bush served as managing director of the Federal Housing Finance Board, where she established financial policies and oversaw management and safety and soundness for 12 Federal Home Loan Banks. She also served as vice president and head of international Finance of Fannie Mae, where she led funding transactions globally, and as the U.S. Alternate Executive Director of the International Monetary Fund Board. In addition Ms. Bush brings extensive financial market, banking, government and international experience to the Board. Additionally, she brings a broad understanding of the operations and business and economic challenges of public companies and the financial services industry. | ||
AGE: 70 DIRECTOR SINCE: 2007 OTHER CURRENT PUBLIC COMPANY BOARDS: Bloom Energy, ManTech International Corporation, Marriott International, Inc., T. Rowe Price Group, Inc. COMMITTEES: Nominating and Governance, Risk Oversight |
Gregory C. Case Independent Biography Mr. Case has been chief executive officer of Aon plc, a leading global professional services firm providing advice and solutions in risk, retirement and health, since 2005 and was president from 2005 to 2018. He is also a member of Aon’s board of directors. Prior to joining Aon, Mr. Case was with McKinsey & Company, an international management consulting firm, for 17 years, most recently serving as head of the Financial Services Practice. In addition Mr. Case has approximately 20 years of experience in the insurance and financial services industries, including in the areas of risk management services, insurance and reinsurance brokerage, and through his management consulting and banking experience. He brings valuable leadership experience and knowledge of business operations and the day-to-day management of a large, regulated global financial corporation. His skills include strategy and business development, risk management and people management. | ||
AGE: 56 DIRECTOR SINCE: 2007 OTHER CURRENT PUBLIC COMPANY BOARDS: Aon plc COMMITTEES: Compensation and Leadership Development (Chair) |
Candace H. Duncan Independent Biography Ms. Duncan retired from KPMG LLP, a global network of professional firms providing audit, tax and advisory services, in November 2013 where she had been managing partner of the Washington, D.C. metropolitan area since 2009. Ms. Duncan also was on the KPMG LLP board of directors from 2009 to 2013, and served as chair of the board’s nominating committee as well as the partnership and employer of choice committee. Prior thereto, she served in various roles at the firm, including managing partner for audit for the Midatlantic area and audit partner in charge for the Virginia business unit. In addition Ms. Duncan has experience leading and managing a large accounting firm’s growth priorities across its audit, tax and advisory functions in key markets. She also has a strong financial and accounting background, gained through her many years of experience at KPMG LLP, including her experience as a lead audit partner for major international and domestic companies. She has served clients on a wide range of accounting and operational issues, public securities issuances and strategic corporate transactions. Her thorough knowledge of public company accounting, financial statements and corporate finance is of significant value to the Company. | ||
AGE: 65 DIRECTOR SINCE: 2014 OTHER CURRENT PUBLIC COMPANY BOARDS: FTD Companies, Inc., Teleflex Inc. COMMITTEES: Audit, Nominating and Governance |
Joseph F. Eazor Independent Biography Mr. Eazor has been the chief executive officer of Rackspace, a leading managed cloud company, since 2017. He previously served as the president and chief executive officer of EarthLink, Inc., a leading communications and IT services provider, and was a member of EarthLink’s board from January 2014 until February 2017. From 2011 to 2013, he served as executive vice president and chief operating officer of global sales and customer operations at EMC and prior to that he served in a variety of leadership roles at Hewlett Packard and Electronic Data Systems. Mr. Eazor also served on the board of Commvault, a data protection and information management company, from October 2015 to July 2018. In addition Mr. Eazor has a proven track record of leading successful global companies. He has extensive experience in international strategy and business development and in technology and IT services. In addition to his corporate roles, Mr. Eazor has management consulting experience from his time as a senior partner with McKinsey & Co. and as a partner and board member of A.T. Kearney, Inc. | ||
AGE: 56 DIRECTOR SINCE: 2016 OTHER CURRENT PUBLIC COMPANY BOARDS: None COMMITTEES: Audit |
Cynthia A. Glassman, Ph.D. Independent Biography Dr. Glassman was appointed by President Bush as Under Secretary for Economic Affairs at the U.S. Department of Commerce from 2006 to 2009 and as Commissioner of the U.S. Securities and Exchange Commission from 2002 to 2006, including serving as acting chair during the summer of 2005. Dr. Glassman is also a Senior Research Scholar at the Institute for Corporate Responsibility at the George Washington University School of Business. She held various positions over 12 years at the Federal Reserve, including as Chief of the Financial Reports Section and an Economist in the Capital Markets Section. She also has 15 years of experience in financial services consulting, including as a Principal of Ernst & Young LLP and Managing Director of Furash & Company. In addition Dr. Glassman brings extensive regulatory, corporate governance, risk management, financial services and banking experience to the Board. She holds a Ph.D. in economics and has spent over 40 years in the public and private sectors focusing on financial services regulatory and public policy issues. | ||
AGE: 71 DIRECTOR SINCE: 2009 OTHER CURRENT PUBLIC COMPANY BOARDS: Navigant Consulting, Inc. COMMITTEES: Audit (Chair) |
Roger C. Hochschild Biography Mr. Hochschild has served as the chief executive officer and president of Discover since October 2018 and served as our president and chief operating officer from 2004 to 2018. He was executive vice president, chief administrative and strategic officer for Morgan Stanley from 2001 to 2004, and was executive vice president, chief marketing officer - Discover from 1998 to 2001, when Discover was a part of Morgan Stanley. In addition Mr. Hochschild's deep understanding of the Company’s business and the financial services industry provides valuable expertise to the Company. He also brings leadership experience in risk management, consumer financial services, including operating in the current regulatory environment, corporate finance, information technology and knowledge of operations and the day-to-day management of a global financial corporation, which plays a critical role in board discussions regarding strategic planning and business development for the Company. | ||
AGE: 54 DIRECTOR SINCE: 2018 OTHER CURRENT PUBLIC COMPANY BOARDS: Principal Financial Group COMMITTEES: None |
Thomas G. Maheras Independent Biography Mr. Maheras has been the managing partner of Tegean Capital Management, LLC, an investment advisory firm based in New York since 2008. Prior to that, he was chairman and co-chief executive officer of Citi Markets and Banking, the investment banking division of Citigroup, Inc., where he held roles of increasing responsibility after starting his career as a fixed-income trader at Salomon Brothers. He has served as chairman of the U.S. Treasury Department Borrowing Advisory Committee and as an executive committee member of the Board of Directors of the Securities Industry and Financial Markets Association. In addition Mr. Maheras has extensive risk management, banking and capital markets experience, including 23 years at Citigroup, Inc. where his responsibilities included leading the global capital markets business. He also brings valuable leadership experience and knowledge of operations and the day-to-day management of a global financial services organization. Mr. Maheras’ financial background and banking and financial services experience includes a knowledge of financial statements, corporate finance, accounting and capital markets. | ||
AGE: 56 DIRECTOR SINCE: 2008 OTHER CURRENT PUBLIC COMPANY BOARDS: None COMMITTEES: Risk Oversight |
Michael H. Moskow Independent Biography Mr. Moskow is currently Vice Chair and Distinguished Fellow, Global Economy at The Chicago Council on Global Affairs. He retired as president and chief executive officer of the Federal Reserve Bank of Chicago in 2007, where he had served since 1994. Mr. Moskow was a Deputy U.S. Trade Representative, following his appointment by President Bush in 1991, and earlier in his career, held a number of senior positions with the U.S. government, including undersecretary of labor at the U.S. Department of Labor, director of the Council on Wage and Price Stability and senior staff economist with the Council of Economic Advisers. Mr. Moskow serves on the board of directors of CityBase, Commonwealth Edison Company, a subsidiary of Exelon Corporation, and Cresset Private Equity Opportunity Fund. In the past five years, he has also served as a director of Taylor Capital Group Inc. In addition Mr. Moskow brings extensive regulatory, risk management, financial services and banking experience to the Board and has extensive knowledge of the economy and financial markets. Through his senior regulatory positions, particularly in the financial services arena, and service on the boards of other financial institutions, he brings a thorough and insightful perspective to a wide range of issues. | ||
AGE: 81 DIRECTOR SINCE: 2007 OTHER CURRENT PUBLIC COMPANY BOARDS: Commonwealth Edison Company COMMITTEES: Risk Oversight (Chair) |
Mark A. Thierer Independent Biography Mr. Thierer currently serves as the managing partner of AssetBlue Investment Group, a position he has held since June 2017. From October 2017 through February 2018, Mr. Thierer also served as the interim chief executive officer of Dentsply Sirona Inc., a manufacturer of dental implants. Mr. Thierer was chief executive officer of OptumRx, a pharmacy care services company, from July 2015 until September 2017. He previously served as chairman and chief executive officer of Catamaran Corporation, one of the nation’s largest pharmacy benefit management companies, from March 2011 until it combined with OptumRx in 2015. In addition Mr. Thierer has experience as a chief executive officer leading a national pharmacy benefit and healthcare information technology solutions company. His skills include strategy and business development, technology, finance and marketing. He brings valuable leadership experience and knowledge of operations and the day-to-day management of a national corporation. Mr. Thierer also has experience in the structuring and execution of strategic corporate transactions, including mergers and acquisitions. | ||
AGE: 59 DIRECTOR SINCE: 2013 OTHER CURRENT PUBLIC COMPANY BOARDS: None COMMITTEES: Compensation and Leadership Development |
Lawrence A. Weinbach Independent Chairman Biography Mr. Weinbach has been chairman of Great Western Products Holdings, LLC, a manufacturer and master distributor of food and nonfood concession products, since 2009, and has been a managing director of Yankee Hill Capital Management, LLC, a private equity firm, since 2006. Prior to that, he was the executive chairman of Unisys Corporation, a worldwide information services and technology company, from 2005 to 2006, and its chairman and chief executive officer from 1997 to 2004. He began his career at Arthur Andersen, ultimately serving as managing partner and chief executive of Andersen Worldwide, a global professional services organization, which included Arthur Andersen and the company now known as Accenture, from 1989 to 1997. In addition Mr. Weinbach has experience in the financial and accounting industry and the information technology and financial services sectors. Mr. Weinbach’s strong financial background, gained through his private equity, accounting, investment banking and financial services experience, includes knowledge of risk management, governance, financial statements, corporate finance, accounting and capital markets. As a former chief executive officer, he also brings valuable leadership experience and knowledge of operations, corporate governance and the day-to-day management of a global corporation. | ||
AGE: 79 DIRECTOR SINCE: 2007 INDEPENDENT CHAIRMAN SINCE: 2019 (Lead Director from 2009-2018) OTHER CURRENT PUBLIC COMPANY BOARDS: None COMMITTEES: Audit, Nominating and Governance (Chair) |
AUDIT COMMITTEE 9 Meetings in 2018 REPORT: Page 50 | MEMBERS Dr. Glassman (Chair) Ms. Duncan Mr. Eazor Mr. Weinbach | |
Primary Responsibilities | ||
• Oversee the integrity of our consolidated financial statements, our system of internal control over financial reporting, our risk management, and the qualifications and independence of our independent registered public accounting firm. • Oversee the internal audit function, including the performance of our internal audit executive. | • Sole authority and responsibility to select, determine the compensation of, evaluate the performance of, and, when appropriate, replace our independent registered public accounting firm. • Oversee the Company's compliance with legal and regulatory requirements. |
COMPENSATION AND LEADERSHIP DEVELOPMENT 7 Meetings in 2018 REPORT: Page 39 | MEMBERS Mr. Case (Chair) Mr. Aronin Mr. Thierer | |
Primary Responsibilities | ||
• Annually review and approve the corporate goals and objectives relevant to the compensation of the CEO and evaluate his performance in light of these goals. • Determine the compensation of our executive officers and other appropriate officers. | • Oversee risk management associated with our compensation practices. • Administer our incentive and stock-based compensation plans. • Oversee plans for management development and succession. |
NOMINATING AND GOVERNANCE 4 Meetings in 2018 | MEMBERS Mr. Weinbach (Chair) Ms. Bush Ms. Duncan | |
Primary Responsibilities | ||
• Identify and recommend candidates for election to our Board and each Board committee. • Consider matters of corporate governance and make recommendations or take action. | • Oversee the annual evaluation of the members of our Board and its committees, and management. • Recommend director compensation and benefits. • Review annually our Corporate Governance Policies. |
RISK OVERSIGHT 8 Meetings in 2018 | MEMBERS Mr. Moskow (Chair) Ms. Bush Mr. Maheras | |
Primary Responsibilities | ||
• Oversee the enterprise-wide risk management framework, make recommendations to the Board on risk management policies and the Company’s risk appetite and tolerance, oversee risk management governance and policies and perform other functions pursuant to the Federal Reserve’s regulations. | • Oversee the performance of our Chief Risk Officer. • Oversee capital planning, liquidity risk management and resolution planning activities. |
• | presides at all meetings of the Board, and has the authority to call, and will lead, non-employee director sessions and independent director sessions; |
• | approves Board meeting agenda items and the schedule of Board meetings; |
• | helps facilitate communication between senior management and the independent directors; |
• | acts as a mentor to the CEO; and |
• | participates and provides leadership on CEO performance evaluation and succession planning. |
RISK OVERSIGHT COMMITTEE |
The Risk Oversight Committee is responsible for overseeing our risk management policies and the operations of the Company’s enterprise-wide risk management framework and capital planning, liquidity risk management and resolution planning activities. The Risk Oversight Committee is responsible for, among other things: • approving and periodically reviewing our risk management policies; • overseeing the operation of policies and procedures which establish risk management governance, and risk-control infrastructure; • overseeing the operation of processes and systems for implementing and monitoring compliance with such policies and procedures; • reviewing and making recommendations to the Board, as appropriate, regarding the Company’s risk management framework, key risk management policies and the Company’s risk appetite and tolerance; • receiving and reviewing regular reports from our Chief Risk Officer on current and emerging risks, the status of and changes to risk exposures, policies, procedures and practices, and the steps management has taken to monitor and control risk exposures; • reviewing and approving the Company’s information security program, which seeks to mitigate information security risks, including cybersecurity risks; and • receiving reports regarding compliance with risk appetite limits, risk management policies, procedures and controls. The Risk Oversight Committee shares information with (which it may do through the Chair of the Committee) and meets in joint session with the Audit Committee as necessary or desirable to provide the committees with the information necessary to permit them to fulfill their duties and responsibilities with respect to oversight of risk management matters. For example, at least quarterly, the Risk Oversight and Audit Committees meet in joint session and receive updates on the Company’s information security program, including trends and developments regarding information security risks. The Risk Oversight Committee also authorizes the Company’s Risk Committee, which is comprised of the members of the Company’s Executive Committee and the Discover Bank President. The Chief Risk Officer, a member of the Executive Committee, serves as the Risk Committee chair. The Risk Committee provides a forum for key members of our executive management team to review and discuss credit, market, liquidity, operational, legal and compliance and strategic risks across the Company and for each business unit. |
AUDIT COMMITTEE |
Our Audit Committee assists the Board in the oversight of, among other things, the integrity of our consolidated financial statements, our compliance with legal and regulatory requirements, our system of internal controls and the qualifications and independence of our independent registered public accounting firm. With respect to compliance matters, our Audit Committee approves our Compliance Policy and reinforces the importance of compliance risk management. The Audit Committee assists the Board in its oversight of the Company’s anti-money laundering program. In addition, the Audit Committee receives reporting on the effectiveness of our Compliance Risk Management Program. Our Audit Committee also, taking into consideration the Board’s allocation of the review of risk among various committees of the Board, receives and reviews reports from the Chief Risk Officer and other members of management as the Audit Committee deems appropriate. These reports include a review of the guidelines and policies for assessing and managing the Company’s exposure to risks, the corporation’s major financial risk exposures, and the steps management has taken to monitor and control such exposures. The Audit Committee shares information with (which it may do through the Chair of the Committee) and meets in joint session with the Risk Oversight Committee as necessary or desirable to provide the committees with the information necessary to permit them to fulfill their duties and responsibilities with respect to oversight of risk management matters. The Audit Committee provides oversight of the Company’s internal audit function. The Audit Committee reviews and approves the appointment, replacement and compensation of the head of Internal Audit and the charter, budget and staffing levels of the Company’s internal audit function. The Audit Committee reviews and approves the annual audit plan. The Audit Committee also receives periodic reports from the head of Internal Audit on the status of the annual audit plan, including significant results and the status of corrective actions. |
COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE |
The Compensation Committee is responsible for overseeing risk management associated with the Company’s employee compensation practices, including an annual review of the Company’s risk assessment of its compensation plans and practices to assess whether employee plans have features that might encourage excessive risk-taking that could threaten the value of the Company, are reasonably likely to have a material adverse effect on the Company or could result in a failure to comply with regulatory requirements. The Compensation Committee reviews reports from and meets with the Company’s Chief Risk Officer and the Risk Oversight and Audit Committees of the Board of Directors to discuss the annual employee incentive compensation risk assessment and to review outcomes of certain risk events and any impact to compensation decisions. Separately, the Compensation Committee meets with the Company’s Chief Risk Officer to monitor the results of the Company’s incentive compensation program payments for certain employees, including our NEOs. The Compensation Committee also oversees the Company’s succession planning process. On an annual basis, management conducts succession planning for all of the Company’s officer level roles, including our NEOs. Management further identifies critical roles beyond the officer level where there are uniquely strong needs for immediate successors, where restructuring is not likely to be a viable succession plan, and where having the role unfilled for a period of time could create regulatory, risk management or business continuity gaps. Annually, our CEO and President and Chief Human Resources Officer partner to conduct succession planning for our NEOs and other executives. For each of our NEOs, the role is reviewed to determine options for succession and development needed to increase succession readiness. Consideration is given to external hiring where appropriate. Management then reviews NEO succession plans with the Compensation Committee and the Board. |
COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
The following persons served on our Compensation Committee during 2018: Messrs. Case, Aronin, Lenny(1) and Thierer. During 2018, no member of the Compensation Committee was an officer or employee or former officer of the Company or any of our subsidiaries. None of our executives served as a member of (i) the compensation committee of another entity in which one of the executive officers of such entity served on our Compensation Committee or (ii) the compensation committee of another entity in which one of the executive officers of such entity served as a member of our Board. |
(1) | Mr. Lenny retired from the Board, effective May 2, 2018 |
• | An annual retainer fee of $100,000 (increased to $105,000, effective January 1, 2019); |
• | A Lead Director retainer fee of $75,000 (replaced with an Independent Chairman annual retainer of $210,000, effective January 1, 2019); |
• | A committee chair retainer fee of: (i) $30,000 each for the chairpersons of the Audit Committee and Risk Oversight Committee; (ii) $25,000 for the chairperson of the Compensation Committee; and (iii) $20,000 for the chairperson of the Nominating and Governance Committee; and |
• | A non-chair committee membership fee of: (i) $20,000 for each member of each of the Audit Committee and Risk Oversight Committee; (ii) $10,000 for each member of the Compensation Committee; and (iii) $5,000 for each member of the Nominating and Governance Committee. |
Director | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |
Jeffrey S. Aronin | 110,000 | 139,943 | 249,943 | |
Mary K. Bush | 125,000 | 139,943 | 264,943 | |
Gregory C. Case(2) | 125,000 | 139,943 | 264,943 | |
Candace H. Duncan(2) | 123,324 | 139,943 | 263,267 | |
Joseph F. Eazor | 120,000 | 139,943 | 259,943 | |
Cynthia A. Glassman | 130,000 | 139,943 | 269,943 | |
Richard H. Lenny (3) | 38,860 | — | 38,860 | |
Thomas G. Maheras | 120,000 | 139,943 | 259,943 | |
Michael H. Moskow | 130,000 | 139,943 | 269,943 | |
Mark A. Thierer(2) | 110,000 | 139,943 | 249,943 | |
Lawrence A. Weinbach | 215,000 | 139,943 | 354,943 |
(1) | Reflects RSUs granted under the Directors’ Compensation Plan described above. Amounts reflect the grant date fair value of the 2018 RSUs, which were granted on May 2, 2018 for all non-employee directors. These amounts reflect the RSUs’ grant date fair value in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (“FASB ASC Topic 718”) and may not correspond to the actual value that might be realized by the named individuals. Additional details on accounting for stock-based compensation can be found in Note 2: “Summary of Significant Accounting Policies - Stock-based Compensation” and Note 10: “Stock-Based Compensation Plans” of our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018. As of December 31, 2018, each non-employee director held the following number of RSUs, including deferred RSUs: Mr. Aronin held 59,292; Ms. Bush held 54,060; Mr. Case held 66,195; Ms. Duncan held 11,179; Mr. Eazor held 1,985; Dr. Glassman held 1,985; Mr. Lenny held 0; Mr. Maheras held 42,947; Mr. Moskow held 46,975; Mr. Thierer held 14,120; and Mr. Weinbach held 51,007. |
(2) | The amounts listed for these individuals in the “Fees Earned or Paid in Cash” column were deferred under the Directors’ Voluntary Nonqualified Deferred Compensation Plan. |
(3) | Mr. Lenny retired from the Board, effective May 2, 2018. |
PROPOSAL 2 Advisory Vote to Approve Named Executive Officer Compensation The Board of Directors recommends a vote “FOR” approval of the NEO compensation as disclosed pursuant to Item 402 of SEC Regulation S-K, including in the "Compensation Discussion and Analysis," the compensation tables, and any related information contained in this Proxy Statement. Proxies solicited by the Board will be voted “FOR” this proposal unless otherwise instructed. | |
Achieved profit target with higher revenues offsetting higher credit losses | Based on net income of $2,742 million, the Company achieved profit before taxes and reserves (“PBTR”) of $4,020 million(1) | |
Continued strong card loan and sales growth while maintaining a disciplined approach to credit | The Company achieved year-over-year loan growth of 7% and card sales growth of 8% while progressing new underwriting capabilities | |
Accelerated volume growth in Payment Services, led by PULSE | Payment Services transaction dollar volume grew 15% year-over-year | |
Strong return on equity and significant capital deployment | The Company achieved return on equity of 25% for the full year while increasing quarterly dividend by 14% to $0.40 per share of Common Stock and repurchased approximately 28 million shares |
• | Based on net income of $2,742 million, the Company achieved profit before taxes and reserves ("PBTR") of $4,020 million(1), relatively flat to the 2018 Annual Operating Plan ("Annual Plan") target of $4,050 million, with revenue favorability more than offset by higher credit losses. |
• | The Company continued its strong loan growth with year-over-year growth of 7%, in line with the Annual Plan target. The growth was supported by double digit growth in the Company's credit card new accounts and 8% growth in card sales. |
• | Credit performance, on average, was in line with most competitors, but unfavorable compared to the prior year and the Annual Plan as credit losses continued to increase to long-run levels as the supply of consumer credit grows. Total provision expense increased $456 million year-over-year primarily due to higher levels of net charge-offs, partially offset by a lower reserve build. The total net charge-off rate on average loans outstanding was 3.06%, up from the prior year rate of 2.70%. |
• | The Company continued to make progress in addressing the Written Agreement with the Federal Reserve relating to the Company's AML program. |
• | Other non-interest expenses in our Direct Banking segment slightly exceeded the Annual Plan target and were higher than the prior year by 8% as the Company invested in profitable loan growth, global acceptance, new capabilities, and product enhancements. |
(1) | Profit before taxes and reserves ("PBTR") is a non-GAAP financial measure which should be viewed in addition to, not as a substitute for, the Company's reported results. PBTR is derived by adding the increase in the allowance for loan losses of $423 million and income tax expense of $855 million to net income of $2,742 million. The Committee believes that PBTR is a better measure of the core operating performance of the business that increases focus on factors the Company's incentive-eligible employees are most able to directly impact and influence and controls for variability in significant macroeconomic impacts. |
• | Payment Services segment pre-tax income increased $7 million, primarily driven by revenue growth due to higher volume at PULSE and Network Partners. Transaction dollar volume for the segment was higher by 15% from the prior year, primarily driven by increases in PULSE network volume. Diners Club International volumes increased 7% over the prior year driven by growth in the EMEA (Europe, Middle East, and Africa) and Asia Pacific regions. In Network Partners, volume increased 33% from the prior year based on continued expansion with our AribaPay product. |
• | Direct-to-consumer deposit balances increased 13% year-over-year and represented 47% of the Company’s funding at year-end. |
• | Discover Bank issued approximately $4.8 billion of public credit card asset-backed securities and approximately $10.4 billion of brokered deposits. The Company issued $1.7 billion of senior unsecured debt and $0.5 billion of subordinated unsecured debt. These wholesale funding activities are part of the Company's strategy to maintain access to a broad and diverse set of funding channels that complement growth in core deposit funding. |
• | The Company increased its quarterly dividend by 14% to $0.40 per share of Common Stock and repurchased approximately 28 million shares, or approximately 8%, of the Company’s outstanding Common Stock in 2018. The Company had a 93% payout ratio(1). This is the eighth year in a row that we have increased our dividend. |
• | The Company’s continued focus on delivering outstanding customer satisfaction resulted in its distinction as being ranked “Highest in Customer Satisfaction with Credit Card Companies” for the fourth time in five years by J.D. Power.(2) |
• | In 2018, the Company launched the Discover it® Business credit card, offering an unlimited 1.5 percent cash back on all purchases with no annual fee. The Discover it® Business credit card is the latest addition to the Discover it® family of credit cards and includes all the features and benefits that Discover it® credit cards are known for, including no foreign transaction fees, Social Security Number alerts, Freeze, and FICO credit scores. This new card also includes free business features to help small business owners manage their finances; employers can get free employee cards with spending limits for each employee and the ability to earn rewards on all of their purchases, as well as the ability to download transactions directly into QuickBooks, Quicken, and Excel. |
• | In 2018, the Company relaunched Identity Theft Protection, a digital fee product that notifies Discover cardmembers of potential threats to their identity. Identity Theft Protection monitors the three major credit bureaus and other data sources to provide bank account, loan, criminal court, address change, credit utilization alerts, and more. The product also includes $1MM in Identity Theft insurance(3) for legal expenses, reimbursement of stolen funds, and other covered expenses. |
(1) | Payout ratio represents capital returned to common shareholders divided by net income allocated to common shareholders. |
(2) | Discover received the highest score in the J.D. Power 2014-2016 and 2018 Credit Card Satisfaction Studies of customers’ satisfaction with their primary credit card. Visit jdpower.com/awards. |
(3) | Identity Theft Insurance is underwritten by insurance company subsidiaries or affiliates of American International Group, Inc. (AIG) 175 Water Street, New York, New York 10038. Please refer to the actual policies for terms, conditions, and exclusions of coverage. Coverage may not be available in all jurisdictions. |
We Do | We Do Not |
ü Pay for performance: The majority of the compensation for our NEOs is in the form of variable compensation linked to the long-term financial and strategic goals of the Company over a three-year performance period. Incentive compensation metrics are tied to the Company’s Annual Plan and NEOs’ goals are designed to be aligned to the plan. ü Shareholder alignment: Our compensation program is designed to be aligned with our long-term interests and those of our shareholders with deferred long-term incentives (“LTI”) in the form of RSUs and PSUs linked to stock price appreciation. PSUs represent the majority of LTI for our NEOs, and in addition to being subject to time-based vesting for three years, are subject to Company performance, and stock price fluctuations over the three-year performance period. ü Independent oversight: Our Compensation Committee includes only directors who are independent under applicable NYSE listing standards and the Committee is advised by an independent compensation consultant. ü Share ownership guidelines for NEOs: Our CEO and Executive Chairman must own shares with a value of at least seven times their respective base salaries and our other NEOs must own shares with a value of at least three times their respective base salaries. Each NEO must achieve his or her ownership guideline within five years of appointment. ü Share retention requirements: NEOs must hold 100% of net shares received upon vesting for one year post-vesting to promote continued shareholder alignment. ü Incentive award limits: NEOs' incentive awards have a maximum payout cap. ü Clawback of incentive compensation: Our Employee Compensation Policy and equity awards provide for clawbacks that allow us to recover shares issued pursuant to RSUs and PSUs under certain circumstances. ü Risk management: We regularly evaluate the risk impact of the design of our incentive compensation program. The compensation decisions for our NEOs include a risk review that is considered before we make annual short-term incentive ("STI") and LTI awards and before the determination of vesting for all outstanding stock grants which may result in a reduction in the number of the shares vesting. ü Balanced change in control: Our change in control severance policy includes a double trigger and does not provide excise tax gross-ups for any employees. ü Restrictive covenants: LTI awards to NEOs are subject to non-competition and non-solicitation provisions. ü Limited perquisites: Perquisites provided to our NEOs are generally limited to access to an executive gym, charitable contributions and security. On occasion, our NEOs may use the Company’s tickets for sporting, cultural or other events for personal use when they are not otherwise used for business purposes. | û No employment contracts for NEOs: We do not have individual employment agreements with any of our NEOs. û No special benefit plans: We do not provide any benefit plans to our executives that are not generally available to other employees and we do not provide any supplemental executive retirement plan benefits to any executive. û No hedging or pledging: Directors and executive officers, including NEOs, are prohibited from hedging Company securities, holding Company securities in a margin account or otherwise pledging Company securities, including as collateral for a loan. û No excise tax gross-ups: We do not provide excise tax gross-ups for any employee. |
Pay for Performance Our compensation should reflect Company, business segment, and individual performance. | Balanced Compensation Structure We seek to deliver a mix of fixed and variable compensation that is aligned with shareholder interests and the long-term interests of the Company and that appropriately balances risk and reward. | Market-Competitive Pay Opportunity Our compensation should be competitive relative to our peers in order to attract, motivate and retain a talented executive team. |
• | Financial Performance: How well the Company performed compared to its Annual Plan. For 2018, the main factor the Committee considered in evaluating financial performance was the Company's PBTR. |
• | Other Performance Factors: How well the Company performed compared to other secondary financial metrics, key focus areas as well as relative to competitors. |
– | Other Financial Metrics: How well the Company performed compared to other secondary financial metrics, including net income, return on equity ("ROE") (and risk-adjusted returns), earnings per share ("EPS"), total revenue (defined as net interest income plus other income), net charge-offs, and operating expenses. |
– | Key Focus Areas: How well the Company accelerated profitable growth, enhanced capabilities and operating models, and matured risk management. |
– | Relative Performance: How well the Company performed against a select group of competitors on profitability, credit performance, growth, total shareholder return, and other measures. |
• | Risk Performance: How well the Company performed with respect to risk management, capital adequacy, and regulatory compliance. |
• | Individual Performance: How well each NEO performed relative to individual objectives, including relative role impact, experience, and internal pay equity. |
(At Risk) | ||||
Element | Base Salary | Short-Term Cash Incentive | Long-Term Equity Incentive | |
Highlights | Fixed compensation based on scope of responsibility, impact on the organization, expertise, experience, and individual performance. | Annual cash bonus opportunity based on Company financial performance, primarily PBTR, and other performance factors, risk and individual performance. | Annual stock award opportunity based on financial performance, other performance factors, risk and individual performance. The award is granted using a mix of PSUs and RSUs. | |
2018 CEO Target Pay Mix | 14.9% | 21.5% | RSUs 19.1% | PSUs 44.5% |
• Ally Financial, Inc. • American Express Company • Ameriprise Financial, Inc. • Capital One Financial Corporation • CIT Group Inc. • Comerica Incorporated | • Fidelity National Information Services, Inc. • Fifth Third Bancorp • Fiserv, Inc. • KeyCorp • M&T Bank Corporation | • Mastercard Incorporated • Regions Financial Corporation • Synchrony Financial • Visa Inc. • The Western Union Company |
• | Achieved operating efficiency ratio(1) of 38% driven by strong revenue growth in Direct Banking; revenue grew faster than expenses as the Company invested in profitable loan growth, global acceptance, new capabilities, and product enhancements. |
• | Continued strong loan and revenue growth while maintaining a disciplined approach to credit. |
• | Enhanced next generation analytical capabilities in customer acquisition, collections, and credit risk, driving strong new accounts and charge-off savings. |
• | Improved network acceptance, domestically and internationally, through increased merchant and acquirer relationships and network-to-network partnerships. |
• | Utilized deposit growth initiatives and capital markets transactions to maintain a balance sheet position to benefit from a rising interest rate environment. |
• | Maintained strong capital position while returning over $2.6 billion(2) of capital to shareholders in buybacks and Common Stock dividends. |
• | Maintained a disciplined focus on key initiatives including the launch of the Discover it® Business credit card with free business features to help small business owners manage their finances, and the relaunch of Identity Theft Protection, a digital fee product that helps Discover cardmembers protect themselves from identity theft or fraud and manage their credit. |
• | Implemented new digital and mobile capabilities focused on operating efficiencies and customer service. |
2018 | Change from 2017 | |||
Total Revenue(4) | $10,709 | 8 | % | |
Net Charge-off Dollars | $2,612 | 23 | % | |
Operating Expense | $4,077 | 8 | % | |
Net Income | $2,742 | 31 | % | |
Diluted Earnings Per Share | $7.79 | 44 | % | |
Return on Equity | 25 | % | 6 | % |
(1) | Operating efficiency ratio represents total other expense divided by revenue net of interest expense. |
(2) | The sum of Common Stock dividends and share repurchases, net of Common Stock issued under stock-based compensation plans. |
(3) | Profit before taxes and reserves ("PBTR") is a non-GAAP financial measure which should be viewed in addition to, not as a substitute for, the Company's reported results. PBTR is derived by adding the increase in the allowance for loan losses of $423 million and income tax expense of $855 million to net income of $2,742 million. The Committee believes that PBTR is a better measure of the core operating performance of the business that increases focus on factors the Company's incentive-eligible employees are most able to directly impact and influence and controls for variability in significant macroeconomic impacts. |
(4) | Total revenue equals the sum of net interest income and other income. |
• | Total loan growth of 7%, supported by strong sales growth and balance transfer volume. Loan growth is considered a key driver of revenue and future profitability, and the Company continued its strong momentum after achieving 9% loan growth in 2017. |
• | Direct Banking revenue was higher than 2017 by 8% driven by loan and sales growth as well as net interest margin expansion. |
• | Total net charge-off rate on average loans outstanding of 3.06% was up from the prior year rate of 2.70% due primarily to supply-driven credit normalization and the seasoning of loan growth from the last few years. |
• | The Company achieved a strong operating efficiency ratio(1) of 38% as revenue growth of 8% slightly outpaced that of expenses. |
• | Total network volume was higher than the prior year by 12% driven by strong PULSE network volume growth of 14% and Network Partners volume growth of 33% driven by continued expansion of our AribaPay product. |
• | Payment Services pre-tax earnings of $152 million were above 2017 by $7 million driven by higher revenue from volume growth at PULSE and Network Partners. |
• | Continued progress was made on regulatory matters and maturing risk programs. |
ROGER C. HOCHSCHILD CEO and President | ||
2018 COMPENSATION | Key Achievements | |
Executed smooth transition into CEO role Met Annual Plan PBTR and EPS Led operating areas to achieve strong lending, deposits and payments growth, and profitability Progressed new capabilities across acquisitions, underwriting, and servicing | Continued progress on Company operating efficiency: achieved a flattening of headcount growth while achieving organizational efficiencies Progressed Payments Strategy Supported maturing risk management, including regulatory risk |
R. MARK GRAF Executive Vice President, Chief Financial Officer | ||
2018 COMPENSATION | Key Achievements | |
Exceeded treasury funding goals in the aggregate Fortified the balance sheet through effective risk and capital management; supported all governing and risk management committee requirements | Continued strength in investor relations, including industry recognition for this function Drove positive operating leverage and drove savings through corporate procurement Supported maturing risk management, including regulatory risk |
DIANE E. OFFEREINS Executive Vice President, President - Payment Services | ||
2018 COMPENSATION | Key Achievements | |
Exceeded Payments Services Annual Plan volume and income target performance in the aggregate Progressed Payments Strategy Increased global acceptance through agreements with new and existing partners Increased network acceptance, network-to-network partners, and issuer base for PULSE | Launched PayPal account linking and Pay with CBB; Launched Apple Business Chat Installed Enterprise Payments Platform to improve Pulse dispute capabilities, align with industry standards, and enhance technology infrastructure Supported maturing risk management, including regulatory risk |
CARLOS M. MINETTI Executive Vice President, President - Consumer Banking | ||
2018 COMPENSATION | Key Achievements | |
Implemented strategies to balance growth, risk, and profitability across Consumer Banking Met Consumer Banking Annual Plan target for PBTR Exceeded Annual Plan target for New Deposits and met targets for other banking product new originations Launched Cashback Checking | Led significant improvement in Discover Home Equity versus prior year Continued focus on building next generation capabilities in banking system platform across Consumer Banking Products Supported maturing risk management, including regulatory risk |
JULIE LOEGER Executive Vice President, President - US Cards | ||
2018 COMPENSATION | Key Achievements | |
Exceeded sales and receivables Annual Plan targets and met New Accounts, Revenue Margin, and Operating Plan goals Led several successful continuous improvement initiatives including enhancements to 5% Cashback Bonus, Pay with Cashback Bonus, and Account Center & Mobile Redesigns Improved capabilities in New Account Acquisition through improved analytical models, personalization, site experience, and speed | J.D. Power award for "Highest in Customer Satisfaction with Credit Card Companies", 4 out of 5 years in a row(1) Launched Social Security Number Alert and New Account Alert benefits to cardholders Introduced the Discover it® Business Card product Supported maturing risk management, including regulatory risk |
DAVID W. NELMS Executive Chairman | ||
2018 COMPENSATION | Key Achievements | |
Met Annual Plan target for PBTR and loan growth Met EPS target, despite provision higher than Annual Plan Achieved favorable company operating efficiency ratio(2) of 38% | Renewed payments volume and profit growth Progressed Payments strategy Supported maturing risk management, including regulatory risk Transitioned seamlessly to the new CEO |
(1) | Discover received the highest score in the J.D. Power 2014-2016 and 2018 Credit Card Satisfaction Studies of customers’ satisfaction with their primary credit card. Visit jdpower.com/awards |
(2) | Operating efficiency ratio represents total other expense divided by revenue net of interest expense. |
• | Review, approve, and administer all compensation programs affecting NEOs and evaluate whether such plans are aligned with the Company’s compensation structure policies; |
• | Annually review and approve: |
– | Performance criteria, goals, and award vehicles used in our compensation plans for our NEOs, and |
– | Performance of and compensation delivered to our NEOs; |
• | Review the Company’s compensation practices to evaluate whether such practices take into account risk outcomes in making compensation determinations and do not encourage imprudent risk-taking; |
• | Oversee the Company’s management development and succession planning efforts; and |
• | Review and approve any contracts, policies, or programs related to compensation, contractual arrangements, or severance plans affecting NEOs. |
(1) | Profit before taxes and reserves ("PBTR") is a non-GAAP financial measure which should be viewed in addition to, not as a substitute for, the Company's reported results. PBTR is derived by adding the increase in the allowance for loan losses of $423 million and income tax expense of $855 million to net income of $2,742 million. The Committee believes that PBTR is a better measure of the core operating performance of the business that increases focus on factors the Company's incentive-eligible employees are most able to directly impact and influence and controls for variability in significant macroeconomic impacts. |
LONG-TERM INCENTIVE AWARD MIX | |
CEO and Executive Chairman | All other NEOs |
2018 CEO MIX OF COMPENSATION |
Executive Officer | Required Multiple | Actual Multiple |
Roger C. Hochschild | 7X | 53X |
R. Mark Graf | 3X | 6X |
Diane E. Offereins | 3X | 9X |
Carlos M. Minetti | 3X | 10X |
Julie Loeger | 3X | 3X |
David W. Nelms | 7X | 54X |
Executive | Year | Salary(1) ($) | Stock Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | Change in Pension Value and NQDC Earnings(4) ($) | All Other Compensation(5) ($) | Total ($) | |||||
Roger C. Hochschild | 2018 | 840,385 | 3,569,969 | 1,211,250 | 0 | 42,498 | 5,664,102 | |||||
CEO and President | 2017 | 800,000 | 3,200,017 | 1,320,000 | 32,668 | 18,750 | 5,371,435 | |||||
2016 | 798,077 | 3,199,992 | 1,254,000 | 14,457 | 18,550 | 5,285,076 | ||||||
R. Mark Graf | 2018 | 690,385 | 2,204,990 | 831,250 | 0 | 39,658 | 3,766,283 | |||||
EVP, Chief Financial | 2017 | 650,000 | 1,950,058 | 822,250 | 0 | 18,750 | 3,441,058 | |||||
Officer | 2016 | 649,038 | 1,950,014 | 781,150 | 0 | 18,550 | 3,398,752 | |||||
Diane E. Offereins | 2018 | 690,385 | 2,204,990 | 962,500 | 0 | 34,758 | 3,892,633 | |||||
EVP, President - | 2017 | 650,000 | 1,950,058 | 863,375 | 28,228 | 18,750 | 3,510,411 | |||||
Payment Services | 2016 | 650,000 | 3,500,035 | 863,375 | 17,168 | 18,550 | 5,049,128 | |||||
Carlos M. Minetti | 2018 | 690,385 | 2,204,990 | 787,500 | 0 | 41,158 | 3,724,033 | |||||
EVP, President - | 2017 | 650,000 | 1,950,058 | 781,150 | 22,718 | 18,750 | 3,422,676 | |||||
Consumer Banking | 2016 | 650,000 | 3,500,035 | 781,150 | 10,344 | 18,550 | 4,960,079 | |||||
Julie Loeger (6) | 2018 | 648,077 | 1,876,885 | 897,850 | 0 | 44,366 | 3,467,178 | |||||
EVP, President - | ||||||||||||
US Cards | ||||||||||||
David W. Nelms (7) | 2018 | 1,100,000 | 6,930,013 | 2,090,000 | 0 | 48,758 | 10,168,771 | |||||
Executive Chairman | 2017 | 1,080,770 | 6,600,021 | 2,500,000 | 29,391 | 18,750 | 10,228,932 | |||||
2016 | 1,000,000 | 6,000,039 | 1,741,250 | 16,184 | 18,550 | 8,776,023 |
(1) | Represents the base salary earned during the year. Prior year base salary earned has been updated to reflect actual salary paid as follows: Mr. Hochschild's 2016 salary from $800,000 to $798,077; Mr. Graf's 2016 salary from $650,000 to $649,038; and Mr. Nelms' 2017 salary from $1,100,000 to $1,080,770. |
(2) | Represents the aggregate grant date fair value of RSU and PSU awards granted to the NEOs pursuant to FASB ASC Topic 718. The value of PSUs is based on the probable outcome of the performance conditions on the grant date. The grant date fair value of the PSUs granted for 2018, assuming the highest level of performance conditions is met was $3,748,483 for Mr. Hochschild; $1,984,491 for Mr. Graf; $1,984,491 for Ms. Offereins; $1,984,491 for Mr. Minetti; $1,689,197 for Ms. Loeger; and $7,796,304 for Mr. Nelms. Please see "Components of Compensation" for further details on our LTI program. Additional details on accounting for stock-based compensation can be found in Note 2: "Summary of Significant Accounting Policies — Stock-based Compensation" and Note 10: "Stock-Based Compensation Plans" of our consolidated financial statements in our Annual Report on Form 10-K. |
(3) | Represents the annual cash short-term incentive earned for the year and paid to the NEOs within the first two and a half months of the following year if employed on the payment date. |
(4) | Represents the actuarial increase during the year in the pension value, primarily due to the change in the Pension Plan discount rate and mortality tables. The change in pension value for eligible NEOs resulted in negative amounts in 2018 for Mr. Hochschild $(18,085), Ms. Offereins $(12,016), Mr. Minetti $(11,634), Ms. Loeger $(30,542), and Mr. Nelms $(14,808). For details on the valuation method and assumptions used in calculating the present value of accumulated benefit, please see Note 11: "Employee Benefit Plans" of our consolidated financial statements in our Annual Report on Form 10-K. There were no above market nonqualified deferred compensation earnings for the NEOs. A description of the Company's pension benefits is provided under "2018 Pension Benefits." |
(5) | Represents the incremental cost to the Company of providing certain perquisites and other personal benefits. For 2018, these amounts include: |
Executive | 401(k) Contributions(a) ($) | Charitable Contributions(b) ($) | Other(c) ($) | Total ($) | ||||
Roger C. Hochschild | 19,100 | 10,000 | 13,398 | 42,498 | ||||
R. Mark Graf | 19,100 | 10,000 | 10,558 | 39,658 | ||||
Diane E. Offereins | 19,100 | 4,500 | 11,158 | 34,758 | ||||
Carlos M. Minetti | 19,100 | 10,000 | 12,058 | 41,158 | ||||
Julie Loeger | 19,100 | 14,500 | 10,766 | 44,366 | ||||
David W. Nelms | 19,100 | 20,000 | 9,658 | 48,758 |
(a) | Represents the Company's contributions to the Discover 401(k) Plan for each NEO during each calendar year. |
(b) | Represents contributions made by the Company to charitable organizations chosen by each NEO, as well as contributions made on behalf of certain NEOs under our charitable contribution matching programs, under which personal contributions meeting the guidelines of our program are eligible for Company matching contributions (exceeding the amount generally available to the broader employee population). |
(c) | Includes costs of perquisites or personal benefits that do not exceed the greater of $25,000 or 10% of the total amount of perquisites and personal benefits or have no aggregate incremental cost to the Company including the following: airline concierge keys, the Company’s cost for providing a personal security assessment and additional personal security services to each NEO, the aggregate incremental cost attributable to each NEO for access to/use of the Company’s Executive Fitness Center, the estimated resale value of gifts received from third parties, and estimated resale value of Company tickets for sporting, cultural or other events for personal use when they are not otherwise used for business purposes. |
(6) | Prior year compensation information has been intentionally omitted, as this is Ms. Loeger's first year as a Company NEO. |
(7) | Mr. Nelms served as the Company's Chief Executive Officer until October 1, 2018. Mr. Nelms continued to serve on the Board and remained the Company's Executive Chairman until December 31, 2018. Effective December 31, 2018, Mr. Nelms stepped down as Executive Chairman and as a Director, but remained an executive officer of the Company until his retirement in March 2019. |
Estimated future payouts under non-equity incentive plan awards (1) | Estimated future payouts under equity incentive plan awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | Grant Date Fair Value of Stock and Option Awards(4) ($) | ||||||||||
Name | Grant Date | Target ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||
Roger C. Hochschild | 1,275,000 | ||||||||||||
2/22/2018 | 13,775 | 1,071,006 | |||||||||||
2/22/2018 | 0 | 32,141 | 48,212 | 2,498,963 | |||||||||
R. Mark Graf | 875,000 | ||||||||||||
2/22/2018 | 11,344 | 881,996 | |||||||||||
2/22/2018 | 0 | 17,016 | 25,524 | 1,322,994 | |||||||||
Diane E. Offereins | 875,000 | ||||||||||||
2/22/2018 | 11,344 | 881,996 | |||||||||||
2/22/2018 | 0 | 17,016 | 25,524 | 1,322,994 | |||||||||
Carlos M. Minetti | 875,000 | ||||||||||||
2/22/2018 | 11,344 | 881,996 | |||||||||||
2/22/2018 | 0 | 17,016 | 25,524 | 1,322,994 | |||||||||
Julie Loeger | 816,219 | ||||||||||||
2/22/2018 | 9,656 | 750,754 | |||||||||||
2/22/2018 | 0 | 14,484 | 21,726 | 1,126,131 | |||||||||
David W. Nelms | 2,200,000 | ||||||||||||
2/22/2018 | 22,283 | 1,732,503 | |||||||||||
2/22/2018 | 0 | 66,849 | 100,274 | 5,197,510 |
(1) | Represents the target payout under the annual STI program. Payments can range above or below target primarily based on annual Company PBTR. The Compensation Committee also considers other secondary Company-wide metrics as described in more detail under "Components of Compensation — Short-Term Incentive Program." Because there is no threshold or maximum payout, those columns have been omitted in accordance with SEC rules. Actual payout amounts for 2018 are included in the "Non-Equity Incentive Plan Compensation" column of the "2018 Summary Compensation Table." |
(2) | Represents PSUs awarded in February 2018 under the 2014 Omnibus Incentive Plan. PSUs will vest and convert to shares of Common Stock on February 1, 2021, within the represented threshold and maximum amounts, depending on the extent the Company exceeds specific cumulative EPS performance goals over the three-year period and provided the executive remains employed by the Company (with exceptions for certain termination events as detailed below), and are subject to an evaluation of compliance with the Company’s risk policies. The entire PSU award will be canceled if the minimum cumulative EPS performance threshold is not met. To the extent the NEO voluntarily terminates from the Company or is terminated for cause prior to the scheduled vesting date, other than as described below, none of the PSUs will vest and the entire award will be forfeited. In certain instances of a termination of the NEO’s employment prior to the scheduled vesting date, including due to (i) involuntary termination such as a reduction in force or elimination of the executive’s position, provided that a fully-executed irrevocable release agreement is executed or (ii) the executive's eligible retirement, a pro-rata portion of the PSUs will vest and convert to shares following the conclusion of the performance and vesting periods, based on actual performance. In the event of death or disability, the award will vest and shares will convert and be paid at the end of the performance period based on actual performance achieved. In the event of a change in control of the Company during the first year of the performance period, the award will convert to cash at target performance and be paid out according to the vesting schedule or sooner in the event of a qualified termination following the change in control event. In the event of a change in control of the Company during the second or third year of the performance period, performance will be measured through the last day of the Company’s quarter preceding the change in control and the award will then be converted to cash and paid out according to the vesting schedule or sooner in the event of a qualified termination following the change in control event. |
(3) | Represents RSUs awarded in February 2018 under the 2014 Omnibus Incentive Plan, which are expected to vest and convert in three equal installments on February 1, 2019, 2020 and 2021. In certain instances of a termination of the NEO’s employment prior to the scheduled vesting date, including due to (i) involuntary termination such as a reduction in force or elimination of the executive’s position, provided that a fully-executed irrevocable release agreement is executed or (ii) the executive's eligible retirement, a pro-rata portion of the RSUs will vest and convert to shares. Vesting of these RSUs will be accelerated in the event of termination of the executive’s employment due to (i) a change in control or (ii) the executive’s death or disability. Unvested RSUs will be canceled in the event of a termination of employment for any other reason. |
(4) | Represents the aggregate grant date fair value of the awards pursuant to FASB ASC Topic 718. Additional details on accounting for stock-based compensation can be found in Note 2: "Summary of Significant Accounting Policies - Stock-based Compensation" and Note 10: "Stock-Based Compensation Plans" of our consolidated financial statements contained in our Annual Report on Form 10-K. |
Stock Awards(1) | ||||||||||
Number of Shares, Units or Other Rights That Have Not Vested (#) | Market Value of Shares, Units or Other Rights That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||
Roger C. Hochschild(2) | 100,000 | (3) | 5,898,000 | 47,211 | (8) | 2,784,505 | ||||
6,585 | (4) | 388,383 | 48,212 | (9) | 2,843,544 | |||||
8,992 | (5) | 530,348 | ||||||||
13,775 | (6) | 812,450 | ||||||||
49,788 | (7) | 2,936,496 | ||||||||
R. Mark Graf | 17,149 | (4) | 1,011,448 | 24,660 | (8) | 1,454,447 | ||||
5,351 | (4) | 315,602 | 25,524 | (9) | 1,505,406 | |||||
7,306 | (5) | 430,908 | ||||||||
11,344 | (6) | 669,069 | ||||||||
26,005 | (7) | 1,533,775 | ||||||||
Diane E. Offereins | 9,604 | (4) | 566,444 | 24,660 | (8) | 1,454,447 | ||||
7,306 | (5) | 430,908 | 25,524 | (9) | 1,505,406 | |||||
11,344 | (6) | 669,069 | ||||||||
46,677 | (7) | 2,753,009 | ||||||||
Carlos M. Minetti | 9,604 | (4) | 566,444 | 24,660 | (8) | 1,454,447 | ||||
7,306 | (5) | 430,908 | 25,524 | (9) | 1,505,406 | |||||
11,344 | (6) | 669,069 | ||||||||
46,677 | (7) | 2,753,009 | ||||||||
Julie Loeger | 4,665 | (4) | 275,142 | 23,394 | (8) | 1,379,778 | ||||
6,932 | (5) | 408,849 | 21,726 | (9) | 1,281,399 | |||||
9,656 | (6) | 569,511 | ||||||||
22,671 | (7) | 1,337,136 | ||||||||
David W. Nelms(2) | 10,290 | (4) | 606,904 | 104,328 | (8) | 6,153,265 | ||||
15,456 | (5) | 911,595 | 100,274 | (9) | 5,914,161 | |||||
22,283 | (6) | 1,314,251 | ||||||||
100,021 | (7) | 5,899,239 |
(1) | All equity award values are based on a December 31, 2018 closing stock price of $58.98 per share of our Common Stock. RSUs include the right to receive dividend equivalents in the same amount and at the same time as dividends are paid to all Company common shareholders. PSUs include the right to receive dividend equivalents which will accumulate and pay out in cash if and when the underlying shares are released to the NEOs. |
(2) | Excludes 502,557 deferred RSUs for Mr. Nelms and 430,763 deferred RSUs for Mr. Hochschild, as described in "2018 Nonqualified Deferred Compensation Table." These shares will convert to shares of Common Stock when Mr. Nelms and Mr. Hochschild leave the Company. |
(3) | These RSUs are expected to vest and convert to shares of Common Stock on December 17, 2020. |
(4) | These RSUs vested and converted to shares of Common Stock on February 1, 2019. |
(5) | These RSUs vested or are expected to vest and convert to shares of Common Stock in equal installments on February 1, 2019 and 2020. |
(6) | These RSUs vested or are expected to vest and convert to shares of Common Stock in equal installments on February 1, 2019, 2020 and 2021. |
(7) | These PSUs vested and converted to shares of Common Stock on February 1, 2019, based on EPS performance and after a satisfactory risk policies review. Amounts reported reflect the actual vesting level as determined by the Committee following its review of performance and risk assessment. |
(8) | These PSUs are expected to vest and convert to shares of Common Stock on February 1, 2020, if the performance conditions are met and the risk policies review is satisfactory. As required under applicable SEC guidance, because cumulative performance exceeded the target level, unvested PSUs are shown at the amounts corresponding to, and assuming achievement of, the maximum performance level for the full performance period. The final payout will be determined by the Committee and may be less than amount shown. |
(9) | These PSUs are expected to vest and convert to shares of Common Stock on February 1, 2021, if the performance conditions are met and the risk policies review is satisfactory. As required under applicable SEC guidance, because performance during the first year of the performance period exceeded the target level, unvested PSUs are shown at the amounts corresponding to, and assuming achievement of, the maximum performance level for the full performance period. The final payout will be determined by the Committee and may be less than amount shown. |
Stock Awards | ||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1) ($) | ||
Roger C. Hochschild | 61,011 | 4,918,707 | ||
R. Mark Graf | 52,101 | 4,200,383 | ||
Diane E. Offereins | 42,697 | 3,442,232 | ||
Carlos M. Minetti | 42,697 | 3,442,232 | ||
Julie Loeger | 16,716 | 1,347,644 | ||
David W. Nelms | 322,520 | 21,673,562 |
(1) | The amount shown represents the closing price of a share of our Common Stock on the scheduled vesting date multiplied by the number of RSUs and PSUs that vested. |
Name | Plan Name | Number of Years of Credited Service(1) (#) | Present Value of Accumulated Benefit(2)(3) ($) | ||
Roger C. Hochschild | Discover Financial Services Pension Plan | 9.1667 | 192,892 | ||
R. Mark Graf(4) | Discover Financial Services Pension Plan | n/a | n/a | ||
Diane E. Offereins | Discover Financial Services Pension Plan | 9.0833 | 242,109 | ||
Carlos M. Minetti | Discover Financial Services Pension Plan | 7.0000 | 146,958 | ||
Julie Loeger | Discover Financial Services Pension Plan | 16.8333 | 360,815 | ||
David W. Nelms | Discover Financial Services Pension Plan | 9.3333 | 210,316 |
(1) | For actuarial valuation purposes, credited service is attributed through the measurement date of December 31, 2008, the date that the Discover Pension Plan was frozen. |
(2) | Service credit and actuarial values are calculated as of December 31, 2018, the plan’s measurement date for the last year. |
(3) | For details on the valuation method and assumptions used in calculating the present value of accumulated benefit, please see Note 11: "Employee Benefit Plans" of our consolidated financial statements in our Annual Report on Form 10-K. |
(4) | Mr. Graf does not participate in the Discover Pension Plan as he was hired after it was frozen. |
Name | Plan Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY(1) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | |||||
Roger C. Hochschild | 2007 Omnibus Incentive Plan | — | — | (7,727,888 | ) | — | 25,406,402 | ||||
David W. Nelms | 2007 Omnibus Incentive Plan | — | — | (9,015,873 | ) | — | 29,640,812 |
(1) | Reflects decrease in value of deferred RSUs due to decline in stock price as compared to December 31, 2017. Excludes cash dividend equivalent payments of $753,836 and $646,145 paid on deferred RSUs for Mr. Nelms and Mr. Hochschild, respectively. |
• | A lump sum cash payment equal to 1.5 times the sum of his or her annual base salary plus average cash bonus paid in the prior three years or, if the NEO has been an employee for less than three years, the number of years the NEO has been employed by the Company; |
• | A lump sum cash payment equal to the prorated target cash bonus under the Company’s incentive compensation plans for the year of termination, or if no target was established for the year of termination, the annual cash bonus for the prior year; |
• | Full vesting of all stock-based awards granted to the NEO under the Company’s incentive compensation plans; |
• | Outplacement services for a period of two years at the Company’s expense with a firm selected by the Company; |
• | Certain legal fees if the NEO commences litigation after exhausting the internal administrative claims procedure and, as a result, becomes entitled to receive benefits in an amount greater than those offered by the Company prior to such litigation; and |
• | A lump sum cash payment equal to the difference between COBRA (for medical, dental and vision) and active employee premiums for 24 months. |
• | A lump sum cash payment of 12 months of his or her annual base salary plus target annual cash bonus; |
• | A lump sum cash payment equal to the prorated target annual cash bonus under the Company’s incentive compensation plan for any prior year and the year of termination (to the extent earned and not yet paid); |
• | Outplacement services for a period of one year at the Company’s expense with a firm selected by the Company; and |
• | A lump sum cash payment equal to 12 months of the applicable premium for group health plan coverage in place prior to termination of employment, plus a payment for income taxes on such amount. |
Executive Payment Elements | Termination in Connection with a Change in Control ($) | Involuntary Termination Without Cause ($) | Death ($) | Disability ($) | Voluntary Termination or Involuntary Termination with Cause ($) | Retirement(7) ($) | ||
Roger C. Hochschild | ||||||||
Salary and Other Cash Payments | 6,080,250 | (1) | 2,125,000 | 70,833 | 0 | 0 | n/a | |
Target Annual Incentive Plan Payout (2) | 1,275,000 | 1,275,000 | 1,275,000 | 1,275,000 | 0 | n/a | ||
Equity Awards(3) | 15,331,751 | 15,584,457 | 15,584,457 | 15,584,457 | 0 | n/a | ||
Health Coverage(4) | 29,290 | 30,921 | 0 | 0 | 0 | n/a | ||
Other(5) | 25,000 | 12,500 | 0 | 0 | 0 | n/a | ||
Section 280G Cut-Back(6) | 0 | n/a | n/a | n/a | n/a | n/a | ||
Total | 22,741,291 | 19,027,878 | 16,930,290 | 16,859,457 | 0 | n/a | ||
Executive Payment Elements | Termination in Connection with a Change in Control ($) | Involuntary Termination Without Cause ($) | Death ($) | Disability ($) |